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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934
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Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for use of the Commission only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section240.14a-11(c) or
Section240.14a-12
THE EMPIRE DISTRICT ELECTRIC COMPANY
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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[LOGO]
THE EMPIRE DISTRICT ELECTRIC COMPANY
602 JOPLIN STREET
JOPLIN, MISSOURI 64801
August 2, 1999
Dear Stockholder:
You are cordially invited to attend a special meeting of the stockholders of
The Empire District Electric Company to be held at 10:00 a.m., Joplin time, on
Friday, September 3, 1999, at the Holiday Inn, 3615 South Range Line, Joplin,
Missouri 64804.
At this important meeting, you will be asked to adopt a merger agreement and
approve a merger between Empire and UtiliCorp United Inc. The merger agreement
was executed on May 10, 1999, and provides for the merger of Empire into
UtiliCorp after certain conditions are met, including the approval of Empire's
stockholders.
Your board of directors has unanimously approved the merger agreement and
the merger and believes that the merger, which is explained in detail on page 17
of the attached prospectus/proxy statement, is fair and in the best interests of
Empire and its stockholders. The board unanimously recommends that you adopt the
merger agreement and approve the merger at the special meeting so that the
merger may be completed.
This event presents an important decision for you as an Empire stockholder.
Therefore, we request that you carefully read the attached materials. We have
made every effort to present this information so that it is easy to read and
understand.
Your participation in this special meeting, either in person or by proxy, is
important. If you do not vote then it will have the same effect as if you had
voted against the merger agreement and the merger. Even if you plan to attend
the meeting, please sign, date and return the enclosed proxy promptly. At the
meeting, if you desire to vote in person, you may withdraw your proxy.
Sincerely,
[SIGNATURE]
M.W. McKinney
PRESIDENT AND CHIEF EXECUTIVE OFFICER
YOUR VOTE IS IMPORTANT
PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY PROMPTLY
<PAGE>
THE EMPIRE DISTRICT ELECTRIC COMPANY
602 JOPLIN STREET
JOPLIN, MISSOURI 64801
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
---------------------
To the Holders of Common Stock:
A special meeting of the stockholders of The Empire District Electric
Company, a Kansas corporation, will be held on Friday, the 3(rd) of September,
1999, at 10:00 a.m., Joplin time, at the Holiday Inn, 3615 South Range Line,
Joplin, Missouri 64804, for the following purposes:
1. To consider and vote upon a proposal to adopt the Agreement and Plan of
Merger dated as of May 10, 1999 between Empire and UtiliCorp United Inc.,
a Delaware corporation, which provides for the merger of Empire into
UtiliCorp, and to approve the merger.
2. To transact any other business that may properly come before the special
meeting, or any adjournment or postponement of the special meeting.
Any matter listed above may be considered or acted upon at the first session
of the special meeting or at any adjournment or postponement of the special
meeting.
Holders of common stock of record on our books at the close of business on
July 30, 1999 will be entitled to vote on all matters which may come before the
special meeting or any adjournment or postponement of the special meeting. A
complete list of the stockholders entitled to vote at the meeting will be
available at our office, 602 Joplin Street, Joplin, Missouri 64801, for
examination by any stockholder for any purpose relating to the meeting for a
period of ten days prior to the meeting and also at the meeting.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
THE MERGER. YOUR BOARD BELIEVES THAT THE MERGER IS FAIR AND IN THE BEST
INTERESTS OF EMPIRE AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT YOU
VOTE "FOR" THE PROPOSAL TO ADOPT THE MERGER AGREEMENT AND APPROVE THE MERGER.
STOCKHOLDERS WHO DO NOT EXPECT TO ATTEND IN PERSON ARE ENCOURAGED,
REGARDLESS OF THE NUMBER OF SHARES OF COMMON STOCK OWNED, TO SIGN AND DATE THE
ENCLOSED PROXY AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE. NO POSTAGE NEEDS
TO BE AFFIXED TO THE ENVELOPE IF IT IS MAILED IN THE UNITED STATES.
IF THE MERGER IS CONSUMMATED, HOLDERS OF EMPIRE COMMON STOCK WILL RECEIVE
INSTRUCTIONS REGARDING THE SURRENDER OF THEIR STOCK CERTIFICATES. STOCKHOLDERS
SHOULD NOT SEND THEIR STOCK CERTIFICATES UNTIL THEY RECEIVE THOSE INSTRUCTIONS.
J.S. Watson
SECRETARY-TREASURER
Joplin, Missouri
Dated: August 2, 1999
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[LOGO]
PROSPECTUS OF
UTILICORP UNITED INC.
Up to 24,856,000 Shares of Common Stock
$1.00 Par Value Per Share
The boards of directors of UtiliCorp United Inc. and The Empire District
Electric Company have agreed to the merger of Empire into UtiliCorp. After the
merger, Empire will cease to exist as a separate legal entity and UtiliCorp will
continue as the merger's surviving corporation.
In exchange for each share of Empire common stock, Empire stockholders will
have the option to receive either (1) $29.50 in cash or (2) shares of UtiliCorp
common stock with an average trading price of $29.50. The amount of cash or
value of stock received by Empire stockholders will increase or decrease if the
average trading price of UtiliCorp common stock prior to the effective time of
the merger is above $26.00 or below $22.00. In addition, no more than 50% of the
shares of Empire common stock can be converted into cash and the total number of
shares of UtiliCorp common stock issued to Empire stockholders and issuable to
holders of Empire restricted stock, stock units or options to acquire Empire
common stock is limited to 19.9% of the outstanding shares of common stock of
UtiliCorp at the effective time of the merger. Therefore, if too many Empire
stockholders elect to receive cash or too many Empire stockholders are to
receive stock and the limitations described above are exceeded, the amount of
cash or the number of shares of stock actually received by each Empire
stockholder may differ from the consideration elected.
[LOGO]
PROXY STATEMENT OF
THE EMPIRE DISTRICT ELECTRIC COMPANY
For a Special Meeting of Stockholders
To Be Held on September 3, 1999
The merger cannot be completed unless it is approved by Empire stockholders
holding a majority of the outstanding shares of common stock. Empire's board of
directors has scheduled a special meeting for Empire's stockholders to vote on
the merger as follows:
Friday, September 3, 1999
10:00 a.m., Joplin time
Holiday Inn
3615 South Range Line
Joplin, Missouri 64804
This document gives you detailed information about the proposed merger. We
encourage you to read this entire document carefully. Please see "Where You Can
Find More Information" on page 65 for additional information about UtiliCorp and
Empire on file with the SEC.
This proxy statement/prospectus is first being mailed to stockholders on or
about August 2, 1999.
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED
THE UTILICORP COMMON STOCK TO BE ISSUED UNDER THIS PROXY STATEMENT/PROSPECTUS OR
DETERMINED IF THIS PROXY STATEMENT/PROSPECTUS IS ACCURATE OR ADEQUATE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROXY STATEMENT/PROSPECTUS IS JULY 29, 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C>
DOCUMENTS INCORPORATED BY REFERENCE...................................................................... iv
QUESTIONS AND ANSWERS ABOUT THE MERGER................................................................... 1
SUMMARY.................................................................................................. 3
The Companies.......................................................................................... 3
The Merger and the Merger Agreement.................................................................... 3
Recent Developments.................................................................................... 6
Market Price Information............................................................................... 7
Comparative Per Share Information...................................................................... 8
Selected Historical and Pro Forma Financial Information................................................ 10
UtiliCorp Selected Historical Financial Information.................................................. 10
Empire Selected Historical Financial Information..................................................... 11
Selected Unaudited Pro Forma Combined Financial Information.......................................... 12
Cautionary Statement Concerning Forward-Looking Statements............................................. 13
THE SPECIAL MEETING...................................................................................... 14
Time and Place......................................................................................... 14
Matters to be Considered............................................................................... 14
Record Date............................................................................................ 14
Quorum................................................................................................. 14
Votes Required; Effect of Abstentions and Non-Votes.................................................... 14
Voting and Revocation of Proxies....................................................................... 14
Solicitation of Proxies................................................................................ 15
Expenses............................................................................................... 15
Surrender of Certificates.............................................................................. 15
THE COMPANIES............................................................................................ 16
UtiliCorp.............................................................................................. 16
Empire................................................................................................. 17
THE MERGER............................................................................................... 17
Background of the Merger............................................................................... 17
Reasons for the Merger................................................................................. 19
Recommendation of Empire's Board of Directors.......................................................... 20
Opinion of Salomon Smith Barney Inc.................................................................... 21
Interests of Empire's Management and Directors in the Merger........................................... 27
Federal Income Tax Consequences........................................................................ 29
Regulatory Matters..................................................................................... 32
Accounting Treatment................................................................................... 33
Dissenters' Rights..................................................................................... 33
Restrictions on Resales by Empire Affiliates........................................................... 35
Stockholder Rights Plan................................................................................ 35
Conduct of Business after the Merger................................................................... 35
THE MERGER AGREEMENT..................................................................................... 36
The Merger and Its Effective Time...................................................................... 36
What Empire Stockholders Will Receive.................................................................. 36
Manner of Electing Cash or Stock....................................................................... 37
Adjustments to Amount of Cash or Common Stock by Empire Stockholders................................... 37
Manner of Converting Shares............................................................................ 38
Conditions to the Merger............................................................................... 38
Representations and Warranties......................................................................... 39
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
Conduct of Business Prior to the Effective Time........................................................ 40
No Solicitation........................................................................................ 41
Employee Benefit Matters............................................................................... 43
Stock Plans and Stock Options.......................................................................... 44
Anti-Takeover Statutes................................................................................. 45
Advisory Board......................................................................................... 45
Charitable and Economic Development Support............................................................ 45
Termination of DRIP.................................................................................... 45
Dividend Record Date................................................................................... 45
Amendment.............................................................................................. 45
Termination of the Merger Agreement.................................................................... 45
Expenses and Termination Fees.......................................................................... 46
Indemnification and Insurance.......................................................................... 46
COMPARATIVE MARKET PRICE AND DIVIDEND INFORMATION........................................................ 48
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION....................................................... 49
DESCRIPTION OF UTILICORP CAPITAL STOCK................................................................... 54
General................................................................................................ 54
Dividend Rights and Limitations........................................................................ 54
Voting Rights.......................................................................................... 54
Liquidation Rights..................................................................................... 54
Class A Common Stock and Preference Stock.............................................................. 55
Stockholder Rights Plan................................................................................ 55
Additional Anti-Takeover Defenses...................................................................... 56
Transfer Agent and Registrar........................................................................... 57
COMPARATIVE RIGHTS OF EMPIRE STOCKHOLDERS AND UTILICORP STOCKHOLDERS..................................... 57
General................................................................................................ 57
Authorized and Outstanding Capital Stock............................................................... 57
Number of Directors.................................................................................... 58
Classified Board of Directors.......................................................................... 58
Removal of Directors................................................................................... 58
Voting for Mergers and Other Activities................................................................ 58
Special Meetings....................................................................................... 58
Stockholder Action by Written Consent.................................................................. 58
Indemnification and Limitation of Liability............................................................ 59
Amendment of Charters.................................................................................. 59
Amendment of Bylaws.................................................................................... 59
Notice of Stockholder Proposals........................................................................ 59
Nomination of Directors................................................................................ 60
Stockholder Inspection................................................................................. 61
Dissenters' Rights..................................................................................... 61
Stockholder Rights Plans............................................................................... 61
Anti-Takeover Statutes................................................................................. 62
Business Combinations.................................................................................. 63
EMPIRE STOCKHOLDER PROPOSALS............................................................................. 65
LEGAL MATTERS............................................................................................ 65
EXPERTS.................................................................................................. 65
WHERE YOU CAN FIND MORE INFORMATION...................................................................... 65
</TABLE>
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<TABLE>
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<S> <C>
ANNEXES:
ANNEX A: AGREEMENT AND PLAN OF MERGER.................................................................... A-i
ANNEX B-1: OPINION OF SALOMON SMITH BARNEY INC........................................................... B-1-1
ANNEX B-2: CONFIRMATION OF SALOMON SMITH BARNEY INC...................................................... B-2-1
ANNEX C: KANSAS DISSENTERS' RIGHTS STATUTE............................................................... C-1
</TABLE>
iii
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DOCUMENTS INCORPORATED BY REFERENCE
This proxy statement/prospectus incorporates by reference important
information that we are not delivering with this document. The SEC allows us to
"incorporate by reference" information into this document, which means that we
can disclose important information to you by referring you to another document
separately filed with the SEC. See "Where You Can Find More Information" on page
65. You can obtain this information without charge by contacting either:
UtiliCorp United Inc.
Investor Relations
20 West Ninth Street
Kansas City, Missouri 64105
Tel: (816) 421-6600; or
The Empire District Electric Company
Shareholder Relations
602 Joplin Street
Joplin, Missouri 64801
Tel: (417) 625-5100
TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS IN ADVANCE OF THE SPECIAL MEETING
YOU SHOULD MAKE YOUR REQUEST NO LATER THAN AUGUST 27, 1999.
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QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHY SHOULD EMPIRE MERGE WITH UTILICORP?
A: Your board of directors believes that the merger will benefit both you and
Empire because, among other reasons:
- the merger offers you an attractive premium over the trading price of
Empire's common stock prior to the announcement of the merger and the
potential for increased dividends;
- the merger provides you with the opportunity to participate in a larger
and more diversified company with greater financial stability; and
- the merger offers you, our customers, our employees and the Empire
community a unique opportunity to realize the benefits created by
combining the two companies.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: The merger is subject to certain regulatory approvals, which we expect to
obtain by the end of 2000. The merger should close soon after we receive the
last regulatory approval.
Q: WHAT SHOULD I DO NOW?
A: You should mail your signed and dated proxy cards in the enclosed envelope as
soon as possible to be sure that your shares will be represented at the special
meeting. The special meeting will take place on Friday, September 3, 1999. Your
board of directors unanimously recommends voting in favor of adopting the merger
agreement and approving the merger.
Q: HOW DO I CHOOSE WHETHER I WANT UTILICORP COMMON STOCK OR CASH?
A: About 30 days before the effective date of the merger, you will receive an
election form. You must complete, sign and return the election form as directed
on the form. If you fail to submit an election form within the deadline set
forth on the form or if you fail to indicate whether you want to receive cash or
UtiliCorp common stock, you will be deemed to have elected to receive UtiliCorp
common stock.
Q: WHEN SHOULD I SEND IN MY STOCK CERTIFICATES?
A: After the merger closes, UtiliCorp will send you a letter of transmittal
describing how you can exchange your Empire stock certificates for cash or
UtiliCorp common stock and specific instructions explaining how to respond to
the letter of transmittal. You should not surrender your Empire stock
certificates until you receive a letter of transmittal following the merger.
Q: IF I AM NOT GOING TO ATTEND THE SPECIAL MEETING SHOULD I RETURN MY PROXY
CARD?
A: Yes. Returning your proxy card ensures that your shares will be represented
at the special meeting, even if you are unable or do not want to attend.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER WILL MY BROKER VOTE MY
SHARES FOR ME?
A: You should instruct your broker to vote your shares, following the directions
your broker provides. If you do not instruct your broker, your broker generally
will not have discretion to vote your shares. Broker non-votes will have the
same effect as votes cast against the merger agreement and the merger.
Q: CAN I CHANGE MY VOTE AFTER I MAIL MY PROXY CARD?
A: Yes. You can change your vote at any time before we vote your proxy at the
special meeting. You can do so in several ways:
- First, you can send to Empire at the address listed below a written notice
stating that you would like to revoke your proxy.
- Second, you can complete a new proxy card and send it to the address
below, and the new proxy card will automatically replace any earlier dated
proxy card that you returned.
- Third, you can attend the special meeting and vote in person.
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- Fourth, if you instructed a broker to vote your shares, you can follow
your broker's directions for changing those instructions.
You should send any notice of revocation or your completed new proxy card to
Empire at the following address:
The Empire District Electric Company
602 Joplin Street
Joplin, Missouri 64801
Attn: Corporate Secretary
Facsimile: (417) 625-5173
Q: WHO CAN ANSWER MY QUESTIONS?
A: If you have questions regarding
the special meeting or need assistance
in voting your shares please
contact our proxy solicitor:
Innisfree M&A Incorporated
501 Madison Avenue, 20th Floor
New York, New York 10022
Tel: (888) 750-5834 (toll-free)
For all other questions you shoud contact:
UtiliCorp United Inc.
20 West Ninth Street
Kansas City, Missouri 64105
Attn: Ellen Fairchild
Tel: (816) 421-6600; or
The Empire District Electric Company
602 Joplin Street
Joplin, Missouri 64801
Attn: Janet Watson
Tel: (417) 625-5100
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SUMMARY
This summary highlights selected information from this proxy
statement/prospectus and may not contain all of the information that is
important to you. To understand the merger fully and for a more complete
description of the legal terms of the merger, you should carefully read this
entire document.
THE COMPANIES
The Empire District Electric Company
602 Joplin Street
Joplin, Missouri 64801
(417) 625-5100
Website: HTTP://WWW.EMPIREDISTRICT.COM
Based in Joplin, Missouri, Empire is an operating public utility which is
engaged in the generation, purchase, transmission, distribution and sale of
electricity. Empire currently serves approximately 145,000 electric customers in
Missouri, Kansas, Oklahoma and Arkansas. It also provides monitored security,
fiber optic service and decorative lighting. The territory served by Empire's
electric operations comprises an area of about 10,000 square miles and has a
population of over 330,000.
UtiliCorp United Inc.
20 West Ninth Street
Kansas City, Missouri 64105
(816) 421-6600
Website: HTTP://WWW.UTILICORP.COM
UtiliCorp is a multinational energy and energy services company
headquartered in Kansas City, Missouri. It has regulated utility operations in
eight states and energy operations in New Zealand, Australia, the United Kingdom
and Canada. It also owns non-utility subsidiaries involved in energy trading;
natural gas gathering, processing and transportation; energy efficiency services
and various other energy-related businesses.
THE MERGER AND THE MERGER AGREEMENT
WHAT EMPIRE COMMON STOCKHOLDERS WILL RECEIVE IN THE MERGER. In exchange for
each share of Empire common stock, Empire stockholders will have the option to
receive:
- $29.50 in cash, subject to the adjustments described below; or
- Shares of UtiliCorp common stock with an average trading price of $29.50,
subject to the adjustments described below.
The value of the merger consideration received may be more or less than $29.50
and the form of the merger consideration received may be adjusted, depending on
certain factors. First, if the average trading price of UtiliCorp's common
stock, based on the closing prices on the NYSE during the 20 trading days ending
on the third trading day prior to the closing date of the merger, is less than
$22.00 per share, then the value of the consideration received per share of
Empire common stock will decrease. Conversely, if the average trading price of
UtiliCorp's common stock during that same period is greater than $26.00 per
share, then the value of the consideration received per share of Empire common
stock will increase. See "The Merger Agreement--What Empire Stockholders Will
Receive" on page 36.
In addition to the adjustments described above, the form of the merger
consideration received by Empire stockholders will be adjusted if either too
many stockholders elect to receive cash or too many stockholders are to receive
stock. Pursuant to the merger agreement:
- No more than 50% of the shares of Empire common stock can be converted
into cash; and
- No more than 19.9% of the total number of shares of UtiliCorp common stock
outstanding at the effective time of the merger can be issued or issuable
in exchange for Empire common stock, restricted stock, stock units or
options to acquire Empire common stock.
If holders of more than 50% of the outstanding shares of Empire common stock
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elect to receive cash, the exchange agent will use a lottery to determine which
holders will receive cash and all others will receive UtiliCorp common stock. If
too many Empire stockholders are to receive UtiliCorp common stock, UtiliCorp
has the option to limit the total stock issued in the following manner:
- First, all Empire stockholders who failed to timely return an election
form or who did not indicate a preference as to the form of consideration
they wanted to receive will receive cash for all or a portion of their
Empire shares on a pro rata basis.
- Second, if necessary, the Empire stockholders who elected to receive
UtiliCorp common stock will have the number of shares of UtiliCorp common
stock they receive reduced on a pro rata basis and instead will receive
cash for those reduced shares.
In this document, we use the term "merger consideration" to refer to the
amount of cash or the number of shares of UtiliCorp common stock into which
shares of Empire common stock will be converted as a result of the merger.
Each share of UtiliCorp common stock issued to Empire stockholders carries
with it a preference stock purchase right issued under UtiliCorp's stockholders
rights plan. See "Description of UtiliCorp Capital Stock-- Stockholder Rights
Plan" on page 55 for a description of these purchase rights.
REASONS FOR THE MERGER. Your board of directors believes that the merger
offers you an attractive premium over the trading price of Empire's common stock
prior to the announcement of the merger and the potential for increased
dividends. In addition, the merger provides you with the opportunity to
participate in a combined entity with greater financial stability and the
potential for increased economic growth and diversification. In short, your
board believes that the merger offers you, our customers, our employees and the
Empire community a unique opportunity to realize the benefits created by
combining the two companies. See "The Merger--Reasons for the Merger" on page
19.
RECOMMENDATION OF EMPIRE'S BOARD. Your board of directors believes that the
merger is fair and in the best interests of Empire and its stockholders. Your
board has unanimously approved the merger agreement and the merger, and
recommends that you vote "FOR" the proposal to adopt the merger agreement and
approve the merger.
OPINIONS OF SALOMON SMITH BARNEY INC. In deciding to approve the merger,
one of the factors your board of directors considered was a written opinion
dated May 10, 1999 from its financial advisor, Salomon Smith Barney Inc.,
stating that, as of that date, the merger consideration was fair, from a
financial point of view, to Empire common stockholders. This opinion is attached
as Annex B-1 to this proxy statement/prospectus. In addition, on the date of
this proxy statement/prospectus Salomon Smith Barney confirmed in writing its
May 10, 1999 opinion, stating that, as of the date of this proxy
statement/prospectus, the merger consideration was fair, from a financial point
of view, to Empire common stockholders. This confirmation is attached as Annex
B-2 to this proxy statement/prospectus. We urge you to read both the opinion and
the confirmation in their entirety.
STOCKHOLDER VOTE REQUIRED TO APPROVE THE MERGER. The favorable vote of the
holders of a majority of the outstanding shares of Empire's common stock is
required to adopt the merger agreement and approve the merger. Failure to vote
will count as a vote against adoption of the merger agreement and approval of
the merger. On July 30, 1999 Empire's directors and executive officers and their
affiliates beneficially owned approximately 0.66% of the outstanding shares of
Empire's common stock. We expect that they will vote their shares for adoption
of the merger agreement and approval of the merger. You will have one vote at
the special meeting for each share of Empire common stock you owned at the close
of business on July 30, 1999. On that date, approximately 17,234,780 shares of
common stock were outstanding.
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REGULATORY MATTERS. The merger requires the approval of the Federal Energy
Regulatory Commission and the utility regulators in Missouri, Kansas, Colorado,
Iowa, Minnesota, West Virginia, Arkansas and Oklahoma. In addition, for the
merger to close, the waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 must expire or terminate. We expect all of this to
occur by the end of 2000. See "The Merger--Regulatory Matters" on page 32.
INTERESTS OF EMPIRE'S MANAGEMENT AND DIRECTORS IN THE MERGER. When
considering the recommendation of your board of directors, you should be aware
that certain members of Empire's management and board have interests in the
merger that may differ from yours. For example:
- the officers and other employees hold restricted stock awards that will be
converted into fully-vested, unrestricted common stock of UtiliCorp as a
result of the merger;
- the directors hold stock units that will be converted into UtiliCorp stock
units as a result of the merger;
- our employees have been granted stock options that, if still outstanding
at the effective time of the merger, will be converted into options to
purchase UtiliCorp common stock as a result of the merger;
- certain key employees participate in Empire's severance pay plan that
generally provides for (a) payments to these key employees in the event of
their termination or resignation, under certain circumstances, within
three years following the approval of the merger by Empire's stockholders,
and (b) continuation of benefits no less favorable than those under
Empire's health, insurance, retirement and other employee benefit plans in
existence at the time of the approval of the merger by Empire's
stockholders. UtiliCorp will honor these obligations under the Empire
severance pay plan;
- certain employee benefits for current and former Empire employees will
continue for at least 18 months after the merger; and UtiliCorp will
provide health and life benefits to existing Empire retirees and certain
Empire employees who retire after the merger; and
- UtiliCorp will indemnify Empire directors and officers for six years after
the merger for certain claims against them and will provide them with
officers' and directors' liability insurance for the same time period.
These interests may cause directors and management to have conflicts of
interest regarding the merger. Your board was aware of these interests and
considered them, among other matters, in approving the merger agreement. For
more information on the interests of Empire's management and directors in the
merger, see "The Merger--Interests of Empire's Management and Directors in the
Merger" on page 27.
FEDERAL INCOME TAX CONSEQUENCES. A condition to each of Empire's and
UtiliCorp's obligation to complete the merger is the receipt of an opinion from
its legal counsel stating that the merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code. Assuming that the merger is so treated for federal income
tax purposes, Empire's stockholders that exchange their Empire shares:
- for cash will generally recognize a capital gain or loss equal to the
difference between the amount of cash received and the stockholder's basis
in the Empire common stock; and
- for shares of UtiliCorp common stock generally will not recognize any
income, gain or loss, except with respect to cash received instead of
fractional shares.
Neither Empire nor UtiliCorp will recognize any gain or loss as a result of
the merger. We urge you to consult your own tax advisor regarding the tax
consequences of the
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merger to you. For more information about tax matters, see "The Merger--Federal
Income Tax Consequences" on page 29.
TERMINATION FEES AND EXPENSES. The merger agreement requires Empire to pay
UtiliCorp a fee of up to $15 million, or Empire or UtiliCorp to reimburse the
other for costs relating to the merger up to $1.75 million, if the merger
agreement terminates under certain circumstances. For more information on the
fees and expenses that may be paid, and the conditions under which the merger
agreement may terminate, see "The Merger Agreement-- Termination of the Merger
Agreement" on page 45 and "The Merger Agreement-- Expenses and Termination Fees"
on page 46.
DISSENTERS' RIGHTS. If the merger is completed, Empire stockholders will be
entitled to appraisal rights under Kansas law, if they:
- did not vote to adopt the merger agreement and approve the merger;
- elected to receive UtiliCorp common stock in exchange for their Empire
common stock or did not make an election;
- would receive cash because too many Empire stockholders are to receive
UtiliCorp common stock; and
- otherwise comply with Section 17-6712 of the Kansas General Corporation
Code.
See "The Merger--Dissenters' Rights" on page 33.
RESALES OF UTILICORP STOCK. Generally, shares of UtiliCorp's common stock
received in the merger will be freely transferable. However, resales of shares
held by Empire "affiliates" as defined under applicable federal securities laws
(primarily directors and certain officers of Empire) will be restricted. See
"The Merger-- Restrictions on Resales by Empire Affiliates" on page 35.
COMPARATIVE RIGHTS OF STOCKHOLDERS. When the merger closes, the rights of
Empire stockholders that receive UtiliCorp common stock will be governed by
UtiliCorp's governing corporate documents and Delaware law, rather than Empire's
governing corporate documents and Kansas law, as is currently the case.
Accordingly, the rights of Empire's stockholders will change in a number of
respects as a result of the merger. For a description of these changes, see
"Comparative Rights of Empire Stockholders and UtiliCorp Stockholders" beginning
on page 57.
RECENT DEVELOPMENTS
UTILICORP. On March 5, 1999, UtiliCorp announced that it had entered into
an agreement with St. Joseph Light & Power Company under which St. Joseph will
merge into UtiliCorp, in a stock transaction valued at approximately $270
million including the assumption of debt. Under the terms of that agreement,
UtiliCorp is offering $23.00 for each share of St. Joseph common stock, payable
in UtiliCorp common stock. UtiliCorp expects to issue approximately 8.1 million
shares of common stock to St. Joseph's stockholders. Headquartered in St.
Joseph, Missouri, St. Joseph is an electric and gas utility that supplies
electricity to approximately 62,000 customers and natural gas to approximately
6,000 customers in communities in northeastern Missouri.
The St. Joseph merger is intended to qualify as a tax-free reorganization
for federal income tax purposes and will be accounted for as a purchase. St.
Joseph shareholders approved this transaction on June 16, 1999, and the
consummation of the transaction is now subject to certain conditions, including
the approval of various regulatory commissions. UtiliCorp expects the St. Joseph
merger to close by mid-2000.
On June 30, 1999, UtiliCorp signed a letter of intent with Quanta Services,
Inc., a provider of specialized contracting services to electric utilities,
telecommunications and cable television operations and governmental entities, to
invest up to $400 million in Quanta. The initial investment of $150 million will
be in the form of convertible 6.5% preferred stock and is expected to close in
September 1999. The convertible preferred stock can be converted
6
<PAGE>
into Quanta common stock at UtiliCorp's option at any time and at the option of
Quanta after three years. Additionally, the convertible preferred stock will
automatically convert into Quanta common stock at the end of ten years. The
remaining investment of up to $250 million could take the form of additional
convertible preferred stock or a direct equity investment in Quanta common
stock. The closing of the transaction is subject to the approval of UtiliCorp's
and Quanta's boards of directors, negotiation of a definitive agreement and
certain other conditions.
EMPIRE. On July 1, 1999, Empire mailed a notice of redemption to all of its
preferred stockholders announcing that it will redeem all of the outstanding
shares of its cumulative preferred stock on August 2, 1999. The redemption
proceeds to the holders of the preferred stock, including accrued dividends,
will be approximately $33.1 million.
MARKET PRICE INFORMATION
UtiliCorp common stock trades on the NYSE, the Pacific Stock Exchange and
the Toronto Stock Exchange, in each case under the symbol "UCU." Empire common
stock trades on the NYSE, under the symbol "EDE." The following table presents
closing sale prices reported by the NYSE Composite Transactions Reporting System
in The Wall Street Journal for shares of both UtiliCorp and Empire common stock
as of:
- May 10, 1999, the last trading day before the merger was publicly
announced; and
- July 28, 1999, the last practicable date before the printing of this proxy
statement/prospectus:
<TABLE>
<CAPTION>
UTILICORP EMPIRE
COMMON EMPIRE COMMON EQUIVALENT
STOCK PRICE STOCK PRICE PER SHARE PRICE
--------------- --------------- ---------------
<S> <C> <C> <C>
May 10, 1999.................................. $ 24.19 $ 21.25 $ 29.50
July 28, 1999................................. $ 24.13 $ 26.13 $ 29.50
</TABLE>
Empire Equivalent Per Share Price assumes merger consideration of $29.50 of
UtiliCorp common stock for each share of Empire common stock held immediately
before the merger, assuming that the average trading price of UtiliCorp common
stock is no more than $26.00 and no less than $22.00.
7
<PAGE>
COMPARATIVE PER SHARE INFORMATION
We have summarized below the per share information of UtiliCorp and Empire
on a historical basis and the per share information of UtiliCorp, Empire and St.
Joseph on a pro forma combined and pro forma equivalent combined basis. Please
read this table together with the historical financial statements and related
notes of UtiliCorp and Empire incorporated into this document by reference and
with the selected historical and unaudited pro forma financial information we
have included in this proxy statement/prospectus. The pro forma information does
not necessarily portray the book value per share or earnings per share from
continuing operations we would have had if the merger had closed on the date or
at the beginning of the periods indicated or the future results we will
experience after the merger.
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
UTILICORP EMPIRE COMBINED PER EQUIVALENT
HISTORICAL HISTORICAL UTILICORP COMBINED PER
PER SHARE PER SHARE SHARE EMPIRE SHARE(1)
----------- ----------- ------------- ---------------
<S> <C> <C> <C> <C>
AS OF MARCH 31, 1999
--------------------------------------------------------
Book Value Per Share......................... $ 16.14 $ 13.39 $ 17.30 $ 21.27
AS OF DECEMBER 31, 1998
--------------------------------------------------------
Book Value Per Share......................... $ 15.83 $ 13.40 $ 17.64 $ 21.68
THREE MONTHS ENDED MARCH 31, 1999
--------------------------------------------------------
Cash Dividends Declared Per Share............ $ .30 $ .32 $ .30 $ .37
Earnings Per Share from Continuing Operations
Basic...................................... $ .57 $ .27 $ .47 $ .58
Diluted.................................... $ .57 $ .27 $ .46 $ .57
YEAR ENDED DECEMBER 31, 1998
--------------------------------------------------------
Cash Dividends Declared Per Share............ $ 1.20 $ 1.28 $ 1.20 $ 1.48
Earnings Per Share from Continuing Operations
Basic...................................... $ 1.65 $ 1.53 $ 1.48 $ 1.82
Diluted.................................... $ 1.63 $ 1.53 $ 1.47 $ 1.81
</TABLE>
- ------------------------
(1) If the St. Joseph merger is not completed, the pro forma book value per
equivalent combined Empire share would be $21.17 as of March 31, 1999, and
the pro forma diluted earnings per combined Empire share would be $.61 for
the three months ended March 31, 1999.
8
<PAGE>
HISTORICAL CALCULATIONS. We calculated the basic earnings per share
information using the weighted average number of shares of common stock
outstanding for each company during the period. We calculated the diluted
earnings per share information using the weighted average number of shares of
common stock outstanding for each company during the period, plus the number of
potentially dilutive shares of common stock outstanding for each company during
the period (e.g., shares issuable upon the exercise of stock options). We
calculated book value per share information using the number of shares of common
stock outstanding for each company at the end of the period.
PRO FORMA COMBINED CALCULATIONS. The calculations assume that 13.1 million
shares of UtiliCorp common stock will be issued in the merger, based on an
assumption that 62% of outstanding Empire common stock will be converted into
UtiliCorp common stock. The assumed common stock conversion percentage of 62%
combined with debt assumed and cash paid represents an indicative long-term
capital structure of UtiliCorp. The actual number of shares issued will depend
on the number of Empire stockholders that elect to receive UtiliCorp common
stock and the number of shares of UtiliCorp common stock outstanding on the
effective date of the merger. Although UtiliCorp does not anticipate making any
change to its dividend, the pro forma combined dividends per share are not
necessarily indicative of its level of dividends after the merger closes.
PRO FORMA EQUIVALENT COMBINED CALCULATIONS. The pro forma equivalent
combined information was calculated by multiplying the pro forma combined
information amounts by an exchange ratio of 1.2292, which is the number of
shares of UtiliCorp common stock that Empire's stockholders will be entitled to
receive for each share of Empire common stock they held immediately before the
merger, assuming an average trading price of $24.00 per share of UtiliCorp
common stock. The actual exchange ratio will depend on the average trading price
for UtiliCorp's common stock during the 20 trading days ending on the third
trading day prior to the closing date of the merger.
9
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
We are providing the following financial information about UtiliCorp, Empire
and St. Joseph to aid you in your analysis of the financial aspects of the
merger. The information presented is a summary only, and you should read it
together with the historical financial statements and related notes of UtiliCorp
and Empire incorporated into this document by reference, the historical
financial statements and related notes of St. Joseph included in St. Joseph's
SEC filings and with the unaudited pro forma combined financial statements
beginning on page 49. See "Selected Unaudited Pro Forma Combined Financial
Information" beginning on page 12 for more information about where to obtain St.
Joseph's financial statement and related notes.
UTILICORP SELECTED HISTORICAL FINANCIAL INFORMATION
We derived the following information from UtiliCorp's consolidated audited
and unaudited financial statements.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,(1) YEAR ENDED DECEMBER 31,
------------------ -------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- --------- -------- -------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales......................... $3,801.0 $2,895.8 $12,563.4 $8,926.3 $4,332.3 $2,792.6 $2,398.1
Income before income taxes.... 74.9 68.6 218.8 223.8 186.5 131.8 146.5
Preference stock dividend
requirements................ -- -- -- .3 2.1 2.1 3.0
Earnings available for common
shares...................... 51.9 43.3 132.2 121.8 103.7 77.7 91.4
Diluted earnings per share.... .57 .53 1.63 1.51 1.46 1.14 1.37
Cash dividends per share...... .30 .30 1.20 1.17 1.17 1.15 1.13
Ratio of earnings to fixed
charges..................... 2.46x 2.23x 2.43x 2.46x 2.15x 1.93x 2.31x
</TABLE>
<TABLE>
<CAPTION>
AS OF
MARCH 31, AS OF DECEMBER 31,
---------- ------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1999 1998 1997 1996 1995 1994
---------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
BALANCE SHEET DATA:
Total assets.................. $ 6,396.3 $5,991.5 $5,113.5 $4,739.8 $3,885.9 $3,111.1
Long-term debt, net........... 1,708.8 1,375.8 1,358.6 1,470.7 1,355.4 976.9
Short-term debt (including
current maturities)......... 599.1 484.4 263.4 277.7 303.7 321.2
Preference stock, not
mandatorily redeemable...... -- -- -- 25.0 25.0 25.0
Preferred stock of
subsidiary.................. -- -- -- -- .4 .4
Company-obligated mandatorily
redeemable preferred
securities of partnership... 100.0 100.0 100.0 100.0 100.0 --
Common stock equity........... 1,485.5 1,446.3 1,163.6 1,158.0 946.3 906.8
Book value per common share... 16.14 15.83 14.43 14.49 13.73 13.49
</TABLE>
- ------------------------------
(1) Ratio of earnings to fixed charges is calculated on a twelve month basis for
the three month periods.
10
<PAGE>
EMPIRE SELECTED HISTORICAL FINANCIAL INFORMATION
We derived the following information from Empire's audited and unaudited
financial statements.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, (1) YEAR ENDED OF DECEMBER 31,
-------------------- -----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
--------- --------- --------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales................................. $ 54.7 $ 51.4 $ 239.9 $ 215.3 $ 206.0 $ 192.8 $ 177.8
Income before income taxes............ 8.1 5.3 44.5 36.8 33.8 30.2 30.4
Earnings available for common
shares.............................. 4.6 2.7 25.9 21.4 19.6 17.4 18.1
Diluted earnings per share............ .27 .16 1.53 1.29 1.23 1.18 1.32
Cash dividends per share.............. .32 .32 1.28 1.28 1.28 1.28 1.28
Ratio of earnings to fixed charges.... 3.44x 3.02x 3.32x 3.01x 3.11x 2.90x 3.16x
</TABLE>
<TABLE>
<CAPTION>
AS OF
MARCH 31, AS OF DECEMBER 31,
----------- -----------------------------------------------------
1999 1998 1997 1996 1995 1994
----------- --------- --------- --------- --------- ---------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets............................... $ 664.5 $ 653.3 $ 626.5 $ 597.0 $ 557.4 $ 520.2
Long-term debt, net........................ 246.1 246.1 196.4 219.5 194.7 185.0
Short-term debt (including current
maturities).............................. 22.0 14.5 51.0 7.5 14.0 16.0
Preferred stock............................ 32.6 32.6 32.9 32.9 32.9 32.9
Common stock equity........................ 230.5 229.8 219.0 213.1 193.1 173.8
Book value per common share................ 13.39 13.40 13.03 12.93 12.67 12.42
</TABLE>
- ------------------------------
(1) Ratio of earnings to fixed charges is calculated on a twelve month basis for
the three month periods.
11
<PAGE>
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following pro forma information combines the historical consolidated
financial statements of UtiliCorp and St. Joseph, including their respective
subsidiaries, and the historical financial statements of Empire, after
accounting for the St. Joseph merger and the Empire merger as purchase
transactions. The unaudited pro forma combined balance sheet gives effect to the
mergers as if they had occurred on March 31, 1999. The unaudited pro forma
combined statements of income assume the merger became effective on January 1,
1998. The pro forma information does not necessarily portray the historical
results or financial position that would have been achieved had the mergers been
in effect, and you should not construe it as a representation of future
operations. For more detailed pro forma information, including the assumptions
and adjustments made in calculating the pro forma information, please see
"Unaudited Pro Forma Combined Financial Information" on page 49.
You should read the following information together with the historical
financial statements of UtiliCorp, Empire and St. Joseph and all related notes.
The historical financial statements of UtiliCorp and Empire are incorporated
into this proxy statement/prospectus by reference. St. Joseph's historical
financial statements are included in St. Joseph's SEC filings, which are
available from the SEC at its public reference rooms, from commercial retrieval
services and at the website maintained by the SEC at HTTP://WWW.SEC.GOV. See
"Where You Can Find More Information" on page 65.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEAR ENDED
------------------------ DECEMBER 31,
1999 1998 1998
----------- ----------- --------------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE
AMOUNTS)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Sales................................................... $ 3,884.4 $ 2,976.9 $ 12,927.7
Income before income taxes.............................. 75.0 68.5 243.3
Earnings available for common shares.................... 52.1 43.6 149.5
Diluted earnings per share.............................. .46 .43 1.47
Cash dividends per share................................ .30 .30 1.20
</TABLE>
<TABLE>
<CAPTION>
AS OF
MARCH 31, 1999
-----------------------------------
(DOLLARS IN MILLIONS, EXCEPT PER
SHARE AMOUNTS)
<S> <C>
BALANCE SHEET DATA:
Total assets............................................ $ 7,925.8
Long-term debt, net..................................... 2,251.8
Short-term debt (including current maturities)........ 634.8
Company-obligated mandatorily redeemable
preferred securities of partnership................. 100.0
Common stock equity..................................... 1,985.1
Book value per common share............................. 17.64
</TABLE>
12
<PAGE>
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
In this document, UtiliCorp and Empire have made forward-looking statements
that are subject to risks and uncertainties. Forward-looking statements include
statements concerning possible or assumed future results of operations set
forth:
- under "Questions and Answers About the Merger";
- under "The Merger--Reasons for the Merger";
- in statements about the benefits that UtiliCorp or Empire may achieve as a
result of the merger, or about other effects of the merger or the future
development of UtiliCorp;
- in statements before, after or including the words "may," "will," "could,"
"should," "believe," "expect," "future," "potential," "anticipate,"
"intend," "plan," "estimate," or "continue" or similar expressions; and
- in other statements about matters that are not historical facts.
Various risks and uncertainties may cause actual results to differ
materially from the results that these statements express or imply. For
instance, some of the important factors that could cause UtiliCorp's or Empire's
actual results to differ materially from those anticipated include:
- weather, which can affect results significantly to the extent temperatures
differ from normal;
- the timing and extent of changes in energy commodity prices and interest
rates;
- cost and availability of purchased power and fuel;
- electric utility restructuring, competition and other changing business
and economic conditions;
- the pace and degree of regulatory changes, including environmental
regulation, in the U.S. and abroad;
- natural gas liquids prices and volumes, which are particularly volatile
and difficult to predict;
- the pace of well connections to UtiliCorp's gas gathering system;
- the value of the U.S. dollar relative to the British pound, Canadian
dollar, Australian dollar and New Zealand dollar;
- the continued expansion of the electric power markets and development of
liquid term markets;
- the outcome of rate proceedings;
- a significant delay in the expected completion of, and unexpected
consequences resulting from, the merger; and
- year 2000 technology issues and costs.
Please do not place undue reliance on these forward-looking statements,
which speak only as of the date of this proxy statement/ prospectus.
13
<PAGE>
THE SPECIAL MEETING
TIME AND PLACE
The special meeting will be held at 10:00 a.m., Joplin time, on Friday,
September 3, 1999 at the Holiday Inn, 3615 South Range Line, Joplin, Missouri
64804.
MATTERS TO BE CONSIDERED
At the special meeting, Empire stockholders will consider and vote upon a
proposal to adopt the merger agreement and approve the merger. You will also
consider any other matters that may properly come before the special meeting or
any adjournment or postponement of the special meeting.
RECORD DATE
Your board of directors has fixed the close of business on July 30, 1999 as
the record date for the special meeting. Only stockholders of record on the
record date are entitled to receive notice of and to vote at the special
meeting. On the record date, 17,234,780 shares of common stock were outstanding
and held by approximately 8,819 holders of record.
QUORUM
The presence, either in person or by proxy, of the holders of a majority of
the issued and outstanding shares of common stock entitled to vote at the
special meeting is necessary to constitute a quorum for the transaction of
business at the special meeting. Abstentions and broker non-votes are counted
for purposes of determining the presence of a quorum at the special meeting.
In the absence of a quorum at the special meeting or for any other reason,
the holders of a majority of the shares of common stock present in person or
represented by proxy at the special meeting may adjourn the special meeting for
the purpose of allowing additional time to solicit and obtain additional proxies
or votes or for any other purpose. At any reconvened meeting at which a quorum
is present, all proxies will be voted in the same manner as those proxies would
have been voted at the meeting at which the adjournment is taken, except for any
proxies that have been effectively revoked or withdrawn. Once a quorum is
present, Empire may reconvene the special meeting without notice to
stockholders, other than an announcement at the meeting at which the adjournment
is taken, unless the adjournment is for more than 30 days or a new record date
is set.
VOTES REQUIRED; EFFECT OF ABSTENTIONS AND NON-VOTES
Each outstanding share of common stock is entitled to one vote on each
matter to be considered at the special meeting. The favorable vote of the
holders of a majority of the outstanding shares of common stock entitled to vote
at the special meeting is required to adopt the merger agreement and approve the
merger. A stockholder's failure to vote will have the effect of a vote against
the adoption of the merger agreement and the approval of the merger. Brokers
generally will not have discretionary authority to vote shares of common stock
held in "street name" if they have not received instructions from the beneficial
owners. Broker non-votes will have the same effect as votes cast against the
merger agreement and the merger. On the record date, Empire's directors and
executive officers and their affiliates beneficially owned an aggregate of
114,279 shares of common stock, or approximately 0.66% of the shares
outstanding. Empire expects that these shares will be voted for adoption of the
merger agreement and approval of the merger.
VOTING AND REVOCATION OF PROXIES
All shares of common stock represented at the special meeting by properly
executed proxies received before or at the special meeting, unless those proxies
have been revoked, will be voted at the special meeting, including any
postponement or adjournment of the special meeting. If no instructions are
indicated, the proxies will be voted FOR adoption of the merger agreement and
approval of the merger. In addition, the
14
<PAGE>
persons designated in the proxies will have discretion to vote upon any other
matters that may properly come before the special meeting, including the right
to vote for any adjournment of the special meeting to solicit additional
proxies.
A person giving a proxy may revoke it at any time before the proxy is voted
at the special meeting. A proxy may be properly revoked by:
- writing to the Corporate Secretary of Empire, at 602 Joplin Street,
Joplin, Missouri 64801, facsimile number: (417) 625-5173;
- completing a new proxy card and sending it to the Corporate Secretary of
Empire at the address above, in which case the new proxy card will
automatically replace any earlier dated proxy card;
- voting in person at the special meeting (attendance at the special meeting
will not automatically revoke a proxy); or
- assuming that you instructed a broker to vote your shares, following your
broker's directions for changing those instructions.
Empire will appoint one or more inspectors, who may be its employees, to
determine, among other things, the number of shares of common stock represented
at the special meeting and the validity of the proxies submitted for vote at the
special meeting. The inspectors of election appointed for the special meeting
will tabulate votes cast by proxy and in person.
SOLICITATION OF PROXIES
Proxies are being solicited by and on behalf of your board of directors.
Directors, officers and employees of Empire may solicit proxies by mail, in
person, or by telephone, by facsimile or by other means of communication. Empire
has engaged Innisfree M&A Incorporated to assist it in distributing proxy
materials and contacting record and beneficial owners of common stock and have
agreed to pay Innisfree M&A Incorporated approximately $8,500, plus
out-of-pocket expenses, for its services. Brokerage houses, nominees,
fiduciaries and other custodians will be requested to forward soliciting
materials to beneficial owners and will be reimbursed for their reasonable
expenses incurred in sending proxy materials to beneficial owners.
EXPENSES
Empire will bear its own expenses in connection with the special meeting and
the solicitation of proxies from its stockholders, except that Empire and
UtiliCorp will share equally the costs of printing and filing this proxy
statement/prospectus.
SURRENDER OF CERTIFICATES
IF THE MERGER IS CONSUMMATED, HOLDERS OF EMPIRE COMMON STOCK WILL RECEIVE
INSTRUCTIONS REGARDING THE SURRENDER OF THEIR STOCK CERTIFICATES. STOCKHOLDERS
SHOULD NOT SEND THEIR STOCK CERTIFICATES UNTIL THEY RECEIVE THOSE INSTRUCTIONS.
15
<PAGE>
THE COMPANIES
UTILICORP
UtiliCorp is a multinational energy solutions provider with headquarters in
Kansas City, Missouri. A brief description of UtiliCorp's three business
segments follows:
REGULATED BUSINESSES. This segment includes UtiliCorp's domestic utility
generation, distribution and transmission businesses. Through it, UtiliCorp
strives to be a competitively priced, safe and reliable provider of electricity
and natural gas. The regulated businesses segment serves over 1.2 million
regulated gas and electricity customers and is UtiliCorp's largest business
segment in terms of earnings before interest and taxes.
UtiliCorp's regulated gas and electric service territory is located in eight
states. UtiliCorp believes that the geographic diversity of its regulated gas
and electric business limits earnings volatility resulting from a single adverse
regulatory ruling and lowers UtiliCorp's exposure to catastrophic events.
UtiliCorp has both winter-peaking and summer-peaking gas and electric utilities,
which increases the stability of UtiliCorp's earnings and cash flow.
The generation business within the regulated businesses segment provides
wholesale electricity to UtiliCorp's retail operations and to other utilities,
municipalities and large customers. It has 1,680 megawatts of regulated,
non-nuclear capacity located in Missouri, Kansas and Colorado.
AQUILA ENERGY. The Aquila Energy segment has three distinct businesses, as
follows:
- ENERGY MARKETING. Aquila Energy's wholesale energy marketing business is
conducted through various operating units, collectively referred to as
"energy marketing." Energy marketing is a gas and power marketing unit
with a marketing, supply and transportation network consisting of
relations with gas producers, local distribution companies and end-users
throughout the U.S. and Canada.
- GAS GATHERING AND PROCESSING. Aquila Energy includes Aquila Gas Pipeline
Corporation, which gathers and processes natural gas and natural gas
liquids. This company owns and operates a 3,403-mile intrastate gas
transmission and gathering network and four processing plants that extract
and sell natural gas liquids.
- INDEPENDENT POWER PROJECTS. Aquila Energy participates in the ownership
and operation of facilities in the independent and wholesale power
generation market. Consistent with UtiliCorp's overall strategy to
minimize risk through diversification, Aquila Energy has invested in
generation facilities that are geographically diverse and use a variety of
fuels and proven technologies. To date, Aquila Energy has made investments
in 18 projects located in seven states and Jamaica, including a
600-megawatt gas powered merchant plant currently under development.
INTERNATIONAL. UtiliCorp's international operations are managed separately
from the other two business segments. The international segment includes
UtiliCorp's investments in:
- UnitedNetworks Limited, an electric distribution company in New Zealand
(UtiliCorp owns 79%);
- United Energy Limited, an electric distribution company in Australia
(UtiliCorp owns 34%);
- Multinet Gas/Ikon Energy, natural gas distribution and retail businesses
in Australia (UtiliCorp owns 25.5%);
- Aquila Energy Limited (formerly United Gas Limited), a natural gas
marketing and transportation business in the United Kingdom (UtiliCorp
owns 100%); and
16
<PAGE>
- West Kootenay Power, a hydro-electric utility in British Columbia, Canada
(UtiliCorp owns 100%).
UtiliCorp continues to seek early entry into markets that provide a
combination of stable and attractive political and economic environments and
markets open or opening to competition in electric or natural gas sales.
EMPIRE
Based in Joplin, Missouri, Empire is an operating public utility which is
engaged in the generation, purchase, transmission, distribution and sale of
electricity. Empire currently serves approximately 145,000 electric customers in
parts of Missouri, Kansas, Oklahoma and Arkansas. It also provides monitored
security, fiber optic service and decorative lighting. In 1998, 99.6% of
Empire's gross operating revenues resulted from the sale of electricity. The
territory served by Empire's electric operations comprises an area of about
10,000 square miles and has a population of over 330,000. As of June 30, 1999,
Empire had 641 employees.
THE MERGER
BACKGROUND OF THE MERGER
In recent years, Empire has carefully followed developments in the electric
industry that have resulted in increased competition in the markets for
electricity. Empire has reviewed prospects for effective competition in light of
these developments, particularly the pressures on small and medium-sized utility
companies making it difficult for them to compete as effectively as larger
utilities. As a result, Empire began to develop strategic alternatives,
including possible business combinations.
During the past several years, Empire's management has had discussions with
other utility companies in light of possible strategic alliances, including
business combination transactions. As part of this effort, over the last two
years Empire has engaged in general conversations with UtiliCorp regarding
activities which might be mutually beneficial. One outgrowth of these
conversations was the signing of an agreement in June of 1998 for Empire to
market natural gas in its service area for UtiliCorp's subsidiary, Aquila
Energy.
As part of this continuing process, Empire conferred with Salomon Smith
Barney from time to time as its principal investment advisor and consulted with
Cahill Gordon & Reindel as its principal legal advisor, with respect to matters
covered in this discussion.
In August of 1998, Mr. John R. Baker, a member of the board of directors of
UtiliCorp, and Mr. Myron W. McKinney, President and Chief Executive Officer of
Empire, met to continue to assess areas of common interest between the two
companies. At this meeting the discussion was centered on the possibility of
UtiliCorp managing natural gas purchases for Empire, and UtiliCorp and Empire
participating in joint generation projects or other energy supply activities. At
the conclusion of this meeting Mr. Baker and Mr. McKinney agreed to continue
discussions.
Subsequent telephone conversations between Mr. Baker and Mr. McKinney led to
a meeting in Kansas City on October 21, 1998, where the possibility of a
business combination was discussed. UtiliCorp was represented at the meeting by
Mr. Richard C. Green, Chairman of the Board and Chief Executive Officer of
UtiliCorp, Mr. Baker and Mr. Robert L. Howell, Senior Vice President, Corporate
Development, and Empire was represented at the meeting by Mr. McKinney. At the
conclusion of this meeting it was agreed that the companies would enter into
confidentiality agreements and commence an exchange of information to determine
the feasibility of a business combination. The confidentiality agreements were
executed on October 29, 1998, and the companies initiated an information
exchange.
From the end of October 1998 through early January 1999, Mr. Baker and Mr.
McKinney held several telephone conversations to continue discussions regarding
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a possible business combination. On January 14, 1999, representatives of Empire
and UtiliCorp met at UtiliCorp's headquarters in Kansas City. Mr. Virgil E.
Brill, Vice President-Energy Supply, Mr. Robert B. Fancher, Vice
President-Finance, and Mr. McKinney represented Empire, and Messrs. Baker, Green
and Howell represented UtiliCorp. At this meeting, UtiliCorp presented its views
on the business rationale for a combination of the two companies and its views
on the valuation of Empire, alternative forms of consideration, accounting and
tax treatments associated with those alternative forms of consideration, social
issues and advantages for both organizations. Empire agreed to discuss these
issues internally and with its financial and legal advisors and to consider the
benefits of further discussions with UtiliCorp. Empire representatives agreed to
respond as soon as possible.
On January 27, 1999, Mr. McKinney met with Mr. Baker, Mr. Green, Mr. Howell
and Mr. James G. Miller, Senior Vice President of UtiliCorp, in Kansas City to
respond to certain aspects of the issues presented at the January 14 meeting.
The discussion centered on certain social issues including transition teams,
continued benefit plans, continued Empire presence in Joplin and community
support. Mr. McKinney also addressed valuation issues. Mr. McKinney stated that
if UtiliCorp's views on possible values were within a certain range he would
suggest to the Empire board of directors that discussions concerning a possible
merger of the companies continue on an exclusive basis. Empire's regular
quarterly board meeting was scheduled for February 4, 1999, and Mr. McKinney
requested that UtiliCorp respond prior to that meeting.
Messrs. Howell and Miller called Mr. McKinney on February 3, 1999 to further
discuss issues raised, including valuation, at the January 27 meeting. Messrs.
Howell and Miller reported that UtiliCorp was willing to continue discussions
with Empire on the terms previously discussed with a period of exclusivity.
On February 4, 1999, the Empire board received a report from Empire
management on the discussions to date with representatives of UtiliCorp. Empire
management recommended to the board that discussions with UtiliCorp continue on
an exclusive basis. Representatives of Salomon Smith Barney and Cahill Gordon
participated in that meeting. The board agreed with management's recommendation
to continue negotiations on an exclusive basis.
On February 11, 1999, Mr. McKinney met with Mr. Baker, Mr. Howell and Mr.
Miller in Kansas City to discuss an appropriate period for continuing
negotiations on an exclusive basis, as well as scheduling for due diligence and
for preparation of a merger agreement.
A meeting at which Empire had an opportunity to review UtiliCorp's business
was held at UtiliCorp's headquarters in Kansas City on March 10, 1999. Empire
was represented at the meeting by its senior management team and representatives
from Salomon Smith Barney. At the meeting UtiliCorp senior management and the
Empire representatives discussed a wide range of topics relating to UtiliCorp's
business.
On March 15, 1999, the companies commenced negotiating a merger agreement,
and during the weeks of March 16 and March 22, 1999, legal advisors for both
UtiliCorp and Empire commenced legal due diligence investigations and the
companies' other representatives and advisors continued due diligence
investigations. Following detailed discussion with Empire's legal and financial
advisors, the Empire board was briefed at a telephonic meeting on March 29,
1999, regarding the status of negotiations concerning the merger and the draft
merger agreement.
Meetings were held on April 1, 1999 and April 7, 1999, in Kansas City to
continue negotiating the terms of the merger. Both Empire and UtiliCorp were
represented by their respective senior management and legal advisors, and Empire
by its financial advisor, at these meetings. Telephone discussions continued
after these meetings between legal advisors for both parties and representatives
of management from both companies.
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The Empire board of directors was updated regarding the merger negotiations
at its quarterly meeting on April 22, 1999.
After that meeting, telephone conversations concerning the terms of the
merger and related matters and to finalize the terms of the merger agreement
continued among Empire's and UtiliCorp's legal advisors and Mr. McKinney and Mr.
Baker.
The Empire board of directors met on Friday, May 7, 1999, in St. Louis,
Missouri to consider the proposed merger. Mr. McKinney informed the board that
an offer to merge Empire into UtiliCorp had been received. Salomon Smith Barney
made a presentation to the Empire board concerning Salomon Smith Barney's
evaluation of the fairness of the consideration to be received by Empire's
stockholders in the proposed merger. Empire's management and legal advisors also
made presentations concerning the transaction.
Following a comprehensive and detailed discussion of various matters
including the merger agreement, the Empire board's duties and Salomon Smith
Barney's presentation, the meeting was adjourned and a meeting of the board to
consider further the proposed merger was scheduled for Monday, May 10, 1999.
The Empire board met again on Monday, May 10, 1999 to continue its
consideration of the proposed merger. At this meeting representatives of Salomon
Smith Barney made a presentation concerning, and provided the board with a
signed copy of, Salomon Smith Barney's fairness opinion. After reviewing matters
considered at this and prior meetings and considering the fairness opinion, as
well as the recommendation of Empire's senior management, the board approved, by
a unanimous vote, the merger agreement and the merger of Empire with UtiliCorp.
The merger agreement was executed and delivered by both companies following
the meeting of the Empire board of directors on May 10, 1999. The merger was
publicly announced on May 11, 1999.
REASONS FOR THE MERGER
Your board of directors believes that the merger will provide opportunities
for you, our customers, our employees and the Empire community to achieve
benefits that would not be available if Empire were to remain an independent
company and that the merger will result in a combined company that will be well
positioned to succeed in the increasingly competitive energy marketplace. As
part of the many benefits expected to result from the merger, your board
believes that:
- the merger consideration offers you an attractive premium over the trading
price of our common stock prior to the announcement of the merger;
- as a result of the merger, you will most likely benefit from increased
dividends;
- you will benefit by participating in the combined economic growth of the
service territories of UtiliCorp and Empire, and from the inherent
increase in scale, the market diversification and the resulting increased
financial stability and strength of the combined entity;
- there will likely be cost savings from a reduction in operating and
maintenance expenses and other factors;
- the combined enterprise can more effectively participate in the
increasingly competitive market for the generation of power; and
- UtiliCorp has significant non-utility operations and, as a larger
financial entity following the merger, should be able to manage and pursue
further non-utility diversification activities more efficiently and
effectively than Empire could as a stand-alone entity.
Your board of directors believes that these factors offer a potential
increase in earnings and stockholder value in excess of what could be achieved
by Empire alone, and that the merger will result in the creation of a larger,
financially stronger company, which will benefit Empire's stockholders,
customers, employees and community.
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RECOMMENDATION OF EMPIRE'S BOARD OF DIRECTORS
Your board of directors believes that the merger is fair and in the best
interests of Empire and its stockholders. Your board has unanimously approved
the merger agreement and the merger, and recommends that you vote "FOR" the
proposal to adopt the merger agreement and to approve the merger.
In considering the recommendation of your board with respect to the merger
agreement and the merger, you should be aware that certain members of Empire's
board and management have interests in the merger that are different than, or in
addition to, the interests of stockholders generally. The board was aware of
these interests and considered them, among other matters, in approving the
merger agreement. See "--Interest of Empire's Management and Directors in the
Merger" on page 27.
Throughout the merger discussions and in reaching its determination to
approve and recommend the merger, your board of directors was motivated by its
desire to position Empire to meet the challenges of the changing energy industry
environment and to provide you with an opportunity to realize the benefits and
lessen the risks presented by the changing environment.
In its deliberations on the merger agreement and the merger, your board of
directors consulted with management and the financial and legal advisors to
Empire. The factors considered by the board include those described below. While
all of these factors were considered by the board, the board did not make
determinations with respect to each factor. Rather, the board made its judgment
with respect to the merger agreement and the merger based on the total mix of
information available to it, and the judgments of individual directors may have
been influenced to a greater or lesser degree by their individual views with
respect to different factors.
The factors considered by your board of directors in evaluating the merger
agreement and the merger included the following:
- its knowledge of the business, operations, assets, properties, results of
operations and financial condition of Empire;
- Empire's strategic alternatives, including the prospects of positioning
Empire for the future and enhancing long-term stockholder value by
remaining an independent company or by effecting a strategic business
combination with another party;
- information concerning Empire's prospects as an independent company;
- information concerning the financial condition, results of operations,
businesses, and competitive position of UtiliCorp and prospects of a
business combination with UtiliCorp;
- the comparative market capitalization, debt-to-equity ratio and financial
strength of Empire and UtiliCorp and the financial effect of a combination
of Empire with UtiliCorp;
- the management philosophy of UtiliCorp, especially as it relates to
meeting the challenges of industry change;
- the prospects of regulatory approval of a combination with UtiliCorp;
- the current and prospective impact of regulation under various state and
federal laws;
- the effects of the changing regulatory environment and increased
competition in the energy industry;
- the recent trend in the utility industry toward consolidation and
strategic partnerships, including those in markets near Empire's service
territory, that create larger, stronger companies to face an increasingly
competitive environment;
- the exchange ratio and recent trading prices for Empire common stock and
UtiliCorp common stock;
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- UtiliCorp's dividend rate compared to Empire's dividend rate;
- the opportunity for Empire stockholders to receive a premium over the
market price for Empire common stock prior to announcement of the merger
agreement;
- the anticipated positive effects of the merger on Empire stockholders and
customers, including the ability to remain competitive, integrate
corporate and administrative functions and reduce operating costs;
- the terms of the merger agreement and other documents executed and to be
executed in connection with the merger, and the course of negotiations and
discussions leading to the execution of the merger agreement. See "The
Merger Agreement" beginning on page 36 and "--Background of the Merger"
beginning on page 17;
- the effect of the merger on Empire's employees and the communities in
which Empire operates;
- the tax and accounting treatment for the merger; and
- the presentations made by Salomon Smith Barney to the Empire board of
directors, including information regarding Empire as an independent entity
and Empire in combination with UtiliCorp and the opinion of Salomon Smith
Barney rendered to the Empire board of directors on May 10, 1999 that, as
of such date, the merger consideration was fair, from a financial point of
view, to Empire stockholders. See "--Opinion of Salomon Smith Barney Inc."
on this page.
During its deliberations regarding the merger agreement and the merger, the
board of directors also analyzed certain risks associated with the merger. The
board was advised regarding the risks of obtaining regulatory approval for the
merger, the potential for a negative effect on its credit rating pending the
merger and the likelihood and cost of obtaining the required consent of the
holders of Empire's first mortgage bonds to the amendment of the indenture under
which those bonds were issued, a condition to the closing of the merger. After
reviewing these matters thoroughly, the board determined that the benefits of
the merger outweighed these risks.
OPINION OF SALOMON SMITH BARNEY INC.
At the meeting of the Empire board of directors held on May 10, 1999,
Salomon Smith Barney delivered a written opinion dated May 10, 1999 stating
that, as of that date, the merger consideration was fair, from a financial point
of view, to holders of Empire common stock. On the date of this proxy statement/
prospectus, Salomon Smith Barney confirmed in writing its May 10, 1999 opinion,
stating that, as of the date of this proxy statement/ prospectus, the merger
consideration was fair, from a financial point of view, to holders of Empire
common stock. No limitations were imposed by the Empire board upon Salomon Smith
Barney regarding the investigation made or the procedures followed by Salomon
Smith Barney in rendering its opinion. The opinion of Salomon Smith Barney was
for the use and benefit of the Empire board in connection with its consideration
of the merger.
THE FULL TEXT OF THE WRITTEN OPINION OF SALOMON SMITH BARNEY DATED MAY 10,
1999 IS ATTACHED AS ANNEX B-1 TO THIS PROXY STATEMENT/ PROSPECTUS AND EXPLAINS
THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED AND LIMITATIONS ON
THE REVIEW UNDERTAKEN BY SALOMON SMITH BARNEY. THE FULL TEXT OF THE CONFIRMATION
OF THE MAY 10, 1999 SALOMON SMITH BARNEY OPINION IS ATTACHED AS ANNEX B-2. YOU
ARE URGED TO READ THE SALOMON SMITH BARNEY OPINION AND CONFIRMATION IN THEIR
ENTIRETY. THE SALOMON SMITH BARNEY OPINION IS DIRECTED ONLY TO THE FAIRNESS,
FROM A FINANCIAL POINT OF VIEW, OF THE MERGER CONSIDERATION TO HOLDERS OF EMPIRE
COMMON STOCK AND DOES NOT CONSTITUTE A RECOMMENDATION AS TO HOW YOU SHOULD VOTE
AT THE SPECIAL MEETING. THE SUMMARY OF THE OPINION IN THIS PROXY
STATEMENT/PROSPECTUS IS QUALIFIED BY REFERENCE TO THE FULL TEXT OF THE OPINION,
WHICH IS INCORPORATED INTO THIS PROXY STATEMENT/ PROSPECTUS BY REFERENCE.
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In connection with rendering its opinions, Salomon Smith Barney reviewed and
analyzed, among other things, the following:
- with respect to its May 10, 1999 opinion, a draft of the merger agreement
dated May 9, 1999 (which was identical in all material respects to the
executed merger agreement dated May 10, 1999) and, with respect to its
confirmation, the executed merger agreement dated May 10, 1999;
- publicly available information concerning Empire, including its Annual
Reports on Form 10-K for each of the years in the three year period ended
December 31, 1998;
- internal information prepared by Empire, primarily financial in nature,
including projections, concerning the business and operations of Empire
furnished to Salomon Smith Barney by Empire for purposes of its analysis;
- publicly available information concerning the trading of, and the trading
market for, Empire common stock;
- publicly available information concerning UtiliCorp, including its Annual
Reports on Form 10-K for each of the years in the three year period ended
December 31, 1998;
- other information, primarily financial in nature, including projections,
concerning the business and operations of UtiliCorp, furnished to Salomon
Smith Barney by UtiliCorp for purposes of its analysis;
- publicly available information concerning the trading of, and the trading
market for, UtiliCorp common stock;
- publicly available information with respect to certain other companies
that Salomon Smith Barney believed to be comparable to Empire or UtiliCorp
and the trading markets for certain of those other companies' securities;
and
- publicly available information concerning the nature and terms of other
transactions that Salomon Smith Barney considered relevant to its inquiry.
Salomon Smith Barney has also considered other information, financial
studies, analyses, investigations and financial, economic and market criteria
that it deemed relevant. Salomon Smith Barney also met with officers and
employees of Empire and UtiliCorp to discuss the foregoing as well as other
matters that it believed relevant to its inquiry.
In its review and analysis and in arriving at its opinion, Salomon Smith
Barney assumed and relied upon the accuracy and completeness of all of the
financial and other information provided to it or publicly available. Salomon
Smith Barney has not attempted independently to verify and has not assumed any
responsibility for verifying any of that information. Further it has relied upon
the assurances of management of Empire that they are not aware of any facts that
would make any of that information inaccurate or misleading. Salomon Smith
Barney has not conducted a physical inspection of any of the properties or
facilities of Empire or UtiliCorp. In addition, it has not made or obtained or
assumed any responsibility for making or obtaining any independent evaluation or
appraisal of any properties or facilities, nor has it been furnished with any
evaluations or appraisals of those properties or facilities.
With respect to financial projections, Salomon Smith Barney has been advised
by the management of Empire and UtiliCorp and has assumed that the financial
projections were reasonably prepared and reflect the best currently available
estimates and judgment of the management of Empire and UtiliCorp, as to the
future financial performance of Empire and UtiliCorp. Salomon Smith Barney
expresses no view with respect to such projections or the assumptions on which
they were based.
Salomon Smith Barney has also assumed that the merger will be completed in a
timely manner and in accordance with the terms of the merger agreement. In
rendering its opinion, Salomon Smith Barney noted its understanding that the
shares of UtiliCorp common stock
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delivered as merger consideration will be delivered on a tax-free basis.
In conducting its analysis and arriving at its opinion as expressed in this
proxy statement/ prospectus, Salomon Smith Barney has considered such financial
and other factors as it deemed appropriate under the circumstances including,
among others, the following:
- the historical and current financial position and results of operations of
Empire and UtiliCorp;
- the business prospects of Empire and UtiliCorp;
- the historical and current market for Empire common stock, UtiliCorp
common stock and for the equity securities of certain other companies that
it believes to be comparable to Empire or UtiliCorp; and
- the nature and terms of certain other merger transactions that it believes
to be relevant.
Salomon Smith Barney has also taken into account its assessment of general
economic, market and financial conditions as well as its experience in
connection with similar transactions and securities valuation generally. Salomon
Smith Barney has not been asked to consider, and its opinion does not address,
the relative merits of the merger as compared to any alternative business
strategy that might exist for Empire. Salomon Smith Barney's opinion necessarily
is based upon conditions as they exist and can be evaluated on the date of this
proxy statement/prospectus, and Salomon Smith Barney assumes no responsibility
to update or revise its opinion based upon circumstances or events occurring
after the date of this proxy statement/prospectus. Its opinion is limited to the
fairness, from a financial point of view, of the merger consideration to holders
of Empire common stock and does not address Empire's underlying business
decision to effect the merger or constitute a recommendation of the merger to
Empire. The Salomon Smith Barney opinion does not imply any conclusion as to the
likely trading range of the UtiliCorp common stock following the completion of
the merger, which may vary depending upon many factors including changes in
interest rates, market conditions, general economic conditions and other factors
that generally influence the price of securities.
In connection with its opinion, Salomon Smith Barney performed various
financial analyses, which it discussed with the Empire board of directors on May
10, 1999. The material portions of the analyses performed by Salomon Smith
Barney in connection with the rendering of its opinion are summarized below.
DISCOUNTED CASH FLOW ANALYSIS. Salomon Smith Barney performed a discounted
cash flow analysis of Empire to estimate a range of values for the Empire common
stock. The discounted cash flow analysis for Empire was based upon certain
financial forecasts for the years ended 1999 through 2002 prepared by the
management of Empire. As a substitute for the cash flows generated beyond 2002,
Salomon Smith Barney calculated a terminal year value for Empire by applying a
range of multiples of common stock price to earnings per share ("P/E multiples")
of 12.0x to 14.0x to terminal year net income, and then added to those values
the outstanding debt (net of cash) as of the end of the terminal year. The
unleveraged free cash flow amounts for the years ended 1999 to 2002, plus the
terminal value, were then discounted to the present using a range of discount
rates of 6.8% to 7.5%, based upon an analysis of the weighted average cost of
capital of Empire. Analysis of the forecast for Empire, without considering any
benefits derived from the merger, indicated an implied equity value range per
share of Empire common stock of $20.54 to $23.56.
Salomon Smith Barney performed a similar analysis of UtiliCorp to estimate a
range of values for the UtiliCorp common stock. The discounted cash flow
analysis for UtiliCorp was based upon certain base financial forecasts for the
years ended 1999 through 2002 provided by the management of UtiliCorp. These
base forecasts were subsequently adjusted by Salomon Smith Barney together with
Empire, and separate analyses were prepared upon each of the two sets of
financial forecasts. As a substitute for the cash flows generated beyond 2002,
Salomon
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Smith Barney calculated a terminal year value for UtiliCorp by applying a range
of P/E multiples of 12.0x to 15.0x to terminal year net income, and then added
to those values the outstanding debt (net of cash) as of the end of the terminal
year. The unleveraged free cash flow amounts for the years ended 1999 to 2002,
plus the terminal value were then discounted to the present using a range of
discount rates of 6.4% to 6.9%, based upon an analysis of the weighted average
cost of capital of UtiliCorp. Analysis of the base forecasts and adjusted
forecasts for UtiliCorp, without considering any benefits derived from the
merger, indicated an implied equity value range per share of UtiliCorp common
stock of $24.20 to $30.54 using the base forecasts, and $22.53 to $28.43 using
the adjusted forecasts.
PUBLIC MARKET VALUATION ANALYSIS. Using publicly available information,
Salomon Smith Barney performed a public market valuation analysis for each of
Empire and UtiliCorp based on a selected range of multiples as applied to 1998
and estimated 1999 and 2000 earnings per share figures, as well as historical
(December 31, 1998) book value per share figures, derived from the group of
comparable companies listed below. Salomon Smith Barney determined that the
following companies were comparable to Empire:
EMPIRE COMPARABLE COMPANIES
- Central Hudson
- CLECO
- Madison Gas & Electric
- Otter Tail Power
- SIGCORP
- WPS Resources
Salomon Smith Barney determined that the following companies were comparable
to UtiliCorp:
UTILICORP COMPARABLE COMPANIES
- GPU Inc.
- Reliant Energy
- New Century Energies
- CMS Energy
- Northern States Power
- NIPSCO Industries
- Texas Utilities
Estimated 1999 and 2000 earnings per share figures for Empire and UtiliCorp
were based on forecasts provided by the managements of both Empire and
UtiliCorp. Estimated 1999 and 2000 earnings per share for the Empire comparable
companies and UtiliCorp comparable companies were based on consensus estimates
published by First Call Corporation.
Salomon Smith Barney's analysis of the Empire comparable companies indicated
a range of book value per share multiples of 1.5x to 1.85x, resulting in an
implied equity range per share of Empire common stock of $20.39 to $25.14 based
on Empire's book value per share as of December 31, 1998 of $13.40, and a range
of P/E multiples based on 1998, estimated 1999 and estimated 2000 earnings per
share figures of 12.0x to 14.0x, 12.5x to 13.5x and 12.0x to 13.0x,
respectively, resulting in an implied equity value range per share of Empire
common stock of $18.36 to $21.42 based on Empire's 1998 earnings per share of
$1.53, $16.88 to $18.23 based on Empire's estimated 1999 earnings per share
figure of $1.35, and $18.19 to $19.71 based on Empire's estimated 2000 earnings
per share figure of $1.52, respectively. Based on these analyses, Salomon Smith
Barney derived an implied equity value range per share of Empire common stock of
$19.00 to $22.50.
Salomon Smith Barney's analysis of the UtiliCorp comparable companies
indicated a range of book value per share multiples of 1.4x to 1.8x, resulting
in an implied equity range per share of UtiliCorp common stock of $21.58 to
$27.75 based on UtiliCorp's book value per share as of December 31, 1998 of
$15.83, and a range of P/E multiples based on 1998, estimated 1999 and estimated
2000 earnings per share figures of 12.5x to 16.5x, 11.5x to 13.5x and 11.0x to
12.5x, respectively, resulting in an implied equity value range per share of
UtiliCorp common stock of $17.51 to $23.12 based on UtiliCorp's 1998 earnings
per share of $1.63, $20.56 to $24.13 based on UtiliCorp's
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estimated 1999 earnings per share figure of $1.79, and $22.77 to $25.88 based on
UtiliCorp's estimated 2000 earnings per share figure of $2.07, respectively.
Based on these analyses, Salomon Smith Barney derived an implied equity value
range per share of UtiliCorp common stock of $21.50 to $25.00.
PRIVATE MARKET VALUATION ANALYSIS. Using publicly available information,
Salomon Smith Barney performed an analysis of selected electric utility industry
acquisition transactions announced since 1997, including:
- UtiliCorp's acquisition of St. Joseph Light & Power;
- New England Electric System's acquisition of Eastern Utilities Associates;
- AES's acquisition of CILCORP;
- CalEnergy's acquisition of MidAmerican Energy; and
- Western Resources' acquisition of Kansas City Power & Light.
For each of these transactions, Salomon Smith Barney calculated, among other
things, multiples based on earnings per share figures for the last twelve
months, projected one year and two year forward earnings per share figures, book
value per share, firm value to cash flow and firm value to EBIT and EBITDA for
the last twelve months, as well as premiums to market price one day, five days
and one month prior to announcement. Based on this analysis, Salomon Smith
Barney derived a selected range of multiples based on these transactions and
applied this selected multiple range to Empire's 1998 earnings per share figure,
estimated 1999 earnings per share figure, estimated 2000 earnings per share
figure and historical (December 31, 1998) book value per share. Based on these
analyses, Salomon Smith Barney derived an implied equity value range per share
of Empire common stock of $24.50 to $32.00. Salomon Smith Barney also applied a
range of observed control premiums from these transactions to the $19.00 to
$22.50 range derived in the public market valuation analysis to derive an
implied valuation of $21.85 to $30.38.
HISTORICAL TRADING RATIOS ANALYSIS. Salomon Smith Barney analyzed the
historical ratios between the market prices per share of the Empire common stock
and the UtiliCorp common stock. The historical trading ratios were analyzed over
the five year period between May 7, 1994 and May 7, 1999. The historical trading
ratios were also analyzed for each of the two year, one year, six months, three
months and one month periods ended May 7, 1999. During the five year period, the
high, low and average historical trading ratios were 1.08, 0.75 and 0.93,
respectively. Over the two year, one year, six month, three month and one month
periods, the high, low and average historical trading ratios were 1.08, 0.75 and
0.89; 1.08, 0.82 and 0.93; 1.08, 0.85 and 0.97; 1.06, 0.86 and 0.96; and 0.98,
0.86 and 0.92, respectively. The collar range under the merger agreement of
1.135 to 1.341 shares of UtiliCorp common stock is a premium to the highest
historical trading ratio of 1.08 over the five year period.
PRO FORMA ANALYSIS OF THE MERGER. Salomon Smith Barney analyzed the pro
forma impact of the merger on an earnings per share basis to UtiliCorp's
stockholders and on a dividend per share basis to Empire's stockholders for the
fiscal years ended December 31, 1999 to December 31, 2001. The analysis was
performed utilizing stand-alone earnings and stand-alone dividends estimated for
the years ended 1999 through 2001 for UtiliCorp and Empire based on adjusted
forecasts for UtiliCorp and financial projections prepared by Empire's
management, in each case not taking into account the synergies associated with
the merger. Based upon such analysis, the merger would result in a dilution to
UtiliCorp's stockholders in earnings per share for 1999 ranging from 6.1% to
8.3%, for 2000 ranging from 4.9% to 7.2%, and for 2001 ranging from 4.7% to
7.0%, not taking into account the synergies associated with the merger, and an
accretion to Empire's stockholders in dividends per share for 1999 ranging from
6.4% to 25.8%, for 2000 ranging from 8.6% to 28.3% and for 2001 ranging from
10.6% to 30.7%.
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The preparation of a fairness opinion is a complex process not susceptible
to partial analysis or summary descriptions. The summary set forth above is not
and does not purport to be a complete description of the analyses underlying
Salomon Smith Barney's opinion or its presentation to the Empire board of
directors. Salomon Smith Barney believes that its analyses and the summary set
forth above must be considered as a whole and that selecting portions of its
analyses and the factors considered by it, without considering all such analyses
and factors, could create an incomplete view of the processes underlying the
analyses set forth in its opinion. In addition, no company used in the public
market valuation analysis summarized above is identical to Empire or UtiliCorp
or any of their business segments and no transaction used in the private market
valuation analysis summarized above is identical to the merger. Accordingly, an
analysis of the data described above necessarily involves complex considerations
and judgments concerning differences in financial and operating characteristics
of Empire, UtiliCorp or any of their business segments and other facts that
could affect the public trading value or the acquisition value of the companies
to which they are being compared.
In performing its analyses, Salomon Smith Barney made numerous assumptions
with respect to industry performance, general business, financial, market and
economic conditions and other matters, many of which are beyond the control of
Empire or UtiliCorp. The analyses which Salomon Smith Barney performed are not
necessarily indicative of actual values or actual future results, which may be
significantly more or less favorable than suggested by such analyses. Such
analyses were prepared solely as part of Salomon Smith Barney's analysis of the
fairness, from a financial point of view, of the merger consideration to holders
of Empire common stock. The analyses do not purport to be appraisals or to
reflect the prices at which a company or any of its businesses might actually be
sold or the prices at which any securities may trade at the present time or at
any time in the future. In addition, the opinion of Salomon Smith Barney and
Salomon Smith Barney's presentation to the Empire board of directors were among
the many factors taken into consideration by the Empire board of directors in
making its determination to approve the merger.
Pursuant to an engagement letter dated January 24, 1996, Empire agreed to
pay to Salomon Smith Barney:
(1) a retainer fee of $75,000, which was payable upon execution of the
engagement letter;
(2) a monthly fee of $25,000 (beginning one month following the execution of
the engagement letter) so long as Salomon Smith Barney is providing
services under the engagement letter; and
(3) a transaction fee of $2,500,000 plus an amount equal to approximately
3.0% of the excess, if any, of the aggregate consideration (as defined
in the engagement letter) payable in connection with the merger above
$336,000,000, payable 25% upon execution of the merger agreement or a
letter of intent to effect the merger, 25% upon shareholder approval of
the merger, and the remainder upon the consummation of the merger and
payable at the closing.
The fee described in clause (3) above is payable less any fees previously
paid under clauses (1) and (2). Empire also agreed, subject to certain
limitations, to reimburse Salomon Smith Barney for all reasonable fees and
disbursements of Salomon Smith Barney's counsel and all of Salomon Smith
Barney's reasonable travel and other out-of-pocket expenses incurred in
connection with its engagement, and agreed to indemnify Salomon Smith Barney and
certain related persons against various liabilities, relating to or arising out
of its engagement, including liabilities under the federal securities laws.
Salomon Smith Barney is an internationally recognized investment banking
firm that provides financial services in connection with a wide range of
business transactions. As part of its business, Salomon
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<PAGE>
Smith Barney regularly engages in the valuation of companies and their
securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements and other purposes. In the ordinary
course of its business, Salomon Smith Barney may actively trade the securities
of Empire and UtiliCorp for its own account and the accounts of its customers
and, accordingly, may at any time hold a long or short position in such
securities.
In addition, Salomon Smith Barney and its affiliates have rendered certain
investment banking and financial advisory services to Empire and UtiliCorp for
which Salomon Smith Barney received customary compensation. Salomon Smith Barney
and its affiliates (including Citigroup Inc.) may have other business
relationships with Empire, UtiliCorp and their affiliates. The Empire board of
directors retained Salomon Smith Barney based on Salomon Smith Barney's
expertise in the valuation of companies as well as its substantial experience in
transactions such as the merger.
INTERESTS OF EMPIRE'S MANAGEMENT AND DIRECTORS IN THE MERGER
You should be aware that certain members of Empire's management and board of
directors have certain interests in the merger that differ from, and are in
addition to, your interests generally. These interests, which are described
below, may present these individuals with potential conflicts of interest. The
board was aware of these interests and considered them, among other matters, in
adopting the merger agreement and approving the merger.
RESTRICTED STOCK AWARDS. Empire maintains a Stock Incentive Plan which
allows for the grant of restricted stock awards to selected employees. The
merger agreement provides that, at the effective time of the merger, all shares
of Empire restricted stock will be converted into fully-vested, unrestricted
shares of UtiliCorp common stock. The number of shares of UtiliCorp common stock
into which each share of restricted stock will be converted will be equal to the
number of shares of Empire restricted common stock multiplied by the Exchange
Ratio (as defined below in "The Merger Agreement--What Empire Stockholders Will
Receive" on page 36). See "The Merger Agreement--Stock Plans and Stock Options"
on page 44.
As of June 30, 1999, Empire's executive officers held the following shares
of unvested, restricted stock awarded pursuant to the Stock Incentive Plan:
<TABLE>
<CAPTION>
TOTAL SHARES OF
EXECUTIVE OFFICER RESTRICTED STOCK
- ------------------------------------ -----------------
<S> <C>
Myron W. McKinney................... 1,457
Virgil E. Brill..................... 638
Robert B. Fancher................... 531
Clifford A. (Tony) Stark............ 524
William L. Gipson................... 381
-----
TOTAL............................. 3,531
-----
-----
</TABLE>
Empire intends to continue to grant restricted stock awards pursuant to the
Stock Incentive Plan until the consummation of the merger.
STOCK UNITS. Empire also maintains a Stock Unit Plan for Directors to
provide those directors who have never been officers of Empire the opportunity
to accumulate retirement benefits in the form of common stock units. The merger
agreement provides that, at the effective time of the merger, all stock units in
respect of shares of Empire common stock will be converted into stock units in
respect of shares of UtiliCorp common stock. The number of UtiliCorp stock units
into which each Empire stock unit will be converted will be equal to the number
of Empire stock units held by a director multiplied by the Exchange Ratio.
Robert L. Lamb, a current director of Empire, is not able to participate in this
plan because he was a former President of Empire. See "The Merger
Agreement--Stock Plans and Stock Options" on page 44.
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<PAGE>
As of June 30, 1999, Empire's directors held the following stock units:
<TABLE>
<CAPTION>
DIRECTOR TOTAL STOCK UNITS
- ------------------------------------ -----------------
<S> <C>
Melvin F. Chubb..................... 5,336
Dwain Hammons....................... 10,168
Ross C. Hartley..................... 6,709
Jack R. Herschend................... 3,556
Francis E. Jeffries................. 9,609
Roy E. Mayes........................ 5,336
Mary M. Posner...................... 758
------
TOTAL............................. 41,472
------
------
</TABLE>
Empire intends to continue to grant stock units pursuant to its existing
Stock Unit Plan for Directors until the consummation of the merger.
EMPLOYEE STOCK PURCHASE PLAN. Empire's Employee Stock Purchase Plan permits
the grant of options to all regular, full-time employees to purchase common
stock at 90% of either market value at the date of grant or market value at the
date of exercise, whichever is lower. The merger agreement provides that, at the
effective time of the merger, UtiliCorp will automatically assume each
outstanding option to purchase Empire common stock. After the merger is
completed, the holders of Empire options will have options exercisable for the
number of shares of UtiliCorp common stock equal to the number of shares of
Empire common stock covered by the options immediately before the effective
time, multiplied by the Exchange Ratio. See "The Merger Agreement--Stock Plans
and Stock Options" on page 44.
As of June 30, 1999 Empire's executive officers held the following options
under the Employee Stock Purchase Plan:
<TABLE>
<CAPTION>
EXECUTIVE OFFICER OPTIONS
- --------------------------------------------- -----------
<S> <C>
Myron W. McKinney............................ 915
Virgil E. Brill.............................. 0
Robert B. Fancher............................ 0
Clifford A. (Tony) Stark..................... 800
William L. Gipson............................ 915
-----
TOTAL...................................... 2,630
-----
-----
</TABLE>
CHANGE OF CONTROL AGREEMENTS. Empire has a Severance Plan which provides
certain key employees with severance benefits. Five of Empire's executive
officers and 23 other key employees have entered into one-year agreements under
the Severance Plan which are automatically extended for three years following a
change in control and may be terminated thereafter. The approval of the merger
by you will constitute a change of control for the purposes of the Severance
Plan.
A participant in the Severance Plan is entitled to receive certain benefits
in the event of certain involuntary terminations of employment, including
terminations by the employee following certain changes in duties, benefits, etc.
that are treated as involuntary terminations, occurring within three years after
a change in control, or a voluntary termination of employment occurring between
twelve and eighteen months after a change in control. A senior officer
participant, which would include Messrs. McKinney, Fancher, Brill, Stark and
Gipson, would be entitled to receive benefits of three times that participant's
annual base salary and average annual incentive compensation.
A participant who is not a senior officer, which would include members of
management other than those listed in the previous sentence, would receive
approximately two weeks of severance compensation for each full year of
employment with Empire with a minimum of 17 weeks. Payments to participants
resulting from involuntary terminations are to be paid in a lump sum within 30
days following termination, while payments resulting from voluntary termination
are paid in monthly installments and cease if the participant becomes otherwise
employed.
In addition, all restricted stock held by a participant vests upon a
voluntary or involuntary termination after a change in control. Also, all
participants who qualify for payments under the Severance Plan will continue to
receive benefits for a specified period of time under the Empire health,
insurance and other employee benefit plans in existence at the time of the
change in control, and senior officer participants will be entitled to
supplemental payments equal to the additional benefits they would have earned
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under Empire's qualified and nonqualified defined benefit plans at the time they
begin to receive benefits. If any payments under the Severance Plan are subject
to the excise tax on "excess parachute payments" under Section 4999 of the
Internal Revenue Code, senior officer participants are also entitled to an
additional amount essentially designed to put them in the same after-tax
position as if this excise tax had not been imposed.
CONTINUATION OF EMPLOYEE BENEFITS. For at least 18 months after the
completion of the merger, UtiliCorp will maintain employee benefits for both
current and former employees of Empire, including officers, that, on a
benefit-by-benefit basis, are no less favorable than the benefits provided
pursuant to Empire's employee plans and programs in effect prior to the
effective time of the merger. After this 18 month period, UtiliCorp will provide
Empire's current employees, including officers, benefits that are no less
favorable than those provided to similarly situated UtiliCorp employees.
UtiliCorp will also honor all obligations to Empire's current employees,
including officers, under the Severance Plan described above. Also after the 18
month period described above, UtiliCorp will provide health and life benefits
for Empire's existing retirees and employees, including officers, who retire
within 18 months of the completion of the merger which are in the aggregate at
least comparable to the benefits provided to similarly situated UtiliCorp
retirees or active employees. See "The Merger Agreement--Employee Benefit
Matters" on page 43.
ADVISORY BOARD. For a period of three years after the closing of the
merger, UtiliCorp will maintain an advisory board comprised of five persons
designated by Empire, which may include existing officers or directors of
Empire, and approved by UtiliCorp. The advisory board will review and consult
with UtiliCorp with respect to its business operations, including its charitable
and civic activities, in Empire's current service area. Each member of the
advisory board will receive an annual fee of $15,000 and will be reimbursed for
related out-of-pocket expenses. UtiliCorp will provide members of the advisory
board the same indemnification rights that are provided to UtiliCorp's directors
under its certificate of incorporation and bylaws. See "The Merger
Agreement--Advisory Board" on page 45.
INDEMNIFICATION OF DIRECTORS AND OFFICERS. For a period of at least six
years after the effective time of the merger, the merger agreement requires
UtiliCorp to indemnify each present and former Empire director, officer,
employee or agent to the same extent and on the same terms provided for in
Empire's articles of incorporation and bylaws and to the fullest extent
permitted by applicable law. The indemnification will be against all damages and
expenses paid in connection with any proceeding or investigation based on the
fact that the indemnified party is or was an officer or director and pertaining
to any matter arising out of actions occurring before the merger closes. For a
period of six years after the effective time, UtiliCorp is also required to
maintain in effect directors' and officers' liability insurance covering
Empire's officers and directors. However, UtiliCorp is not required to pay
annual premiums in excess of 200% of Empire's current annual premiums. See "The
Merger Agreement--Indemnification and Insurance" on page 46.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion is a summary of certain material U. S. federal
income tax consequences of the merger, and does not purport to be a complete
analysis or description of all potential tax effects of the merger. The
following discussion is based on the Internal Revenue Code, Treasury Regulations
under the Internal Revenue Code, and administrative rulings and pronouncements
and judicial decisions in effect as of the date of this proxy
statement/prospectus, all of which are subject to change, possibly with
retroactive effect, and to differing interpretations. The discussion below does
not address the effects of the merger under any state, local or foreign tax
laws.
The tax consequences of the merger for you may vary depending upon your
particular situation. Certain Empire stockholders (including insurance
companies, tax exempt organizations,
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<PAGE>
financial institutions, broker dealers, persons who do not hold Empire common
stock as capital assets, individuals who received Empire common stock as
compensation, individuals who hold Empire common stock as part of a position in
a "straddle" or as part of a "hedging" transaction for federal income tax
purposes, and individuals with a "functional currency" (as defined by the
Internal Revenue Code) other than the U.S. dollar and non-U.S. persons) may be
subject to special rules not discussed below. You are urged to consult your tax
advisor with respect to the specific tax consequences to you as a result of the
merger, including the effect of U.S. federal, state and local, and foreign and
other tax rules, and the effect of possible changes in tax laws.
It is a condition to Empire's obligation to complete the merger that Empire
receive an opinion from its counsel, Cahill Gordon & Reindel, and it is a
condition to UtiliCorp's obligation to complete the merger that UtiliCorp
receive an opinion from its counsel, Blackwell Sanders Peper Martin LLP, in each
case to the effect that the merger will be treated for federal income tax
purposes as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code.
In rendering their opinions, Cahill Gordon & Reindel and Blackwell Sanders
will make certain assumptions and will receive and rely upon representations,
unverified by counsel, contained in certificates of Empire, UtiliCorp and
possibly others. The inaccuracy of any of those assumptions or representations
might jeopardize the validity of the opinions rendered.
Assuming that, consistent with the opinions of counsel referred to above,
the merger is treated for federal income tax purposes as a reorganization within
the meaning of Section 368(a) of the Internal Revenue Code, and based upon the
assumptions and representations referred to in the preceding paragraph, for
federal income tax purposes:
- Empire and UtiliCorp will each be a party to the reorganization within the
meaning of Section 368(b) of the Internal Revenue Code;
- neither Empire nor UtiliCorp will recognize any gain or loss as a result
of the merger;
- an Empire stockholder who exchanges his or her Empire common stock for
UtiliCorp common stock:
-- will not recognize any income, gain or loss on that exchange, except
as described below with respect to cash that is received instead of a
fractional share of UtiliCorp common stock;
-- will have an aggregate tax basis in the shares of UtiliCorp common
stock received equal to the aggregate tax basis in his or her shares
of Empire common stock exchanged; and
-- will have a holding period for the shares of UtiliCorp common stock
received that includes the holding period for his or her shares of
Empire common stock exchanged.
- An Empire stockholder who exchanges his or her Empire common stock for
cash:
-- will generally recognize capital gain or loss equal to the difference
between the amount of cash received and the stockholder's adjusted
tax basis in the Empire common stock; and
-- will recognize a long-term capital gain or loss if the stockholder
has held the Empire common stock for more than one year.
- An Empire stockholder who receives cash instead of a fractional share of
UtiliCorp common stock:
-- will be treated as having received the fractional share pursuant to
the merger and then as having exchanged it for cash in a transaction
generally giving rise to capital gain or loss;
-- will recognize a capital gain or loss equal to the difference between
the
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<PAGE>
cash received and the ratable portion of the tax basis of the Empire
common stock exchanged that is allocated to the fractional share; and
-- will recognize a long-term capital gain or loss if the stockholder
has held the Empire common stock for more than one year.
In the event that either too many Empire stockholders elect to receive cash
or too many Empire stockholders are to receive UtiliCorp common stock, some
stockholders may receive both cash and UtiliCorp common stock in exchange for
their shares of Empire common stock. If this happens, the Empire stockholder:
- will generally realize gain or loss equal to the difference between the
sum of the cash and the fair market value of the UtiliCorp common stock
received and the stockholder's adjusted tax basis in the Empire common
stock;
- will recognize gain, however, only to the extent of the lesser of such
gain or the cash received by the stockholder, and will not recognize any
loss;
- will have an aggregate adjusted tax basis in the UtiliCorp common stock
received equal to the stockholder's adjusted basis in the Empire common
stock, decreased by the amount of cash received by the stockholder and
increased by the amount of the gain, if any, recognized by the
stockholder; and
- will have a holding period for the UtiliCorp common stock received that
includes the holding period for his or her shares of Empire common stock
exchanged.
There are complicated rules on how to determine the amount and character,
ordinary or capital, of the gain recognized when a stockholder receives cash and
UtiliCorp common stock. Under most circumstances, however, an Empire stockholder
who receives both cash and UtiliCorp common stock will recognize a capital gain.
A stockholder who receives cash and (1) who would have owned 1% or more of the
UtiliCorp common stock after the merger, if that stockholder had exchanged all
of his or her Empire common stock for UtiliCorp common stock, or (2) who
exercises control over UtiliCorp corporate affairs, should consult his or her
tax advisor regarding the character of any gain recognized in the merger.
The tax opinions referred to above are not binding on the IRS or any court
and do not preclude the IRS or a court from reaching a contrary conclusion.
Moreover, no rulings have been or will be sought from the IRS concerning the tax
consequences of the merger. If the merger were not treated as a reorganization
under Section 368 of the Internal Revenue Code then, among other consequences:
- all Empire stockholders regardless of whether they received cash or
UtiliCorp common stock would recognize gain or loss equal to the
difference between the aggregate fair market value of the cash and
UtiliCorp common stock received and the aggregate tax basis of the Empire
stock exchanged; and
- Empire would be taxed as if, at the time of the merger, Empire had
disposed of its assets in a fully taxable transaction for an amount based
on the aggregate merger consideration.
DISSENTING STOCKHOLDERS. An Empire stockholder who exercises dissenters'
rights as described below under "Dissenters' Rights" should, in general, treat
the difference between the tax basis of the Empire common stock held by that
stockholder and the amount received through the exercise of those rights as
capital gain or loss for federal income tax purposes.
BACKUP WITHHOLDING; INFORMATION REPORTING. Certain noncorporate stockholders
of Empire may be subject to backup withholding at a rate of 31% on cash payments
received. Backup withholding will not apply, however, to a stockholder who:
- furnishes a correct taxpayer identification number and certifies that he
or she is not subject to backup withholding on the substitute Form W-9
included in the letter
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<PAGE>
of transmittal that will be delivered to Empire stockholders after the
merger is completed;
- provides a certificate of foreign status on Form W-8; or
- is otherwise exempt from backup withholding.
A stockholder who fails to provide the correct taxpayer identification
number on Form W-9 may be subject to a $50 penalty imposed by the IRS.
REGULATORY MATTERS
The merger cannot be completed until UtiliCorp and Empire receive certain
regulatory approvals, all of which are presently anticipated to be received by
the end of 2000. The following is a summary of the material regulatory
requirements affecting the merger.
STATE APPROVALS. Empire and UtiliCorp are subject to the jurisdiction of
the Missouri Public Service Commission and the Kansas State Corporation
Commission and the merger must be approved by those two commissions. The failure
of the Missouri Commission to state, prior to the closing of the merger, its
policy on the extent to which UtiliCorp may recover the premium paid for the
Empire common stock may be taken into account in determining whether UtiliCorp
may terminate the merger agreement. Upon adoption of the merger agreement and
approval of the merger by Empire's stockholders, UtiliCorp and Empire will file
a joint application with the Missouri and Kansas commissions requesting that
they approve the merger.
The merger must also be approved by the public service commissions in
Colorado, Iowa, Minnesota and West Virginia, where UtiliCorp has utility
operations, and by the public service commissions in Arkansas and Oklahoma where
Empire has utility operations. UtiliCorp and Empire are preparing applications
to file with these commissions requesting that they approve the merger. The
applications may be filed before or after Empire's stockholders adopt the merger
agreement and approve the merger.
FERC APPROVAL. The approval of the Federal Energy Regulatory Commission is
required in order to complete the merger. Upon adoption of the merger agreement
and approval of the merger by Empire's stockholders, Empire and UtiliCorp will
file a joint application with the FERC requesting that it approve the merger.
ANTITRUST CONSIDERATIONS. The Hart-Scott-Rodino Antitrust Improvements Act
of 1976 provides that certain transactions, such as the merger, may not be
consummated until certain information has been submitted to the U.S. Department
of Justice and the Federal Trade Commission and specified waiting period
requirements have been satisfied.
If the merger is not consummated within 12 months after the expiration of
the waiting period, Empire and UtiliCorp would have to submit new information
under the Hart-Scott Act, and a new waiting period would apply. Accordingly,
Empire and UtiliCorp intend to make their filings under the Hart-Scott Act at a
time when they believe that the waiting period will expire within 12 months
before the merger's anticipated closing.
OTHER. The approval by the Federal Communications Commission of the transfer
of FCC licenses from Empire to UtiliCorp is required to complete the merger.
Empire also possesses municipal franchises and environmental permits and
licenses that may require the consent of the franchiser or licensor to the
merger, or that may need to be renewed, replaced or transferred as a result of
the merger. Neither Empire nor UtiliCorp anticipates any significant
difficulties at the present time in obtaining any of these approvals, consents,
renewals, replacements or transfers.
GENERAL. Under the merger agreement, Empire and UtiliCorp have agreed to
use their reasonable best efforts to obtain all regulatory approvals necessary
or advisable to consummate the merger. However, various other parties may seek
to oppose the granting of the approvals or seek to impose conditions and terms
in the approvals. While Empire and UtiliCorp believe that they will receive the
required regulatory approvals for the merger, there can be no assurance as to
the timing of the approvals or
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<PAGE>
the ability to obtain the approvals on acceptable terms.
The merger cannot occur until UtiliCorp and Empire obtain final orders
approving the merger from the FERC and the state commissions described above. In
addition, none of the approvals may contain terms and conditions which would
require UtiliCorp or Empire to take or not take any action that would cause a
Material Adverse Effect (as defined in "The Merger Agreement--Conditions of the
Merger" on page 38) on UtiliCorp or a material adverse effect on the financial
condition, income, assets, business or prospects of the business operations
presently owned and operated by Empire. We cannot predict whether the approvals
granted will contain terms or conditions that would cause those effects.
ACCOUNTING TREATMENT
UtiliCorp will account for the merger as a purchase. Under this method of
accounting, the acquired assets and liabilities are recorded at their fair
values. To the extent that the amount paid in the merger exceeds the fair value
of the acquired assets and liabilities, the excess will be recorded as
acquisition premium and will be amortized over a period of years.
DISSENTERS' RIGHTS
If the merger is completed, Empire stockholders will be entitled to
appraisal rights under Kansas law, if they:
- did not vote to adopt the merger agreement and approve the merger;
- elected to receive UtiliCorp common stock in exchange for their Empire
common stock or did not make an election;
- would receive cash because too many Empire stockholders are to receive
UtiliCorp common stock; and
- otherwise comply with Section 17-6712 of the Kansas General Corporation
Code.
THE FOLLOWING IS A SUMMARY OF THE MATERIAL ASPECTS OF SECTION 17-6712. THE
FULL TEXT OF SECTION 17-6712 IS REPRINTED AS ANNEX C TO THIS PROXY
STATEMENT/PROSPECTUS. YOU SHOULD READ ANNEX C IN ITS ENTIRETY.
To perfect appraisal rights under Section 17-6712 with respect to your
shares of Empire common stock, you:
- must not vote for the adoption of the merger agreement and the approval of
the merger;
- must be required to accept for your Empire common stock something other
than UtiliCorp common stock and cash instead of fractional shares (i.e.,
you must have elected to receive UtiliCorp common stock or made no
election with respect to consideration to be received in the merger and
you must be required to accept cash instead of UtiliCorp common stock
because too many Empire stockholders are to receive UtiliCorp common
stock); and
- must deliver to Empire a written objection to the merger before the vote
on the proposal to adopt the merger agreement and approve the merger.
In order not to vote in favor of the adoption of the merger agreement and
the approval of the merger, you must either:
- not return a proxy card and not vote in person in favor of the adoption of
the merger agreement and the approval of the merger;
- return a proxy card with the "Against" or "Abstain" box checked;
- vote in person against the adoption of the merger agreement and the
approval of the merger; or
- register in person an abstention from the proposal to adopt the merger
agreement and approve the merger.
If you wish to assert your appraisal rights you must be the record holder of
your shares of common stock on the date the written objection to the merger is
made. Only a holder of record is entitled to assert appraisal rights for the
shares of common stock registered in that holder's name. Moreover, to preserve
your
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<PAGE>
appraisal rights, you must continue to hold your shares through the effective
time of the merger. Accordingly, if you are the record holder of shares of
common stock on the date the written objection to the merger is made, but
subsequently transfer shares prior to the effective time of the merger, you will
lose any right to appraisal in respect of those shares.
ALL WRITTEN OBJECTIONS TO THE MERGER MUST BE MAILED OR DELIVERED TO:
The Empire District Electric Company
602 Joplin Street
Joplin, Missouri 64801
Attention: Corporate Secretary
Alternatively, a written objection may be delivered to the Corporate
Secretary at the special meeting prior to the vote on the merger agreement.
Within 10 days after the effective time of the merger, UtiliCorp will mail
to each Empire stockholder who properly delivered to Empire a written objection
to the merger and did not vote for the adoption of the merger agreement and the
approval of the merger (a "dissenting stockholder") written notice that the
merger has become effective. A dissenting stockholder who desires to pursue his
or her rights as a dissenting stockholder then has 20 days from the date
UtiliCorp mails such notice in which to demand in writing from UtiliCorp payment
of the value of his or her shares of Empire common stock. UtiliCorp must then
pay to the dissenting stockholder the value of his or her shares determined in
the following manner. If, within 30 days following the 20-day period provided
for dissenting stockholders to demand payment, UtiliCorp and any dissenting
stockholder fail to agree on the value of such holder's Empire common stock,
then either UtiliCorp or any dissenting stockholder may, within four months
after the expiration of that 30-day period, file a petition with the district
court of Kansas and demand a determination by an appraiser or appraisers
appointed by the district court of the value of the shares of Empire common
stock of all dissenting stockholders. All dissenting stockholders, whether or
not residents of the State of Kansas, would be parties to such action. UtiliCorp
is not under any obligation, and has no present intention, to file a petition
with respect to appraisal of the value of the Empire common stock.
If a petition for an appraisal is timely filed by a dissenting stockholder
and a copy served upon UtiliCorp, UtiliCorp then must file with the clerk of the
Kansas district court a list containing the names and addresses of the Empire
stockholders who have demanded appraisal of their Empire shares and with whom
agreements as to the value of their shares have not been reached. After notice
to the Empire stockholders as required by Section 17-6712, the district court
may conduct a hearing on such petition to determine those Empire stockholders
entitled to appraisal rights.
The court would then appoint one or more appraisers to determine the value
of the shares of Empire common stock of all of the dissenting stockholders. In
determining the value of the dissenting stockholders' shares, the common stock
will be valued as of the effective time of the merger without regard to any
element of value arising from the expectation or accomplishment of the merger,
and the appraisers will base their valuation upon such investigation as seems
proper to the appraisers. The appraisers must give all interested parties a
reasonable opportunity to submit pertinent evidence of the value of the shares
of Empire common stock. After receiving the report of the appraisers, the court
then will determine the value of the shares of Empire common stock of all of the
dissenting stockholders and will direct payment of that value, together with
such interest as the court orders, if any, to the appropriate parties. The costs
of the appraisal, including reasonable fees and expenses of the appraisers, but
not including fees and expenses of counsel and experts retained by any party,
would be assessed against the parties as the court deems equitable. In any case,
however, the cost of mailing and publishing the required notices of the
proceedings would be assessed against UtiliCorp.
Empire stockholders considering seeking appraisal should be aware that the
value of their shares as determined under Section 17-6712 could be more than,
the same as or less than the
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<PAGE>
consideration they are entitled to receive under the terms of the merger
agreement, and that investment banking opinions as to fairness from a financial
point of view are not necessarily opinions as to value under Section 17-6712.
At the time of appointing the appraisers, the court will require the
dissenting stockholders to submit their stock certificates to the clerk of the
court, to be held by the clerk pending the appraisal proceedings. If any Empire
stockholder fails to comply with that direction, the court will dismiss the
proceedings as to that stockholder.
Any stockholder who has duly demanded appraisal in compliance with Section
17-6712 will not, after the effective time of the merger, be entitled to vote
those shares of Empire common stock or to receive payment of dividends or other
distributions with respect to those shares, except for dividends or
distributions payable to holders of record of Empire common stock at a date
prior to the effective time of the merger and with certain other limited
exceptions as set forth in Section 17-6712(i).
Any Empire stockholder who properly objects to the merger but fails to
perfect, or effectively withdraws or loses, his or her right to appraisal, will
then have the right to receive the consideration for his or her shares in
accordance with the terms of the merger agreement. In addition, any Empire
stockholder who has demanded payment for his or her shares may only withdraw
that demand and accept the consideration offered by the merger agreement if the
stockholder receives the written consent of UtiliCorp.
RESTRICTIONS ON RESALES BY EMPIRE AFFILIATES
All shares of UtiliCorp common stock issued in connection with the merger
will be registered under the Securities Act of 1933. These shares will be freely
transferable unless they are held by "affiliates" of Empire. The term
"affiliates" is defined under the Securities Act, and includes, among others,
Empire's directors and certain of its officers. Affiliates may resell their
shares only in transactions permitted by Rule 145 under the Securities Act,
under an effective registration statement, or as otherwise permitted under the
Securities Act.
Empire has agreed to use its reasonable best efforts to deliver to
UtiliCorp, on or prior to the effective time of the merger, a letter agreement
executed by each affiliate of Empire. The letter agreement will state, among
other things, that the affiliate will not sell or otherwise dispose of any
shares of UtiliCorp common stock issued to him or her in connection with the
merger in violation of the Securities Act or the rules and regulations of the
SEC.
STOCKHOLDER RIGHTS PLAN
Empire has in place a stockholder rights plan which provides for, among
other things, certain distributions to Empire's stockholders upon an actual or
prospective change of control of Empire. The plan has an anti-takeover effect
because a distribution under the plan may cause substantial dilution to a person
or group that attempts to acquire a substantial number of shares without board
approval.
In connection with executing the merger agreement, the board approved an
amendment of the rights plan to render it inoperative as to the execution and
delivery of the merger agreement and the consummation of the merger. The
amendment to the rights plan is dated as of May 10, 1999.
CONDUCT OF BUSINESS AFTER THE MERGER
Upon the closing of the merger, Empire will cease to exist as a separate
legal entity, and UtiliCorp will continue as the merger's surviving corporation.
After the closing of the merger, UtiliCorp intends to operate the utility
businesses of Empire as a division of UtiliCorp under Empire's present name and
will maintain an office in Joplin, Missouri. It is not anticipated that
UtiliCorp's board of directors or management will change as a result of the
merger.
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THE MERGER AGREEMENT
The following is a summary of the material terms of the merger agreement, a
copy of which is attached as Annex A to this proxy statement/ prospectus and is
incorporated in this proxy statement/prospectus by reference. This summary is
qualified by reference to the full text of the merger agreement. We urge you to
carefully read the merger agreement in its entirety.
THE MERGER AND ITS EFFECTIVE TIME
The merger agreement provides that, subject to the satisfaction of various
conditions, including the adoption of the merger agreement and the approval of
the merger by Empire's stockholders, Empire will be merged into UtiliCorp at the
effective time. The "effective time" is the time at which the merger becomes
effective under Delaware law.
WHAT EMPIRE STOCKHOLDERS WILL RECEIVE
The merger agreement provides that each share of Empire common stock will be
converted, at the election of the holder, into $29.50 of cash or UtiliCorp
common stock with an Average Trading Price of $29.50, in each case, subject to
adjustment depending on the value of UtiliCorp common stock prior to the merger
as described further in this subsection and subject to the limitations described
below under the heading "Adjustment to Amount of Cash or Common Stock Received
by Empire Stockholders."
Empire stockholders who elect to receive UtiliCorp common stock will receive
for each share of Empire common stock they own a number of shares of UtiliCorp
common stock equal to the Exchange Ratio, as defined below. Empire stockholders
who elect to receive cash will receive for each share of Empire common stock an
amount of cash equal to the Average Trading Price, as described below, of a
share of UtiliCorp common stock multiplied by the Exchange Ratio.
The term "Exchange Ratio" means:
- 1.341, if the Average Trading Price of a share of UtiliCorp common stock
is less than $22.00;
- A number, rounded to the nearest hundred-thousandth, equal to $29.50
divided by the Average Trading Price of a share of UtiliCorp common stock,
if the Average Trading Price of a share of UtiliCorp common stock is
greater than or equal to $22.00, but less than or equal to $26.00; and
- 1.135, if the Average Trading Price of a share of UtiliCorp common stock
is greater than $26.00.
The term "Average Trading Price" means the average of the daily closing
prices for a share of UtiliCorp common stock on the NYSE Composite Transactions
Reporting System for the 20 trading days ending on the third NYSE trading day
prior to the closing date of the merger.
If the Average Trading Price is between $22.00 and $26.00, Empire
stockholders will receive $29.50 worth of cash or UtiliCorp common stock for
each Empire share. Empire stockholders will receive less per share if the
Average Trading Price is below $22.00 and will receive more per share if the
Average Trading Price is above $26.00
In addition, because the Exchange Ratio is based on an average and will be
determined three trading days before the closing date, it is possible that the
value of the stock consideration received by an Empire stockholder at the
effective time of the merger will be higher or lower than the value determined
on the calculation date, depending on the price movement of UtiliCorp common
stock after the Exchange Ratio is calculated. There can be no assurance that the
price of UtiliCorp common stock will not decline from the market price used in
calculating the Exchange Ratio.
Cash will be paid for any fractional share of UtiliCorp common stock to
which an Empire
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stockholder would otherwise be entitled. The number of shares of UtiliCorp
common stock each Empire stockholder will receive will be adjusted for any stock
dividend, stock split, reclassification or other similar change relating to
UtiliCorp's common stock.
Each share of UtiliCorp common stock issued to Empire stockholders carries
with it a preference stock purchase right issued under UtiliCorp's stockholders
rights plan. See "Description of UtiliCorp Capital Stock-- Stockholder Rights
Plan" on page 55 for a description of these purchase rights.
MANNER OF ELECTING CASH OR STOCK
UtiliCorp and Empire will mail copies of the election forms to each record
holder of Empire common stock approximately 30 days prior to the anticipated
effective time of the merger. On the form each Empire stockholder will be
required to:
- elect to receive cash;
- elect to receive UtiliCorp common stock; or
- indicate that the holder has no preference as to the receipt of cash or
UtiliCorp common stock.
If an Empire stockholder fails to complete and return an election form, that
stockholder will be deemed to have indicated that he or she has no preference as
to the receipt of cash or UtiliCorp common stock and will receive UtiliCorp
common stock unless an adjustment to the merger consideration is required, as
set forth below.
All election forms must be completed, signed and returned to the exchange
agent prior to 5:00 p.m., Eastern Time, on the last NYSE trading date before the
third business day before the anticipated effective time. Any Empire stockholder
may revoke and change his or her election prior to that deadline.
ADJUSTMENTS TO AMOUNT OF CASH OR COMMON STOCK RECEIVED BY EMPIRE STOCKHOLDERS
The merger agreement limits the amount of cash and UtiliCorp common stock
that will be exchanged for Empire common stock. Under the merger agreement:
- no more than 50% of the shares of Empire common stock can be converted
into cash; and
- no more than 19.9% of the total number of shares of UtiliCorp common stock
outstanding at the effective time of the merger can be issued or issuable
in exchange for Empire common stock, restricted stock, stock units or
options to acquire Empire common stock.
If holders of more than 50% of the outstanding shares of Empire common stock
elect to receive cash, the exchange agent will use a lottery system to determine
which holders that made a cash election will receive cash. All other holders
will receive UtiliCorp common stock. Also, if there is a reasonable possibility
that the merger will not qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code because the amount of cash paid to
the Empire stockholders exceeds the limits established by federal income tax
law, the number of shares of Empire common stock that are exchanged for cash
will be reduced using the lottery system explained above or another method that
the exchange agent considers fair and equitable and the holders of these shares
will receive UtiliCorp common stock.
If too many Empire stockholders are to receive UtiliCorp common stock,
UtiliCorp will have the option to limit the number of Empire shares that will be
converted into UtiliCorp common stock. The following two-step procedure will be
used to determine which Empire stockholders will receive UtiliCorp common stock
and which will receive cash:
- First, all Empire stockholders that either did not return an election form
or indicated on their election form that they did not have a preference as
to the receipt of UtiliCorp common stock or cash will have all or a
portion of their shares converted into cash on a pro rata basis; and
- Second, if necessary, all Empire stockholders that elected to receive
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UtiliCorp common stock will have their shares converted into cash on a pro
rata basis until the total number of shares of UtiliCorp common stock
issued or issuable in the transaction is no more than 19.9% of the then
issued and outstanding shares of UtiliCorp common stock.
MANNER OF CONVERTING SHARES
After the effective time of the merger, the exchange agent will mail a
transmittal letter to each record holder of shares of Empire common stock. The
transmittal letter will include instructions to be followed by Empire's
stockholders in exchanging their shares.
After receiving the transmittal letters, Empire's stockholders will
surrender their stock certificates to the exchange agent for cancellation,
together with a signed copy of the transmittal letter. In return, they will
receive (1) a check for the appropriate amount of cash and/or (2) certificates
for the appropriate number of shares of UtiliCorp common stock, plus a check for
the value of any fractional shares. A holder of unsurrendered Empire stock
certificates will not be entitled to receive dividends or other distributions
payable by UtiliCorp until those stock certificates are surrendered. Upon
surrender, those dividends or distributions will be paid to the holder without
interest. EMPIRE STOCKHOLDERS SHOULD NOT SEND IN THEIR EMPIRE STOCK CERTIFICATES
UNTIL THEY RECEIVE A TRANSMITTAL LETTER.
If there is a transfer of Empire common stock that is not registered in
Empire's stock transfer records, then a check for the proper amount of cash
and/or a certificate representing the proper number of shares of UtiliCorp
common stock may be issued to the person to whom the stock was transferred.
However, before that payment is made, that person must deliver the certificate
representing the Empire common stock to the exchange agent, along with documents
that prove that the transfer has been properly made and that all transfer taxes
have been paid.
In addition, if any Empire share certificate has been lost, stolen or
destroyed, then a check for the proper amount of cash and/or a certificate
representing the proper number of shares of UtiliCorp common stock may be
delivered to the Empire stockholder who claimed his or her certificate was lost,
stolen or destroyed. However, before that payment is made, the stockholder must
deliver to the exchange agent (1) an affidavit stating that the certificate was
lost, stolen or destroyed and (2) an appropriate indemnity or surety bond. All
amounts paid to that stockholder will be paid without interest and will be
reduced by the amount of any applicable withholding taxes.
CONDITIONS TO THE MERGER
The closing of the merger is subject to the satisfaction of several
conditions, including:
- The holders of a majority of the outstanding shares of Empire's common
stock must adopt the merger agreement and approve the merger;
- UtiliCorp and Empire must obtain all final regulatory approvals under
applicable laws and no final regulatory approval may require UtiliCorp or
Empire to take or not take any action that would cause a Material Adverse
Effect (as defined below) on UtiliCorp or a material adverse effect on the
financial condition, income, assets, business, or prospects of the
business operations presently owned and operated by Empire;
- there must be no legal restraint or prohibition preventing the closing of
the merger;
- a registration statement registering the shares of UtiliCorp common stock
to be issued in the merger must be declared effective, which has already
happened, and no stop order suspending the registration statement's
effectiveness may be in effect; and
- the shares of UtiliCorp common stock to be issued in the merger must have
been approved for listing on the NYSE.
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UtiliCorp's obligation to complete the merger is subject to the satisfaction
or waiver of further conditions, including:
- the representations and warranties of Empire set forth in the merger
agreement must be true and correct, subject to certain exceptions, on the
closing date and UtiliCorp must have received a certificate to that effect
signed by Empire's CEO;
- Empire must have complied in all material respects with all agreements and
covenants required to be complied with by it under the merger agreement
prior to the effective time and UtiliCorp must have received a certificate
to that effect signed by Empire's CEO;
- UtiliCorp must have received an opinion from its legal counsel, Blackwell
Sanders Peper Martin LLP, that the merger will be treated for federal
income tax purposes as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code;
- no Material Adverse Effect on Empire may have occurred, and no fact or
circumstance may exist which is reasonably likely to cause a Material
Adverse Effect on Empire; and
- Empire's Indenture of Mortgage and Deed of Trust must have been amended,
to the reasonable satisfaction of UtiliCorp, to delete certain
restrictions on the payment of dividends. This condition has already been
met.
Empire's obligation to complete the merger is also subject to the
satisfaction or waiver of additional conditions, including:
- the representations and warranties of UtiliCorp set forth in the merger
agreement must be true and correct, subject to certain exceptions, on the
closing date and Empire must have received a certificate to that effect
signed by UtiliCorp's CEO;
- UtiliCorp must have complied in all material respects with all agreements
and covenants required to be complied with by it under the merger
agreement prior to the effective time and Empire must have received a
certificate to that effect signed by UtiliCorp's CEO;
- Empire must have received an opinion from its legal counsel, Cahill Gordon
& Reindel, that the merger will be treated for federal income tax purposes
as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code; and
- no Material Adverse Effect on UtiliCorp may have occurred, and no fact or
circumstance may exist which is reasonably likely to cause a Material
Adverse Effect on UtiliCorp.
For the purpose of this proxy statement/prospectus, "Material Adverse
Effect" means, with respect to Empire or UtiliCorp, a material adverse effect on
the business, properties, assets, liabilities (contingent or otherwise),
financial condition, results of the operations or prospects of that company and
its subsidiaries, taken as a whole, or a material adverse effect on the ability
of that company to perform its obligations under or to consummate the
transactions contemplated by the merger agreement.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains various representations and warranties made by
Empire and UtiliCorp that relate to, among other things:
- corporate organization, good standing and corporate power;
- regulation as a public utility;
- corporate authorization;
- regulatory approvals;
- no conflicts with, or violations of, material agreements and applicable
laws resulting from the signing and delivery of the merger agreement and
completion of the transactions contemplated by the merger agreement;
- capital structure;
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- documents and reports filed with the SEC;
- the absence of any material undisclosed liabilities;
- litigation;
- the absence of certain changes or events;
- general compliance with material agreements and applicable laws;
- taxes;
- environmental matters;
- employee benefits;
- transactions with affiliates;
- the accuracy of information supplied to the other party;
- finders' fees;
- applicability of anti-takeover statutes;
- year 2000 matters; and
- ownership of the other party's common stock.
In addition, Empire made several other representations and warranties that
relate to, among other things:
- intellectual property;
- labor matters;
- opinion of Salomon Smith Barney Inc.;
- amendment to its stockholder rights agreement to permit the merger;
- insurance; and
- appraisal rights for Empire stockholders.
In addition, UtiliCorp represented that it has no intention of reducing its
current annual dividend.
None of the representations and warranties made by UtiliCorp or Empire will
survive beyond the effective time.
CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME
The merger agreement provides that, prior to the effective time, Empire will
conduct its operations in the ordinary course of business consistent with past
practice and will use reasonable efforts to preserve existing business and
employee relationships. In addition, subject to certain exceptions, Empire has
agreed to certain limitations on its ability to do certain things without
UtiliCorp's consent, including:
- amend its charter documents in a manner that would be materially adverse
to UtiliCorp or its stockholders;
- amend the terms of any of its outstanding equity securities;
- merge or consolidate with any other entity;
- issue securities, except for certain issuances to directors and employees
under existing stock plans and for issuances pursuant to existing contract
terms;
- sell assets;
- incur material liens on any material asset;
- make material loans, capital contributions or investments;
- declare or pay dividends, except for regular quarterly cash dividends of
not more than $.32 per share on its common stock and for dividends on its
preferred stock;
- enter into agreements with respect to the voting of its capital stock;
- take various specified actions with respect to its capital stock (e.g.,
redeem or reclassify its common stock);
- make acquisitions of businesses or material assets;
- incur material indebtedness or guarantee any indebtedness, other than in
certain circumstances including in connection with redeeming its preferred
stock;
- terminate or modify existing material contracts or enter into new ones
other than in the ordinary course of Empire's regulated utility business;
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- make capital expenditures in excess of 110% of budgeted amounts;
- make any material changes to accounting policies and procedures;
- make material tax elections;
- make changes in compensation, benefits or benefit plans;
- take actions that might reasonably result in a material breach of the
merger agreement;
- enter into new lines of business or make any material change in the line
of business in which it engages, except for the sale of the assets of its
water distribution business;
- take actions that would result in the failure of the merger to qualify as
a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code; and
- make filings to change its rates or otherwise effect agreements with
regulatory agencies that would have a material adverse effect on the
benefits associated with the merger.
The merger agreement also contains limitations on UtiliCorp's ability to do
certain things subject to certain exceptions without Empire's consent,
including:
- amend its charter documents in a manner that would be materially adverse
to Empire or its stockholders;
- issue any Class A common stock;
- declare or pay any dividend except for stock dividends and its regular
quarterly cash dividends;
- enter into any agreements with respect to the voting of its capital stock;
- reclassify any of its common stock or Class A common stock;
- make material changes to accounting policies and procedures;
- take actions that might reasonably result in a material breach of the
merger agreement;
- take any action that would cause Empire stockholders to receive anything
in the merger other than cash or UtiliCorp common stock or securities or
other consideration that UtiliCorp common stock may be converted into
prior to the effective time of the merger;
- take actions that would have a material adverse effect on the interests of
the holders of Empire common stock;
- repurchase UtiliCorp common stock so that the number of outstanding shares
is less than the number on the date the merger agreement was signed except
for repurchases in accordance with UtiliCorp's normal repurchase policy;
- take actions that would result in the failure of the merger to qualify as
a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code; and
- make filings to change its rates or otherwise effect agreements with
regulatory agencies that would have a material adverse effect on the
benefits associated with the merger.
NO SOLICITATION
TAKEOVER PROPOSALS. The merger agreement provides that neither Empire nor
any of its affiliates may, prior to the effective time:
- solicit, initiate or knowingly encourage the submission of any Takeover
Proposal, as defined below;
- enter into any agreement with respect to a Takeover Proposal; or
- participate in any discussions or negotiations regarding any Takeover
Proposal or any proposal that may reasonably be expected to lead to any
Takeover Proposal.
If, however, at any time prior to the adoption of the merger agreement and
the
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approval of the merger by Empire's stockholders, Empire's board of directors
determines, in good faith, after consulting with its financial and legal
advisors, that failing to take one or both of the following actions could
reasonably be expected to be a breach of its fiduciary duties to Empire's
stockholders, then Empire may:
- furnish information relating to Empire under a customary confidentiality
agreement; and
- participate in discussions, investigations or negotiations regarding a
Takeover Proposal.
However, Empire may take either or both of these steps only in response to a
Takeover Proposal that is not solicited by Empire or its affiliates and that is
made after the date of the merger agreement. Empire also must give UtiliCorp
three days prior written notice of its decision to take these steps prior to
doing so. In addition, Empire agreed to cease, upon the signing of the merger
agreement, all existing discussions with any company other than UtiliCorp that
could reasonably be expected to lead to any Takeover Proposal, except to the
extent otherwise permitted by the merger agreement.
A "Takeover Proposal" means any proposal to acquire:
- 20% or more of the shares of Empire common stock, whether by purchase,
merger, consolidation, share exchange, business combination or other
similar transaction; or
- 20% or more of the assets of Empire.
SUPERIOR PROPOSALS. The merger agreement provides that Empire's board of
directors will recommend the approval of the merger agreement and the merger to
Empire's stockholders and that it may not:
- withdraw or modify its approval or recommendation of the merger agreement
and the merger;
- approve or recommend any Takeover Proposal; or
- cause Empire to enter into a letter of intent, agreement in principle,
acquisition agreement or similar agreement relating to any Takeover
Proposal.
If, however, at any time prior to the adoption of the merger agreement and
approval of the merger by Empire's stockholders, Empire's board of directors
determines, in good faith, after consulting with its financial and legal
advisors, that it has received a Takeover Proposal that constitutes a Superior
Proposal, as defined below, and that failure to terminate the merger agreement
and accept the Superior Proposal could reasonably be expected to be a breach of
its fiduciary duties to Empire's stockholders, then Empire's board of directors
may:
- withdraw or modify its approval or recommendation of the merger agreement
and the merger;
- approve or recommend a Superior Proposal, as defined below; or
- terminate the merger agreement.
In each case, however, Empire's board of directors must take the action
prior to the approval of the merger agreement by Empire's stockholders.
Furthermore, Empire's board of directors may approve or recommend a Superior
Proposal or terminate the merger agreement only after giving UtiliCorp three
business days prior written notice that Empire's board of directors has received
a Takeover Proposal that constitutes a Superior Proposal. The notice must
specify the material terms of the Superior Proposal and identify the company
making the Superior Proposal.
A "Superior Proposal" means any proposal by a third party to acquire:
- more than 50% of the shares of Empire common stock outstanding, whether by
a tender or exchange offer, merger, share exchange or other business
combination; or
- all or substantially all of Empire's assets;
but only if Empire's board of directors determines in good faith, based on the
written advice of an independent financial advisor, that
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the terms of the proposal are more favorable to Empire and its stockholders than
the merger. In making this determination, Empire's board of directors must take
into account any changes to the merger agreement's financial and other
contractual terms proposed by UtiliCorp in response to the proposal and all
other relevant financial and strategic considerations.
EMPLOYEE BENEFIT MATTERS
COMPARABLE BENEFITS. The merger agreement provides that for at least 18
months following the effective time of the merger, UtiliCorp will provide
benefits to employees and former employees of Empire that are, on a
benefit-by-benefit basis, no less favorable than those provided by Empire as of
the date of the merger agreement and will make the UtiliCorp employee stock
purchase plan available to employees of Empire as soon as permissible after the
effective time of the merger. After that, UtiliCorp will provide Empire
employees with benefits that are no less favorable than those offered to
similarly situated UtiliCorp employees.
In addition, following the 18-month period beginning at the effective time
of the merger and for so long as UtiliCorp maintains a health care plan for its
active or former employees, UtiliCorp will provide health care and life benefits
to individuals who are retirees of Empire as of the effective time of the
merger, as well as to any Empire employee who retires within 18 months of the
effective time of the merger and who meets the eligibility requirements of
Empire's retiree health care and life plans. The retiree health care and life
benefits provided by UtiliCorp must be at least comparable in the aggregate to
the benefits provided to similarly situated UtiliCorp retirees or, if better,
the benefits provided to active UtiliCorp employees, except that coverage after
the employee reaches age 65 may be coordinated with Medicare in a manner similar
to how Empire coordinated with Medicare on the date of the merger agreement.
After a period of 18 months after the effective time of the merger, UtiliCorp
may increase the portion of the premiums paid by Empire retirees by 15% per year
until that portion is comparable to the portion of the premium paid by similarly
situated UtiliCorp retirees. In addition, UtiliCorp may modify the cost sharing
ratio and the premium rates in accordance with the past practice of Empire.
Also, beginning with the first open enrollment period following the 18 month
period after the effective time of the merger, UtiliCorp has agreed to provide
all Empire employees and retirees with the option to purchase UtiliCorp dental
and vision coverage at premiums equal to those paid by active and retired
UtiliCorp employees.
HONORING EMPIRE'S EXISTING OBLIGATIONS. The merger agreement provides that
UtiliCorp will comply with the terms of all of Empire's employee benefit plans
in effect prior to the effective time and will honor all of Empire's obligations
to provide severance pay and other severance benefits to Empire employees.
UtiliCorp may amend or terminate any plan, if the plan so provides, after the
effective time so long as any amendment or termination does not conflict with
UtiliCorp's obligations summarized under "Comparable Benefits" above. In
addition, UtiliCorp will honor all vacation, holiday, sickness and personal days
accrued by Empire's employees.
PARTICIPATION IN UTILICORP'S BENEFIT PLANS. The merger agreement provides
that Empire's employees will be given full credit under any UtiliCorp benefit
plan in which they become participants for their service with Empire as if that
service was rendered to UtiliCorp. If necessary, however, there will be an
offset to avoid the duplication of benefits. In addition, UtiliCorp will waive
any preexisting condition limitation applicable to Empire's employees, other
than any limitation already in effect with respect to an employee that has not
been satisfied as of the effective time of the merger under the similar Empire
employee benefit plan. UtiliCorp will also recognize the dollar amount of all
expenses incurred by Empire employees during the calendar year in which the
effective time occurs for purposes of satisfying the calendar year deductibles
and co-payment limitations for that year under UtiliCorp's benefit plans.
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NON-DISCRIMINATION. UtiliCorp has agreed that, for two years after the
effective time, all workforce reductions will be made on a fair and equitable
basis without regard to whether employment was with UtiliCorp or Empire, and all
work force reductions after the effective time will be done in accordance with
all applicable collective bargaining agreements and laws. In addition, employees
whose jobs are eliminated during the two year period will be entitled to
participate on a fair and equitable basis in any placement programs offered by
UtiliCorp.
STOCK PLANS AND STOCK OPTIONS
EMPIRE STOCK OPTIONS. The merger agreement provides that at the effective
time, all rights under outstanding Empire stock options or other rights to
acquire Empire stock will be converted into rights for UtiliCorp common stock.
UtiliCorp will assume each right to acquire Empire stock in accordance with its
terms and the terms of the plan under which it was issued. Following the
effective time:
- each Empire option to acquire Empire stock assumed by UtiliCorp may be
exercised only for shares of UtiliCorp common stock;
- the number of shares of UtiliCorp common stock subject to each converted
option will equal:
(1) the number of shares of Empire common stock subject to the option
immediately prior to the effective time, multiplied by
(2) the Exchange Ratio; and
- the per share exercise price for each Empire stock option will be adjusted
by dividing:
(1) the per share exercise price for the stock option immediately prior
to the effective time, by
(2) the Exchange Ratio.
On the exercise of a stock option, a cash payment will be made instead of
issuing any fractional shares of UtiliCorp common stock in an amount based upon
the closing price of UtiliCorp common stock on the last NYSE trading day of the
calendar month immediately preceding the date of exercise.
EMPIRE RESTRICTED STOCK AWARDS. The merger agreement provides that at the
effective time, all Empire restricted stock awards will be converted into
fully-vested, unrestricted shares of UtiliCorp common stock. Each share of
Empire restricted common stock will be converted into a number of shares of
UtiliCorp common stock equal to the Exchange Ratio. However, the holder of any
Empire restricted stock will receive cash instead of any fractional shares of
UtiliCorp common stock resulting from the conversion.
EMPIRE STOCK UNIT AWARDS. The merger agreement provides that at the
effective time, all stock unit awards granted to Empire directors with respect
to Empire common stock will be converted into stock units with respect to
UtiliCorp common stock. Each Empire stock unit will be converted into a number
of UtiliCorp stock units equal to the Exchange Ratio. However, the holder of any
Empire stock unit will receive cash instead of any fractional share of UtiliCorp
common stock underlying the UtiliCorp stock units resulting from the conversion.
REGISTRATION. The merger agreement provides that as soon as practicable
following the effective time, UtiliCorp must file with the SEC a registration
statement registering enough shares of UtiliCorp common stock to cover the
exercise of the Empire stock options that were converted into UtiliCorp stock
options, as described above. Alternatively, UtiliCorp may cause the Empire stock
options to be deemed options issued under a UtiliCorp stock plan for which
enough shares of UtiliCorp common stock have already been registered. The
applicable registration statement must be kept effective for so long as any
converted option remains outstanding.
TRANSFER RESTRICTIONS. The merger agreement provides that all transfer
restrictions applicable to Empire stock options awarded under Empire stock plans
will remain in full force and effect after the assumption of the options by
UtiliCorp at the effective time.
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ANTI-TAKEOVER STATUTES
Empire made a representation in the merger agreement that it had opted out
of the Kansas Control Share Acquisition Statute. That statute restricts certain
business transactions and is described under "Comparative Rights of Empire
Stockholders and UtiliCorp's Stockholders--Anti-Takeover Statutes" on page 62.
Empire and UtiliCorp also made representations that to the best of each's
knowledge, no other anti-takeover law will apply to the merger. If the merger
does become subject to an anti-takeover law, Empire and UtiliCorp have agreed to
take whatever actions may be necessary to eliminate or minimize the effect of
the anti-takeover law and ensure that the merger takes place in accordance with
the merger agreement's terms.
ADVISORY BOARD
The merger agreement provides that UtiliCorp will maintain an advisory board
for a period of at least three years following the closing date. The advisory
board will consist of five persons nominated by Empire and approved by
UtiliCorp. The advisory board will meet at least quarterly, and will review and
consult with UtiliCorp regarding Empire's business operations in its current
service area, including UtiliCorp's civic, charitable and business and customer
development activities in that area.
CHARITABLE AND ECONOMIC DEVELOPMENT SUPPORT
The merger agreement provides that for a period of at least five years
following the effective time of the merger, UtiliCorp will provide charitable
contributions and community support within Empire's current service area at
levels that are at least comparable to the level of charitable contributions and
community support provided by Empire within that area during the two years prior
to the effective time of the merger.
TERMINATION OF DRIP
The merger agreement provides that Empire will either terminate its Dividend
Reinvestment and Stock Purchase Plan at least 30 days prior to the anticipated
effective time of the merger or it will cause the plan to be administered only
as an "open market" purchase plan during the 30 days prior to the anticipated
effective time of the merger so that shares issuable under the plan would be
purchased in the open market.
DIVIDEND RECORD DATE
The merger agreement provides that Empire and UtiliCorp will coordinate with
each other to establish a record date in the quarter in which the merger closes
for the payment of any dividends on Empire's common stock in order to assure
that you are entitled to receive a dividend on either Empire common stock or on
UtiliCorp common stock received in the merger, but not both.
AMENDMENT
Empire and UtiliCorp may amend the merger agreement at any time before or
after Empire's stockholders approve the merger agreement, but only if authorized
by their boards of directors. After Empire's stockholders approve the merger
agreement, however, no amendment may be made which by law requires further
approval by Empire's stockholders, without that further approval. In any event,
the merger agreement may only be amended in a writing signed by both Empire and
UtiliCorp.
TERMINATION OF THE MERGER AGREEMENT
Prior to the effective time of the merger, the merger agreement may be
terminated as follows:
- by mutual written consent of Empire and UtiliCorp;
- by either Empire or UtiliCorp, if the effective time does not occur on or
before June 1, 2000, except that if the required regulatory approvals have
not been obtained by that date but all other conditions to the closing
have been, or are capable of being, fulfilled, then the termination date
will be extended to December 31, 2000;
45
<PAGE>
- by either Empire or UtiliCorp, if a court or other governmental authority
takes any action that permanently prohibits the closing of the merger;
- by either Empire or UtiliCorp, if Empire's stockholders fail to adopt the
merger agreement and approve the merger;
- by UtiliCorp, if Empire breaches any representation, warranty, covenant or
agreement set forth in the merger agreement, subject to a 45 business-day
cure period and certain other exceptions;
- by UtiliCorp, if Empire's board of directors withdraws or modifies its
recommendation of the merger agreement, or if it approves or recommends a
Takeover Proposal other than the merger;
- by UtiliCorp, if Empire or any of its affiliates materially and knowingly
breaches the "No Solicitation" covenant previously described;
- by Empire, if as previously explained under "No Solicitation," prior to
its stockholders' adoption of the merger agreement and approval of the
merger, Empire's board of directors determines, after consulting with its
financial and legal advisors, that failing to terminate the merger
agreement could reasonably be expected to be a breach of its fiduciary
duties to Empire's stockholders, subject to certain conditions; or
- by Empire, if UtiliCorp breaches any representation, warranty, covenant or
agreement set forth in the merger agreement, subject to a 20 business-day
cure period and certain other exceptions.
EXPENSES AND TERMINATION FEES
The merger agreement provides that if either party terminates the merger
agreement because of a breach of any representation, warranty, covenant or
agreement by the other party, then the breaching party must reimburse the
terminating party for its reasonable costs and expenses incurred in connection
with the merger agreement and the merger, including the fees of its legal
counsel and financial and other advisors. However, the amount of the costs and
expenses to be reimbursed may not exceed $1.75 million.
Empire must pay UtiliCorp a $15 million termination fee within five business
days after a termination of the merger agreement as follows:
- by UtiliCorp because Empire's board of directors withdrew or modified its
recommendation of the merger agreement, or because it approved or
recommended another Takeover Proposal;
- by UtiliCorp because Empire or any of its affiliates materially and
knowingly breached the "No Solicitation" covenant previously described; or
- by Empire because failing to terminate the merger agreement could
reasonably be expected to be a breach of the fiduciary duties that
Empire's board of directors owes to its stockholders.
If (1) the merger agreement is terminated by either Empire or UtiliCorp
because Empire's stockholders fail to adopt the merger agreement and approve the
merger and (2) another Takeover Proposal is made prior to the date of the
special stockholders' meeting, Empire must pay UtiliCorp a termination fee of
$15 million if Empire enters into an agreement with respect to that Takeover
Proposal within 24 months of the merger agreement's termination. The payment of
that fee must be made within five business days after the signing of the new
agreement.
INDEMNIFICATION AND INSURANCE
The merger agreement provides that all rights to indemnification as of the
date of the merger agreement in favor of the directors, officers, employees and
agents of Empire as to their activities in those roles before the effective time
will survive the merger and continue in full force and effect for a period of at
least six years from the effective time of the merger.
Additionally, following the effective time, UtiliCorp will, to the fullest
extent permitted by law, indemnify the present and former directors, officers,
employees and agents of Empire as to
46
<PAGE>
their activities in those roles before the effective time, including actions
relating to the merger agreement and the merger.
UtiliCorp must maintain Empire's existing directors' and officers' liability
insurance for six years after the effective time. Alternatively, UtiliCorp may
substitute policies of at least the same coverage with substantially equivalent
terms and conditions for matters occurring prior to the effective time. If the
insurance in effect at the effective time expires or is cancelled, UtiliCorp
must use reasonable best efforts to obtain substantially similar coverage, but
UtiliCorp is not required to obtain coverage if it cannot be obtained at a cost
equal to or less than 200% of the total annual premiums paid by Empire for that
insurance as of the date of the merger agreement. UtiliCorp, however, must
obtain the best insurance it can for that amount.
47
<PAGE>
COMPARATIVE MARKET PRICE AND DIVIDEND INFORMATION
The following tables present, for the fiscal quarters indicated, the
dividends declared with respect to, and the high and low sales prices of, shares
of UtiliCorp common stock and Empire common stock as reported by the NYSE
Composite Transactions Reporting System in The Wall Street Journal. The numbers
for UtiliCorp have been adjusted to reflect the three-for-two stock split that
occurred on March 12, 1999. The fiscal year of both companies ends on December
31.
<TABLE>
<CAPTION>
PRICE RANGE
QUARTERLY CASH --------------------
UTILICORP DIVIDENDS HIGH LOW
- ------------------------------------------------------------------------------ --------------- --------- ---------
<S> <C> <C> <C>
1997:
First Quarter................................................................. $ .293 $ 18.83 $ 17.00
Second Quarter................................................................ $ .293 $ 19.59 $ 17.71
Third Quarter................................................................. $ .293 $ 20.59 $ 19.33
Fourth Quarter................................................................ $ .293 $ 26.04 $ 20.09
-----
$ 1.17
1998:
First Quarter................................................................. $ .300 $ 26.29 $ 23.33
Second Quarter................................................................ $ .300 $ 26.33 $ 23.21
Third Quarter................................................................. $ .300 $ 26.25 $ 22.63
Fourth Quarter................................................................ $ .300 $ 24.46 $ 22.87
-----
$ 1.20
1999:
First Quarter................................................................. $ .300 $ 24.75 $ 22.44
Second Quarter................................................................ $ .300 $ 25.88 $ 22.00
Third Quarter (through July 28, 1999)......................................... -- $ 24.88 $ 24.00
</TABLE>
<TABLE>
<CAPTION>
PRICE RANGE
QUARTERLY CASH --------------------
EMPIRE DIVIDENDS HIGH LOW
- ------------------------------------------------------------------------------ --------------- --------- ---------
<S> <C> <C> <C>
1997:
First Quarter................................................................. $ .32 $ 19.38 $ 17.75
Second Quarter................................................................ $ .32 $ 18.38 $ 15.75
Third Quarter................................................................. $ .32 $ 18.50 $ 16.25
Fourth Quarter................................................................ $ .32 $ 20.00 $ 17.06
-----
$ 1.28
1998:
First Quarter................................................................. $ .32 $ 22.50 $ 18.38
Second Quarter................................................................ $ .32 $ 22.50 $ 20.00
Third Quarter................................................................. $ .32 $ 23.38 $ 19.31
Fourth Quarter................................................................ $ .32 $ 26.12 $ 20.88
-----
$ 1.28
1999:
First Quarter................................................................. $ .32 $ 25.62 $ 22.00
Second Quarter................................................................ $ .32 $ 26.31 $ 20.69
Third Quarter (through July 28, 1999)......................................... -- $ 26.75 $ 25.81
</TABLE>
On May 10, 1999, the last trading day before the merger was publicly
announced, the closing price for shares of UtiliCorp common stock was $24.19,
and the closing price for shares of Empire common stock was $21.25. On July 28,
1999, the last practicable date before the printing of this proxy statement/
prospectus, the closing price for shares of UtiliCorp common stock was $24.13,
and the closing price for shares of Empire common stock was $26.13.
48
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma information reflects the historical
consolidated financial statements of UtiliCorp and St. Joseph, including their
respective subsidiaries and the historical financial statements of Empire, after
accounting for both the Empire merger and the St. Joseph merger as purchase
transactions. You should read the following information together with the
historical financial statements of UtiliCorp, Empire and St. Joseph and all
related notes. The historical financial statements of UtiliCorp and Empire are
incorporated into this proxy statement/prospectus by reference. St. Joseph's
historical financial statements are included in St. Joseph's SEC filings, File
No. 1-3576, which are available from the SEC at its public reference rooms, from
commercial retrieval services and at the website maintained by the SEC at
HTTP://WWW.SEC.GOV. See "Where You Can Find More Information" on page 65.
The unaudited pro forma combined balance sheet assumes the mergers became
effective on March 31, 1999. The unaudited pro forma combined income statements
assume the mergers became effective on January 1, 1998.
The information presented on the following pages is not necessarily
indicative of the results of operations or financial position that might have
occurred had the mergers actually closed on the assumed dates. The information
is also not necessarily indicative of the future results of operations or
financial position of UtiliCorp. The information does not include any
adjustments to historical results relating to cost savings or changes in rate
tariffs that may result from the mergers.
The pro forma adjustments reflect the mergers' impact as purchase
transactions. The pro forma balance sheet and income statement adjustments
include or reflect the following:
- the removal of Empire's and St. Joseph's common stock and the addition of
new UtiliCorp common stock resulting from the estimated issuance of
approximately 13.1 million shares of UtiliCorp common stock in connection
with the Empire merger and approximately 8.1 million shares of UtiliCorp
common stock in connection with the St. Joseph merger. These amounts were
determined as follows:
- - the number of shares to be issued to Empire stockholders was based on
an exchange ratio of 1.2292 (assuming a UtiliCorp stock price of $24)
multiplied by the number of Empire shares expected to be converted
into UtiliCorp stock; and
- - the number of shares to be issued to St. Joseph stockholders assumes
a UtiliCorp stock price of $23.42;
- an assumption that 62% of the outstanding Empire common stock will be
converted into UtiliCorp common stock, and that the remaining 38% will be
converted into cash. The amount of Empire common stock that can be
converted into UtiliCorp common stock ranges between 50% and 100%. A 10%
increase in the assumed amount of Empire common stock will result in an
approximate $50 million decrease in UtiliCorp's long-term debt and a $50
million increase in UtiliCorp's common stock equity (approximately 2.1
million shares). A 10% decrease in the assumed amount of Empire common
stock would have an equivalent opposite impact on long-term debt and
common stock equity.
- an assumed interest rate of 7% for incremental debt relating to the cash
portion of the Empire merger;
- the amortization of the acquisition premiums on a straight-line basis over
30 years grossed up for revenue requirements and an assumption that the
premiums are not tax deductible;
- the establishment of deferred taxes to reflect the revenue requirement
related to the acquisition premium. This amount is amortized to income
over 30 years; and
- the redemption of Empire's outstanding preferred stock on August 2, 1999.
It is assumed that the funds used to redeem the preferred stock will come
from newly issued long term debt at an interest rate of 7%.
49
<PAGE>
UTILICORP UNITED INC.
UNAUDITED PRO FORMA COMBINED
BALANCE SHEET
<TABLE>
<CAPTION>
AS OF MARCH 31, 1999
---------------------------------------------------------------------------------------------------
PRO FORMA
COMBINED
PRO FORMA (EMPIRE
UTILICORP (AS EMPIRE DISTRICT COMBINED ST. JOSEPH AND ST.
REPORTED) (AS REPORTED) ADJUSTMENTS (EMPIRE) (AS REPORTED) ADJUSTMENTS JOSEPH)
------------- --------------- ----------- --------- ------------- ----------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Current assets................ $1,721.0 $ 45.1 -- $1,766.1 $ 27.9 -- $1,794.0
Property, plant and equipment,
net......................... 3,536.7 578.6 $458.3(a) 4,573.6 181.5 $154.7(a) 4,909.8
Investments in subsidiaries
and partnerships............ 744.0 -- -- 744.0 5.1 -- 749.1
Price risk management
assets...................... 197.1 -- -- 197.1 -- -- 197.1
Deferred charges.............. 197.5 40.8 -- 238.3 37.5 -- 275.8
------------- ------ ----------- --------- ------ ----------- ---------
Total assets.................. $6,396.3 $664.5 $458.3 $7,519.1 $252.0 $154.7 $7,925.8
------------- ------ ----------- --------- ------ ----------- ---------
------------- ------ ----------- --------- ------ ----------- ---------
Current liabilities........... $2,139.0 $ 49.3 -- $2,188.3 $ 31.2 -- $2,219.5
Long-term liabilities:
Long-term debt, net......... 1,708.8 246.1 $223.8(b) 2,178.7 73.1 -- 2,251.8
Deferred income taxes and
credits................... 434.0 82.7 183.4(c) 700.1 35.4 61.9(c) 797.4
Price risk management
liabilities............... 284.2 -- -- 284.2 -- -- 284.2
Minority interests.......... 150.9 -- -- 150.9 1.4 -- 152.3
Other deferred credits........ 93.9 23.3 -- 117.2 18.3 -- 135.5
------------- ------ ----------- --------- ------ ----------- ---------
Total long-term liabilities... $2,671.8 $352.1 $407.2 $3,431.1 $128.2 $ 61.9 $3,621.2
------------- ------ ----------- --------- ------ ----------- ---------
------------- ------ ----------- --------- ------ ----------- ---------
Preferred stock............... -- 32.6 (32.6) -- --
Company-obligated mandatorily
redeemable preferred
securities of partnership... 100.0 -- -- 100.0 -- -- 100.0
Common shareowners' equity.... 1,485.5 230.5 83.7(d) 1,799.7 92.6 92.8(d) 1,985.1
------------- ------ ----------- --------- ------ ----------- ---------
Total liabilities and
stockholders' equity........ $6,396.3 $664.5 $458.3 $7,519.1 $252.0 $154.7 $7,925.8
------------- ------ ----------- --------- ------ ----------- ---------
------------- ------ ----------- --------- ------ ----------- ---------
</TABLE>
- ------------------------
(a) This amount represents the excess of fair value over book value of utility
plant. This amount has been grossed up to a revenue requirements level.
(b) This amount represents the estimated long-term debt that will be incurred to
fund the cash portion of the total consideration provided to Empire
stockholders and to retire Empire's preferred stock. A 7% interest rate is
assumed on this debt.
(c) This amount represents the deferred taxes related to the utility plant
acquisition adjustment described in (a) above. This amount has been grossed
up to revenue requirements level. The tax rate assumed is 40%.
(d) The amount of Empire common stock that can be converted into UtiliCorp
common stock ranges between 50% and 100%. A 10% increase in the assumed
amount of Empire common stock will result in an approximate $50 million
decrease in UtiliCorp's long-term debt and a $50 million increase in
UtiliCorp's common stock equity (approximately 2.1 million shares). A 10%
decrease in the assumed amount of Empire common stock would have an
equivalent opposite impact on long-term debt and common stock equity.
50
<PAGE>
UTILICORP UNITED INC.
UNAUDITED PRO FORMA COMBINED
INCOME STATEMENT
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 1999
-----------------------------------------------------------------------------------------------------
PRO FORMA
PRO FORMA COMBINED
UTILICORP (AS EMPIRE DISTRICT COMBINED ST. JOSEPH (EMPIRE AND
REPORTED) (AS REPORTED) ADJUSTMENTS (EMPIRE) (AS REPORTED) ADJUSTMENTS ST. JOSEPH)
------------- --------------- ----------- --------- ------------- ----------- -----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Sales.................... $3,801.0 $ 54.7 -- $3,855.7 $28.7 -- $3,884.4
Cost of sales............ 3,518.1 20.2 -- 3,538.3 12.9 -- 3,551.2
------------- ------ ----------- --------- ----- ----------- -----------
Gross profit........... 282.9 34.5 -- 317.4 15.8 -- 333.2
------------- ------ ----------- --------- ----- ----------- -----------
Operating, administrative
and maintenance
expense................ 136.4 15.2 151.6 10.2 161.8
Depreciation expense..... 44.5 6.4 3.8(a) 54.7 3.0 1.3(a) 59.0
------------- ------ ----------- --------- ----- ----------- -----------
Income from operations... 102.0 12.9 (3.8) 111.1 2.6 (1.3) 112.4
------------- ------ ----------- --------- ----- ----------- -----------
Other income (expense):
Equity in earnings of
investments and
partnership.......... 11.9 -- -- 11.9 -- -- 11.9
Other income
(expense)............ (2.3) (0.1) -- (2.4) 0.1 -- (2.3)
------------- ------ ----------- --------- ----- ----------- -----------
Total other income....... 9.6 (0.1) -- 9.5 0.1 -- 9.6
------------- ------ ----------- --------- ----- ----------- -----------
Earnings before interest
and taxes.............. 111.6 12.8 (3.8) 120.6 2.7 (1.3) 122.0
------------- ------ ----------- --------- ----- ----------- -----------
Interest expense:
Interest expense....... 34.5 4.7 3.9(b) 43.1 1.7 -- 44.8
Minority interest in
income of
partnership.......... 2.2 -- -- 2.2 -- -- 2.2
------------- ------ ----------- --------- ----- ----------- -----------
Total interest expense... 36.7 4.7 3.9 45.3 1.7 -- 47.0
------------- ------ ----------- --------- ----- ----------- -----------
Earnings before income
taxes.................. 74.9 8.1 (7.7) 75.3 1.0 (1.3) 75.0
Income taxes............. 23.0 2.9 (3.1)(c) 22.8 0.6 (0.5)(c) 22.9
------------- ------ ----------- --------- ----- ----------- -----------
Net income............... 51.9 5.2 (4.6) 52.5 0.4 (0.8) 52.1
------------- ------ ----------- --------- ----- ----------- -----------
Preference stock......... -- 0.6 (0.6)(d) -- -- -- --
------------- ------ ----------- --------- ----- ----------- -----------
Earnings available for
common stock........... $ 51.9 $ 4.6 $ (4.0) $ 52.5 $ 0.4 $ (0.8) $ 52.1
------------- ------ ----------- --------- ----- ----------- -----------
------------- ------ ----------- --------- ----- ----------- -----------
Weighted average common
shares outstanding:
Basic.................. 90.80 17.13 N/A 103.90 8.16 N/A 111.95
Diluted................ 91.70 17.13 N/A 104.80 8.19 N/A 112.85
Earnings per common share
Basic.................. $ 0.57 $ 0.27 N/A $ 0.50 $0.05 N/A $ 0.47
Diluted................ 0.57 0.27 N/A 0.50 0.05 N/A 0.46
</TABLE>
- ------------------------------
Note: All three month pro forma adjustments are generally calculated by taking
the annual amount divided by four.
(a) This amount represents the estimated amortization of the acquisition premium
reflected in utility plant on the balance sheet. The amortization is
calculated on a straight line basis over 30 years.
(b) This amount represents the estimated interest expense related to the
incremental long-term debt shown on the pro forma balance sheet. The rate
used is 7%.
(c) This amount represents the tax benefit of the interest expense and the
amortization of the deferred tax amount related to the utility plant
acquisition adjustment. The deferred tax amount is amortized over 30 years
on a straight line basis. The tax rate used is 40%.
(d) This amount reflects the elimination of the preferred stock dividend of
Empire. All preferred stock is assumed to be redeemed.
51
<PAGE>
UTILICORP UNITED INC.
UNAUDITED PRO FORMA COMBINED
INCOME STATEMENT
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 1998
----------------------------------------------------------------------------------------------------
PRO FORMA
COMBINED
(EMPIRE
PRO FORMA AND
UTILICORP EMPIRE DISTRICT COMBINED ST. JOSEPH ST.
(AS REPORTED) (AS REPORTED) ADJUSTMENTS (EMPIRE) (AS REPORTED) ADJUSTMENTS JOSEPH)
------------- --------------- ----------- --------- ------------- ----------- ----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Sales......................... $2,895.8 $51.4 -- $2,947.2 $29.7 -- $2,976.9
Cost of sales................. 2,642.3 20.7 -- 2,663.0 13.1 -- 2,676.1
------------- ----- ----- --------- ----- ----- ----------
Gross profit................ 253.5 30.7 -- 284.2 16.6 -- 300.8
------------- ----- ----- --------- ----- ----- ----------
Operating, administrative and
maintenance expense......... 130.1 14.6 -- 144.7 8.7 -- 153.4
Depreciation expense.......... 42.0 6.2 3.8(a) 52.0 2.8 1.3(a) 56.1
------------- ----- ----- --------- ----- ----- ----------
Income from operations........ 81.4 9.9 (3.8) 87.5 5.1 (1.3) 91.3
------------- ----- ----- --------- ----- ----- ----------
Other income (expense):
Equity in earnings of
investments and
partnership............... 22.2 -- -- 22.2 -- -- 22.2
Other income (other)........ 0.6 (0.1) -- 0.5 0.2 -- 0.7
------------- ----- ----- --------- ----- ----- ----------
Total other income............ 22.8 (0.1) -- 22.7 0.2 -- 22.9
------------- ----- ----- --------- ----- ----- ----------
Earnings before interest and
taxes....................... 104.2 9.8 (3.8) 110.2 5.3 (1.3) 114.2
------------- ----- ----- --------- ----- ----- ----------
Interest expense:
Interest expense............ 33.4 4.5 3.9(b) 41.8 1.7 -- 43.5
Minority interest in income
of partnership............ 2.2 -- -- 2.2 -- -- 2.2
------------- ----- ----- --------- ----- ----- ----------
Total interest expense........ 35.6 4.5 3.9 44.0 1.7 -- 45.7
------------- ----- ----- --------- ----- ----- ----------
Earnings before income
taxes....................... 68.6 5.3 (7.7) 66.2 3.6 (1.3) 68.5
Income taxes.................. 25.3 2.0 (3.1)(c) 24.2 1.2 (0.5)(c) 24.9
------------- ----- ----- --------- ----- ----- ----------
Net income.................... 43.3 3.3 (4.6) 42.0 2.4 (0.8) 43.6
------------- ----- ----- --------- ----- ----- ----------
Preference stock.............. -- 0.6 (0.6)(d) -- -- -- --
------------- ----- ----- --------- ----- ----- ----------
Earnings available for common
stock....................... $ 43.3 $ 2.7 $(4.0) $ 42.0 $ 2.4 $(0.8) $ 43.6
------------- ----- ----- --------- ----- ----- ----------
------------- ----- ----- --------- ----- ----- ----------
Weighted average common shares
outstanding:
Basic....................... 80.52 16.79 N/A 93.60 8.06 N/A 101.65
Diluted..................... 81.70 16.79 N/A 94.80 8.08 N/A 102.85
Earnings per common share:
Basic....................... $ 0.54 $0.16 N/A $ 0.45 $0.30 N/A $ 0.43
Diluted..................... 0.53 0.16 N/A 0.44 0.30 N/A 0.43
</TABLE>
- ------------------------------
Note: All three month pro forma adjustments are generally calculated by taking
the annual amount divided by four.
(a) This amount represents the estimated amortization of the acquisition premium
reflected in utility plant on the balance sheet. The amortization is
calculated on a straight line basis over 30 years.
(b) This amount represents the estimated interest expense related to the
incremental long-term debt shown on the pro forma balance sheet. The rate
used is 7%.
(c) This amount represents the tax benefit of the interest expense and the
amortization of the deferred tax amount related to the utility plant
acquisition adjustment. The deferred tax amount is amortized over 30 years
on a straight line basis. The tax rate used is 40%.
(d) This amount reflects the elimination of the preferred stock dividend of
Empire. All preferred stock is assumed to be redeemed.
52
<PAGE>
UTILICORP UNITED INC.
UNAUDITED PRO FORMA COMBINED
INCOME STATEMENT
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1998
-----------------------------------------------------------------------------------------------------
PRO FORMA
COMBINED
(EMPIRE
EMPIRE PRO FORMA AND
UTILICORP DISTRICT COMBINED ST. JOSEPH ST.
(AS REPORTED) (AS REPORTED) ADJUSTMENTS (EMPIRE) (AS REPORTED) ADJUSTMENTS JOSEPH)
------------- ------------- ----------- ------------- ------------- ----------- ----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C>
Sales....................... $12,563.4 $239.9 -- $12,803.3 $124.4 -- $12,927.7
Cost of sales............... 11,596.0 89.4 -- 11,685.4 52.3 -- 11,737.7
------------- ------ ----------- ------------- ------ ----- ----------
Gross profit.............. 967.4 150.5 -- 1,117.9 72.1 -- 1,190.0
------------- ------ ----------- ------------- ------ ----- ----------
Operating, administrative
and maintenance
expense................... 548.9 61.9 -- 610.8 38.4 -- 649.2
Depreciation, depletion and
amoritization............. 150.0 25.0 15.3(a) 190.3 11.5(a) 5.2 207.0
Provision for asset
impairments............... 27.7 -- -- 27.7 -- -- 27.7
------------- ------ ----------- ------------- ------ ----- ----------
Income from operations...... 240.8 63.6 (15.3) 289.1 22.2 (5.2) 306.1
------------- ------ ----------- ------------- ------ ----- ----------
Other income (expense):
Equity in earnings of
investments and
partnership............. 125.1 -- -- 125.1 -- -- 125.1
Minority interests........ (5.6) -- -- (5.6 ) (0.1) -- (5.7)
Other income (other)...... (8.9) (0.6) -- (9.5 ) 0.9 -- (8.6)
------------- ------ ----------- ------------- ------ ----- ----------
Total other income.......... 110.6 (0.6) -- 110.0 0.8 -- 110.8
------------- ------ ----------- ------------- ------ ----- ----------
Earnings before interest and
taxes..................... 351.4 63.0 (15.3) 399.1 23.0 (5.2) 416.9
------------- ------ ----------- ------------- ------ ----- ----------
Interest expense:
Interest
expense--long-term
debt.................... 111.4 17.9 15.7(b) 145.0 6.1 -- 151.1
Interest
expense--short-term
debt.................... 12.3 0.6 -- 12.9 0.7 -- 13.6
Minority interest in
income of partnership... 8.9 -- -- 8.9 -- -- 8.9
------------- ------ ----------- ------------- ------ ----- ----------
Total interest expense...... 132.6 18.5 15.7 166.8 6.8 -- 173.6
------------- ------ ----------- ------------- ------ ----- ----------
Earnings before income
taxes..................... 218.8 44.5 (31.0) 232.3 16.2 (5.2) 243.3
Income taxes................ 86.6 16.2 (12.4)(c) 90.4 5.5 (2.1)(c) 93.8
------------- ------ ----------- ------------- ------ ----- ----------
Net income.................. 132.2 28.3 (18.6) 141.9 10.7 (3.1) 149.5
------------- ------ ----------- ------------- ------ ----- ----------
Preference stock............ -- 2.4 (2.4)(d) -- -- -- --
------------- ------ ----------- ------------- ------ ----- ----------
Earnings available for
common stock.............. $ 132.2 $ 25.9 $(16.2) $ 141.9 $ 10.7 $(3.1) $ 149.5
------------- ------ ----------- ------------- ------ ----- ----------
------------- ------ ----------- ------------- ------ ----- ----------
Weighted average common
shares outstanding:
Basic..................... 80.07 16.93 N/A 93.17 8.10 N/A 100.95
Diluted................... 81.18 16.94 N/A 94.28 8.13 N/A 102.07
Earnings per common share:
Basic..................... $ 1.65 $ 1.53 N/A $ 1.52 $ 1.32 N/A $ 1.48
Diluted................... 1.63 1.53 N/A 1.51 1.31 N/A 1.47
</TABLE>
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(a) This amount represents the estimated amortization of the acquisition premium
reflected in utility plant on the balance sheet. The amortization is
calculated on a straight line basis over 30 years.
(b) This amount represents the estimated interest expense related to the
incremental long-term debt shown on the pro forma balance sheet. The rate
used is 7%.
(c) This amount represents the tax benefit of the interest expense and the
amortization of the deferred tax amount related to the utility plant
acquisition adjustment. The deferred tax amount is amortized over 30 years
on a straight line basis. The tax rate used is 40%.
(d) This amount reflects the elimination of the preferred stock dividend of
Empire. All preferred stock is assumed to be redeemed.
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DESCRIPTION OF UTILICORP CAPITAL STOCK
GENERAL
The following description of UtiliCorp's capital stock is a summary, does
not purport to be complete and is subject to and qualified by reference to
UtiliCorp's governing corporate documents and UtiliCorp's Michigan Gas Utilities
Indenture, dated as of July 1, 1951, which secures the first mortgage bonds
issued by Michigan Gas Utilities Company and assumed by UtiliCorp in connection
with its acquisition of Michigan Gas Utilities Company in 1989.
DIVIDEND RIGHTS AND LIMITATIONS
Subject to the limitations referred to below, dividends may be declared on
UtiliCorp's capital stock out of funds legally available for that purpose.
Cash dividends on UtiliCorp's capital stock are restricted by provisions of
the Michigan Gas Utilities Indenture. Under the most restrictive of these
provisions, UtiliCorp may not declare or pay any dividend, other than a dividend
payable in shares of its capital stock, if, after giving effect to the dividend,
the sum of:
- the aggregate amount of all dividends declared and all other distributions
made, other than dividends declared or distributions made in shares of its
capital stock, subsequent to December 31, 1984; plus
- the excess, if any, of the amount applied to or set apart for the
acquisition of any shares of its capital stock subsequent to December 31,
1984, over amounts received by UtiliCorp as the net cash proceeds of sales
of shares of its capital stock subsequent to that date
would exceed the sum of the net income of UtiliCorp since January 1, 1985, plus
$50 million. In addition, UtiliCorp may not declare dividends unless it
maintains a tangible net worth of at least $250 million and the total principal
amount of its outstanding indebtedness does not exceed 70% of its
capitalization. None of UtiliCorp's retained earnings was restricted as to
payment of cash dividends on its capital stock as of June 30, 1999.
In addition, following the effective time of the merger, UtiliCorp will
assume all the rights and obligations under Empire's Indenture of Mortgage and
Deed of Trust. Under this indenture, UtiliCorp will not be able to declare or
pay any dividends, other than dividends payable in shares of common stock, on or
make any other distribution on, or purchase, other than with the proceeds of
additional common stock financing, any shares of, its common stock, if the
cumulative aggregate amount of those dividends, distributions and purchases made
since August 31, 1944 exceeds the earned surplus of UtiliCorp accumulated since
August 31, 1944.
VOTING RIGHTS
Holders of UtiliCorp's common stock are entitled to one vote for each share
held of record. UtiliCorp's board of directors is divided into three classes,
and each year one class is elected to serve a three-year term. Holders of common
stock do not have cumulative voting in the election of directors. Accordingly,
the holders of more than 50% of the outstanding shares of UtiliCorp common stock
voting for the election of directors can elect all the directors, and the
remaining holders will not be able to elect any directors.
LIQUIDATION RIGHTS
UtiliCorp's outstanding common stock is, and the common stock that may be
offered from time to time, including in connection with the merger, when issued
and paid for will be, fully paid and non-assessable. Holders of common stock do
not have any preemptive rights. On liquidation, the holders of the common stock
will be entitled to all amounts remaining for distribution after payment of the
liquidation preferences of the outstanding shares, if any, of the Class A common
stock and the preference stock.
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CLASS A COMMON STOCK AND PREFERENCE STOCK
Without action by UtiliCorp's stockholders, UtiliCorp's board of directors
may issue one or more series of Class A common stock or preference stock that
may have terms more favorable than the common stock, including preferential
dividend, liquidation, redemption and voting rights.
UtiliCorp may use the Class A common stock or the preference stock as an
anti-takeover device, because these securities may be issued with "super voting"
rights and placed in the control of parties aligned with current management.
However, the NYSE has in effect a rule that restricts the ability of UtiliCorp
to issue Class A common stock and preference stock with super voting rights. In
addition, in accordance with the terms of the merger agreement, UtiliCorp may
not issue any Class A common stock prior to the effective time of the merger
without the consent of Empire. There are presently no shares of Class A common
stock or preference stock issued or outstanding,
STOCKHOLDER RIGHTS PLAN
UtiliCorp has adopted a stockholder rights plan under which UtiliCorp's
stockholders have been granted one preference stock purchase right for each
share of common stock held. The following description of the purchase rights is
not intended to be complete and is qualified by reference to the Rights
Agreement dated December 31, 1996, between UtiliCorp and First Chicago Trust
Company of New York, a copy of which has been filed with the SEC as an exhibit
to UtiliCorp's Form 8-A Registration Statement filed on March 14, 1997.
Each purchase right, when it becomes exercisable as described below,
entitles the holder to purchase one one-thousandth of a share of Series A
Participating Cumulative Preference Stock of UtiliCorp at a purchase price of
$76.67, subject to certain adjustments and other specified conditions.
The purchase rights become exercisable upon the occurrence of a
"distribution date," which is defined in the rights agreement as the earlier of:
- the tenth business day, or such later date as UtiliCorp's board of
directors may fix, after the date on which any company commences a tender
or exchange offer which, if consummated, would result in the company
acquiring ownership of more than 15% of UtiliCorp's outstanding common
stock; or
- the "Flip-In Date," which means the tenth business day after UtiliCorp
first publicly announces that a company has acquired ownership of more
than 15% of UtiliCorp's outstanding common stock, or such other date as
UtiliCorp's board of directors may fix by resolution adopted prior to the
Flip-In Date that would otherwise have occurred.
The rights agreement does not apply to certain acquisitions, including
acquisitions by a company that inadvertently acquires ownership of more than 15%
of UtiliCorp's outstanding common stock, provided the company promptly divests
sufficient shares of common stock to reduce its percentage ownership below 15%.
If a Flip-In Date occurs, each purchase right, other than the purchase
rights beneficially owned by the acquiring company or any of its affiliates,
will constitute the right to purchase from UtiliCorp that number of shares of
UtiliCorp's common stock having a market value equal to twice the exercise price
of the right. On the occurrence of a Flip-In Date, the purchase rights
beneficially owned by the acquiring company or any of its affiliates will be
void.
In addition, UtiliCorp's board of directors may, at its option, at any time
after a Flip-In Date and prior to the time the acquiring company becomes the
owner of more than 50% of the outstanding shares of UtiliCorp's common stock,
elect to exchange all of the outstanding purchase rights, other than those
rights beneficially owned by the acquiring company or its affiliates, for shares
of UtiliCorp common stock at an exchange ratio
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of one share of UtiliCorp common stock per purchase right. Immediately upon the
taking of that action by UtiliCorp's board of directors, the right to exercise
the rights will terminate and each right will then represent only the right to
receive the appropriate number of shares of common stock.
Whenever UtiliCorp becomes obligated to issue shares of common stock upon
the exercise of or in exchange for rights, UtiliCorp may substitute shares of
preference stock, at a ratio of one one-thousandth of a share of preference
stock for each share of common stock.
If (1) UtiliCorp is acquired in a merger or other similar business
combination entered into while the acquiring company or any of its affiliates is
in control of UtiliCorp's board of directors and certain other conditions are
met or (2) 50% or more of UtiliCorp's assets or assets representing 50% or more
of UtiliCorp's operating income or cash flow are transferred to an acquiring
company or any of its affiliates while that person is in control of UtiliCorp's
board of directors, UtiliCorp is required to ensure that the purchase rights
will "flip-over" and entitle each holder of a purchase right to purchase capital
stock of the acquiring company having a market value equal to twice the purchase
price of the preference stock otherwise purchasable pursuant to the purchase
right.
At any time prior to the earlier of a Flip-In Date and the tenth anniversary
of the Rights Agreement, UtiliCorp's board of directors may redeem the rights in
whole, but not in part, at a price of $0.01 per right. Under certain
circumstances the Rights Agreement may be amended by UtiliCorp's board of
directors without approval from UtiliCorp's stockholders.
The rights have an anti-takeover effect. Specifically, the rights may cause
substantial dilution to a person or group that attempts to acquire a substantial
number of shares of UtiliCorp's common stock without board approval. The rights
will not interfere with any merger or other business combination with a third
party approved by UtiliCorp's board of directors, because the board may, at any
time prior to a Flip-In Date, redeem the rights as described above or amend the
Rights Agreement to render it inapplicable to a specific transaction.
ADDITIONAL ANTI-TAKEOVER DEFENSES
A number of provisions in UtiliCorp's governing corporate documents may have
the effect of discouraging other companies from acquiring large blocks of
UtiliCorp's common stock or delaying or preventing a change of control of
UtiliCorp. For instance, because UtiliCorp's certificate of incorporation
authorizes the issuance of additional capital stock by UtiliCorp's board of
directors without stockholder approval, the board could issue additional shares
of stock to discourage a change of control of UtiliCorp. Furthermore, the
absence of cumulative voting rights could discourage accumulations of large
blocks of UtiliCorp's common stock by purchasers seeking representation on
UtiliCorp's board of directors.
Other provisions in UtiliCorp's certificate of incorporation designed to
discourage attempts to obtain control of UtiliCorp in a transaction not approved
by its board of directors include:
- an 80% stockholder vote requirement to remove the entire board of
directors;
- a prohibition against the removal of individual directors without cause;
- a requirement that the board be divided into three classes, with one class
elected each year for a three-year term;
- an 80% stockholder vote requirement to amend provisions of the certificate
of incorporation relating to UtiliCorp's board of directors;
- an 80% stockholder vote requirement to approve certain business
transactions, unless certain minimum price conditions are met;
- an 80% stockholder vote requirement to amend the above-listed provisions;
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- a requirement that stockholder action may be taken only at an annual or
special meeting; and
- a requirement that special meetings may be called by not less than a
majority of the stockholders.
UtiliCorp's bylaws also contain provisions that may have an anti-takeover
effect, including:
- advance notice requirements for stockholder nominations to UtiliCorp's
board of directors; and
- a requirement that nominating stockholders provide information comparable
to that which UtiliCorp would be required to provide under federal
securities laws.
These bylaw provisions could enable UtiliCorp to delay undesirable stockholder
actions to give UtiliCorp more time and information to adequately respond.
For a more complete description of these provisions in UtiliCorp's governing
corporate documents, see "Comparative Rights of Empire Stockholders and
UtiliCorp Stockholders" beginning on this page.
As previously described, UtiliCorp's stockholder rights plan also has an
anti-takeover effect. Severance agreements between UtiliCorp and certain of its
management employees may have anti-takeover effects as well, because they
provide for the payment of certain benefits if the employees are terminated
without good cause or resign for good reason, as defined in the agreements,
within three years after a change of control of UtiliCorp.
As a Delaware corporation, UtiliCorp is subject to Delaware's "business
combination statute," which restricts certain business combination transactions.
For a summary of this statute, see "Comparative Rights of Empire Stockholders
and UtiliCorp Stockholders--Anti-Takeover Statutes" on page 62.
TRANSFER AGENT AND REGISTRAR
The co-transfer agents for UtiliCorp's common stock are: First Chicago Trust
Company of New York, New York; UMB Bank, N.A., Kansas City, Missouri; and The
R-M Trust Company, Toronto, Ontario, Canada. The registrar for the common stock
is First Chicago Trust Company of New York, New York.
COMPARATIVE RIGHTS OF EMPIRE STOCKHOLDERS AND UTILICORP STOCKHOLDERS
GENERAL
Empire is incorporated in Kansas, and UtiliCorp is incorporated in Delaware.
As a result of the merger, Empire's stockholders, whose rights are currently
governed by Kansas law and Empire's articles of incorporation and bylaws, will
become UtiliCorp stockholders. Following the merger, their rights will be
governed by Delaware law and UtiliCorp's certificate of incorporation and
bylaws. The material differences between the rights of Empire's stockholders and
UtiliCorp's stockholders result from differences in the companies' governing
corporate documents and applicable state law. These differences are summarized
below.
The following summary is not intended to be complete and is qualified by
reference to applicable Kansas and Delaware corporate law, Empire's articles of
incorporation and bylaws and UtiliCorp's certificate of incorporation and
bylaws. See "Where You Can Find More Information" at page 65.
AUTHORIZED AND OUTSTANDING CAPITAL STOCK
Both Kansas and Delaware law require a corporation's governing corporate
documents to set forth the total number of shares of stock which the corporation
has the authority to issue.
The authorized capital stock of Empire consists of 100,000,000 shares of
common stock, of which approximately 17,234,780 shares are currently
outstanding, 5,000,000 shares of cumulative preferred stock, of which no shares
will be outstanding as of August 2, 1999, and 2,500,000 shares of preference
stock, of which
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500,000 shares are available for issuance under a rights agreement between
Empire and ChaseMellon Shareholder Services.
The authorized capital stock of UtiliCorp consists of 200,000,000 shares of
common stock, of which approximately 93,053,486 shares are currently
outstanding, 20,000,000 shares of Class A common stock, of which no shares are
currently outstanding, and 10,000,000 shares of preference stock, of which
60,000 shares are available for issuance under a rights agreement between
UtiliCorp and First Chicago Trust Company of New York.
NUMBER OF DIRECTORS
Under Empire's articles of incorporation, Empire's board of directors must
consist of at least 9 but no more than 11 directors. Currently, Empire has 10
directors, but the exact number of directors, within the permitted range may be
determined by a two-thirds vote of Empire's board. Under UtiliCorp's certificate
of incorporation, UtiliCorp's board of directors must consist of at least three
directors. Currently, UtiliCorp has nine directors, but the number of directors
may be changed by the majority vote of UtiliCorp's board.
CLASSIFIED BOARD OF DIRECTORS
The board of directors of each of Empire and UtiliCorp is divided into three
classes, and each class has approximately an equal number of directors. At each
annual meeting of Empire's stockholders and UtiliCorp's stockholders, one class
of directors is elected to a three-year term. This manner of classifying a board
of directors may have an anti-takeover effect, because it delays the ability of
an acquiring company to elect a majority of the target company's directors.
REMOVAL OF DIRECTORS
Under Kansas law, both the entire Empire board and individual Empire
directors can only be removed for cause by the affirmative vote of a majority of
the outstanding shares. UtiliCorp's certificate of incorporation provides that
the entire UtiliCorp board of directors may be removed only by an affirmative
vote of at least 80% of all outstanding shares at a stockholder meeting called
for that purpose. Individual directors may be removed by the affirmative vote of
a majority of all outstanding shares, but only at a meeting called for that
purpose, and only for cause.
VOTING FOR MERGERS AND OTHER ACTIVITIES
The provisions of Kansas and Delaware law regarding mergers and certain
other corporate activities are substantially similar. Both a Kansas and a
Delaware corporation must obtain the affirmative vote of the holders of a
majority of its outstanding shares to approve a merger, a sale of substantially
all of its assets or a voluntary dissolution.
Neither Kansas nor Delaware law requires the surviving corporation in a
merger to obtain its stockholders' approval, however, if:
- the merger agreement does not amend the existing certificate or articles
of incorporation;
- each outstanding share of the surviving corporation is unchanged; and
- the number of shares to be issued in the merger does not exceed 20% of the
number of shares outstanding immediately prior to the merger.
Because of this exception, UtiliCorp is not required to obtain its stockholders'
approval of the merger agreement and the merger with Empire.
SPECIAL MEETINGS
Special meetings of Empire's stockholders may only be called by Empire's
board of directors, its president, or a vice president. Special meetings of
UtiliCorp's stockholders may only be called by UtiliCorp's chairman or
president, by a majority of UtiliCorp's directors, or by a majority of
UtiliCorp's stockholders.
STOCKHOLDER ACTION BY WRITTEN CONSENT
Empire's stockholders may take any action by written consent of the holders
of all outstanding shares entitled to vote thereon without a meeting. Under
UtiliCorp's certificate
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of incorporation, however, UtiliCorp's stockholders may not take any action by
written consent without a meeting.
INDEMNIFICATION AND LIMITATION OF LIABILITY
The provisions of Kansas and Delaware law relating to a corporation's
ability to indemnify its officers and directors are substantially similar.
Generally, the directors and officers of both Empire and UtiliCorp are
indemnified for their actions to the fullest extent permitted by applicable law.
Empire's articles of incorporation expressly eliminate, to the fullest extent
permitted by Kansas law, the personal liability of any Empire director to Empire
or its stockholders for money damages for any breach by the director of his
fiduciary duties to Empire. Empire's articles, however, do not limit a
director's personal liability for, among other things, a breach of his or her
duty of loyalty or any act of willful misconduct. UtiliCorp's certificate of
incorporation contains a similar provision which indemnifies its officers and
directors to the fullest extent of Delaware law, but it does not, however,
expressly place any limitations on a director's personal liability.
AMENDMENT OF CHARTERS
The provisions in both Empire's and UtiliCorp's charter regarding the
number, election and removal of directors, director powers, and certain business
combination transactions may not be repealed or amended without the affirmative
vote of at least 80% of all outstanding shares. In addition, Empire's articles
of incorporation require approval of two-thirds of the votes held by Empire's
cumulative preferred stockholders to amend the articles in a manner that would
adversely affect Empire's cumulative preferred stockholders. As of August 2,
1999, however, no shares of Empire's cumulative preferred stock will be
outstanding. Otherwise, amendments to Empire's articles of incorporation are
governed by Kansas law and amendments to UtiliCorp's certificate of
incorporation are governed by Delaware law.
Kansas law and Delaware law are substantially similar with respect to
amending a corporation's charter, and generally both provide that to amend a
corporation's charter, the corporation's board of directors must adopt a
resolution setting forth the proposed amendment and declaring its advisability.
The amendment then requires the affirmative vote of a majority of all
outstanding shares and in certain circumstances, the affirmative vote of a
majority of all outstanding shares of particular classes or series of stock.
AMENDMENT OF BYLAWS
Empire's articles of incorporation require amendments to its bylaws to be
approved by 80% of the outstanding voting shares or two-thirds of the continuing
directors. Furthermore, amendments to the provisions in Empire's articles
regarding amending its bylaws must be approved by 80% of Empire's outstanding
voting shares or two-thirds of the continuing directors.
Generally, amendments to UtiliCorp's bylaws may be made by either
UtiliCorp's stockholders or its board of directors. However, the provisions in
the bylaws regarding UtiliCorp's board of directors may not be repealed or
amended without the affirmative vote of at least 80% of all outstanding shares,
unless first approved by the affirmative vote of at least two-thirds of the
directors. Also, any amendments made by UtiliCorp's board of directors are
subject to the right of UtiliCorp's stockholders to change or repeal them.
NOTICE OF STOCKHOLDER PROPOSALS
Empire's articles of incorporation provide that any stockholder who is
entitled to vote at an annual meeting and who intends to bring a matter before
an annual stockholders' meeting must deliver written notice of his or her intent
to do so to Empire's corporate secretary. The corporate secretary must receive
the notice:
- at least 35 days and no more than 50 days before the meeting; or
- no later than 10 days following the date on which notice of the meeting
was sent to stockholders, if less than 45 days prior notice of the meeting
is given.
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The notice must provide:
- a brief description of the business the stockholder proposes to bring
before the meeting and the reasons for bringing it before the meeting;
- the stockholder's name and address, as they appear in Empire's records;
- a representation that the stockholder is entitled to vote at the meeting
and intends to appear in person or by proxy at the meeting; and
- any material interest of the stockholder in the proposed item of business.
In addition, the stockholder must comply with all applicable provisions of the
Securities Exchange Act of 1934.
UtiliCorp's bylaws provide that any stockholder who is entitled to vote at a
stockholders' meeting and who intends to bring a matter other than the election
of directors before the meeting must deliver notice of his or her intent to do
so to UtiliCorp's corporate secretary. For an annual meeting, the corporate
secretary must receive the notice no later than:
- 60 days in advance of the meeting, if it will be held on a day within 30
days preceding the anniversary of the previous year's annual meeting;
- 90 days in advance of the meeting, if it will be held on or after the
anniversary of the previous year's annual meeting; or
- the tenth day following the date of public disclosure of the meeting date,
if the meeting will be held at any other time.
For a special meeting, the corporate secretary must receive the notice no later
than the tenth day following the date of public disclosure of the meeting date.
NOMINATION OF DIRECTORS
Empire's articles of incorporation provide that an Empire stockholder
entitled to vote for the election of directors at a meeting called for that
purpose may nominate one or more persons for the election, but only if the
stockholder delivers notice of his or her intent to make the nomination to
Empire's corporate secretary. The timing requirements for receiving the notice
are the same as for receiving notice of stockholder proposals, described above.
The notice must set forth:
- all information concerning each nominee that would be required under SEC
rules to be included in a proxy statement soliciting proxies for the
election of the nominee as a director;
- the consent of each nominee to being named as a nominee and to serve as an
Empire director if elected;
- the name and address of the stockholder;
- a representation that the stockholder is entitled to vote at the meeting
and intends to appear in person or by proxy at the meeting to nominate
each nominee; and
- a description of all arrangements or understandings between the
stockholder and each nominee or other person in making each nomination.
In addition, the stockholder must comply with all applicable provisions of the
Exchange Act.
Similarly, UtiliCorp's bylaws provide that a UtiliCorp stockholder entitled
to vote for the election of directors at a meeting called for that purpose may
nominate one or more persons for the election, but only if the stockholder
delivers notice of his or her intent to make the nomination to UtiliCorp's
corporate secretary. The timing requirements for receiving the notice are the
same as for receiving notice of stockholder proposals, described above. The
notice must include:
- the name, age, business address and residence address of each nominee;
- the occupation of each nominee;
- the number of shares of UtiliCorp stock owned by each nominee;
- such other information concerning each nominee as would be required under
SEC rules to be included in a proxy statement
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soliciting proxies for the election of the nominee as a director; and
- a signed consent of each nominee to serve as a UtiliCorp director if
elected.
STOCKHOLDER INSPECTION
Under both Kansas and Delaware law, any stockholder may inspect a
corporation's stock ledger, stockholder list and other books and records for any
proper purpose. A "proper purpose" is defined as a purpose reasonably related to
the person's interest as a stockholder. Both Kansas and Delaware law
specifically provide that a stockholder may appoint an agent for the purpose of
examining the corporation's books and records.
Empire's bylaws allow any stockholder or his or her authorized
representative to inspect Empire's books and records during usual business
hours. Empire's bylaws further require any agent of a stockholder to provide
written proof of the agent's authority to act on behalf of the stockholder
before he or she will be given access to Empire's books and records. UtiliCorp's
bylaws provide that UtiliCorp's board of directors may determine whether and, if
so, when and under what conditions UtiliCorp's books and records will be
available for inspection by stockholders. The bylaws further provide that the
rights of stockholders in this regard will be limited accordingly, except as
otherwise required by law.
DISSENTERS' RIGHTS
Both Kansas and Delaware law provide dissenters' rights to all stockholders
entitled to vote in merger transactions, except as explained below. Generally,
Kansas and Delaware law do not provide dissenters' rights in a merger if the
dissenting shares of the corporation are traded nationally or held of record by
more than 2,000 stockholders, or if the corporation is the surviving corporation
and no vote of its stockholders is required, subject to certain exceptions. One
of those exceptions occurs when stockholders are required, despite their
election to the contrary, to accept cash for their common stock rather than
securities of the surviving corporation. When this happens stockholders are
entitled to dissenters' rights.
Dissenters' rights, also known as appraisal rights, are rights afforded to
stockholders who dissent from specific transactions. The dissenting
stockholders, if they comply with the procedural requirements of applicable law,
are entitled to elect not to participate in the subject transaction and to
receive instead the fair value of their shares in cash. For a description of
dissenters' rights applicable to the merger, see "The Merger--Dissenters'
Rights" on page 33.
STOCKHOLDER RIGHTS PLANS
UtiliCorp and Empire both are party to stockholder rights plans. UtiliCorp's
rights plan is described in detail under "Description of UtiliCorp Capital
Stock--Stockholder Rights Plan" beginning on page 55. The following description
of Empire's rights plan, which has been amended to provide that none of the
transactions contemplated by the merger agreement will be a triggering event
under the plan, is not intended to be complete and is qualified by reference to
the Rights Agreement between Empire and ChaseMellon Shareholder Services dated
as of July 26, 1990, as amended, which has been filed with the SEC as an exhibit
to Empire's Current Report on Form 8-K dated July 26, 1990 and to Empire's Form
8-A/A Registration Statement dated June 17, 1999.
Under the Empire rights plan, holders of Empire common stock are granted
one-half of one preference stock purchase right for each share of Empire common
stock held. Each purchase right enables the holder to acquire one one-hundredth
of a share of Series A Participating Preference Stock, or, under certain
circumstances, other securities, at an exercise price of $75 per one
one-hundredth share, subject to adjustment. The purchase rights, other than
those held by an acquiring person or group, are exercisable only if an acquiring
person or group acquires 10% or more of Empire's common stock (as compared to a
15% threshold for a similar event under UtiliCorp's rights plan) or announces an
intention to make a tender offer or exchange offer which would result in the
acquiring person or group owning 10% or more
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of common stock (as compared to a 15% threshold for a similar event under
UtiliCorp's rights plan). The purchase rights may be redeemed by Empire in
whole, but not in part, for $0.01 per purchase right, prior to 10 days after the
first public announcement of the acquisition of 10% or more of Empire's common
stock by an acquiring person or group (as compared to a 15% threshold for a
similar event under UtiliCorp's rights plan).
In addition, upon the occurrence of a merger or other business combination,
or an event of the type described in the preceding paragraph, holders of the
purchase rights, other than an acquiring person or group, will be entitled, upon
exercise of a purchase right, to receive either Empire common stock or common
stock of the acquiring person or group having a value equal to two times the
exercise price of the purchase right. Any time after an acquiring person or
group acquires 10% (as compared to a 15% threshold for a similar event under
UtiliCorp's rights plan, or more) but less than 50%, of Empire's outstanding
common stock, Empire's board of directors may, at its option, exchange part or
all of the purchase rights, other than purchase rights held by the acquiring
person or group, for Empire common stock on a one-for-two basis.
Each of the UtiliCorp rights plan and the Empire rights plan has an
anti-takeover effect because a distribution under either plan may cause
substantial dilution to a person or group that attempts to acquire a substantial
number of shares without board approval.
ANTI-TAKEOVER STATUTES
Both Kansas and Delaware law contain statutory provisions that may have
anti-takeover effects.
BUSINESS COMBINATION STATUTES. Both Kansas and Delaware have a statute
known as a "business combination statute." This statute restricts certain
"business combinations" between a domestic corporation and an "interested
stockholder." For this purpose, a "business combination" means one of various
types of transactions, including mergers, that increases the proportionate
voting power of the interested stockholder. An "interested stockholder" means
any person, or their affiliate or associate, who owns or controls 15% or more of
the outstanding shares of the corporation's voting stock.
Under both statutes, a domestic corporation may not engage in a business
combination with an interested stockholder for a period of three years following
the time the interested stockholder became an interested stockholder, unless:
- prior to that time the board of directors of the corporation approved
either the business combination or the transaction that resulted in the
stockholder becoming an interested stockholder;
- upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding shares owned by persons who are
directors and also officers and shares held by specified employee stock
ownership plans; or
- at or after that time the business combination is approved by the board of
directors and authorized at a stockholders' meeting by the affirmative
vote of at least two-thirds of the outstanding voting stock not owned by
the interested stockholder.
A domestic corporation may opt out of coverage of the business combination
statute by including a provision to that effect in its governing corporate
documents. Neither Empire nor UtiliCorp has opted out of coverage of these
statutes.
CONTROL SHARE ACQUISITION STATUTES. Kansas also has a statute known as a
"control share acquisition statute." This statute provides that any person must
obtain stockholder approval before acquiring any shares of stock of a publicly
traded Kansas corporation, such as Empire, if after the acquisition he or she
would have the power to exercise certain levels of voting power set forth in the
statute. If the acquiring person
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fails to obtain stockholder approval, the acquiring person's shares lose their
voting rights. The voting rights may be retained or restored only if certain
disclosure requirements are met and upon the approval by both a majority of the
outstanding voting stock and a majority of the outstanding voting stock after
exclusion of "interested shares." For this purpose, "interested shares" means
all shares owned by the acquiring person, by directors of the corporation who
are also its employees, and by officers of the corporation.
A Kansas corporation may opt out of coverage by the control share
acquisition statute by including a provision to that effect in its governing
corporate documents. Empire has done so through a provision in its bylaws.
Delaware does not have a control share acquisition statute, and therefore
UtiliCorp is not subject to one.
BUSINESS COMBINATIONS
The charter documents of both Empire and UtiliCorp contain a provision
requiring a super-majority stockholder vote for certain business transactions.
However, the provisions are different in certain respects, as described below.
Empire's articles of incorporation require the affirmative vote of at least
80% of all outstanding shares of Empire's voting stock to approve any Business
Combination, as defined below, with a Substantial Stockholder, as defined below.
For this purpose, a Substantial Stockholder means any person or company that
owns 5% or more of Empire's outstanding voting stock. A Business Combination
means:
- any merger, consolidation or share exchange involving Empire;
- any sale or other disposition by Empire to a Substantial Stockholder, or
by a Substantial Stockholder to Empire, of assets worth $10 million or
more;
- the issuance or transfer by Empire of securities worth $10 million or
more;
- the adoption of any plan of liquidation or dissolution proposed by a
Substantial Stockholder; or
- any recapitalization or other restructuring of Empire that has the effect
of increasing the proportionate ownership of a Substantial Stockholder.
The 80% voting requirement does not apply if two-thirds of Empire's
Continuing Directors, as defined below, approve the Business Combination, or all
of the following conditions have been met:
- the ratio of (1) the per share consideration received by Empire's
stockholders in the Business Combination to (2) the fair market value of
Empire's stock immediately before the announcement of the Business
Combination is at least equal to the ratio of (1) the highest price per
share that the Substantial Stockholder paid for any shares of stock within
the 2-year period prior to the Business Combination to (2) the fair market
value of Empire's stock immediately prior to the initial acquisition by
the Substantial Stockholder of any stock during the 2-year period;
- the per share consideration received by Empire's stockholders in the
Business Combination must be at least equal to the highest of the
following:
(1) The highest price per share paid by the Substantial Stockholder
within the 2-year period prior to the first public announcement of
the Business Combination or in the transaction in which the
stockholder became a Substantial Stockholder, whichever is higher,
plus interest;
(2) the fair market value per share of the Empire stock on the date of
the first public announcement of the Business Combination or the
date the stockholder became a Substantial Stockholder, whichever is
higher;
(3) the book value per share of Empire stock on the last day of the
calendar month immediately before (1) the date of the first public
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announcement of the Business Combination or (2) the date the
stockholder became a Substantial Stockholder, whichever is higher;
or
(4) the highest preferential amount to which the stockholder is entitled
in the event of a voluntary or involuntary liquidation or
dissolution;
- the consideration received by Empire's stockholders must be in the same
form paid by the Substantial Stockholder in acquiring its shares;
- except as required by law, after the stockholder became a Substantial
Stockholder there is no reduction in the rate of dividends, except as
approved by two-thirds of the Continuing Directors; Empire does not take
any action which allows any holder of cumulative preferred shares or any
preference shares to elect directors without the approval of the
Continuing Directors; the Substantial Stockholder does not acquire any
newly issued voting shares from Empire; and the Substantial Stockholder
does not acquire any additional Empire voting shares or securities
convertible into Empire voting shares after becoming a Substantial
Stockholder;
- prior to the consummation of the Business Combination, the Substantial
Stockholder does not receive any financial assistance from Empire and does
not make any change in Empire's business or equity capital structure
without approval of the Continuing Directors; and
- a disclosure statement that satisfies the SEC's proxy rules is sent to the
voting stockholders describing the business combination.
For this purpose, Continuing Directors means directors who were directors
before a Substantial Stockholder became a Substantial Stockholder or any person
designated as a Continuing Director by two-thirds of the then Continuing
Directors.
UtiliCorp's certificate of incorporation requires the affirmative vote of at
least 80% of all outstanding shares of UtiliCorp's common stock to approve any
Business Transaction, as defined below, between UtiliCorp and a Related Person,
as defined below. For this purpose, a Related Person means any person or company
that owns 20% or more of UtiliCorp's outstanding common stock. A Business
Transaction means:
- any merger involving UtiliCorp;
- any sale or other disposition of 20% or more of UtiliCorp's assets;
- any sale or other disposition of 20% or more of the assets of a Related
Person to UtiliCorp;
- the issuance or sale of any of UtiliCorp's securities; or
- any liquidation, spin-off or dissolution transaction involving UtiliCorp.
The 80% voting requirement does not apply if either:
- a majority of UtiliCorp's directors who were directors before the Related
Person became a Related Person, or the successors of such directors who
are recommended or elected by a majority of such directors, approves the
Business Transaction; or
- the Business Transaction is a merger, or a sale of substantially all of
UtiliCorp's assets, and the cash or fair market value of the property to
be received per share by UtiliCorp's stockholders is at least equal to the
greater of:
(1) the highest price paid by the Related Person for a share of
UtiliCorp's common stock during specified times; and
(2) 110% of the book value per share of UtiliCorp's common stock
immediately before the first public announcement of the proposed
Business Transaction or on the date on which the Related Person
became a Related Person, whichever is higher.
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EMPIRE STOCKHOLDER PROPOSALS
Empire's 2000 Annual Meeting is tentatively scheduled to be held on April
27, 2000 (if the merger is not consummated prior to such time). Specific
proposals of Empire stockholders intended to be presented at that meeting:
- must comply with the requirements of the Exchange Act and the rules and
regulations promulgated thereunder and Empire's articles of incorporation,
and
- if intended to be included in the proxy materials for Empire's 2000 Annual
Meeting, must be received at the principal office of Empire not later than
November 16, 1999.
If the date of the 2000 Annual Meeting is changed by more than 30 days,
stockholders will be advised of such change and of the new date for submission
of proposals.
LEGAL MATTERS
Blackwell Sanders Peper Martin LLP, legal counsel to UtiliCorp, will pass
upon the validity of the UtiliCorp common stock to be issued in connection with
the merger.
At the closing of the merger, Cahill Gordon & Reindel (a partnership
including a professional corporation), legal counsel to Empire, and Blackwell
Sanders each is required to provide its client with a tax opinion to the effect
that the merger will be treated for federal income tax purposes as a
reorganization within the meaning of Section 368(a) of the Internal Revenue
Code. Blackwell Sanders has given an opinion that the statements made under the
caption "The Merger--Federal Income Tax Consequences," to the extent they
constitute a discussion of matters of federal income tax law or legal
conclusions with respect to those matters, are true and correct in all material
respects.
EXPERTS
The consolidated financial statements and schedules included in UtiliCorp
United Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998,
which is incorporated by reference in this document, have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their reports with
respect thereto, and are incorporated herein in reliance upon the authority of
Arthur Andersen LLP as experts in giving its reports.
The consolidated financial statements and schedules of The Empire District
Electric Company incorporated in this document by reference to The Empire
District Electric Company's Annual Report on Form 10-K for the year ended
December 31, 1998, have been so incorporated in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
UtiliCorp and Empire file annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information that we file at the SEC's public
reference room at 450 Fifth Street, N.W., Washington D.C. 20549, as well as at
the SEC's regional offices at 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and 7 World Trade Center, Suite 1300, New York, New York 10048.
Please call the SEC at 1-800-SEC-0330
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for more information on the public reference rooms.
Our SEC filings are also available to the public from commercial retrieval
services and at the website maintained by the SEC at HTTP://WWW.SEC.GOV.
Reports, proxy statements and other information are also available for
inspection at the offices of the NYSE.
Information concerning St. Joseph is available from the sources listed above
with respect to UtiliCorp and Empire. While we have included in this proxy
statement/ prospectus information about St. Joseph insofar as it is known or
reasonably available to us, St. Joseph is not affiliated with UtiliCorp or
Empire. Although we have no knowledge that would indicate that statements
relating to St. Joseph contained in this proxy statement/ prospectus in reliance
upon publicly available information are inaccurate or incomplete, neither
UtiliCorp nor Empire were involved in the preparation of such information and
statements and, for the foregoing reasons, are not in a position to verify any
such information or statements.
In addition, UtiliCorp filed a registration statement on Form S-4 with the
SEC to register the UtiliCorp common stock to be issued to Empire's stockholders
in the merger. This document is a part of that registration statement and
constitutes a prospectus of UtiliCorp in addition to being a proxy statement of
Empire for its special meeting. As allowed by SEC rules, this document does not
contain all the information you can find in the registration statement or the
exhibits to the registration statement.
Any information incorporated by reference is deemed to be part of this
document, except for any information superseded by information in, or
incorporated by reference in, this document. This document incorporates by
reference the documents set forth below that we have previously filed with the
SEC. These documents contain important information about UtiliCorp and Empire
and their financial status.
UTILICORP SEC FILINGS
<TABLE>
<S> <C>
Annual Report on Form 10-K................... For the fiscal year ended December 31, 1998
Quarterly Report on Form 10-Q................ For the three months ended March 31, 1999
Current Report on Form 8-K................... Filed on May 14, 1999
Current Report on Form 8-K................... Filed on March 5, 1999
Description of UtiliCorp's common stock in
Form 8-B Registration Statement............ Filed on May 5, 1987
Description of UtiliCorp's preference stock
purchase rights in Form 8-A Registration
Statement.................................. Filed on March 4, 1997
</TABLE>
EMPIRE SEC FILINGS
<TABLE>
<S> <C>
Annual Report on Form 10-K................... For the fiscal year ended December 31, 1998
Quarterly Report on Form 10-Q................ For the three months ended March 31, 1999
</TABLE>
We are also incorporating by reference additional documents that we file
with the SEC between the date of this document and the date of the special
meeting.
If you are a stockholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through us or the SEC.
Documents incorporated by reference are available from us
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without charge, but without exhibits unless we have specifically incorporated by
reference an exhibit in this document. Stockholders may obtain documents
incorporated by reference in this document by requesting them in writing or by
telephoning the appropriate party at the following addresses and telephone
numbers:
UtiliCorp United Inc.
Investor Relations
20 West Ninth Street
Kansas City, Missouri 64105
Tel: (816) 421-6600
Website: HTTP://WWW.UTILICORP.COM
The Empire District Electric Company
Shareholder Relations
602 Joplin Street
Joplin, Missouri 64801
Tel: (417) 625-5100
Website: HTTP://WWW.EMPIREDISTRICT.COM
You should rely only on the information contained or incorporated by
reference in this document to vote on the matter or matters presented at the
special meeting. We have not authorized anyone to provide you with information
that is different from what is contained in this document. This document is
dated July 29, 1999, and you should not assume that the information contained in
the document is accurate as of any other date. Neither the mailing of this
document to Empire stockholders nor the issuance of UtiliCorp common stock in
connection with the merger shall create any implication to the contrary.
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ANNEX A
AGREEMENT AND PLAN OF MERGER
BETWEEN
THE EMPIRE DISTRICT ELECTRIC COMPANY
AND
UTILICORP UNITED INC.
DATED AS OF MAY 10, 1999
A-i
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I THE MERGER.................................................................. A-1
SECTION 1.01. THE MERGER.......................................................... A-1
SECTION 1.02. CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING
CORPORATION......................................................... A-2
SECTION 1.03. DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION................. A-2
SECTION 1.04. ADVISORY BOARD...................................................... A-2
ARTICLE II CONVERSION OF CAPITAL STOCK................................................ A-2
SECTION 2.01 UCU SHARES.......................................................... A-2
SECTION 2.02 CONVERSION OF COMPANY COMMON STOCK.................................. A-2
SECTION 2.03 CANCELLATION OF COMPANY TREASURY SHARES; REDEMPTION OF COMPANY
PREFERRED STOCK..................................................... A-5
SECTION 2.04. EXCHANGE OF CERTIFICATES............................................ A-6
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................. A-8
SECTION 3.01. ORGANIZATION AND POWER; REGULATION AS A PUBLIC UTILITY.............. A-8
SECTION 3.02. CORPORATE AUTHORIZATION............................................. A-8
SECTION 3.03. GOVERNMENTAL AUTHORIZATION.......................................... A-9
SECTION 3.04. NON-CONTRAVENTION................................................... A-9
SECTION 3.05. CAPITALIZATION...................................................... A-9
SECTION 3.06. REPORTS AND FINANCIAL STATEMENTS.................................... A-10
SECTION 3.07. NO UNDISCLOSED LIABILITIES.......................................... A-11
SECTION 3.08. LITIGATION.......................................................... A-11
SECTION 3.09. ABSENCE OF CERTAIN CHANGES OR EVENTS................................ A-11
SECTION 3.10. COMPLIANCE WITH LAWS; NO DEFAULT.................................... A-11
SECTION 3.11. TAXES............................................................... A-12
SECTION 3.12. INTELLECTUAL PROPERTY............................................... A-13
SECTION 3.13. ENVIRONMENTAL MATTERS............................................... A-13
SECTION 3.14. EMPLOYEE BENEFITS AND LABOR MATTERS................................. A-15
SECTION 3.15. TRANSACTIONS WITH AFFILIATES........................................ A-17
SECTION 3.16. INFORMATION SUPPLIED................................................ A-17
SECTION 3.17. OPINION OF FINANCIAL ADVISOR........................................ A-18
SECTION 3.18. FINDERS' FEES....................................................... A-18
SECTION 3.19. TAKEOVER STATUTES................................................... A-18
SECTION 3.20. RIGHTS AGREEMENT.................................................... A-18
SECTION 3.21. YEAR 2000........................................................... A-18
SECTION 3.22 INSURANCE........................................................... A-19
SECTION 3.23 NO DISSENTERS' RIGHTS............................................... A-19
SECTION 3.24 OWNERSHIP OF UCU COMMON STOCK....................................... A-19
SECTION 3.25 DEFINITION OF "KNOWLEDGE"........................................... A-19
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF UCU...................................... A-19
SECTION 4.01. ORGANIZATION AND POWER; REGULATION AS A PUBLIC UTILITY.............. A-19
SECTION 4.02. CORPORATE AUTHORIZATION............................................. A-19
SECTION 4.03. GOVERNMENTAL AUTHORIZATION.......................................... A-20
SECTION 4.04. NON-CONTRAVENTION................................................... A-20
SECTION 4.05. CAPITALIZATION...................................................... A-20
SECTION 4.06. REPORTS AND FINANCIAL STATEMENTS.................................... A-21
SECTION 4.07. NO UNDISCLOSED LIABILITIES.......................................... A-22
SECTION 4.08. LITIGATION.......................................................... A-22
</TABLE>
A-ii
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 4.09. ABSENCE OF CERTAIN CHANGES OR EVENTS................................ A-22
SECTION 4.10. COMPLIANCE WITH LAWS; NO DEFAULT.................................... A-22
SECTION 4.11. TAXES............................................................... A-23
SECTION 4.12. ENVIRONMENTAL MATTERS............................................... A-23
SECTION 4.13. EMPLOYEE BENEFITS................................................... A-24
SECTION 4.14. DIVIDENDS........................................................... A-24
SECTION 4.15. TRANSACTIONS WITH AFFILIATES........................................ A-24
SECTION 4.16. INFORMATION SUPPLIED................................................ A-24
SECTION 4.17. FINDERS' FEES....................................................... A-25
SECTION 4.18. TAKEOVER STATUTES................................................... A-25
SECTION 4.19. YEAR 2000........................................................... A-25
SECTION 4.20. OWNERSHIP OF COMPANY COMMON STOCK................................... A-25
SECTION 4.21. DEFINITION OF "KNOWLEDGE"........................................... A-25
ARTICLE V CONDUCT OF BUSINESS......................................................... A-25
SECTION 5.01. CONDUCT OF THE COMPANY.............................................. A-25
SECTION 5.02. CONDUCT OF UCU...................................................... A-27
SECTION 5.03. REORGANIZATION...................................................... A-28
SECTION 5.04. RATE MATTERS........................................................ A-28
ARTICLE VI ADDITIONAL AGREEMENTS...................................................... A-29
SECTION 6.01. NO SOLICITATION..................................................... A-29
SECTION 6.02. PROXY STATEMENT; REGISTRATION STATEMENT............................. A-30
SECTION 6.03. STOCKHOLDERS' MEETING............................................... A-31
SECTION 6.04. ACCESS TO INFORMATION............................................... A-31
SECTION 6.05. NOTICES OF CERTAIN EVENTS........................................... A-32
SECTION 6.06. APPROPRIATE ACTION; CONSENTS; FILINGS............................... A-32
SECTION 6.07. PUBLIC DISCLOSURE................................................... A-32
SECTION 6.08. REORGANIZATION...................................................... A-32
SECTION 6.09. AFFILIATES.......................................................... A-33
SECTION 6.10. LISTING OF STOCK.................................................... A-33
SECTION 6.11. INDEMNIFICATION OF DIRECTORS AND OFFICERS........................... A-33
SECTION 6.12. COMPANY STOCK OPTIONS AND RESTRICTED STOCK AWARDS; ACKNOWLEDGMENT
WITH RESPECT TO COMPANY STOCK PLANS................................. A-34
SECTION 6.13. BENEFITS CONTINUATION; SEVERANCE.................................... A-35
SECTION 6.14. OPERATION OF COMPANY'S BUSINESS AFTER CLOSING....................... A-37
SECTION 6.15. TAKEOVER STATUTES................................................... A-37
SECTION 6.16. DISCLOSURE SCHEDULES................................................ A-37
SECTION 6.17. CHARITABLE AND ECONOMIC DEVELOPMENT SUPPORT......................... A-37
SECTION 6.18 TRANSITION TASK FORCE............................................... A-37
SECTION 6.19 TERMINATION OF DRIP................................................. A-38
SECTION 6.20. DIVIDEND RECORD DATE................................................ A-38
SECTION 6.21. REAL ESTATE TRANSFER TAXES.......................................... A-38
SECTION 6.22. ASSUMPTION OF DEBT OBLIGATIONS...................................... A-38
SECTION 6.23. AMENDMENT OF FIRST MORTGAGE BOND INDENTURE.......................... A-38
ARTICLE VII CONDITIONS TO MERGER...................................................... A-38
SECTION 7.01. CONDITIONS TO EACH PARTY'S OBLIGATIONS.............................. A-38
SECTION 7.02. ADDITIONAL CONDITIONS TO OBLIGATIONS OF UCU......................... A-39
SECTION 7.03. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY................. A-40
</TABLE>
A-iii
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE VIII TERMINATION.............................................................. A-40
SECTION 8.01. TERMINATION......................................................... A-40
SECTION 8.02. EFFECT OF TERMINATION............................................... A-41
SECTION 8.03. FEES AND EXPENSES................................................... A-41
SECTION 8.04. AMENDMENT........................................................... A-42
SECTION 8.05. EXTENSION; WAIVER................................................... A-42
ARTICLE IX MISCELLANEOUS.............................................................. A-42
SECTION 9.01. NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS........... A-42
SECTION 9.02. NOTICES............................................................. A-43
SECTION 9.03. INTERPRETATION...................................................... A-43
SECTION 9.04. DISCLOSURE SCHEDULES................................................ A-43
SECTION 9.05. COUNTERPARTS........................................................ A-43
SECTION 9.06. ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES......................... A-44
SECTION 9.07. GOVERNING LAW....................................................... A-44
SECTION 9.08. ASSIGNMENT.......................................................... A-44
</TABLE>
A-iv
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "AGREEMENT") dated as of May 10, 1999
between UTILICORP UNITED INC., a Delaware corporation ("UCU"), and THE EMPIRE
DISTRICT ELECTRIC COMPANY, a Kansas corporation (the "COMPANY").
RECITALS:
WHEREAS, the Boards of Directors of UCU and the Company deem it advisable
and in the best interests of each corporation and its respective stockholders
that UCU and the Company enter into a strategic business combination in order to
advance the long-term business interests of UCU and the Company, and have
therefore approved this Agreement, the Merger (as defined in Section 1.01) and
the other transactions contemplated by this Agreement; and
WHEREAS, the combination of UCU and the Company shall be effected by the
terms of this Agreement through a transaction in which the Company will merge
with and into UCU, with UCU as the surviving corporation, and the common
stockholders of the Company (other than those receiving solely Cash
Consideration (as defined in Section 2.02) and Dissenting Stockholders (as
defined in Section 2.02(j)) will become stockholders of UCU; and
WHEREAS, it is intended that, for federal income tax purposes, the Merger
shall qualify as a reorganization under the provisions of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "CODE"); and
WHEREAS, UCU and the Company desire to make certain representations,
warranties, covenants and agreements in connection with this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth below, the
parties agree as follows:
ARTICLE I
THE MERGER
SECTION 1.01. THE MERGER. (a) Upon the terms and subject to the conditions
set forth in this Agreement, at the Effective Time (as defined in Section
1.01(c)), the Company shall be merged (the "MERGER") with and into UCU in
accordance with the General Corporation Code of Kansas (the "KGCC") and the
General Corporation Law of the State of Delaware (the "DGCL"), whereupon the
separate existence of the Company shall cease, and UCU shall continue as the
surviving corporation (the "SURVIVING CORPORATION").
(b) Upon the terms and subject to the conditions of this Agreement, the
closing of the Merger (the "CLOSING") shall take place at 10:00 a.m. on a date
to be specified by the parties (the "CLOSING DATE"), which date shall be no
later than the second business day after satisfaction of the conditions set
forth in Article VII, at the offices of Blackwell Sanders Peper Martin LLP, 2300
Main, Kansas City, Missouri 64108, unless another time, date or place is agreed
to in writing by the parties hereto.
(c) Upon the Closing, the Company and UCU will file (i) a certificate of
merger with the Secretary of State of the State of Kansas and make all other
filings or recordings required by the KGCC in connection with the Merger and
(ii) a certificate of merger with the Secretary of State of the State of
Delaware and make all other filings or recordings required by the DGCL in
connection with the Merger. The Merger shall become effective at such time as
the certificate of merger is duly filed with the Secretary of State of the State
of Delaware or at such later time as is agreed to by UCU and the Company and
specified in the certificate of merger (the "EFFECTIVE TIME").
(d) The Merger shall have the effects set forth in this Agreement and in
Section 17-6709 of the KGCC and Section 259 of the DGCL.
A-1
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SECTION 1.02. CERTIFICATE OF INCORPORATION AND BYLAWS OF THE SURVIVING
CORPORATION. The certificate of incorporation and bylaws of UCU, as in effect
immediately prior to the Effective Time, shall be the certificate of
incorporation and bylaws of the Surviving Corporation.
SECTION 1.03. DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION. The
directors of UCU immediately prior to the Effective Time shall be the initial
directors of the Surviving Corporation, each to hold office in accordance with
the certificate of incorporation and bylaws of the Surviving Corporation, and
the officers of UCU immediately prior to the Effective Time shall be the initial
officers of the Surviving Corporation, in each case until their respective
successors are duly elected or appointed.
SECTION 1.04. ADVISORY BOARD. The Surviving Corporation (and any successor
or assign of Surviving Corporation) shall maintain an advisory board (the
"ADVISORY BOARD"), for a period of at least three years following the Closing
Date. The Advisory Board shall be comprised of five persons nominated in writing
by the Company and approved by UCU (which approval shall not be unreasonably
withheld) on or prior to the Closing Date ("COMPANY DESIGNEES"). Company
Designees shall not be subject to removal without cause by the Surviving
Corporation absent their consent, and any vacancy on the Advisory Board which
arises after the Effective Time shall be filled by a person selected by majority
vote of the remaining Company Designees and approved by UCU (which approval
shall not be unreasonably withheld) (and such replacement person shall be deemed
a "COMPANY DESIGNEE" for all purposes hereunder). The Advisory Board shall meet
no less frequently than quarterly, and the Surviving Corporation shall consult
with the Advisory Board with respect to the business operations of the Surviving
Corporation in the Company's current service area (including consultations with
the Advisory Board in which the Advisory Board may review and make
recommendations consistent with Section 6.17 with respect to the civic,
charitable and business and customer development activities of the Surviving
Corporation in such area). Company Designees shall receive an annual fee of
$15,000 for serving on the Advisory Board, and shall be reimbursed for
reasonable out-of-pocket expenses incurred in connection with their service on
the Advisory Board. The Surviving Corporation shall provide to Company Designees
indemnification rights to the same extent as provided to Surviving Corporation's
directors pursuant to the Surviving Corporation's Certificate of Incorporation
and bylaws.
ARTICLE II
CONVERSION OF CAPITAL STOCK
2.01 UCU SHARES. Each share of common stock of UCU issued and outstanding
immediately prior to the Effective Time shall remain outstanding and unchanged
by reason of the Merger as one share of common stock of the Surviving
Corporation.
2.02 CONVERSION OF COMPANY COMMON STOCK.
(a) OUTSTANDING SHARES OF COMPANY COMMON STOCK. Subject to the other
provisions of this Section 2.02, each share of common stock, par value $1.00 per
share of the Company (the "COMPANY COMMON STOCK") issued and outstanding
immediately prior to the Effective Time, together with any associated Right (as
defined in Section 3.20) (other than shares to be canceled pursuant to Section
2.03(a) and other than Dissenting Shares (as such term is defined in Section
2.02(j)), shall be converted into the right to receive (i) a number of shares of
UCU Common Stock equal to the Exchange Ratio (as such term is defined below),
subject to the payment of cash in lieu of any fractional share (the "STOCK
CONSIDERATION"); or (ii) cash per share of Company Common Stock equal to the
Average Trading Price (as such term is defined below) multiplied by the Exchange
Ratio (the "CASH CONSIDERATION"). The Stock Consideration together with the Cash
Consideration is collectively referred to as the "Merger Consideration."
A-2
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The "EXCHANGE RATIO" shall be determined as follows:
(i) if the Average Trading Price of a share of UCU Common Stock is less
than $22.00, the Exchange Ratio shall equal 1.341; (ii) if the Average Trading
Price of a share of UCU Common Stock is greater than or equal to $22.00, but
less than or equal to $26.00, the Exchange Ratio shall equal a fraction (rounded
to the nearest hundred-thousandth) determined by dividing $29.50 by the Average
Trading Price of a share of UCU Common Stock; and (iii) if the Average Trading
Price of a share of UCU Common Stock is greater than $26.00, the Exchange Ratio
shall equal 1.135. The Exchange Ratio shall be subject to appropriate adjustment
in the event of a stock split, stock dividend or recapitalization after the date
of this Agreement applicable to shares of the UCU Common Stock or the Company
Common Stock.
"AVERAGE TRADING PRICE" shall be equal to the average of the daily closing
prices per share of UCU Common Stock on the New York Stock Exchange ("NYSE")
Composite Transactions Reporting System, as reported in The Wall Street Journal
for the twenty trading days ending on the date immediately prior to the second
full NYSE trading day immediately preceding the Closing Date.
(b) ELECTION. Subject to the maximum amounts set forth in Sections 2.02(c)
and 2.02(d), each record holder of Company Common Stock immediately prior to the
Election Deadline (as defined in Section 2.02(g)) shall be entitled to (i) elect
to receive the Cash Consideration (a "CASH ELECTION"), (ii) elect to receive the
Stock Consideration (a "STOCK ELECTION"), or (iii) indicate that such record
holder has no preference as to the receipt of Cash Consideration or Stock
Consideration (all Company Common Stock held by such record holder, "NO ELECTION
SHARES"), for such holder's Company Common Stock. Elections shall be made on a
form designed for that purpose (a "FORM OF ELECTION"). A holder of record of
shares of Company Common Stock who holds such shares as nominee, trustee or in
another representative capacity (a "REPRESENTATIVE") may submit multiple Forms
of Election, provided that such Representative certifies that each such Form of
Election covers all shares of Company Common Stock held by such Representative
for a particular beneficial owner. To the extent not covered by a properly given
Form of Election, all Company Common Stock issued and outstanding immediately
prior to the Effective Time, shall be designated as No Election Shares and
shall, except as provided in Section 2.02(d) and 2.02(h), be converted solely
into UCU Common Stock.
(c) MAXIMUM CASH ELECTION SHARES. Notwithstanding the provisions of
Section 2.02(b) and subject to Section 2.02(d) and Section 2.02(h), the
aggregate number of shares of Company Common Stock that may be converted into
the right to receive cash (including the right to receive cash in lieu of
fractional shares as provided in this Section 2.02) in the Merger (the "CASH
ELECTION NUMBER") shall not exceed 50% of the shares of Company Common Stock
outstanding at 5:00 Eastern Time on the second day prior to the Effective Time
or such other number as shall be determined in accordance with Section 2.02(h).
If the aggregate number of shares of Company Common Stock covered by Cash
Elections (the "CASH ELECTION SHARES") exceeds the Cash Election Number, those
holders that will be entitled to receive Cash Consideration shall be selected by
the Exchange Agent (as defined in Section 2.04(a)) through a lottery among
holders who made a Cash Election up to the Cash Election Number and all other
Cash Election Shares shall be converted into the right to receive Stock
Consideration.
(d) MAXIMUM STOCK CONSIDERATION. The number of shares of UCU Common Stock
to be issued to holders of Company Common Stock shall not, when added to the
number of shares of UCU Common Stock initially issuable pursuant to Sections
6.12 and 6.13, exceed 19.9% of the total number of shares of UCU Common Stock
issued and outstanding immediately preceding the Effective Time (the "MAXIMUM
STOCK AMOUNT"). If the aggregate number of shares of UCU Common Stock payable as
Stock Consideration (the "AGGREGATE STOCK AMOUNT") exceeds the Maximum Stock
Amount, UCU shall have the option to limit the aggregate Stock Consideration to
the Maximum Stock Amount (a
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"PRORATION EVENT") and to make a corresponding increase in the aggregate Cash
Consideration by instructing the Exchange Agent to:
(A) convert a sufficient number of No Election Shares into the right to
receive the Cash Consideration, which No Election Shares shall be selected PRO
RATA from among all of the holders thereof, based upon the aggregate number of
No Election Shares held by each such holder, such that the Aggregate Stock
Amount to be issued equals as close as practicable the Maximum Stock Amount; and
(B) to the extent that such conversion of the No Election Shares does not
reduce the Aggregate Stock Amount to the Maximum Stock Amount, convert a
sufficient number of Stock Election Shares into the right to receive the Cash
Consideration, which Stock Election Shares shall be selected pro rata from among
all of the holders thereof, based upon the aggregate number of Stock Election
Shares held by each such holder, such that the amount of UCU Common Stock to be
issued equals as close as practicable the Maximum Stock Amount.
(e) FORM OF ELECTION. To be effective, a Form of Election must be properly
completed, signed and submitted to the Exchange Agent prior to the Election
Deadline. UCU shall have the discretion, which it may delegate in whole or in
part to the Exchange Agent, to determine whether Forms of Election have been
properly completed, signed and submitted or revoked and to disregard immaterial
defects in Forms of Election. The decision of UCU (or the Exchange Agent) in
such matters shall be conclusive and binding, absent manifest error. Neither UCU
nor the Exchange Agent shall be under any obligation to notify any person of any
defect in a Form of Election submitted to the Exchange Agent. The Exchange Agent
shall also make all computations contemplated by this Section 2.02, and all such
computations shall be conclusive and binding on the holders of Company Common
Stock.
(f) DEEMED NON-ELECTION. For purposes hereof, a holder of Company Common
Stock who does not submit a Form of Election that is received by the Exchange
Agent prior to the Election Deadline shall be deemed not to have made an
election in accordance with this Section and the shares of Company Common Stock
held by such holder shall be classified as No Election Shares. If UCU or the
Exchange Agent shall determine that any purported Election was not properly
made, such purported Election shall be deemed to be of no force and effect and
the shares of Company Common Stock covered by such purported Election shall be
classified as No Election Shares.
(g) ELECTION DEADLINE. UCU and the Company shall each use its reasonable
efforts to cause copies of the Form of Election to be mailed to the record
holders of Company Common Stock not less than 30 days prior to the Effective
Time and to make the Form of Election available to all persons who become record
holders of Company Common Stock subsequent to the date of such mailing but prior
to the Election Deadline. A Form of Election must be received by the Exchange
Agent by 5:00 p.m., Eastern Time, on the last NYSE trading day prior to the
third business day before the anticipated Effective Time (the "ELECTION
DEADLINE") in order to be effective. All elections may be revoked until the
Election Deadline in writing by the record holders submitting Forms of Election.
Any revocations or elections received after the Election Deadline shall be null
and void.
(h) ADJUSTMENT FOR TAX AND ACCOUNTING MATTERS. If, after having made the
calculation under Section 2.02(c), the tax opinions referred to in Sections
7.02(c) and 7.03(c) cannot be rendered (as reasonably determined by Blackwell
Sanders Peper Martin LLP and Cahill Gordon & Reindel), as a result of the Merger
possibly failing to satisfy continuity-of-interest requirements under applicable
federal income tax principles relating to reorganizations described in Section
368(a) of the Code, then UCU shall reduce, to the minimum extent necessary to
enable such tax opinions to be rendered, the amount of cash to be delivered with
respect to the Cash Election Shares (in accordance with the lottery procedures
outlined in Section 2.02(c) or in any other manner considered by the Exchange
Agent to be fair and equitable) and in lieu thereof shall deliver the number of
shares of UCU Common Stock
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having an aggregate value, based on the Average Trading Price, equal to the
amount of such reduction, and the Cash Election Number shall be appropriately
adjusted to give effect to such reduction.
(i) ADJUSTMENT TO PREVENT DILUTION. If, prior to the Effective Time, UCU
shall declare a stock dividend or other similar distribution of shares of UCU
Common Stock or securities convertible into shares of UCU Common Stock, or
effect a stock split, reclassification, recapitalization, stock combination or
other change with respect to the UCU Common Stock, the Exchange Ratio and the
Average Trading Price, if applicable, shall be appropriately adjusted to reflect
such dividend, distribution, stock split, reclassification, recapitalization,
stock combination or other change.
(j) SHARES OF DISSENTING STOCKHOLDERS. Notwithstanding anything in this
Agreement to the contrary, if a Proration Event shall have occurred, any issued
and outstanding shares of Company Common Stock held by a person (a "DISSENTING
STOCKHOLDER") who shall not have voted to adopt this Agreement or consented
thereto in writing and who shall have properly demanded appraisal for such
shares in accordance with Section 17-6712 of the KGCC ("DISSENTING SHARES")
shall not be converted as described in Section 2.02(a), unless such holder fails
to perfect or withdraws or otherwise loses its right to appraisal. If, after the
Effective Time, such Dissenting Stockholder fails to perfect or withdraws or
loses the right to appraisal, such Dissenting Stockholder's shares of Company
Common Stock shall no longer be considered Dissenting Shares for the purposes of
this Agreement and shall thereupon be deemed to have been converted into and to
have become exchangeable for, at the Effective Time, the right to receive for
each such share (a "NONDISSENTING SHARE") the number of shares of UCU Common
Stock and the amount in cash, without interest, that a holder of a No Election
Share who had not demanded appraisal would have received with respect to such
Nondissenting Share after giving effect to Sections 2.02(d) and (h) (it being
understood that no adjustment shall be made to the proration computation (if
any) made following the Election Deadline to give effect to the withdrawal of,
or the failure to perfect, the demand for appraisal with respect to such
Dissenting Shares). The Company shall give UCU (I) prompt notice of any demands
for appraisal of shares of Company Common Stock received by the Company and (ii)
the opportunity to participate in and direct all negotiations and proceedings
with respect to any such demands. Except as required by law, the Company shall
not, without the prior written consent of UCU, make any payment with respect to,
or settle, offer to settle or otherwise negotiate, any such demands.
2.03 CANCELLATION OF COMPANY TREASURY SHARES; REDEMPTION OF COMPANY
PREFERRED STOCK.
(a) As of the Effective Time, each share of Company Common Stock (together
with any associated Right) that is owned by the Company as treasury stock or
owned, directly or indirectly, by the Company, UCU or any of their respective
Subsidiaries shall be canceled and shall cease to exist and no UCU Common Stock
or other consideration shall be delivered in exchange therefor. For purposes of
this Agreement, "Subsidiary" means, with respect to any Person, any corporation
or other organization, whether incorporated or unincorporated, of which directly
or indirectly at least 50% of the securities or other interests having by their
terms ordinary voting power to elect a majority of the Board of Directors or
others performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such Person or by
any one or more of its Subsidiaries, or by such Person and one or more of its
Subsidiaries. For purposes of this Agreement, "PERSON" means an individual, a
corporation, a limited liability company, a partnership, an association, a trust
or any other entity or organization, including a Governmental Authority (as
defined in Section 3.03).
(b) Prior to the Effective Time, the Board of Directors of the Company shall
call for redemption all outstanding shares of Company Preferred Stock (as
defined in Section 3.05) at a redemption price equal to the amount provided for
in the Company's articles of incorporation or in a certificate of designation on
a particular series of Company Preferred Stock, together with all dividends
accrued and
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unpaid to the date of such redemption. All shares of the Company Preferred Stock
shall be redeemed so that no such shares shall be outstanding at the Effective
Time.
SECTION 2.04. EXCHANGE OF CERTIFICATES. The procedures for exchanging
outstanding shares of Company Common Stock for Merger Consideration shall be as
follows:
(a) EXCHANGE AGENT. Prior to or at the Effective Time, UCU shall deposit
with an exchange agent as may be designated by UCU and reasonably acceptable to
the Company (the "EXCHANGE AGENT"), for the benefit of the holders of shares of
Company Common Stock, for exchange in accordance with this Section 2.04,
certificates representing the shares of UCU Common Stock issuable pursuant to
Section 2.02 in exchange for outstanding shares of Company Common Stock and cash
payable pursuant to Section 2.02 in exchange for outstanding shares of Company
Common Stock and shall deposit cash in an amount required to be paid pursuant to
subsections (c) and (e) of this Section 2.04 (such shares of UCU Common Stock
and cash being hereinafter referred to as the "EXCHANGE FUND").
(b) EXCHANGE PROCEDURES. As soon as reasonably 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 Effective Time
represented outstanding shares of Company Common Stock (each a "CERTIFICATE"
and, collectively, the "CERTIFICATES"), (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 delivery of the Certificates to the Exchange
Agent and shall be in such form and have such other provisions as UCU and the
Company may reasonably specify) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for the Merger Consideration
(comprised of certificates representing shares of UCU Common Stock and cash in
lieu of fractional shares constituting the Stock Consideration and/or the Cash
Consideration) which the holder of such Certificate has a right to receive. Upon
surrender of a Certificate for cancellation to the Exchange Agent, together with
such letter of transmittal, duly executed, the holder of record of such
Certificate shall be entitled to receive in exchange therefor (i) a check
representing the Cash Consideration, or (ii) (x) a certificate or certificates
representing that whole number of shares of UCU Common Stock which such holder
has the right to receive pursuant to the provisions of this Article II in such
denominations and registered in such names as such holder may request in
accordance with the instructions set forth in such letter of transmittal and (y)
a check representing the amount of cash, if any, which such holder has the right
to receive pursuant to the provisions of this Article II, after giving effect to
any required withholding tax, without interest. In the event of a transfer of
ownership of shares of Company Common Stock which is not registered on the
transfer records of the Company, (i) a check representing the Cash Consideration
or (ii) a certificate representing the proper number of shares of UCU Common
Stock, together with a check for the cash to be paid in lieu of fractional
shares, if any, without interest, and unpaid dividends and distributions since
the Effective Time, if any, without interest, may be issued to such transferee
if the Certificate representing such shares of Company Common Stock held by such
transferee is presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. Notwithstanding any
other provisions of this Agreement, no dividends or other distributions declared
or made after the Effective Time with respect to any shares of UCU Common Stock
having a record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate, and no cash payment shall be paid to any such holder,
until the holder of such Certificate shall surrender such Certificate as
provided in this Section 2.04. Subject to the effect of applicable laws,
following surrender of any such Certificate, there shall be paid to the holder
of the certificates representing whole shares of UCU Common Stock 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 UCU Common Stock to
which such holder is entitled pursuant to subsection (e) of this Section 2.04
and the amount of dividends or other distributions with a record
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date after the Effective Time previously paid with respect to such whole shares
of UCU Common Stock, less the amount of any withholding taxes which may be
required thereon, 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 shares of UCU Common Stock, less the amount of any
withholding taxes which may be required thereon.
(d) NO FURTHER OWNERSHIP RIGHTS IN COMPANY COMMON STOCK. All shares of UCU
Common Stock issued upon the surrender for exchange of shares of Company Common
Stock in accordance with the terms hereof (including any cash paid pursuant to
this Article II) shall be deemed to have been issued in full satisfaction of all
rights pertaining to such shares of Company Common Stock, subject, however, to
the Surviving Corporation's obligation to pay any dividends or make any other
distributions with a record date prior to the Effective Time which may have been
declared or made by the Company on such shares of Company Common Stock on or
prior to the date hereof and which remain unpaid at the Effective Time, and
there shall be no further registration of transfers on the stock transfer books
of the Surviving Corporation of the shares of Company Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, Certificates are presented to the Surviving Corporation for any reason,
they shall be canceled and exchanged for the Merger Consideration as provided in
this Section 2.04.
(e) NO FRACTIONAL SHARES. No certificate or scrip representing fractional
shares of UCU Common Stock shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to exercise any rights of a stockholder of UCU.
Notwithstanding any other provision of this Agreement, each holder of shares of
Company Common Stock exchanged pursuant to the Merger who would otherwise have
been entitled to receive a fraction of a share of UCU Common Stock (after taking
into account all Certificates delivered by such holder) shall receive, in lieu
thereof, cash (without interest) in an amount equal to such fractional part of a
share of UCU Common Stock multiplied by the Average Trading Price.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund which
remains undistributed to the stockholders of the Company for one year after the
Effective Time shall be delivered to UCU (which shall thereafter act as Exchange
Agent), and any stockholders of the Company who have not previously complied
with this Section 2.04 shall thereafter look as a general creditor only to UCU
for payment of their claim for Cash Consideration or shares of UCU Common Stock,
any cash in lieu of fractional shares of UCU Common Stock and any dividends or
distributions with respect to UCU Common Stock, none of which shall bear
interest.
(g) NO LIABILITY. The Surviving Corporation shall not be liable to any
holder of shares of Company Common Stock or UCU Common Stock, as the case may
be, for such shares (or dividends or distributions with respect thereto) of UCU
Common Stock or cash from the Exchange Fund delivered to a public official as
required by any applicable abandoned property, escheat or similar law. If any
Certificates shall not have been surrendered immediately prior to the date on
which any Cash Consideration, shares of UCU Common Stock, any dividends or
distributions with respect thereto, or any cash in lieu of fractional shares in
respect of such Certificate would otherwise escheat to or become the property
of, or otherwise become deliverable to, any Governmental Authority, any such
shares, dividends or distributions or cash in respect of such Certificate shall,
to the extent permitted by applicable laws, become the property of UCU, free and
clear of all claims or interest of any Person previously entitled thereto.
(h) MISSING CERTIFICATES. In the event any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact and the
providing of an appropriate indemnity or surety bond by the Person claiming such
Certificate to be lost, stolen or destroyed, the Exchange Agent will issue in
exchange for such lost, stolen or destroyed Certificate, the Cash Consideration,
or the Stock
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Consideration and dividends and distributions deliverable in respect thereof
pursuant to this Agreement, less the amount of any withholding taxes that may be
required thereon, and without interest.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to UCU that the statements contained in
this Article III are true and correct, except as set forth in the disclosure
schedule delivered by the Company to UCU prior to execution of this Agreement
(the "COMPANY DISCLOSURE SCHEDULE") or as otherwise expressly permitted by this
Agreement. For purposes of this Agreement, "COMPANY MATERIAL ADVERSE EFFECT"
means a material adverse effect (i) on the business, properties, assets,
liabilities (contingent or otherwise), financial condition, results of
operations or prospects of the Company, taken as a whole, or (ii) on the ability
of the Company to perform its obligations under or to consummate the
transactions contemplated by this Agreement.
SECTION 3.01. ORGANIZATION AND POWER; REGULATION AS A PUBLIC UTILITY. (a)
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, and has the
requisite corporate or other power and authority and governmental approvals to
own, lease and operate its properties and to carry on its business as now being
conducted, except where the failure to be in good standing or have such power,
authority or approvals would not, individually or in the aggregate, be
reasonably expected to have a Company Material Adverse Effect. The Company is
duly qualified or licensed to do business and is in good standing in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification or licensing necessary,
except where the failure to be so duly qualified or licensed and in good
standing would not, individually or in the aggregate, be reasonably expected to
have a Company Material Adverse Effect. As of the date hereof, the Company has
no Subsidiaries. True, accurate and complete copies of the articles of
incorporation and bylaws of the Company, as in effect on the date hereof, have
been delivered to UCU.
(b) The Company is not a "holding company," a "subsidiary company" or an
"affiliate" of any public utility holding company within the meaning of Section
2(a)(7), 2(a)(8) or 2(a)(11) of the Public Utility Holding Company Act of 1935,
as amended ("PUHCA"), respectively. The Company is regulated as a public utility
in the States of Missouri, Oklahoma, Arkansas, and Kansas and in no other state.
SECTION 3.02. CORPORATE AUTHORIZATION. The Board of Directors of the
Company has (a) determined that the Merger is fair and in the best interest of
the Company and its stockholders, (b) approved and adopted this Agreement, and
(c) resolved to recommend to the holders of the Company Common Stock that they
give the Company Stockholders' Approval (as defined below). The execution and
delivery by the Company of this Agreement, and the consummation by the Company
of the transactions contemplated hereby, are within the Company's corporate
powers and, except as set forth in the next succeeding sentence of this Section
3.02, have been duly authorized by all necessary corporate action. The
affirmative vote of a majority of the outstanding shares of Company Common Stock
(the "COMPANY STOCKHOLDERS' APPROVAL") is necessary to approve and adopt this
Agreement and the transactions contemplated by this Agreement. This Agreement
has been duly executed and delivered by the Company and, subject to the receipt
of the Company Stockholders' Approval and, assuming the due authorization,
execution and delivery of this Agreement by UCU, constitutes a valid and binding
agreement of the Company, enforceable against the Company in accordance with its
terms (subject to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and other similar laws affecting creditors' rights generally
from time to time in effect and to general principles of equity, regardless of
whether in a proceeding at equity or at law).
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SECTION 3.03. GOVERNMENTAL AUTHORIZATION. The execution and delivery by
the Company of this Agreement, and the consummation by the Company of the
transactions contemplated hereby, require no action by or in respect of, or
filing with, any federal, state or local government or any court, administrative
agency or commission or other governmental agency or authority, whether domestic
or foreign (a "GOVERNMENTAL AUTHORITY"), other than (i) the filings of a
certificate of merger with respect to the Merger with the Kansas Secretary of
State, a certificate of merger with respect to the Merger with the Delaware
Secretary of State, and appropriate documents with the relevant authorities of
other states in which the Company is qualified to do business; (ii) compliance
with any applicable requirements of the Federal Energy Regulatory Commission
("FERC") and of the utility regulatory commissions of Arkansas, Kansas,
Missouri, and Oklahoma (the "COMPANY REQUIRED STATUTORY APPROVALS"); (iii)
compliance with any applicable requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations promulgated
thereunder (the "HSR ACT"); (iv) compliance with any applicable requirements of
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder (the "SECURITIES ACT"); (v) compliance with any
applicable requirements of the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder (the "EXCHANGE ACT"); (vi)
compliance with any other applicable securities laws; (vii) compliance with any
environmental, health or safety law or regulation requiring any notification,
disclosure or approval in connection with the Merger; (viii) actions or filings
which, if not taken or made, would not, individually or in the aggregate, be
reasonably expected to have a Company Material Adverse Effect; and (ix) filings
and notices not required to be made or given until after the Effective Time.
SECTION 3.04. NON-CONTRAVENTION. The execution and delivery of this
Agreement by the Company does not, and the consummation of the transactions
contemplated hereby will not, subject to the consents, approvals, orders,
authorizations, filings and registrations contemplated by Sections 3.02 and
3.03, (i) conflict with, or result in any violation or breach of any provision
of the articles of incorporation or bylaws of the Company; (ii) result in (A)
any violation or breach of, or constitute (with or without notice or lapse of
time, or both) a default (or give rise to a right of termination, cancellation
or acceleration of any obligation or loss of any material benefit) under any of
the terms, conditions or provisions of any note, bond, mortgage, indenture,
lease, contract or other agreement, instrument or obligation to which the
Company is a party or by which any of them or any of their properties or assets
may be bound or (B) the creation of any Lien (as such term is defined below)
upon any of the properties or assets of the Company, or (iii) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to the Company
or any of its respective properties or assets, except in the case of clauses
(ii) and (iii) for any such violations, breaches, defaults, terminations,
cancellations, accelerations or creations of Liens which would not, individually
or in the aggregate, be reasonably expected to have a Company Material Adverse
Effect. For purposes of this Agreement, "Lien" means, with respect to any asset,
any mortgage, lien, pledge, charge, security interest or encumbrance of any kind
in respect of such asset.
SECTION 3.05. CAPITALIZATION. (a) As of the date hereof, the authorized
capital stock of the Company consists of 100,000,000 shares of Company Common
Stock, 5,000,000 shares of Cumulative Preferred Stock, $10.00 par value
("COMPANY PREFERRED STOCK"), and 2,500,000 shares of Preference Stock, without
par value ("COMPANY PREFERENCE STOCK"). As of March 31, 1999, (i) 17,138,486
shares of Company Common Stock were issued and outstanding, (ii) -0- shares of
Company Common Stock were held in the treasury of the Company, (iii) the maximum
number of shares of Company Common Stock issuable pursuant to the Company
Employee Plans (as defined in Section 3.14(a)) and the Company Benefit
Arrangements (as defined in Section 3.14(d)) is 1,967,707 shares, (iv) 500,000
shares of Company Preference Stock were available for issuance under the Rights
Agreement dated as of July 26, 1990 between the Company and Chase Mellon
Shareholder Services (the "RIGHTS AGREEMENT"), (v) the maximum number of newly
issued shares of Company Common Stock issuable under the Dividend Reinvestment
and Stock Purchase Plan (the "DRIP") is 290,329 shares, (vi) the maximum
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number of shares of Company Common Stock issuable to Directors under the Stock
Unit Plan for Directors is 100,000 shares, (vii) 3,262,818 shares of Company
Preferred Stock were issued and outstanding, and (viii) no shares of Company
Preference Stock were issued and outstanding or reserved for issuance other than
as described in subsection (iv) above. No change in such capitalization has
occurred since such date except as would have been permitted by Section 5.01(d)
if it were to have applied to such period. Section 3.05 of the Company
Disclosure Schedule sets forth a complete and accurate list of all Company
Benefit Arrangements pursuant to which shares of Company Common Stock or rights
thereto, may be issued, Company Stock Options (as defined in Section 6.12(a))
and Company Restricted Stock Awards (as defined in Section 6.12(c)). All
outstanding shares of the Company Common Stock are, and all shares of Company
Common Stock, subject to issuance as specified above, upon issuance on the terms
and conditions specified in the instruments pursuant to which they are issuable,
shall be, duly authorized, validly issued, fully paid and non-assessable, and
not subject to any preemptive right. There are no obligations, contingent or
otherwise, of the Company to repurchase, redeem or otherwise acquire any shares
of Company Common Stock.
(b) Except as set forth in Section 3.05(a), there are no equity securities
of any class of the Company, or any security exchangeable into or exercisable
for such equity securities, issued, reserved for issuance or outstanding. Except
as set forth in Section 3.05(a), there are no options, warrants, securities,
calls, rights, commitments or agreements of any character to which the Company
is a party or by which any of them are bound obligating the Company to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock of the Company or obligating the Company to grant, extend,
accelerate the vesting of or enter into any such option, warrant, equity
security, call, right, commitment or agreement. There are no voting trusts or
other agreements or understandings with respect to the shares of capital stock
of the Company to which the Company is a party.
SECTION 3.06. REPORTS AND FINANCIAL STATEMENTS. (a) The Company has filed
all required reports, schedules, forms, statements and other documents with the
SEC since December 31, 1993 (the "COMPANY SEC REPORTS").
(b) As of its filing date, each Company SEC Report filed pursuant to the
Exchange Act did not 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, in the light of the circumstances under which they were
made, not misleading, except to the extent that such statements have been
modified or superseded by a later filed Company SEC Report.
(c) Each Company SEC Report that is a registration statement, as amended or
supplemented, if applicable, filed pursuant to the Securities Act as of the date
such registration statement or amendment became effective did not 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, in the light
of the circumstances under which they were made, not misleading, except to the
extent that such statements have been modified or superseded by a later filed
Company SEC Report.
(d) The financial statements (including, in each case, any related notes)
contained in the Company SEC Reports complied as to form in all material
respects with the applicable published rules and regulations of the SEC with
respect thereto, were prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods involved (except
as
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may be indicated in the notes to such financial statements or, in the case of
unaudited statements, as permitted for presentation in Quarterly Reports on Form
10-Q), and fairly presented in all material respects (subject in the case of
unaudited statements to normal, recurring audit adjustments) the financial
position of the Company as at the respective dates and the results of its
operations and cash flows for the respective periods indicated. The audited
balance sheet of the Company as of December 31, 1998 is referred to herein as
the "COMPANY BALANCE SHEET".
(e) Since December 31, 1993, the Company has made all required filings with
the FERC and any appropriate state public utilities commission, except for such
filings the failure to make which would not, individually or in the aggregate,
be reasonably expected to have a Company Material Adverse Effect.
SECTION 3.07. NO UNDISCLOSED LIABILITIES. The Company does not have any
liabilities or obligations of any kind whatsoever, whether accrued, contingent,
absolute, determined, determinable or otherwise, other than:
(a) liabilities or obligations which would not, individually or in the
aggregate, be reasonably expected to have a Company Material Adverse Effect;
(b) liabilities or obligations disclosed or provided for in the Company
Balance Sheet or in the notes thereto or in the Company SEC Reports filed
prior to the date hereof;
(c) liabilities or obligations under this Agreement or incurred in
connection with the transactions contemplated by this Agreement; or
(d) liabilities or obligations incurred since December 31, 1998 in the
ordinary course of business consistent with past practices.
SECTION 3.08. LITIGATION. Except as disclosed in the Company SEC Reports
filed prior to the date hereof:
(a) There is no action, suit, investigation or proceeding pending against,
or to the knowledge of the Company, threatened against or affecting, the Company
or any of its properties before any Governmental Authority or arbitrator which,
individually or in the aggregate, would be reasonably expected to have a Company
Material Adverse Effect; and
(b) There is no judgment, decree, injunction, or order of any Governmental
Authority or arbitrator applicable to the Company which, individually or in the
aggregate, would be reasonably expected to have a Company Material Adverse
Effect.
SECTION 3.09. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the
Company Balance Sheet, except as permitted by or as disclosed in this Agreement
or the Company SEC Reports filed prior to the date hereof, the Company has
conducted its businesses only in the ordinary course and in a manner consistent
with past practice and, since such date, there has not been (a) any Company
Material Adverse Effect or any event or development (including in connection
with the Merger) that would, individually or in the aggregate, reasonably be
expected to have a Company Material Adverse Effect, or (b) any event that would,
individually or in the aggregate, reasonably be expected to prevent or
materially delay the performance of this Agreement by the Company.
SECTION 3.10. COMPLIANCE WITH LAWS; NO DEFAULT. Except as disclosed in the
Company SEC Reports filed prior to the date hereof:
(a) (i) The Company is not in violation of and has not violated or failed
to comply with any statute, law, ordinance, regulation, rule, judgment, decree,
order, writ, injunction, permit or license of any Governmental Authority or
arbitrator applicable to its business or operations, except for violations and
failures to comply that would not, individually or in the aggregate, be
reasonably expected to result in a Company Material Adverse Effect and (ii) to
the knowledge of the Company, the Company has all
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permits, licenses, franchises and other governmental authorizations, consents,
approvals and exemptions necessary to conduct its business as presently
conducted and which are material to the operation of such business.
(b) Each material agreement, contract or commitment to which the Company is
a party or by which the Company is bound or to which any of their respective
properties are subject ("Company Contracts") is a valid, binding and enforceable
obligation of the Company and in full force and effect (subject to applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
other similar laws affecting creditors' rights generally from time to time in
effect and to general principles of equity, regardless of whether in a
proceeding at equity or at law) except where the failure to be valid, binding
and enforceable and in full force and effect would not, individually or in the
aggregate, be reasonably expected to have a Company Material Adverse Effect. The
Company is not in default or violation of any term, condition or provision of
(i) its articles of incorporation or by-laws or (ii) any Company Contract,
except in the case of clause (ii) for any defaults or violations that would not,
individually or in the aggregate, be reasonably expected to have a Company
Material Adverse Effect. The Company is not subject to any agreement, whether
written or oral, restricting the ability of the Company to compete in any
business activity.
SECTION 3.11. TAXES. (a) The Company has timely filed or will file or
cause to be timely filed, all material Tax Returns (as defined in Section
3.11(j)) required by applicable law to be filed by it prior to or as of the
Effective Time, and all such material Tax Returns are, or will be at the time of
filing, complete in all material respects.
(b) The Company has paid or, where payment is not yet due, has established
or will establish or cause to be established in accordance with generally
accepted accounting principles on or before the Effective Time an adequate
accrual for the payment of, all material Taxes (as defined in Section 3.11(j))
due with respect to any period ending prior to or as of the Effective Time.
(c) There are no (i) outstanding consents extending the statute of
limitations for the assessment of any Taxes of the Company, or (ii) proposals,
assertions or assessments against the Company for deficiencies for any Taxes
that have not been satisfied or resolved.
(d) There are no material Tax claims pending against the Company and the
Company does not know of any threatened claim for material Tax deficiencies or
any basis for such claims, no material issues have been raised in writing in any
examination by any taxing authority with respect to the Company which, by
application of similar principles, reasonably could be expected to result in a
material proposed deficiency for any other period not so examined, and there is
not now in force any waiver or agreement by the Company for the extension of
time for the assessment of any material Tax, nor has any such waiver or
agreement been requested in writing by any taxing authority. The Company has no
liability with respect to any material United States federal, state, local,
foreign or other Taxes of any corporation or entity other than the Company.
(e) No transaction contemplated by this Agreement is subject to withholding
under Section 1445 of the Code.
(f) Neither the Company nor any of its other Affiliates (as defined in
Section 3.15), has taken any action, agreed to take any action, or failed to
take any action, or has knowledge of any fact or circumstance that (without
regard to any action taken or agreed to be taken by UCU or any of its
Affiliates) could reasonably be expected to cause the Merger to fail to qualify
as a "reorganization" within the meaning of Section 368(a) of the Code.
(g) The Company has not made during the last 3 years, nor will make prior to
the Effective Time, an election to have a stock purchase treated as an asset
purchase under Section 338 of the Code.
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(h) The Company has not filed with the IRS, and will not file with the IRS
prior to the Effective Time, a statement consenting to the recognition of gain
on the disposition of its "subsection (f) assets" under Section 341(f) of the
Code.
(i) The Company has not made in the last 7 years, and will not make prior to
the Effective Time, any changes in accounting method to which Section 481(a) of
the Code may apply.
(j) "TAXES" shall mean any and all taxes, charges, fees, levies or other
assessments, including income, gross receipts, excise, real or personal
property, sales, withholding, social security, retirement, unemployment,
occupation, use, goods and services, service use, license, value added, capital,
net worth, payroll, profits, withholding, franchise, transfer and recording
taxes, fees and charges, and any other taxes, assessments or similar charges
imposed by the IRS or any taxing authority (whether domestic or foreign
including any state, county, local or foreign government or any subdivision or
taxing agency thereof (including a United States possession)) (a "TAXING
AUTHORITY"), whether computed on a separate, consolidated, unitary, combined or
any other basis; and such term shall include any interest whether paid or
received, fines, penalties or additional amounts attributable to, or imposed
upon, or with respect to, any such taxes, charges, fees, levies or other
assessments. "TAX RETURN" shall mean any report, return, document, declaration
or other information or filing required to be supplied to any Taxing Authority
or jurisdiction (foreign or domestic) with respect to Taxes, including
information returns, any documents with respect to or accompanying payments of
estimated Taxes, or with respect to or accompanying requests for the extension
of time in which to file any such report, return, document, declaration or other
information.
SECTION 3.12. INTELLECTUAL PROPERTY. (a) Except as set forth in the
Company SEC Reports filed prior to the date hereof, the Company owns, is
licensed or is otherwise legally entitled to use, all patents, trade secrets,
trademarks, trade names, service marks, copyrights and mask works, all
applications for and registrations of such patents, trademarks, trade names,
service marks, copyrights and mask works, and all processes, formulae, methods,
schematics, technology, know-how, computer software programs or applications and
tangible or intangible proprietary information utilized in the conduct of the
business of the Company as currently conducted (the "COMPANY INTELLECTUAL
PROPERTY RIGHTS") except to the extent that the failure to have such rights
would not, individually or in the aggregate, be reasonably expected to have a
Company Material Adverse Effect.
(b) Except as disclosed in the Company SEC Reports filed prior to the date
hereof, the Company (i) has not been sued in any suit, action or proceeding
which involves a claim of infringement of any patent, trade secret, trademark,
service mark or copyright or the violation of any trade secret or other
proprietary right of any third party and (ii) has no knowledge that the
manufacturing, importation, marketing, licensing, sale, offer for sale, or use
of any of its products infringes any patent, trademark, service mark, copyright,
trade secret or other proprietary right of any third party, which infringement,
individually or in the aggregate, would be reasonably expected to have a Company
Material Adverse Effect.
SECTION 3.13. ENVIRONMENTAL MATTERS. Except as set forth in the Company
SEC Reports filed prior to the date hereof and except for such as would not,
individually or in the aggregate, reasonably be expected to have a Company
Material Adverse Effect:
(a) (i) No notice, demand, request for information, request for an
investigation, notice of violation, citation, summons, claim, complaint or
order has been received by, is pending, or, to the Company's knowledge,
threatened by any Person against the Company nor has any penalty been
assessed and not paid (or potentially settled), is pending or, to the
Company's knowledge, threatened against the Company relating to or arising
out of Environmental Laws (as defined in Section 3.13(b)(i)).
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(ii) To the Company's knowledge, no property now or previously owned,
leased or operated by the Company nor any property to which the Company has,
directly or indirectly, transported or arranged for the transportation of
any Hazardous Substance (as defined in Section 3.13(b)(ii)) is subject to
investigation or cleanup or is listed or proposed for listing on any
federal, state, local or foreign list of sites requiring investigation or
cleanup.
(iii) Except in material compliance with Environmental Laws, there have
been no Releases (as defined in Section 3.13(b)(iii)) at any property now
owned, leased or operated by the Company.
(iv) To the Company's knowledge, there are no liabilities or
Environmental Claims (as defined in Section 3.13(b)(iv)) of or relating to
the Company of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, arising under or relating to
Environmental Laws.
(v) The Company has or has applied for all permits or licenses necessary
to operate its facilities in compliance with Environmental Laws and is
currently in material compliance with all applicable Environmental Laws.
(vi) Except in material compliance with Environmental Laws, the Company
has not generated, used, treated, recycled, stored, disposed or transported
Hazardous Substances.
(vii) To the Company's knowledge, the Company's underground and
aboveground storage tanks (hereinafter "TANKS") located at any property
currently owned, leased or operated by the Company are now operated in
material compliance with all applicable Environmental Laws, and the
Company's Tanks located at any property formerly owned, leased or operated
by the Company at anytime after January 1, 1990, were operated by the
Company in material compliance with all applicable Environmental Laws.
(viii) The Company has no liability or potential liability for any former
manufactured gas plant facility.
(b) For purposes of this Agreement, the following terms shall have the
meanings set forth below:
(i) "ENVIRONMENTAL LAWS" shall mean all applicable statutes, regulations,
rules, ordinances, codes, licenses, permits, orders, approvals, authorizations,
judgments, decrees, injunctions, and similar items, of all governmental
agencies, departments, commissions, boards, bureaus or instrumentalities of the
United States or other nations, and the states and political subdivisions
thereof, and all applicable principles of common law pertaining to the
regulation and protection of the environment, human health, safety and damages
to natural resources, including without limitation, Releases and threatened
Releases or otherwise relating to the operation, manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Substances. Environmental Laws include, but are not limited to, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"); the Federal Insecticide, Fungicide and Rodenticide Act, as
amended ("FIFRA"); the Resource Conservation and Recovery Act, as amended
("RCRA"); the Toxic Substances Control Act, as amended ("TSCA"); the Clean Air
Act, as amended ("CAA"); the Federal Water Pollution Control Act, as amended
("FWPCA"); the Oil Pollution Act of 1990, as amended ("OPA"); the Occupational
Safety and Health Act, as amended ("OSHA"); and the Safe Drinking Water Act, as
amended ("SDWA"); and their state and local counterparts or equivalents, as
amended from time to time.
(ii) "HAZARDOUS SUBSTANCE" shall mean (a) any chemicals, materials,
substances or wastes which are defined as or included in the definition of
"hazardous substances", "hazardous materials", "toxic substances", "extremely
hazardous substances", "toxic pollutants", or words of similar import, under any
applicable Environmental Law; (b) any petroleum, petroleum products (including,
without limitation, crude oil or any fraction thereof), natural gas, natural gas
liquids, liquefied natural gas or
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synthetic gas useable for fuel (or mixtures of natural gas and such synthetic
gas) or oil and gas exploration or production waste, polychlorinated biphenyls
("PCBs"), asbestos-containing materials, and mercury; and (c) any other
chemical, material, substance, or waste, exposure to which is prohibited,
limited or regulated by any governmental or regulatory authority under any
applicable Environmental Law.
(iii) "RELEASE" means any emission, spill, seepage, leak, escape, leaching,
discharge, injection, pumping, pouring, emptying, dumping, disposing or release
of Hazardous Substances.
(iv) "ENVIRONMENTAL CLAIMS" shall mean any and all administrative,
regulatory or judicial actions or causes of action, suits, obligations,
liabilities, losses, proceedings, decrees, judgments, penalties, fees, demands,
demand letters, orders, directives, claims (including any claims involving toxic
torts or liability in tort, strict, absolute or otherwise), liens, notices of
noncompliance or violation, or legal fees or costs of investigations, monitoring
or proceedings, relating to any Environmental Law or any environmental permit
issued under any such Environmental Law, or arising from the presence, Release
or threatened Release (or alleged presence, Release or threatened Release) into
the environment of any Hazardous Substances (hereinafter "CLAIMS") including,
without limitation, and regardless of the merit of such Claim, any and all
Claims by any governmental or regulatory authority or by any third party for
enforcement, cleanup, remediation, removal, response or other actions or
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief pursuant to any Environmental Law or for any injury (including
death of any person or persons) or threat of injury to health, safety, natural
resources or the environment.
SECTION 3.14. EMPLOYEE BENEFITS AND LABOR MATTERS. (a) The Company
Disclosure Schedule contains a list identifying each "employee benefit plan" (as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974
("ERISA")), which is subject to any provision of ERISA and is maintained,
administered or contributed to by the Company and covers any employee or former
employee of the Company or under which the Company has any liability (referred
to collectively herein as the "COMPANY EMPLOYEE PLANS"). Copies of such plans
(and, if applicable, related trust agreements and insurance contracts) and all
amendments thereto have been made available to UCU together with the summary
plan description, the annual report (Form 5500 including, if applicable,
Schedule B thereto) prepared in connection with any such plan for the past three
years and the actuarial valuation report prepared in connection with any such
plan for the past three years. The only Company Employee Plans which
individually or collectively would constitute an "employee pension benefit plan"
(as defined in Section 3(2) of ERISA) are identified as such in the list
referred to above.
(b) No "accumulated funding deficiency" (as defined in Section 412 of the
Code) has been incurred with respect to any Company Employee Plan subject to
Title IV of ERISA, whether or not waived. No "reportable event" (within the
meaning of Section 4043 of ERISA) and no event described in Section 4041, 4042,
4062 or 4063 of ERISA has occurred in connection with any Company Employee Plans
subject to Title IV of ERISA other than any event which would not, individually
or in the aggregate, be reasonably expected to have a Company Material Adverse
Effect. No condition exists and no event has occurred that could constitute
grounds for termination of any Company Employee Plans subject to Title IV of
ERISA other than any such terminations that would not, individually or in the
aggregate, be reasonably expected to have a Company Material Adverse Effect.
Neither Company nor any Company ERISA Affiliate has any material unsatisfied or
potential liability under Title IV of ERISA in connection with the termination
of, or complete or partial withdrawal from, any plan covered or previously
covered by Title IV of ERISA. As of the last day of the most recent plan year,
the value of the assets of each Company Employee Plan that is subject to Title
IV of ERISA equaled or exceeded the present value of the "benefit liabilities"
(as defined in Section 4001 (a)(16) of ERISA) of each such Company Employee
Plan, using the Company Employee Plan assumptions for funding purposes in effect
for such plan year. Nothing done or omitted to be done and no transaction or
holding of any asset under or in connection with any Company Employee Plan has
made or will make
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the Company or any officer or director of the Company subject to any liability
under Title I of ERISA or liable for any tax pursuant to Section 4975 of the
Code that would, individually or in the aggregate, be reasonably expected to
have a Company Material Adverse Effect. For purposes of this Section, "Company
ERISA Affiliate" means any other Person which, together with the Company, would
be treated as a single employer under Section 414 of the Code.
(c) Each Company Employee Plan that is intended to be qualified under
Section 401(a) of the Code has received a determination letter from the IRS that
it is so qualified and, to the knowledge of the Company, is so qualified and has
been so qualified during the period since its adoption. To the knowledge of the
Company, each trust created under any such Company Employee Plan is exempt from
tax under Section 501(a) of the Code and, to the knowledge of the Company, has
been so exempt since its creation. The Company has made available to UCU the
most recent determination letter of the IRS relating to each such Company
Employee Plan. The Company and all Company ERISA Affiliates have performed all
obligations required to be performed by them with respect to each Company
Employee Plan, and each Company Employee Plan has been maintained in substantial
compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations, including, but not limited to, ERISA
and the Code, which are applicable to such Company Employee Plan, excluding any
instances of non-performance or non-compliance that would not, individually or
in the aggregate, be reasonably expected to have a Company Material Adverse
Effect.
(d) The Company Disclosure Schedule contains a list of each employment,
severance or other similar contract, arrangement or policy and each plan or
arrangement (whether written or oral) providing for insurance coverage
(including any self-insured arrangements), workers' compensation, disability
benefits, supplemental unemployment benefits, vacation benefits, retirement
benefits or for deferred compensation, profit sharing, bonuses, stock options,
stock appreciation or other forms of incentive compensation or post-retirement
insurance, compensation or benefits which is not a Company Employee Plan, is
entered into, maintained or contributed to, as the case may be, by the Company
and covers any employee or former employee of the Company. Such contracts, plans
and arrangements as are described above, copies or descriptions of all of which
(and, if applicable any related trust agreement or insurance contract) have been
furnished previously to UCU, are referred to collectively herein as the "COMPANY
BENEFIT ARRANGEMENTS". The Company and all Company ERISA Affiliates have
performed all obligations required to be performed by them with respect to each
Company Benefit Arrangement and each Company Benefit Arrangement has been
maintained in substantial compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and regulations that are
applicable to such Company Benefit Arrangement, excluding any instances of
non-performance or non-compliance that would not, individually or in the
aggregate, be reasonably expected to have a Company Material Adverse Effect.
(e) All contributions and other payments required to be made by the Company
pursuant to any Company Employee Plan or Company Benefit Arrangement have been
timely made or reflected on the Company SEC Reports.
(f) Since January 1, 1999, there has been no amendment to, material written
interpretation of or announcement (whether written or oral) by the Company or
any of its Affiliates of any amendment to, or material change in employee
participation or coverage under, any Company Employee Plan or Company Benefit
Arrangement.
(g) The execution of, and the performance of the transactions contemplated
in, this Agreement will not (either alone or upon the occurrence of any
additional or subsequent events) constitute an event under any Company Employee
Plan or Company Benefit Arrangement that will or may result in any payment
(whether of severance pay or otherwise), acceleration, forgiveness of
indebtedness, vesting, distribution, increase in benefits or obligation to fund
benefits with respect to any current or former
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employee, director or consultant of the Company, or result in the triggering or
imposition of any restrictions or limitations on the right of UCU or the Company
to amend or terminate any Company Employee Plans and receive the full amount of
any excess assets remaining or resulting from such amendment or termination,
subject to applicable taxes. There is no contract, agreement, plan or
arrangement covering any employee or former employee of the Company that,
individually or in the aggregate, could give rise to the payment of any amount
that would not be deductible pursuant to the terms of Section 280G of the Code.
The Company does not maintain, contribute to, or have any liability or
obligation with respect to any plan, program or arrangement providing post
retirement or post employment health or welfare benefits, other than as required
by Part 6 of Title I of ERISA or Section 4980B of the Code. With respect to any
Company Employee Plan that is an "employee welfare benefit plan" (as defined in
Section 3(1) of ERISA), including any such plan covering former employees of the
Company, the Company has reserved the right to amend or terminate the plan at
any time without liability with respect to claims incurred after the date of
such amendment or termination, and to the knowledge of Company, any such plan
may be amended or terminated at any time without liability with respect to
claims incurred after the date of such amendment or termination.
(h) There are no written actions, lawsuits or claims by or on behalf of any
of the Company Employee Plans or Company Benefit Arrangements, by any employee
or beneficiary covered under any such Company Employee Plan or Company Benefit
Arrangement with respect to such Company Employee Plan or Company Benefit
Arrangement, or otherwise involving any Company Employee Plan or Company Benefit
Arrangement (other than routine claims for benefits and routine expenses)
pending or threatened which could subject the Company, any officer or director,
or any employee of the Company to any liability that, individually or in the
aggregate, would reasonably be expected to have a Company Material Adverse
Effect.
(i) No work stoppage, labor strike or slowdown against the Company is
pending or, to the knowledge of the Company, threatened and the Company is not
involved in or, to the knowledge of the Company, threatened with any labor
dispute or grievance which, individually or in the aggregate, has had or would
be reasonably expected to have a Company Material Adverse Effect. To the
knowledge of the Company there is no organizing effort or representation
question at issue with respect to any employee of the Company. No collective
bargaining agreement to which the Company is or may be a party is currently
under negotiation or renegotiation and no existing collective bargaining
agreement is due for expiration, renewal or renegotiation within the one year
period after the date hereof; provided, that the Collective Bargaining
Agreements dated November 1, 1996 with Local Union No. 1474 of the International
Brotherhood of Electrical Workers ("IBEW") is scheduled to expire on October 31,
1999, and UCU agrees between the date of this Agreement and the Effective Time
the Company may, at its sole option, negotiate and execute a new collective
bargaining agreement with IBEW on terms and conditions which shall be determined
by the Company in its sole discretion.
SECTION 3.15. TRANSACTIONS WITH AFFILIATES. Since the date of the
Company's last proxy statement prior to the date of this Agreement, there have
been no transactions, agreements, arrangements or understandings between the
Company, on the one hand, and the Company's Affiliates or other Persons, on the
other hand, that would be required to be disclosed under Item 404 of Regulation
S-K under the Securities Act. For purposes of this Agreement, "AFFILIATE", when
used with respect to any Person, means any other Person directly or indirectly
controlling, controlled by, or under common control with such Person. As used in
the definition of "Affiliate," the term "control" means possession, directly or
indirectly, of the power to direct or cause the direction of the management or
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
SECTION 3.16. INFORMATION SUPPLIED. The information to be supplied by the
Company for inclusion in the registration statement on Form S-4 or any amendment
or supplement thereto pursuant to which shares of UCU Common Stock issuable in
the Merger will be registered with the SEC (the "REGISTRATION STATEMENT") shall
not at the time the Registration Statement is declared effective by the
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SEC 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 were made,
not misleading. The information to be supplied by the Company for inclusion in
the proxy statement/prospectus or any amendment or supplement thereto (the
"PROXY STATEMENT") to be sent to the stockholders of the Company in connection
with their meeting to consider this Agreement and the Merger (the "COMPANY
STOCKHOLDERS' MEETING") shall not, on the date the Proxy Statement is first
mailed to the stockholders of the Company or at the time of the Company
Stockholders' Meeting, 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
were made, not misleading.
SECTION 3.17. OPINION OF FINANCIAL ADVISOR. The financial advisor of the
Company, Salomon Smith Barney Inc., has delivered to the Company a written
opinion dated the date of this Agreement to the effect that, as of the date
hereof, the Merger Consideration to be received in the Merger is fair from a
financial point of view to the common stockholders of the Company. The Company
has delivered to UCU a copy of such opinion.
SECTION 3.18. FINDERS' FEES. Other than Salomon Smith Barney Inc., no
investment banker, broker, finder, other intermediary or other Person is
entitled to any investment banking, broker's, finder's or similar fee or
commission from the Company upon consummation of the transactions contemplated
by this Agreement.
SECTION 3.19. TAKEOVER STATUTES. The Company has opted out of the
provisions of Sections 17-1286 through 17-1298 of the KGCC and such provisions
shall not apply to control share acquisitions of the Company's capital stock. To
the best of the Company's knowledge, no other "fair price", "moratorium",
"control share acquisition" or other similar anti-takeover statute or regulation
enacted under state or federal laws in the United States (each, a "TAKEOVER
STATUTE") applicable to the Company is applicable to the Merger or the other
transactions contemplated hereby.
SECTION 3.20. RIGHTS AGREEMENT. The Company shall take all necessary
action with respect to the Rights Agreement to (i) render the Rights Agreement
inapplicable to the Merger and the other transactions contemplated by this
Agreement and (ii) provide that UCU shall not be deemed an Acquiring Person (as
defined in the Rights Agreement), the Distribution Date (as defined in the
Rights Agreement) shall not be deemed to occur and the rights issuable pursuant
to the Rights Agreement (the "RIGHTS") will not separate from the shares of
Company Common Stock, as a result of entering into this Agreement or
consummating the Merger and the other transactions contemplated hereby, and,
thereafter, unless this Agreement shall be terminated in accordance with Section
8.01, the Company shall take no action to negate or nullify the foregoing.
SECTION 3.21. YEAR 2000. The Company has initiated a review and assessment
of the Year 2000 Problem (as defined below), has developed a plan for addressing
the Year 2000 Problem on a timely basis and has to date implemented such plan,
except where the Company's failure to do so is not reasonably likely to have a
Company Material Adverse Effect. Except as would not reasonably be expected to
have a Company Material Adverse Effect, to the knowledge of the Company none of
the assets or equipment owned or utilized by the Company will fail to perform
because of, or due in any way to, a Year 2000 Problem. To the knowledge of the
Company, no vendor, supplier or customer of the Company will experience a Year
2000 Problem that, individually or in the aggregate, could reasonably be
expected to have a Company Material Adverse Effect. The term "YEAR 2000 PROBLEM"
means the material inability of any hardware, software or process to recognize
and correctly calculate dates on and after January 1, 2000, or the failure of
computer systems, products or services to perform any of their intended
functions in a proper manner in connection with data containing any date on or
after January 1, 2000.
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SECTION 3.22. INSURANCE. The Company is, and has been continuously since
January 1, 1995, self-insured or 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 the
Company during such time period. The Company has not received any notice of
cancellation or termination with respect to any insurance policy of the Company.
All material insurance policies of the Company are valid and enforceable
policies.
SECTION 3.23 NO DISSENTERS' RIGHTS. The holders of Company Common Stock
are not entitled to appraisal rights under the KGCC or under the Articles of
Incorporation of the Company unless a Proration Event occurs.
SECTION 3.24 OWNERSHIP OF UCU COMMON STOCK. The Company does not
"beneficially own" (as such term is defined in Rule 13d-3 under the Exchange
Act) any shares of UCU Common Stock.
SECTION 3.25 DEFINITION OF "KNOWLEDGE". Wherever in this Agreement the
phrases "to the knokwledge" of the Company, "to the Company's knowledge", or
similar phrases appear, "knowledge" shall mean the actual knowledge of the
senior management of the Company.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF UCU
UCU represents and warrants to the Company that the statements contained in
this Article IV are true and correct, except as set forth in the disclosure
schedule delivered by UCU to the Company prior to the execution of this
Agreement (the "UCU DISCLOSURE SCHEDULE") or as otherwise expressly permitted by
this Agreement. For purposes of this Agreement, "UCU MATERIAL ADVERSE EFFECT"
means a material adverse effect (i) on the business, properties, assets,
liabilities (contingent or otherwise), financial condition, results of
operations or prospects of UCU and its Subsidiaries, taken as a whole, or (ii)
on the ability of UCU to perform its obligations under or to consummate the
transactions contemplated by this Agreement.
SECTION 4.01. ORGANIZATION AND POWER; REGULATION AS A PUBLIC UTILITY. (a)
Each of UCU and its Subsidiaries is a corporation, partnership or other entity
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, and has the requisite
corporate or other power and authority and governmental approvals to own, lease
and operate its properties and to carry on its business as now being conducted,
except where the failure to be in good standing or have such power, authority or
approvals would not, individually or in the aggregate, be reasonably expected to
have a UCU Material Adverse Effect. Each of UCU and its Subsidiaries is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the property owned, leased or operated by it or the nature
of the business conducted by it makes such qualification or licensing necessary,
except where the failure to be so duly qualified or licensed and in good
standing would not, individually or in the aggregate, be reasonably expected to
have a UCU Material Adverse Effect. True, accurate and complete copies of the
certificate of incorporation and bylaws of UCU, as in effect on the date hereof,
have been delivered to the Company.
(b) Neither UCU nor any of its Subsidiaries is a "holding company," a
"subsidiary company" or an "affiliate" of any public utility holding company
within the meaning of Section 2(a)(7), 2(a)(8) or 2(a)(11) of PUHCA,
respectively. UCU and/or its Subsidiaries are regulated as a public utility in
the States of Colorado, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska,
South Dakota and West Virginia (in each of which only UCU is so regulated) and
in no other state, the province of British Columbia, Canada, and in no other
province of Canada, and the countries of New Zealand and Australia and in no
other country.
SECTION 4.02. CORPORATE AUTHORIZATION. The Board of Directors of UCU has
(a) determined that the Merger is fair and in the best interests of UCU and its
stockholders and (b) approved and adopted
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this Agreement. The execution and delivery by UCU of this Agreement, and the
consummation by UCU of the transactions contemplated hereby, are within the
corporate powers of UCU and have been duly authorized by all necessary corporate
action. No approval by UCU stockholders is necessary to approve and adopt this
Agreement and the transactions contemplated by this Agreement. This Agreement
has been duly executed and delivered by UCU and, assuming the due authorization,
execution and delivery of this Agreement by the Company, constitutes a valid and
binding agreement of UCU, enforceable against UCU in accordance with its terms
(subject to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and other similar laws affecting creditors' rights generally
from time to time in effect and to general principles of equity, regardless of
whether in a proceeding at equity or at law). The shares of UCU Common Stock
issued pursuant to the Merger, when issued in accordance with the terms hereof,
will be duly authorized, validly issued, fully paid and non-assessable and free
of preemptive rights.
SECTION 4.03. GOVERNMENTAL AUTHORIZATION. The execution and delivery by
UCU of this Agreement, and the consummation by UCU of the transactions
contemplated hereby, require no action by or in respect of, or filing with, any
Governmental Authority other than (i) the filing of a certificate of merger with
respect to the Merger with the Kansas Secretary of State, a certificate of
merger with respect to the Merger with the Delaware Secretary of State and
appropriate documents with the relevant authorities of other states in which UCU
is qualified to do business; (ii) compliance with any applicable requirements of
the FERC and requirements of the utility regulatory commissions of the states of
Missouri, Kansas, Colorado, Iowa, Michigan, Minnesota, Nebraska, South Dakota
and West Virginia (the "UCU REQUIRED STATUTORY APPROVALS"); (iii) compliance
with any applicable requirements of the HSR Act; (iv) compliance with any
applicable requirements of the Securities Act; (v) compliance with any
applicable requirements of the Exchange Act; (vi) compliance with any other
applicable securities laws; (vii) compliance with any environmental, health or
safety law or regulation requiring any notification, disclosure or approval in
connection with the Merger; (viii) actions or filings which, if not taken or
made, would not, individually or in the aggregate, be reasonably expected to
have a UCU Material Adverse Effect; and (ix) filings and notices not required to
be made or given until after the Effective Time.
SECTION 4.04. NON-CONTRAVENTION. The execution and delivery of this
Agreement by UCU does not, and the consummation of the transactions contemplated
hereby will not, subject to the consents, approvals, orders, authorizations,
filings and registrations contemplated by Sections 4.02 and 4.03, (i) conflict
with, or result in any violation or breach of any provision of the certificate
of incorporation or bylaws of UCU, (ii) result in any violation or breach of, or
constitute (with or without notice or lapse of time, or both) a default (or give
rise to a right of termination, cancellation or acceleration of any obligation
or loss of any material benefit) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, contract or other
agreement, instrument or obligation to which UCU or any of its Subsidiaries is a
party or by which any of them or any of their properties or assets may be bound,
or (iii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to UCU or any of its Subsidiaries or any of their
respective properties or assets, except in the case of clauses (ii) and (iii)
for any such violations, breaches, defaults, terminations, cancellations or
accelerations which would not, individually or in the aggregate, be reasonably
expected to have a UCU Material Adverse Effect.
SECTION 4.05. CAPITALIZATION. (a) As of the date hereof, the authorized
capital stock of UCU consists of 200,000,000 shares of UCU Common Stock,
20,000,000 shares of Class A Common Stock, par value $1.00 per share ("UCU CLASS
A STOCK") and 10,000,000 shares of Preference Stock, without par value ("UCU
PREFERENCE STOCK"). As of March 31, 1999, (i) 92,015,496 shares of UCU Common
Stock were issued and outstanding, (ii) 1,590,489 shares of UCU Common Stock
were held in the treasury of UCU or by Subsidiaries of UCU, (iii) 9,783,779
shares of UCU Common Stock were reserved for issuance pursuant to the UCU
employee plans and the UCU benefit arrangements, (iv) no
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shares of UCU Class A Stock were issued and outstanding and (v) no shares of UCU
Preference Stock were issued and outstanding. Since such date, UCU has not
issued any UCU Class A Stock. All outstanding shares of UCU Common Stock are,
and all shares of UCU Common Stock subject to issuance as specified above, upon
issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, shall be, duly authorized, validly issued, fully paid
and nonassessable, and not subject to any preemptive rights. There are no
obligations, contingent or otherwise, of UCU or any of its Subsidiaries to
repurchase, redeem or otherwise acquire any shares of UCU Common Stock.
(b) Except as set forth in Section 4.05(a), there are no equity securities
of any class of UCU, or any security exchangeable into or exercisable for such
equity securities, issued, reserved for issuance or outstanding. Except as set
forth in Section 4.05(a), there are no options, warrants, securities, calls,
rights, commitments or agreements of any character to which UCU or any of its
Subsidiaries is a party or by which any of them are bound obligating UCU or any
of its Subsidiaries to issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of capital stock of UCU or obligating UCU or any of
its Subsidiaries to grant, extend, accelerate the vesting of or enter into any
such option, warrant, equity security, call, right, commitment or agreement.
There are no voting trusts or other agreements or understandings with respect to
the shares of capital stock of UCU to which UCU is a party.
SECTION 4.06. REPORTS AND FINANCIAL STATEMENTS. (a) UCU has filed all
required reports, schedules, forms, statements and other documents with the SEC
since December 31, 1993 (the "UCU SEC REPORTS").
(b) As of its filing date, each UCU SEC Report filed pursuant to the
Exchange Act did not 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, in the light of the circumstances under which they were
made, not misleading, except to the extent that such statements have been
modified or superseded by a later filed UCU SEC Report.
(c) Each UCU SEC Report that is a registration statement, as amended or
supplemented, if applicable, filed pursuant to the Securities Act as of the date
such registration statement or amendment became effective did not 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, in the light
of the circumstances under which they were made, not misleading, except to the
extent that such statements have been modified or superseded by a later filed
UCU SEC Report.
(d) The consolidated financial statements (including, in each case, any
related notes) contained in the UCU SEC Reports complied as to form in all
material respects with the applicable published rules and regulations of the SEC
with respect thereto, were prepared in accordance with generally accepted
accounting principles applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes to such financial statements
or, in the case of unaudited statements, as permitted for presentation in
Quarterly Reports on Form 10-Q), and fairly presented in all material respects
(subject in the case of unaudited statements to normal, recurring audit
adjustments) the consolidated financial position of UCU and its Subsidiaries as
at the respective dates and the consolidated results of its operations and cash
flows for the respective periods indicated. The audited balance sheet of UCU as
of December 31, 1998 is referred to herein as the "UCU BALANCE SHEET".
(e) Since December 31, 1993, UCU and each of its Subsidiaries has made all
required filings with the FERC and any appropriate public utilities commission,
except for such filings the failure to make which would not, individually or in
the aggregate, be reasonably expected to have a UCU Material Adverse Effect.
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SECTION 4.07. NO UNDISCLOSED LIABILITIES. UCU and its Subsidiaries do not
have any liabilities or obligations of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, other than:
(a) liabilities or obligations which would not, individually or in the
aggregate, be reasonably expected to have a UCU Material Adverse Effect;
(b) liabilities or obligations disclosed or provided for in the UCU
Balance Sheet or in the notes thereto or in the UCU SEC Reports filed prior
to the date hereof;
(c) liabilities or obligations under this Agreement or incurred in
connection with the transactions contemplated by this Agreement; or
(d) liabilities or obligations incurred since December 31, 1998 in the
ordinary course of business consistent with past practices.
SECTION 4.08. LITIGATION. Except as disclosed in the UCU SEC Reports filed
prior to the date hereof:
(a) There is no action, suit, investigation or proceeding pending against,
or to the knowledge of UCU, threatened against or affecting, UCU or any of its
Subsidiaries or any of their respective properties before any Governmental
Authority or arbitrator which, individually or in the aggregate, would be
reasonably expected to have a UCU Material Adverse Effect.
(b) There is no judgment, decree, injunction, or order of any Governmental
Authority or arbitrator applicable to UCU or any of its Subsidiaries which,
individually or in the aggregate, would be reasonably expected to have a UCU
Material Adverse Effect.
SECTION 4.09. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the
UCU Balance Sheet, except as permitted by or as disclosed in this Agreement or
the UCU SEC Reports filed prior to the date hereof, UCU and its Subsidiaries
have conducted their businesses only in the ordinary course and in a manner
consistent with past practice and, since such date, (a) there has not been any
UCU Material Adverse Effect or any event or development (including in connection
with the Merger) that would, individually or in the aggregate, reasonably be
expected to have a UCU Material Adverse Effect, (b) there has not been any event
that would, individually or in the aggregate, reasonably be expected to prevent
or materially delay the performance of this Agreement by UCU, or (c) UCU has not
consummated or agreed to consummate any merger or any material acquisition or
joint venture.
SECTION 4.10. COMPLIANCE WITH LAWS; NO DEFAULT. Except as disclosed in the
UCU SEC Reports filed prior to the date hereof:
(a) (i) Neither UCU nor any of its Subsidiaries is in violation of or has
violated or failed to comply with any statute, law, ordinance, regulation, rule,
judgment, decree, order, writ, injunction, permit or license of any Governmental
Authority or arbitrator applicable to its business or operations, except for
violations and failures to comply that would not, individually or in the
aggregate, be reasonably expected to result in a UCU Material Adverse Effect and
(ii) to UCU's knowledge, UCU and its Subsidiaries have all permits, licenses,
franchises and other governmental authorizations, consents, approvals and
exemptions necessary to conduct their businesses as presently conducted and
which are material to the operation of such businesses.
(b) Each material agreement, contract or commitment to which UCU is a party
or by which UCU is bound or to which its properties are subject ("UCU
CONTRACTS") is a valid, binding and enforceable obligation of UCU and in full
force and effect (subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and other similar laws affecting creditors'
rights generally from time to time in effect and to general principles of
equity, regardless of whether in a proceeding at equity or at law), except where
the failure to be valid, binding and enforceable and in
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full force and effect would not, individually or in the aggregate, be reasonably
expected to have a UCU Material Adverse Effect. UCU is not in default or
violation of any term, condition or provisions of (i) its certificate of
incorporation or bylaws or (ii) any UCU Contract, except in the case of clause
(ii) for any defaults or violations that would not, individually or in the
aggregate, be reasonably expected to have a UCU Material Adverse Effect.
SECTION 4.11. TAXES. (a) UCU has timely filed (or has had timely filed on
its behalf) or will file or cause to be timely filed, all material Tax Returns
required by applicable law to be filed by it prior to or as of the Effective
Time, and all such material Tax Returns are, or will be at the time of filing,
complete in all material respects.
(b) UCU has paid (or has had paid on its behalf) or, where payment is not
yet due, has established (or has had established on its behalf and for its sole
benefit and recourse) or will establish or cause to be established in accordance
with generally accepted accounting principles on or before the Effective Time an
adequate accrual for the payment of, all material Taxes due with respect to any
period ending prior to or as of the Effective Time.
(c) There are no (i) outstanding consents extending the statute of
limitations for the assessment of any Taxes of UCU, or (ii) proposals,
assertions or assessments against UCU for deficiencies for any Taxes that have
not been satisfied or resolved.
(d) There are no material Tax claims pending against UCU and UCU does not
know of any threatened claim for material Tax deficiencies or any basis for such
claims, no material issues have been raised in writing in any examination by any
taxing authority with respect to UCU which, by application of similar
principles, reasonably could be expected to result in a material proposed
deficiency for any other period not so examined, and there is not now in force
any waiver or agreement by UCU for the extension of time for the assessment of
any material Tax, nor has any such waiver or agreement been requested in writing
by any taxing authority. The Company has no liability with respect to any
material United States federal, state, local, foreign or other Taxes of any
corporation or entity other than UCU and its Subsidiaries.
(e) Neither UCU nor any of its other Affiliates, has taken any action,
agreed to take any action, or failed to take any action, or has knowledge of any
fact or circumstance that (without regard to any action taken or agreed to be
taken by the Company or any of its Affiliates) could reasonably be expected to
cause the Merger to fail to qualify as a "reorganization" within the meaning of
Section 368(a) of the Code.
(f) UCU has not made during the last 3 years, nor will make prior to the
Effective Time, an election to have a stock purchase treated as an asset
purchase under Section 338 of the Code.
(g) UCU has not filed with the IRS, and will not file with the IRS prior to
the Effective Time, a statement consenting to the recognition of gain on the
disposition of its "subsection (f) assets" under Section 341(f) of the Code.
(h) The Company has not made in the last 7 years, and will not make prior to
the Effective Time, any changes in accounting method to which Section 481(a) of
the Code may apply.
SECTION 4.12. ENVIRONMENTAL MATTERS. Except as set forth in UCU's SEC
Reports filed prior to the date hereof and except for such as would not,
individually, or in the aggregate, reasonably be expected to have a UCU Material
Adverse Effect:
(a) UCU and, to UCU's knowledge, each of its Subsidiaries is in material
compliance with all applicable Environmental Laws (as defined in Section
3.13(b)(i)).
(b) To UCU's knowledge, there are no liabilities or Environmental Claims (as
defined in Section 3.13(b)(iv)) of or relating to UCU or its Subsidiaries of any
kind whatsoever, whether accrued,
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contingent, absolute, determined, determinable or otherwise, arising under or
relating to Environmental Laws.
SECTION 4.13. EMPLOYEE BENEFITS. (a) The UCU Disclosure Schedule contains
a list identifying each "employee benefit plan" (as defined in Section 3(3) of
ERISA) which is subject to any provision of ERISA and is maintained,
administered or contributed to by UCU and covers any employee or former employee
of UCU or under which UCU has any liability (referred to collectively herein as
the "UCU EMPLOYEE PLANS"). Copies of such plans and all amendments thereto have
been made available to the Company. UCU and all UCU ERISA Affiliates have
performed all obligations required to be performed by it with respect to each
UCU Employee Plan, and each UCU Employee Plan has been maintained in substantial
compliance with its terms and with the requirements prescribed by any and all
statutes, orders, rules and regulations, including, but not limited to, ERISA
and the Code, which are applicable to such UCU Employee Plan, excluding any
instances of non-performance or non-compliance that would not, individually or
in the aggregate, be reasonably expected to have a UCU Material Adverse Effect.
For purposes of this Section, the term "UCU ERISA Affiliate" means any other
Person which, together with the Company, would be treated as a single employer
under Section 414 of the Code.
(b) As of the last day of the most recent plan year, the value of the assets
of each UCU Employee Plan that is subject to Title IV of ERISA equaled or
exceeded the present value of the "benefit liabilities" (as defined in Section
4001(a)(16) of ERISA) of each such UCU Employee Plan, using the UCU Employee
Plan assumptions for funding purposes in effect for such plan year.
(c) The UCU Disclosure Schedule contains a list of each employment,
severance or other similar contract, arrangement or policy and each material
plan or arrangement (whether written or oral) providing for insurance coverage
(including any self-insured arrangements), workers' compensation, disability
benefits, supplemental unemployment benefits, vacation benefits, retirement
benefits or for deferred compensation, profit sharing, bonuses, stock options,
stock appreciation or other forms of incentive compensation or post-retirement
insurance, compensation or benefits which is not a UCU Employee Plan, is entered
into, maintained or contributed to, as the case may be, by UCU and covers any
employee or former employee of UCU (referred to collectively herein as the "UCU
BENEFIT ARRANGEMENTS"). Copies of such plans and all amendments thereto have
been made available to the Company. UCU and all UCU ERISA Affiliates have
performed all obligations required to be performed by them with respect to each
UCU Benefit Arrangement, and each UCU Benefit Arrangement has been maintained in
substantial compliance with its terms and with the requirements prescribed by
any and all statutes, orders, rules and regulations, including, but not limited
to, ERISA and the Code that are applicable to such UCU Benefit Arrangement,
excluding any instances of non-performance or non-compliance that would not,
individually or in the aggregate, be reasonably expected to have a UCU Material
Adverse Effect.
SECTION 4.14. DIVIDENDS. It is the present intention of UCU's Board of
Directors to maintain the dividends on UCU Common Stock at not less than its
current annual dividend rate.
SECTION 4.15. TRANSACTIONS WITH AFFILIATES. Since the date of UCU's last
proxy statement prior to the date of this Agreement, there have been no
transactions, agreements, arrangements or understandings between UCU or its
Subsidiaries, on the one hand, and UCU's Affiliates (other than wholly-owned
Subsidiaries of UCU) or other Persons, on the other hand, that would be required
to be disclosed under Item 404 of Regulation S-K under the Securities Act.
SECTION 4.16. INFORMATION SUPPLIED. Except for information to be supplied
by the Company as to which no representation is made, the Registration Statement
will not, at the time it is declared effective or upon the filing of any
post-effective amendment related thereto, 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 were
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made, not misleading. The information to be supplied by UCU for inclusion in the
Proxy Statement to be sent to the stockholders of the Company in connection with
the Company Stockholders' Meeting will not, on the date the Proxy Statement is
first mailed to the stockholders of the Company or at the time of the Company
Stockholders' Meeting, 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
were made, not misleading.
SECTION 4.17. FINDERS' FEES. No investment banker, broker, finder, other
intermediary or other Person is entitled to any investment banking, broker's,
finder's or similar fee or commission from UCU or any of its Subsidiaries upon
consummation of the transactions contemplated by this Agreement.
SECTION 4.18. TAKEOVER STATUTES. The provisions of Section 203 of the DGCL
do not apply to the Merger or the other transactions contemplated hereby. To the
best of UCU's knowledge, no other Takeover Statute applicable to UCU or any of
its Subsidiaries is applicable to the Merger or the other transactions
contemplated hereby.
SECTION 4.19. YEAR 2000. UCU has initiated a review and assessment of the
Year 2000 Problem with respect to itself and its Subsidiaries, has developed a
plan for addressing the Year 2000 Problem on a timely basis and has to date
implemented such plan, except where UCU's failure to do so is not reasonably
likely to have a UCU Material Adverse Effect. Except as would not reasonably be
expected to have a UCU Material Adverse Effect, to the knowledge of UCU, none of
the assets or equipment owned or utilized by UCU or any of its Subsidiaries will
fail to perform because of, or due in any way to, a Year 2000 Problem. To the
knowledge of UCU, no vendor, supplier or customer of UCU or any of its
Subsidiaries will experience a Year 2000 Problem that, individually or in the
aggregate, could reasonably be expected to have a UCU Material Adverse Effect.
SECTION 4.20. OWNERSHIP OF COMPANY COMMON STOCK. UCU does not
"beneficially own" (as such term is defined in Rule 13d-3 under the Exchange
Act) any shares of Company Common Stock.
SECTION 4.21. DEFINITION OF "KNOWLEDGE". Wherever in this Agreement the
phrases "to the knowledge" of UCU, "to UCU's knowledge", or similar phrases
appear, "knowledge" shall mean the actual knowledge of the senior management of
UCU.
ARTICLE V
CONDUCT OF BUSINESS
SECTION 5.01. CONDUCT OF THE COMPANY. The Company agrees that from the
date hereof until the Effective Time, (i) except as set forth in the Company
Disclosure Schedule or as otherwise expressly permitted by this Agreement, (ii)
except with the prior written consent of UCU (which consent shall not be
unreasonably withheld), or (iii) except as described in the Company's 1998 Form
10-K, the Company and its Subsidiaries shall conduct their business in the
ordinary course consistent with past practice and shall use their reasonable
best efforts to preserve intact their business organizations and material
relationships with third parties and to keep available the services of their
present officers and employees (subject to ordinary and customary retirements).
Without limiting the generality of the foregoing, from the date hereof until the
Effective Time, except as set forth in the Company Disclosure Schedule, the
Company's 1998 Form 10-K or as expressly permitted by this Agreement, without
the prior written consent of UCU (which consent shall not be unreasonably
withheld), the Company will not:
(a) adopt or propose any change in its articles of incorporation or bylaws
without 30 days prior written notice to UCU, or adopt or propose any such change
that would be materially adverse in any way to UCU or its stockholders;
(b) amend any term of any outstanding equity security of the Company;
(c) merge or consolidate with any other Person;
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(d) issue, sell, pledge, dispose of, grant, transfer, lease, license,
guarantee, encumber, or authorize the issuance, sale, pledge, disposition,
grant, transfer, lease, license, guarantee or encumbrance of, (i) any shares of
capital stock of the Company, or securities convertible or exchangeable or
exercisable for any shares of such capital stock, or any options, warrants or
other rights of any kind to acquire any shares of such capital stock or such
convertible or exchangeable securities, or any other ownership interest of the
Company or (ii) except in the ordinary course of business and in a manner
consistent with past practice, any property or assets (including, without
limitation, by merger, consolidation, spin-off or other dispositions of stock or
assets) of the Company, except in the case of either clause (i) or (ii) (A) the
issuance of Company Common Stock to current or former officers, directors and
employees of the Company pursuant to the Company Stock Plans upon the exercise
by such officers, directors and employees of Company Stock Options, set forth
and identified in Section 3.05 of the Company Disclosure Schedule or awarded in
accordance with clause (B) and the vesting of Company Restricted Stock Awards
set forth and identified in Section 3.05 of the Company Disclosure Schedule or
awarded in accordance with clause (B), (B) the award of stock options or Company
Restricted Stock Awards to employees and directors, in each case under existing
Company Stock Plans in the ordinary course of business consistent with past
practice or in connection with promotions or new employee hires in the ordinary
course of business and consistent with past practice, provided that such awards
shall not exceed, in the aggregate, the amounts set forth on Section 5.01(d) of
the Company Disclosure Statement, (C) the issuance of Company Common Stock
pursuant to the DRIP in the ordinary course of business and consistent with past
practice, (D) the issuance of Company Common Stock pursuant to the terms of the
Company's Stock Unit Plan for Directors, and (E) pursuant to contracts or
agreements in force at the date of this Agreement, but in the case of (E) only
to the extent set forth in Section 5.01(d) of the Company Disclosure Statement.
(e) create or incur any material Lien on any material asset other than in
the ordinary course of business and consistent with past practice;
(f) make any material loan, advance or capital contributions to or
investments in any Person;
(g) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock except for (i) dividends paid on each series of Company Preferred
Stock at the rates provided for by their terms, (ii) regular quarterly cash
dividends of not more than $.32 per share on the Company Common Stock, and (iii)
a special dividend payment to be paid, if necessary, in accordance with the
agreements in Section 6.20, or enter into any agreement with respect to the
voting of its capital stock;
(h) reclassify, combine, split, subdivide or redeem, purchase or otherwise
acquire, directly or indirectly, any of its capital stock, except for (i)
purchases made in connection with the Company's DRIP, and (ii) redemption of
Company Preferred Stock pursuant to the provisions of Section 2.03(b);
(i) (i) acquire (including, without limitation, by merger, consolidation,
spin-off or acquisition of stock or material assets) any interest in any Person
or any division thereof or any material assets, other than acquisitions of
assets in the ordinary course of the Company's regulated utility business and
consistent with past practice, (ii) incur any material indebtedness for borrowed
money or guarantee any indebtedness of another Person, or issue or sell any debt
securities or warrants or other rights to acquire any debt security of the
Company, except for indebtedness for borrowed money incurred in the ordinary
course of the Company's regulated utility business and consistent with past
practice or to refinance obligations of the Company at a lower cost of money, to
refinance indebtedness in accordance with its terms or to redeem the Company
Preferred Stock or in connection with transactions otherwise permitted under
this Section 5.01, (iii) terminate, cancel, waive any material rights under or
request any material change in, or agree to any material change in, any material
Company Contract or, except in connection with transactions permitted under this
Section 5.01(i), enter into any contract or agreement material to the business,
results of operations or financial condition of the Company, taken as a whole,
in either case other than in the ordinary course of the Company's
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regulated utility business and consistent with past practice, (iv) make or
authorize capital expenditures during any fiscal year in excess of 110% of the
aggregate amount budgeted by the Company for such fiscal year (together with any
unused portion of the capital expenditure budget from the prior year if such
unused portion is carried over) as disclosed to UCU by the Company for capital
expenditures, except for unplanned capital expenditures due to emergency
conditions, unanticipated catastrophic events, extreme weather, and unscheduled
unit outages or (v) enter into or amend any contract, agreement, commitment or
arrangement that, if fully performed, would not be permitted under this Section
5.01(i);
(j) make any material change with respect to accounting policies or
procedures, other than actions in the ordinary course of business and consistent
with past practice or except as allowed by changes in generally accepted
accounting principles;
(k) make any material Tax election or take any position on any Tax Return
filed on or after the date of this Agreement or adopt any method therefor that
is inconsistent with elections made, positions taken or methods used in
preparing or filing similar Tax Returns in prior periods except as required by
applicable law;
(l) except as may be required by the contractual commitments or corporate
policies with respect to severance or termination pay in existence on the date
hereof and described in Section 5.01(l) of the Company Disclosure Schedule, (i)
increase the compensation payable or to become payable to its officers or
employees (except for increases in the ordinary course of business and
consistent with past practice in salaries or wages of officers or employees of
the Company), (ii) establish, adopt, enter into or amend any collective
bargaining, bonus, profit sharing, thrift, compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, officer or employee, except as
contemplated by this Agreement (including without limitation, Section 3.14
hereof) or to the extent required by applicable law or the terms of a collective
bargaining agreement, (iii) increase the benefits payable under any existing
severance or termination pay policies or employment or other agreements or (iv)
take any affirmative action to accelerate the vesting of any stock based
compensation;
(m) take any action that, individually or in the aggregate, would reasonably
be expected to result in a material breach of this Agreement or knowingly make
any representation and warranty of the Company hereunder untrue in any material
respect at, or as of any time prior to, the Effective Time;
(n) other than the proposed sale of the assets associated with the water
distribution business of the Company, enter into a new line of business or make
any material change in the line of business in which it engages as of the date
of this Agreement; or
(o) agree or commit to do any of the foregoing.
SECTION 5.02. CONDUCT OF UCU. UCU agrees that from the date hereof until
the Effective Time, UCU will conduct its business consistent with past practice,
and, without limiting the generality of the foregoing, from the date hereof to
the Effective Time, except as set forth in Section 5.02 of the UCU Disclosure
Schedule or as otherwise expressly permitted by this Agreement, or as set forth
in the UCU SEC Reports filed prior to the date hereof, without the prior written
consent of the Company (which consent shall not be unreasonably withheld), UCU
will not:
(a) adopt or propose any change in its certificate of incorporation or
bylaws that would be materially adverse to the Company or its
stockholders;
(b) issue any UCU Class A Stock;
(c) declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock (other than a dividend on UCU Common Stock payable
in UCU Common Stock), property or otherwise, with respect to any of its
capital stock (except for regular quarterly cash dividends
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on the UCU Common Stock) or enter into any agreement with respect to the
voting of its capital stock;
(d) reclassify, directly or indirectly, any of its UCU Common Stock or UCU
Class A Stock;
(e) make any material change with respect to accounting policies or
procedures, other than actions in the ordinary course of business and
consistent with past practice or except as allowed by changes in
generally accepted accounting principles;
(f) take any action that, individually or in the aggregate, would reasonably
be expected to result in a material breach of this Agreement or knowingly
make any representation and warranty of UCU hereunder untrue in any
material respect at, or as of any time prior to, the Effective Time;
(g) take any action, or agree to take any action, that would result in the
holders of Company Common Stock receiving anything other than (i) the
Merger Consideration in exchange for their Company Common Stock, or (ii)
the securities or other consideration that UCU Common Stock may be
converted into prior to the Effective Time as though the Company Common
Stock had been converted into UCU Common Stock prior to such action or
agreement to act;
(h) take any action, or agree to take any action that would, individually or
in the aggregate, reasonably be expected to have a material adverse
effect on the interests of holders of Company Common Stock unless (i) UCU
shall have received a written fairness opinion of an investment banker of
national reputation to the effect that such action is fair to the holders
of UCU Common Stock and (ii) such action would not have an adverse effect
on holders of Company Common Stock that would be disproportionately more
adverse than the effect on holders of UCU Common Stock;
(i) consummate repurchases of UCU Common Stock other than repurchases of UCU
Common Stock made in the ordinary course of UCU's stock repurchase policy
consistent with past practice, except that UCU may consummate other
repurchases of UCU Common Stock so long as such repurchases combined with
repurchases made in accordance with UCU's stock repurchase policy do not
reduce the number of outstanding shares of UCU Common Stock below the
number of shares outstanding on the date hereof; or
(j) agree or commit to do any of the foregoing.
SECTION 5.03. REORGANIZATION. During the period from the date of this
Agreement through the Effective Time, unless the other parties hereto shall
otherwise agree in writing, none of UCU (including its Subsidiaries) or the
Company shall knowingly take or fail to take any action which action or failure
would result in the failure of the Merger to qualify as a reorganization within
the meaning of Section 368(a) of the Code or would cause any of the
representations and warranties set forth in the Company Tax Certificate (as
defined in Section 7.02(c)) or the UCU Tax Certificate (as defined in Section
7.02(c)) to be untrue or incorrect in any material respect.
SECTION 5.04. RATE MATTERS. Other than currently pending rate filings,
each of UCU and the Company shall discuss with the other any changes planned in
the states of Missouri and Kansas in its regulated electricity rates or charges,
standards of service or accounting from those in effect in those states 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, whether written or oral, formal or informal, with respect thereto, and
neither UCU nor the Company shall make any filing to change its rates on file
with any public utility commission regulatory authority in such states or the
FERC that would have a material adverse effect on the benefits associated with
the Merger.
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ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. NO SOLICITATION (a) The Company agrees that, from and after
the date hereof, it shall not, nor shall it authorize or permit any officer,
director or employee or any investment banker, attorney, accountant, agent or
other advisor or representative of the Company (collectively, the
"REPRESENTATIVES" of the Company) to, (i) solicit, initiate or knowingly
encourage the submission of any Takeover Proposal (as defined below), (ii) enter
into any agreement with respect to a Takeover Proposal or (iii) participate in
any discussions or negotiations regarding any proposal that constitutes, or may
reasonably be expected to lead to, any Takeover Proposal; provided, however,
that if at any time prior to receipt of the Company Stockholders' Approval the
Board of Directors of the Company determines in good faith, after consultation
with outside counsel and financial advisors, that failing to take such action
could reasonably be expected to be a breach of its fiduciary duties to the
Company's stockholders under applicable law, and subject to providing 3 days
prior written notice of its decision to take such action to UCU, the Company
may, in response to a Takeover Proposal made after the date of this Agreement
which was not solicited by it or its Representatives and which did not otherwise
result from a breach of this Section 6.01 (x) furnish information with respect
to the Company to any person pursuant to a customary confidentiality agreement
(as determined by the Company after consultation with outside counsel) and (y)
participate in discussions, investigations and/or negotiations regarding such
Takeover Proposal. For all purposes of this Agreement, "TAKEOVER PROPOSAL" means
any proposal or offer to acquire, directly or indirectly, in one transaction or
a series of related transactions, 20% or more of the shares of Company Common
Stock outstanding (whether, in either case, by purchase, merger, consolidation,
share exchange, business combination or other similar transaction) or 20% or
more of the assets of the Company, other than the Merger or the transactions
contemplated by Section 6.01(a) of the Company Disclosure Schedule. The Company
immediately upon execution of this Agreement shall cease and cause to be
terminated all existing discussions or negotiations with any Persons conducted
heretofore with respect to, or that could reasonably be expected to lead to, any
Takeover Proposal, subject to the Company's rights pursuant to this Section
6.01.
(b) The Board of Directors of the Company shall promptly recommend the
adoption and approval of this Agreement and the Merger in accordance with
Section 6.03, and, except as set forth in this Section 6.01, neither the Board
of Directors of the Company nor any committee thereof shall (i) withdraw or
modify, or propose publicly to withdraw or modify, the approval or
recommendation by such Board of Directors or such committee of the Merger or
this Agreement; (ii) approve or recommend, or propose publicly to approve or
recommend, any Takeover Proposal or (iii) cause the Company to enter into any
letter of intent, agreement in principle, acquisition agreement or other similar
agreement (each, an "ACQUISITION AGREEMENT") related to any Takeover Proposal.
Notwithstanding the foregoing, if at any time prior to receipt of the Company
Stockholders' Approval the Board of Directors of the Company determines in good
faith, after consultation with outside counsel and financial advisors, that it
has received a Takeover Proposal that constitutes a Superior Proposal and that
failure to terminate this Agreement and accept such Superior Proposal could
reasonably be expected to be a breach of its fiduciary duties to the Company's
stockholders under applicable law the Board of Directors of the Company may (x)
withdraw or modify its approval or recommendation of the Merger and this
Agreement, (y) approve or recommend a Superior Proposal or (z) terminate this
Agreement (and concurrently with or after such termination, if it so chooses,
cause the Company to enter into an Acquisition Agreement with respect to any
Superior Proposal), but in each case only at a time prior to receipt of the
Company Stockholders' Approval and only at a time that is after the third
business day following receipt of written notice advising UCU that the Board of
Directors of the Company has received a Takeover Proposal that constitutes a
Superior Proposal, specifying the material terms and conditions of such Superior
Proposal and identifying the person making such Superior Proposal. For all
purposes of this Agreement, "SUPERIOR PROPOSAL" means a bona fide proposal made
by a third party not affiliated with the Company to acquire, directly or
indirectly,
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for consideration consisting of cash and/or securities, more than 50% of the
shares of Company Common Stock then outstanding (whether pursuant to a tender or
exchange offer, a merger, a share exchange or other business combination) or all
or substantially all of the assets of the Company and otherwise on terms which
the Board of Directors of the Company determines in good faith (based on the
written advice of an independent financial advisor, which may include Salomon
Smith Barney, Inc.) to be more favorable to the Company and its stockholders
than the Merger (taking into account any changes to the financial and other
contractual terms of this Agreement proposed by UCU in response to such proposal
and all other relevant financial and strategic considerations, including, but
not limited to, relevant legal, financial, regulatory and other aspects of the
proposal, the third party making such proposal, the conditions and prospects for
completion of such proposal, the strategic direction and benefits sought by the
Company and any changes to this Agreement proposed by UCU in response to such
proposal).
(c) Nothing contained in this Section 6.01 shall prohibit the Company from
taking and disclosing to its stockholders a position contemplated by Rules 14d-9
and 14e-2 promulgated under the Exchange Act or from making any disclosure to
the Company's stockholders if, in the good faith judgment of the Board of
Directors of the Company, after consultation with outside counsel, such
disclosure is required under applicable law; provided, that no such position
shall be taken or disclosed in a manner that is inconsistent with the
recommendation in favor of approval and adoption of this Agreement and the
Merger unless permitted by the provisions of Sections 6.01(a) and 6.01(b).
SECTION 6.02. PROXY STATEMENT; REGISTRATION STATEMENT. (a) As promptly as
practicable after the execution of this Agreement, UCU and the Company shall
cooperate in preparing and filing with the SEC the Proxy Statement and the
Registration Statement (in which the Proxy Statement will be included). UCU and
the Company shall use their reasonable best efforts to cause the Registration
Statement to become effective under the Securities Act as soon after such filing
as practicable and UCU shall also take such action as may be reasonably required
to cause the shares of UCU Common Stock issuable in connection with the Merger
to be registered or to obtain an exemption from registration under applicable
state "blue sky" or securities laws. Each of the Company and UCU shall furnish
all information concerning itself that is required or customary for inclusion in
the Proxy Statement and the Registration Statement. No representation, covenant
or agreement contained in this Agreement is made by the Company or UCU with
respect to information supplied by the other for inclusion in the Proxy
Statement or the Registration Statement. The Company and UCU shall take such
actions as may be reasonably required to cause the Proxy Statement and the
Registration Statement to comply as to form in all material respects with the
Securities Act and the Exchange Act. The Proxy Statement shall include the
recommendation of the Board of Directors of the Company in favor of approval and
adoption of this Agreement and the Merger, except to the extent the Board of
Directors of the Company shall have withdrawn or modified its approval or
recommendation of this Agreement and the Merger as permitted by Section 6.01(b).
The Company shall use reasonable best efforts to cause the Proxy Statement to be
mailed to its stockholders, as promptly as practicable after the Registration
Statement becomes effective.
(b) UCU and the Company shall make all necessary filings with respect to the
Merger and the transactions contemplated thereby under the Securities Act and
the Exchange Act and applicable state blue sky laws and the rules and
regulations thereunder. No filing of, or amendment or supplement to, the
Registration Statement or the Proxy Statement will be made by UCU or the Company
without providing the other party the opportunity to review and comment thereon.
UCU or the Company will advise the other party, promptly after it receives
notice thereof, of the time when the Registration Statement has become effective
or any supplement or amendment has been filed, the issuance of any stop order,
the suspension of the qualification of the UCU Common Stock issuable in
connection with the Merger for offering or sale in any jurisdiction, or any
request by the SEC for amendment of the Proxy Statement or the Registration
Statement or comments thereon and responses thereto or requests
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by the SEC for additional information. If at any time prior to the Effective
Time any information relating to UCU or the Company, or any of their respective
affiliates, officers or directors, should be discovered by UCU or the Company
which should be set forth in an amendment or supplement to any of the
Registration Statement or the Proxy Statement, so that any of such documents
would not include any misstatement of a material fact or omit to state any
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, the party which
discovers such information shall promptly notify the other party hereto and an
appropriate amendment or supplement describing such information shall be
promptly filed with the SEC and, to the extent required by law, disseminated to
the stockholders of UCU and the Company.
(c) The Company shall use best efforts to cause to be delivered to the
Company and UCU a letter of PricewaterhouseCoopers LLP dated a date within two
(2) business days before the effective date of the Registration Statement and
addressed to the Company and UCU, in form and substance reasonably satisfactory
to the Company and UCU and customary in scope and substance for "cold comfort"
letters delivered by independent public accountants in connection with
registration statements and proxy statements similar to the Proxy Statement and
Registration Statement.
(d) UCU shall use best efforts to cause to be delivered to the Company and
UCU a letter of Arthur Andersen LLP dated a date within two (2) business days
before the effective date of the Registration Statement and addressed to UCU and
the Company, in form and substance reasonably satisfactory to UCU and the
Company and customary in scope and substance for "cold comfort" letters
delivered by independent public accountants in connection with registration
statements and proxy statements similar to the Proxy Statement and Registration
Statement.
(e) It shall be a condition to the mailing of the Proxy Statement to the
stockholders of the Company that the Company shall have received an opinion from
Salomon Smith Barney Inc., dated the date of the Proxy Statement, to the effect
that, as of the date thereof, the Merger Consideration is fair to the holders of
Company Common Stock.
SECTION 6.03. STOCKHOLDERS' MEETING. Except to the extent that the Board
of Directors of the Company shall have withdrawn or modified its approval or
recommendation of this Agreement and the Merger as permitted by Section 6.01(b),
the Company shall take all steps reasonably necessary to duly call, give notice
of, convene and hold the Company Stockholders' Meeting, will recommend to its
stockholders adoption and approval of this Agreement and the Merger, will use
reasonable best efforts to hold the Company Stockholders' Meeting as soon as
practicable after the date hereof and will use reasonable best efforts to
solicit from its stockholders proxies in favor of this Agreement and the Merger.
SECTION 6.04. ACCESS TO INFORMATION. Upon reasonable notice and subject to
applicable law and other legal obligations, each of the Company and UCU shall
afford to the officers, employees, accountants, counsel and other
representatives of the other, reasonable access, during normal business hours
during the period prior to the Effective Time, to all its properties, books,
contracts, commitments and records and, during such period, each of the Company
and UCU shall furnish promptly to the other (a) a copy of each report, schedule,
registration statement and other document filed or received by it during such
period pursuant to the requirements of federal securities laws and (b) all other
information concerning its business, properties and personnel as such other
party may reasonably request. Any such information furnished pursuant to this
Section 6.04 shall be subject to the Confidentiality Agreement dated as of
October 26, 1998, between UCU and the Company (the "CONFIDENTIALITY AGREEMENT")
which shall continue in full force and effect until the Effective Time. No
information or knowledge obtained in any investigation pursuant to this Section
6.04 shall affect or be deemed to modify any representation or warranty
contained in this Agreement or the conditions to the obligations of the parties
to consummate the Merger.
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SECTION 6.05. NOTICES OF CERTAIN EVENTS. (a) UCU and the Company shall
promptly notify each other of:
(i) any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement; and
(ii) any notice or other communication from any Governmental Authority
in connection with the transactions contemplated by this Agreement.
(b) the Company shall promptly notify UCU of any actions, suits, claims,
investigations or proceedings commenced or, to its knowledge, threatened
against, relating to or involving or otherwise affecting the Company which, if
pending on the date of this Agreement, would have been required to have been
disclosed pursuant to Section 3.08 or which relate to the consummation of the
transactions contemplated by this Agreement.
(c) UCU shall (i) promptly notify the Company of any actions, suits, claims,
investigations or proceedings commenced or, to its knowledge, threatened
against, relating to or involving or otherwise affecting UCU or any of its
Subsidiaries which, if pending on the date of this Agreement, would have been
required to have been disclosed pursuant to Section 4.08 or which relate to the
consummation of the transactions contemplated by this Agreement and (ii) use its
reasonable efforts to inform the Company of the consummation of, or agreement to
consummate, any merger or any material acquisition or joint venture to the
extent UCU is permitted to so notify the Company unless such merger, acquisition
or joint venture shall have been included in a UCU SEC Report or otherwise
publicly disclosed.
SECTION 6.06. APPROPRIATE ACTION; CONSENTS; FILINGS. (a) Subject to the
terms and conditions of this Agreement UCU and the Company shall use their
reasonable best efforts to (A) take, or cause to be taken, all reasonable
actions, and do, or cause to be done, all reasonable things, necessary, proper
or advisable under applicable laws to consummate the Merger and the other
transactions contemplated by this Agreement as promptly as practicable, or (B)
obtain from any Governmental Authority any consents, licenses, permits, waivers,
approvals, authorizations or orders required to be obtained or made by UCU and
the Company in connection with the authorization, execution and delivery of this
Agreement and the consummation of the transactions contemplated herein, and (C)
make all necessary filings, and thereafter make any other required submissions,
with respect to this Agreement and the Merger required under applicable public
utility laws and regulations, the Securities Act, the Exchange Act and any other
applicable law;
(b) UCU and the Company shall give any notices to third parties, and use
reasonable best efforts to obtain any third party consents (A) necessary, proper
or advisable in order to consummate the transactions contemplated by this
Agreement or (B) required, individually or in the aggregate, to prevent a UCU
Material Adverse Effect or a Company Material Adverse Effect from occurring
prior to or after the Effective Time.
SECTION 6.07. PUBLIC DISCLOSURE. UCU and the Company shall cooperate with
each other in the development of and consult with each other before issuing any
press release or otherwise making any public statement with respect to the
Merger or this Agreement or the transactions contemplated hereby and shall not
issue any such press release without the consent of the other party (which
consent shall not be unreasonably withheld or delayed), except as may be
required by law, court process or by stock exchange rules.
SECTION 6.08. REORGANIZATION. UCU and the Company shall each use its
reasonable best efforts to cause the Merger to be treated as a reorganization
within the meaning of Section 368(a) of the Code, and UCU and the Company shall
use their reasonable best efforts to obtain the opinion of their respective
counsel referred to in Sections 7.02(c) and 7.03(c).
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SECTION 6.09. AFFILIATES. Within a reasonable time, but not less than 30
days, before the Closing Date, the Company will provide UCU with a list of those
Persons who as of the Closing Date will be, in the Company's reasonable
judgment, "affiliates" of the Company within the meaning of Rule 145 under the
Securities Act or under any applicable accounting rules ("RULE 145 AFFILIATES").
The Company shall use its reasonable best efforts to deliver or cause to be
delivered to UCU on or prior to the Closing Date from each of the Rule 145
Affiliates, an executed letter agreement, in a form reasonably acceptable to UCU
and the Company.
SECTION 6.10. LISTING OF STOCK. UCU shall use its reasonable best efforts
to cause the shares of UCU Common Stock to be issued in the Merger to be
approved for listing on the NYSE on or prior to the Closing Date, subject to
official notice of issuance.
SECTION 6.11. INDEMNIFICATION OF DIRECTORS AND OFFICERS. (a) 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 the Company with respect to their activities as such
prior to the Effective Time, as provided in its articles of incorporation and
by-laws in effect on the date thereof, or otherwise in effect on the date
hereof, shall survive the Merger and shall continue in full force and effect for
a period of not less than six years from the Effective Time.
(b) To the extent, if any, not provided by an existing right of
indemnification or other agreement or policy, after the Effective Time, the
Surviving Corporation shall, to the fullest extent permitted by applicable law,
indemnify and hold harmless, each present and former director, officer, employee
or agent of the Company (collectively, the "INDEMNIFIED PARTIES") against all
costs and expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages, liabilities and settlement amounts paid in connection
with any claim, action, suit, proceeding or investigation (whether arising
before or after the Effective Time), whether civil, administrative or
investigative, arising out of or pertaining to any action or omission in their
capacity as a director, officer, employee or agent (including serving on the
board of directors or similar governing body of a third party at the request of,
or as a designated director) of the Company, in each case occurring before the
Effective Time (including the transactions contemplated by this Agreement);
provided, however, that the Surviving Corporation shall not be liable for any
settlement effected without its written consent (which consent shall not be
unreasonably withheld). In the event of any such costs, expenses, judgments,
fines, losses, claims, damages, liabilities or settlement amounts (whether or
not arising before the Effective Time), (x) the Surviving Corporation shall pay
the reasonable fees and expenses of counsel selected by the Indemnified Parties,
which counsel shall be reasonably satisfactory to the Surviving Corporation,
promptly after statements therefor are received, and otherwise advance to the
Indemnified Parties upon request reimbursement of documented expenses reasonably
incurred, in either case, to the extent not prohibited by the applicable law and
(y) the Surviving Corporation shall cooperate in the defense of any such matter.
The Indemnified Parties as a group may retain only one law firm (other than
local counsel) with respect to each related matter except to the extent there
is, in the sole opinion of counsel to an Indemnified Party, under applicable
standards of professional conduct, a conflict on any significant issue between
positions of any two or more Indemnified Parties, in which case each Indemnified
Party with a conflicting position on such significant issue shall be entitled to
separate counsel reasonably satisfactory to the Surviving Corporation. In the
event any Indemnified Party is required to bring any action to enforce rights or
to collect moneys due under this Agreement and is successful in such action, the
Surviving Corporation shall reimburse such Indemnified Party for all of its
reasonable expenses in bringing and pursuing such action.
(c) For a period of six (6) years after the Effective Time, the Surviving
Corporation shall cause to be maintained in effect the policies of directors'
and officers' liability insurance policy maintained by the Company; PROVIDED
that the Surviving Corporation may substitute therefor policies of at least the
same coverage containing terms and conditions which are substantially equivalent
with respect to matters occurring prior to the Effective Time and provided
further that if the existing D&O Insurance
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expires or is canceled during such period, the Surviving Corporation shall use
its reasonable best efforts to obtain substantially similar liability insurance
with respect to matters occurring at or prior to the Effective Time to the
extent such liability insurance can be maintained annually at a cost to the
Surviving Corporation not greater than 200% of the annual aggregate premiums
currently paid by the Company for such insurance, and PROVIDED, FURTHER, that if
the annual premiums of such insurance coverage exceed such amount, the Surviving
Corporation shall maintain or obtain a policy with the best coverage available,
in the reasonable judgment of the Board of Directors of the Surviving
Corporation, for a cost not exceeding such amount.
(d) In the Event the Surviving Corporation 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 provision shall be made so
that the successors and assigns of the Surviving Corporation shall assume the
obligations set forth in this Section 6.11. This Section 6.11 is intended to
benefit (and shall be enforceable by) the Indemnified Parties and their
respective heirs, executors and personal representatives.
SECTION 6.12. COMPANY STOCK OPTIONS AND RESTRICTED STOCK AWARDS;
ACKNOWLEDGMENT WITH RESPECT TO COMPANY STOCK PLANS. (a) At the Effective Time,
all rights with respect to outstanding options, to purchase or other rights to
acquire shares of Company Common Stock (the "COMPANY STOCK OPTIONS") granted
under any plan or arrangement providing for the grant of options, restricted
stock awards, stock units or other rights to acquire stock to current or former
officers, directors, employees or consultants of the Company (the "COMPANY STOCK
PLANS"), whether or not then exercisable, shall be converted into and become
rights with respect to UCU Common Stock, and UCU shall assume each Company Stock
Option in accordance with the terms of the Company Stock Plan under which it was
issued and any stock option or similar agreement by which it is evidenced. From
and after the Effective Time, (i) each Company Stock Option assumed by UCU shall
be exercised solely for shares of UCU Common Stock; (ii) the number of shares of
UCU Common Stock subject to each Company Stock Option shall be equal to the
number of shares of Company Common Stock subject to such Company Stock Option
immediately prior to the Effective Time multiplied by the Exchange Ratio and
(iii) the per share exercise price under each Company Stock Option shall be
adjusted by dividing the per share exercise price under such Company Stock
Option by the Exchange Ratio and rounding to the nearest cent (each, as so
adjusted, an "ADJUSTED OPTION"); provided, that the terms of each Company Stock
Option shall be subject to further adjustment as appropriate to reflect any
stock split, stock dividend, recapitalization or other similar transaction
subsequent to the Effective Time; and, PROVIDED FURTHER, that the number of
shares of UCU Common Stock that may be purchased upon exercise of any Adjusted
Option shall not include any fractional share and, upon exercise of such
Adjusted Option, a cash payment shall be made for any fractional share based
upon the closing price of a share of UCU Common Stock on the NYSE on the last
trading day of the calendar month immediately preceding the date of exercise.
(b) The adjustments provided herein with respect to any Company Stock
Options that are "incentive stock options" as defined in Section 422 of the Code
shall be and are intended to be effected in a manner which is consistent with
Section 424(a) of the Code.
(c) At the Effective Time, all restricted stock awards ("COMPANY RESTRICTED
STOCK AWARDS") granted by the Company under a Company Stock Plan, whether or not
then vested, shall be converted into UCU Common Stock and shall thereafter be
free of any and all restrictions (whether on transferability or otherwise). The
number of shares of UCU Common Stock into which each Company Restricted Stock
Award shall be converted shall be equal to the number of shares of Company
Common Stock subject to such Company Restricted Stock Award immediately prior to
the Effective Time multiplied by the Exchange Ratio; except that in lieu of any
fractional share of UCU Common Stock resulting from such conversion, the holder
of the Company Restricted Stock Award shall be
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entitled to cash (without interest) in an amount equal to such fractional part
of a share of UCU Common Stock multiplied by the Average Trading Price.
(d) At the Effective Time, all stock units in respect of shares of Company
Common Stock ("COMPANY STOCK UNITS") granted by the Company under the Company's
Stock Unit Plan for Directors shall be converted into stock units in respect of
shares of UCU Common Stock. The number of shares of UCU Common Stock covered by
such stock units after the conversion shall be equal to the number of shares of
Company Common Stock covered by the Company Stock Units immediately prior to the
Effective Time multiplied by the Exchange Ratio, except that in lieu of any
fractional share of UCU Common Stock resulting from such conversion, the holder
of the Company Stock Units shall be entitled to cash (without interest) in an
amount equal to such fractional part of a share of UCU Common Stock multiplied
by the Average Trading Price.
(e) As soon as practicable following the Effective Time, UCU shall prepare
and file with the SEC a registration statement on Form S-8 (or another
appropriate form) registering a number of shares of UCU Common Stock equal to
the number of shares subject to the Adjusted Options (or shall cause such
Adjusted Options to be deemed options issued pursuant to a UCU stock option plan
for which shares of UCU Common Stock have previously been registered pursuant to
an appropriate registration form). Such registration statement shall be kept
effective (and the current status of the initial offering prospectus or
prospectuses required thereby shall be maintained) for at least as long as any
Adjusted Options remain outstanding.
(f) Except as otherwise contemplated by this Section 6.12 and except to the
extent required under the respective terms of the Company Stock Options or other
applicable agreements, all restrictions or limitations on transfer with respect
to Company Stock Options awarded under the Company Stock Plans, to the extent
that such restrictions or limitations shall not have already lapsed, shall
remain in full force and effect with respect to such options after giving effect
to the Merger and the assumption of such options by UCU as set forth above.
(g) UCU acknowledges that the consummation of the Merger will constitute a
"change in control" as such term is defined in those Company Stock Plans listed
on Schedule 6.12.
(h) With respect to those individuals who, subsequent to the Merger, shall
be subject to the reporting requirements under Section 16(a) of the Exchange
Act, the Surviving Corporation shall administer the Company Stock Plans, where
applicable, in a manner that complies with Rule 16b-3 under the Exchange Act.
SECTION 6.13. BENEFITS CONTINUATION; SEVERANCE. (a) Comparable Benefits.
For not less than eighteen months following the Effective Time, UCU shall
provide, or shall cause its Subsidiaries to provide benefits that are, on a
benefit-by-benefit basis, no less favorable than as provided under the Company
Benefit Arrangements and the Company Employee Plans as in effect on the date
hereof, for employees of the Company as of the Closing Date ("AFFECTED
EMPLOYEES") and for former employees of the Company ("FORMER EMPLOYEES"), and
shall provide access to UCU's employee stock purchase plan as soon as
permissible following the Closing Date under the law and such plan. Following
the period described in the first sentence of this Section 6.13, UCU and its
Subsidiaries shall provide, to the extent permitted by law, employee benefits to
the Affected Employees that are no less favorable than those provided by UCU to
other similarly situated employees of UCU. UCU shall comply with the terms of
all the Company Employee Plans, Company Benefit Arrangements and other
contractual commitments in effect immediately prior to the Effective Time
between the Company and Affected Employees or Former Employees, subject to any
reserved right to amend or terminate any Company Employee Plan, Company Benefit
Arrangement or other severance or contractual obligation; provided, however,
that no such amendment or termination may be inconsistent with UCU's obligations
pursuant to the first two sentences of this Section 6.13. Without limiting the
generality of the foregoing, UCU agrees to honor all obligations for severance
pay and other severance benefits to Affected Employees
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according to their terms, subject to any reserved right to amend or terminate
any Company Employee Plan, Company Benefit Arrangement or other severance or
contractual obligation; provided, however, that no such amendment or termination
may be inconsistent with UCU's obligations pursuant to the first two sentences
of this Section 6.13. UCU shall honor all vacation, holiday, sickness and
personal days accrued by Affected Employees and, to the extent applicable,
Former Employees as of the Effective Time. Following the period described in the
first sentence of this Section 6.13, and for so long as UCU or any successor or
Subsidiary maintains any health plan covering any active or former employee, UCU
or its Subsidiaries will provide health and life benefits, (but no accidental
death and dismemberment benefits) to existing retirees of the Company as of the
Closing Date and Affected Employees who retire within eighteen months of the
Closing Date (and who meet the eligibility requirements of the Company's retiree
health and life plans) which are, in the aggregate, at least comparable to the
benefits provided to similarly situated retirees of UCU or, if better, the
benefits provided to active employees of UCU or any successor (except that
coverage provided past the age of 65 shall be coordinated with Medicare in a
manner similar to that currently in effect with respect to such Company
retirees), and with UCU having the right, following the period described in the
first sentence of this Section 6.13, to increase the portion of the premiums
paid by such Company retirees by 15% per year until the portion of the premium
paid by such Company retirees is comparable in percentage to the portion of the
premium paid by similarly situated UCU retirees (except that the portion of the
premium paid by such Company retirees past the age of 65 shall be increased in
the same manner as the portion of the premium paid by such Company retirees
younger than age 65); provided, however, that UCU may modify the cost sharing
ratio and premium rates in accordance with the past practice of the Company.
Former Employees and Affected Employees shall be offered the option to purchase
UCU dental and vision plan coverage at premiums equal to those paid by retired
and active UCU employees, respectively, during the first open enrollment period
following the period described in the first sentence of this Section 6.13.
(b) PARTICIPATION IN BENEFIT PLANS. Employees shall be given credit for all
service with the Company (or service credited by the Company) under all employee
benefit plans and arrangements currently maintained by UCU or any of its
Subsidiaries (and, with respect to any employee benefit plan established by UCU
or any of its Subsidiaries in the future to the extent that similarly situated
employees of UCU are given credit for their service with UCU) in which they are
or become participants for purposes of eligibility, vesting, benefit accrual,
level of participation contribution, and for purposes of qualifying for early
retirement or other benefits tied to periods of service, subject to an offset,
if necessary, to avoid duplication of benefits, to the same extent as if
rendered to UCU or any of its Subsidiaries. UCU shall waive or cause to be
waived any preexisting condition limitation applicable to an Affected Employee
other than any limitation already in effect with respect to such Affected
Employee that has not been satisfied as of the Closing Date under the similar
Company Employee Plan or Company Benefit Arrangement. UCU agrees to recognize
(or cause to be recognized) the dollar amount of all expenses incurred by
Affected Employees during the calendar year in which the Effective Time occurs
for purposes of satisfying the calendar year deductibles and co-payment
limitations for such year under the relevant benefit plans of UCU and its
Subsidiaries. Following the period described in the first sentence of this
subsection (b), UCU and its Subsidiaries shall provide, to the extent permitted
by applicable law, employee benefits to the Affected Employees that are no less
favorable than those provided by UCU to other similarly situated employees of
UCU.
(c) No provision in this Section 6.13 shall be deemed to constitute an
employment contract between the Surviving Corporation and any individual, or a
waiver of the Surviving Corporation's right to discharge any employee at any
time, with or without cause.
(d) NON-DISCRIMINATION. Subject to applicable collective bargaining
agreements, for a period of two years following the Effective Time, any
reductions in workforce in respect of employees of the Surviving Corporation
shall be made on a fair and equitable basis, in light of the circumstances and
the
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objectives to be achieved without regard to whether employment was with the
Company or UCU, and any employees whose employment is terminated or jobs are
eliminated by the Surviving Corporation during such period shall be entitled to
participate on a fair and equitable basis in any job opportunity employment
placement programs offered by the Surviving Corporation. Any workforce
reductions carried out following the Effective Time by the Surviving Corporation
shall be done in accordance with all applicable collective bargaining
agreements, and all laws and regulations governing the employment relationship
thereof including, without limitation, the Worker Adjustment and Retraining
Notification Act and regulations promulgated thereunder, and any comparable
state or local law.
SECTION 6.14. OPERATION OF COMPANY'S BUSINESS AFTER CLOSING. UCU will
conduct the Company's business to maintain the efficient and high quality
service provided by the Company and to this end will consult with the Advisory
Board designated pursuant to Section 1.04 on matters relating to the business in
the Company's current service areas. UCU will continue an office in Joplin.
SECTION 6.15. TAKEOVER STATUTES. If any Takeover Statute is or may become
applicable to the Merger, each of UCU and the Company shall take such actions as
are necessary so that the Merger and the other transactions contemplated by this
Agreement may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise act to eliminate or minimize the effects of
any Takeover Statute on the Merger and such other transactions.
SECTION 6.16. DISCLOSURE SCHEDULES. On or before the date of this
Agreement, (i) the Company has delivered to UCU the Company Disclosure Schedule
accompanied by a certificate signed by a duly authorized financial officer of
the Company stating that the Company Disclosure Schedule is being delivered
pursuant to this Section 6.16 and (ii) UCU has delivered to the Company the UCU
Disclosure Schedule accompanied by a certificate signed by a duly authorized
financial officer of UCU stating that the UCU Disclosure Schedule is being
delivered pursuant to this Section 6.16. The Company Disclosure Schedule and the
UCU Disclosure Schedule constitute an integral part of this Agreement and modify
the respective representations, warranties, covenants or agreements of the
parties hereto contained herein to the extent that such representations,
warranties, covenants or agreements expressly refer to the Company Disclosure
Schedule or the UCU Disclosure Schedule. Any and all statements,
representations, warranties or disclosures set forth in the Company Disclosure
Schedule and the UCU Disclosure Schedule shall be deemed to have been made on
and as of the date of this Agreement.
SECTION 6.17. CHARITABLE AND ECONOMIC DEVELOPMENT SUPPORT. The parties
agree that provision of charitable contributions and community support in the
service area of the Company serves a number of important goals. For a period of
at least five years following the Effective Time, the Surviving Corporation
shall provide, directly or indirectly, charitable contributions and community
support within the service area of the Company at levels substantially
comparable to and no less than the levels of charitable contributions and
community support provided by the Company within the Company's service area
within the two-year period immediately prior to the Effective Time.
SECTION 6.18. TRANSITION TASK FORCE.
a. The Company and UCU shall create a special transition task force to be
led by Jim Miller, and in addition, to consist of two members nominated by the
Company and two additional members nominated by UCU.
b. The functions of the task force shall include (i) serving as a conduit
for the flow of information and documents between the parties, (ii) development
of transition plans and such other matters as may be appropriate and (iii)
otherwise assisting the Company and UCU in making an orderly transition.
c. The Company and UCU will cooperate fully with the transition task force.
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SECTION 6.19. TERMINATION OF DRIP. The Company shall either (i) terminate
the DRIP no later than 30 days prior to the anticipated Effective Time or (ii)
cause the DRIP to be administered only as an "open market" purchase plan (i.e.
shares issuable under the DRIP would be purchased in the open market) during the
30 days prior to the anticipated Effective Time.
SECTION 6.20. DIVIDEND RECORD DATE. The Company agrees to coordinate with
UCU in establishing the record date in the quarter in which the Closing occurs
for the payment of any dividends on the Company Common Stock in order to assure
that the holders of record of Company Common Stock (i) are entitled to receive a
dividend on either Company Common Stock or UCU Common Stock received in the
Merger in the quarter in which the Closing occurs, and (ii) are not entitled to
receive a dividend in such quarter on both Company Common Stock and UCU Common
Stock received in the Merger.
SECTION 6.21. REAL ESTATE TRANSFER TAXES. The Surviving Corporation shall
pay all state or local real property transfer, gains or similar Taxes, if any
(collectively, the "TRANSFER TAXES"), attributable to the transfer of the
beneficial ownership of the Company's and its Subsidiaries' real properties, and
any penalties or interest with respect thereto, payable in connection with the
consummation of the Merger. Prior to the Effective Time, the Company shall
cooperate with UCU in the preparation of any returns that will be filed with
respect to the Transfer Taxes, including supplying in a timely manner a complete
list of all real property interests held by the Company and its Subsidiaries and
any information with respect to such properties that is reasonably necessary to
complete such returns. The portion of the consideration allocable to the real
properties of the Company and its Subsidiaries shall be determined by UCU in its
reasonable discretion. The stockholders of the Company (who are intended
third-party beneficiaries of this Section 6.21) shall be deemed to have agreed
to be bound by the allocation established pursuant to this Section 6.21 in the
preparation of any return with respect to the Transfer Taxes.
SECTION 6.22. ASSUMPTION OF DEBT OBLIGATIONS. The Company and UCU shall
cooperate with one another to cause the Surviving Corporation to expressly
assume, at the Effective Time, any indebtedness of the Company which requires
express assumption of the Company's obligations as set forth in Section 3.04 of
the Company Disclosure Schedule.
SECTION 6.23. AMENDMENT OF FIRST MORTGAGE BOND INDENTURE. The Company
shall use its best efforts to obtain within 120 days of the date hereof the
consent of the requisite number of holders of bonds issued under the Company's
Indenture of Mortgage and Deed of Trust, as amended (the "INDENTURE") to amend
the Indenture in a manner reasonably acceptable to UCU to delete the last
sentence of Section 4.11 of the Indenture and to make any appropriate conforming
changes at a total cost (including consent payments to the bondholders and legal
and financial advisor fees) reasonably acceptable to UCU. If such consents are
not obtained within the applicable time period at a cost reasonably acceptable
to UCU, UCU, in its sole discretion, may terminate this Agreement as provided on
Section 6.23 of each of the Company Disclosure Schedule and the UCU Disclosure
Schedule.
ARTICLE VII
CONDITIONS TO MERGER
SECTION 7.01. CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective
obligations of each party to this Agreement to consummate the Merger and the
transactions contemplated hereby shall be subject to the satisfaction of the
following conditions:
(a) COMPANY STOCKHOLDERS' APPROVAL. The Company Stockholders' Approval
shall have been obtained.
(b) WAITING PERIODS; REQUIRED STATUTORY APPROVALS. The waiting period
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated and the
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Company Required Statutory Approvals and the UCU Required Statutory Approvals
shall have been obtained, such approvals shall have become Final Orders (as
defined below), and none of such approvals or Final Orders shall require or be
conditioned upon any requirement that any of the Company, UCU or the Surviving
Corporation provide any undertaking or agreement, or change or dispose of any
assets or business operations, or take or refrain from taking any other action,
which would cause, individually or in the aggregate, either (i) a UCU Material
Adverse Effect, or (ii) a material adverse effect on the financial condition,
income, assets, business or prospects of the business operations presently owned
and operated by the Company. For purposes of this Section, the determination of
UCU Material Adverse Effect may, without limitation, include the failure of the
Public Service Commission of the State of Missouri ("MPSC") to articulate prior
to Closing, its policy on the extent to which the Surviving Corporation may
recover the Premium (as defined below) related to this transaction. The term
"Premium" means the excess of (xx) the value, as of the Effective Time, of the
UCU Common Stock issued to holders of Company Common Stock as a result of
consummation of the Merger plus all amounts paid in lieu of fractional shares
under Article II and all Cash Consideration paid to holders of Company Common
Stock pursuant to Section 2.02, over (yy) the net book value of the Company's
assets subject to regulation by the MPSC. 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.
(c) NO INJUNCTIONS OR RESTRAINTS. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal or regulatory restraint shall prohibit the
consummation of the Merger.
(d) REGISTRATION STATEMENT. The Registration Statement shall have become
effective under the Securities Act and shall not be the subject of any stop
order or proceedings seeking a stop order.
(e) LISTING OF STOCK. The shares of UCU Common Stock to be issued in the
Merger (including shares of UCU Common Stock issued or issuable in respect of
Company Stock Options and Company Restricted Stock Awards) shall have been
approved for listing on the NYSE, subject to official notice of issuance.
SECTION 7.02. ADDITIONAL CONDITIONS TO OBLIGATIONS OF UCU. The obligations
of UCU to consummate the Merger and the transactions contemplated hereby shall
be subject to the satisfaction of the following additional conditions, any of
which may be waived in writing exclusively by UCU:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
the Company set forth in this Agreement that are qualified by the Company
Material Adverse Effect shall be true and correct as of the Closing Date and the
representations and warranties that are not so qualified, taken together, shall
be true and correct in all material respects, in each case as though made on and
as of the Closing Date (except to the extent any such representation or warranty
expressly speaks as of an earlier date); and UCU shall have received a
certificate signed on behalf of the Company by the chief executive officer of
the Company to such effect.
(b) PERFORMANCE OF OBLIGATIONS. The Company shall have performed in all
material respects each obligation and agreement and shall have complied in all
material respects with each covenant required to be performed and complied with
by it under this Agreement at or prior to the Effective Time; and UCU shall have
received a certificate signed on behalf of the Company by the chief executive
officer of the Company to such effect.
(c) TAX OPINION. UCU shall have received a written opinion from Blackwell
Sanders Peper Martin LLP, counsel to UCU, to the effect that the Merger will be
treated for federal income tax purposes as a reorganization within the meaning
of Section 368(a) of the Code. In rendering such
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opinion, such counsel may require and rely upon reasonable representations and
certificates of UCU (including, without limitation, representations contained in
a certificate of UCU) (the "UCU TAX CERTIFICATE") and the Company (including,
without limitation, representations contained in a certificate of the Company
(the "COMPANY TAX CERTIFICATE").
(d) COMPANY MATERIAL ADVERSE EFFECT. No Company Material Adverse Effect
shall have occurred and there shall exist no fact or circumstance which is
reasonably likely to have a Company Material Adverse Effect.
(e) AMENDMENT OF INDENTURE. The Indenture shall have been amended as
described in Section 6.23.
SECTION 7.03. ADDITIONAL CONDITIONS TO OBLIGATIONS OF THE COMPANY. The
obligation of the Company to effect the Merger is subject to the satisfaction of
each of the following additional conditions, any of which may be waived in
writing exclusively by the Company:
(a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of
UCU set forth in this Agreement that are qualified by the UCU Material Adverse
Effect shall be true and correct as of the Closing Date and the representations
and warranties that are not so qualified, taken together, shall be true and
correct in all material respects, in each case as though made on and as of the
Closing Date (except to the extent any such representation or warranty expressly
speaks as of an earlier date); and the Company shall have received a certificate
signed on behalf of UCU by the chief executive officer of UCU to such effect.
(b) PERFORMANCE OF OBLIGATIONS. UCU shall have performed in all material
respects each obligation and agreement and shall have complied in all material
respects with each covenant required to be performed or complied with by it
under this Agreement at or prior to the Effective Time; and the Company shall
have received a certificate signed on behalf of UCU by the chief executive
officer of UCU to such effect.
(c) TAX OPINION. The Company shall have received a written opinion from
Cahill Gordon & Reindel, counsel to the Company, to the effect that the Merger
will be treated for federal income tax purposes as a reorganization within the
meaning of Section 368(a) of the Code. In rendering such opinion, such counsel
may require and rely upon reasonable representations and certificates of UCU
(including, without limitation, representations contained in the UCU Tax
Certificate) and the Company (including, without limitation, representations
contained in the Company Tax Certificate); and UCU and the Company agree that,
to the extent they can truthfully do so, they will make such representations and
deliver such certificates.
(d) UCU MATERIAL ADVERSE EFFECT. No UCU Material Adverse Effect shall have
occurred and there shall exist no fact or circumstance which is reasonably
likely to have a UCU Material Adverse Effect.
ARTICLE VIII
TERMINATION
SECTION 8.01. TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time by written notice by the terminating party to the
other party, whether before or after approval of the matters presented in
connection with the Merger by the stockholders of the Company:
(a) by mutual written consent of UCU and the Company; or
(b) by either UCU or the Company, if the Effective Time shall not have
occurred on or before June 1, 2000 (the "TERMINATION DATE"); provided, however,
that if on the Termination Date the conditions to the Closing set forth in
Section 7.01(b) shall not have been fulfilled but all other conditions to the
Closing shall have been fulfilled or shall be capable of being fulfilled, then
the
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Termination Date shall be extended to December 31, 2000; and provided, further,
that the right to terminate the Agreement under this Section 8.01(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 the Termination Date; or
(c) by either UCU or the Company, if a court of competent jurisdiction or
other Governmental Authority shall have issued a final, non-appealable order,
decree or ruling, or taken any other action, having the effect of permanently
restraining, enjoining or otherwise prohibiting the Merger; or
(d) by either UCU or the Company if, at the Company Stockholders' Meeting
(including any adjournment or postponement thereof), the requisite vote of the
stockholders of the Company in favor of this Agreement and the Merger shall not
have been obtained; or
(e) by UCU, if a breach of or failure to perform any representation,
warranty, covenant or agreement on the part of the Company set forth in this
Agreement shall have occurred which would cause the conditions set forth in
Sections 7.02(a) or 7.02(b) not to be satisfied, and such breach or failure
shall not have been remedied within 45 business days after receipt by the
Company of notice in writing from UCU specifying the nature of such breach and
requesting that it be remedied or UCU shall not have received adequate assurance
of a cure of such breach within such 45 business-day period; or
(f) by UCU, if the Board of Directors of the Company (i) shall not have
recommended or shall have withdrawn or modified its recommendation of this
Agreement and the Merger or (ii) shall have approved or recommended a Takeover
Proposal, other than the Merger; or
(g) by UCU, if the Company or any of its Affiliates shall have materially
and knowingly breached the covenant contained in Section 6.01; or
(h) by the Company in accordance with Section 6.01(b); provided, that it
has complied with the notice provisions thereof; or
(i) by the Company, if a breach of or failure to perform any
representation, warranty, covenant or agreement on the part of UCU set forth in
this Agreement shall have occurred which would cause the conditions set forth in
Sections 7.03(a) or 7.03(b) not to be satisfied, and such breach or failure
shall not have been remedied within 20 business days after receipt by UCU of
notice in writing from the Company, specifying the nature of such breach and
requesting that it be remedied or the Company shall not have received adequate
assurance of a cure of such breach within such 20 business-day period.
SECTION 8.02. EFFECT OF TERMINATION. In the event of termination of this
Agreement pursuant to Section 8.01, there shall be no liability or obligation on
the part of UCU, the Company, or their respective officers, directors,
stockholders or Affiliates, except as set forth in Section 8.03 and except to
the extent that such termination results from the willful breach by a party of
any of its representations, warranties, covenants or agreements contained in
this Agreement; provided that the provisions of Sections 8.02, 8.03, 9.02 and
9.07 of this Agreement and the Confidentiality Agreement shall remain in full
force and effect and survive any termination of this Agreement.
SECTION 8.03. FEES AND EXPENSES. (a) Except as set forth in this Section
8.03, all fees and expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party incurring such
expenses, whether or not the Merger is consummated; provided, however, that UCU
and the Company shall share equally all fees and expenses, other than attorneys'
and accounting fees and expenses, incurred in relation to the printing and
filing of the Proxy Statement (including any related preliminary materials) and
the Registration Statement (including financial statements and exhibits) and any
amendments or supplements thereto.
(b) If this Agreement is terminated by UCU pursuant to Section 8.01(e) or by
the Company pursuant to Section 8.01(i), the non-terminating party shall
reimburse the other party for all reasonable
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costs and expenses incurred by it in connection with this Agreement and the
transactions contemplated hereby, including without limitation, fees and
expenses of counsel, financial advisors, accountants, actuaries and consultants
and the other party's share of all printing and filing fees. Such amounts shall
be payable only upon due presentation by the terminating party of a written
summary of such expenses, in reasonable detail, within 30 days after the date of
termination, and in no event shall the aggregate amount payable under this
Section 8.03(b) exceed $1.75 million.
(c) If this Agreement is terminated by UCU pursuant to Section 8.01(f) or
Section 8.01(g), the Company shall pay to UCU a termination fee of $15 million
in cash within five business days after such termination.
(d) If this Agreement is terminated by the Company pursuant to Section
8.01(h), the Company shall pay to UCU a termination fee of $15 million in cash
within five business days after such termination.
(e) If this Agreement is terminated by either UCU or the Company pursuant to
Section 8.01(d), a Takeover Proposal shall have been made prior to the date of
the Company Stockholders' Meeting, and, if within 24 months of such termination
the Company shall enter into an Acquisition Agreement relating to such Takeover
Proposal, the Company shall pay to UCU a termination fee of $15 million in cash
within five business days after the execution of such Acquisition Agreement.
SECTION 8.04. AMENDMENT. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of Directors,
at any time before or after approval of the matters presented in connection with
the Merger by the stockholders of the Company, but, after any such approval, no
amendment shall be made which by law requires further approval by such
stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
SECTION 8.05. EXTENSION; WAIVER. At any time prior to the Effective Time,
either party hereto may, to the extent legally allowed, (i) extend the time for
the performance of any of the obligations or other acts of the other party
hereto contained herein, (ii) waive any inaccuracies in the representations and
warranties of the other party hereto contained herein or in any document
delivered pursuant hereto and (iii) waive compliance with any of the agreements
or conditions of the other party hereto contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. None of the representations, warranties, covenants and agreements
in this Agreement or in any instrument delivered pursuant to this Agreement
shall survive the Effective Time, except for Section 6.11 and the other
covenants and agreements which, by their terms, are to be performed after the
Effective Time. The Confidentiality Agreement shall survive the execution and
delivery of this Agreement but shall terminate and be of no further force and
effect as of the Effective Time.
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<PAGE>
SECTION 9.02. NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally,
telecopied (which is confirmed) or 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 UCU, to
UtiliCorp United Inc.
20 West Ninth Street
Kansas City, Missouri 64105
Attention: Richard C. Green, Jr.
Facsimile: (816) 467-3595
with a copy to:
Blackwell Sanders Peper Martin LLP
2300 Main, Suite 1000
Kansas City, Missouri 64108
Attention: Linda K. Tiller, Esq.
Facsimile: (816) 983-8080
(b) if to the Company, to:
The Empire District Electric Company
602 Joplin St.
Joplin, Missouri 64801
Attention: Myron W. McKinney
Facsimile: (417) 625-5153
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, NY 10005
Attention: Gary W. Wolf, Esq.
Facsimile: (212) 269-5420
SECTION 9.03. 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. 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 9.04. DISCLOSURE SCHEDULES. Each exception to a section of this
Agreement set forth in the UCU Disclosure Schedule or the Company Disclosure
Schedule will specifically refer (including by cross-reference) to the section
of the Agreement to which it relates. Any item disclosed in the UCU Disclosure
Schedule or the Company Disclosure Schedule under any specific section number
thereof or disclosed in reference to any specific section hereof shall be deemed
to have been disclosed by UCU or the Company, as appropriate, for all purposes
of this Agreement in response to other sections of either the UCU Disclosure
Schedule or the Company Disclosure Schedule, as the case may be, to the extent
that such disclosure is specifically cross-referenced to such other section(s).
SECTION 9.05. COUNTERPARTS. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement and
shall become effective when the counterparts have
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<PAGE>
been signed by each party and delivered to the other party, it being understood
that both parties need not sign the same counterpart.
SECTION 9.06. ENTIRE AGREEMENT; THIRD PARTY BENEFICIARIES. This Agreement
(including the documents and the instruments referred to herein) (i) constitutes
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, and (ii) except as provided in Sections 1.04 and 6.11 and this Section
9.06, is not intended to confer upon any Person other than the parties hereto
any rights or remedies hereunder.
SECTION 9.07. GOVERNING LAW. This Agreement shall be governed and
construed in accordance with the laws of the State of Kansas without regard to
any applicable conflicts of law rules. Each party hereto irrevocably and
unconditionally consents and submits to the jurisdiction of the courts of the
State of Missouri and of the United States of America located in the State of
Missouri for any actions, suits or proceedings arising out of or relating to
this Agreement and the transactions contemplated hereby, and further agrees that
service of any process, summons, notice or document by U.S. registered or
certified mail to the party at the address specified in Section 9.02, shall be
effective service of process for any action, suit or proceeding brought against
such party in any such court. Each party hereto hereby irrevocably and
unconditionally waives any objection to the laying of venue of any action, suit
or proceeding arising out of this agreement or the transactions contemplated
hereby, in the courts of the State of Missouri located in Kansas City, Missouri
or the United States of America located in Kansas City, Missouri, and hereby
further irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum. If any provision of this
Agreement is held to be unenforceable for any reason, it shall be modified
rather than voided, if possible, in order to achieve the intent of the parties
to the extent possible. In any event, all other provisions of this Agreement
shall be deemed valid and enforceable to the extent possible.
SECTION 9.08. ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by either party hereto
(whether by operation of law or otherwise) without the prior written consent of
the other party, and any attempted assignment thereof without such consent shall
be null and void. Subject to the preceding sentence, this Agreement will be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
IN WITNESS WHEREOF, UCU and the Company have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the date
first written above.
<TABLE>
<S> <C> <C>
UTILICORP UNITED INC.
By: /s/ ROBERT K. GREEN
-----------------------------------------
Name: Robert K. Green
Title: President and Chief Operating
Officer
THE EMPIRE DISTRICT ELECTRIC COMPANY
By: /s/ MYRON W. MCKINNEY
-----------------------------------------
Name: Myron W. McKinney
Title: President and Chief Executive
Officer
</TABLE>
A-44
<PAGE>
ANNEX B-1
OPINION OF SALOMON SMITH BARNEY INC.
[Letterhead of Salomon Smith Barney]
May 10, 1999
Board of Directors
The Empire District Electric Company
602 Joplin Street
Joplin, MO 64801
Ladies and Gentlemen:
You have requested our opinion as investment bankers as to the fairness, from a
financial point of view, to the holders of common stock, par value $1.00 per
share ("Company Common Stock"), of The Empire District Electric Company (the
"Company") of the consideration to be received by such holders in connection
with the proposed merger (the "Merger") of the Company with and into UtiliCorp
United Inc. ("UCU"), pursuant to the Agreement and Plan of Merger (the
"Agreement"), dated as of May 10, 1999, between the Company and UCU.
As more specifically set forth in the Agreement, and subject to the terms and
conditions thereof, the Company will merge with and into UCU and each issued and
outstanding share of Company Common Stock (other than shares owned by the
Company, UCU or any of their respective subsidiaries and other than Dissenting
Shares (as defined and described in the Agreement)) will be converted into the
right to receive (i) a number of shares of common stock, par value $1.00 per
share ("UCU Common Stock"), of UCU equal to the Exchange Ratio (as defined
below), subject to the payment of cash in lieu of any fractional share (the
"Stock Consideration") or (ii) cash per share of Company Common Stock equal to
the Average Trading Price (as defined below) multiplied by the Exchange Ratio
(the "Cash Consideration"). The Stock Consideration together with the Cash
Consideration is collectively referred to as the "Merger Consideration". The
"Exchange Ratio" shall be determined as follows, subject to adjustment in
accordance with the terms of the Agreement: (i) if the Average Trading Price of
a share of UCU Common Stock is less than $22.00, the Exchange Ratio shall equal
1.341; (ii) if the Average Trading Price of a share of UCU Common Stock is
greater than or equal to $22.00, but less than or equal to $26.00, the Exchange
Ratio shall equal a fraction (rounded to the nearest hundred-thousandth)
determined by dividing $29.50 by the Average Trading Price of a share of UCU
Common Stock; and (iii) if the Average Trading Price of a share of UCU Common
Stock is greater than $26.00, the Exchange Ratio shall equal 1.135. "Average
Trading Price" means the average of the daily closing prices per share of UCU
Common Stock on the New York Stock Exchange ("NYSE") Composite Transactions
Reporting System, as reported in The Wall Street Journal for the twenty trading
days ending on the date immediately prior to the second full NYSE trading day
immediately preceding the Closing Date (as defined in the Agreement).
The aggregate number of shares of Company Common Stock that may be converted
into the right to receive cash in the Merger (the "Cash Election Number") shall
not exceed 50% of the outstanding shares of Company Common Stock, subject to
adjustment for tax matters in accordance with the terms of the Agreement. If
elections to receive Cash Consideration by holders of Company Stock exceed the
Cash Election Number, those holders that will be entitled to receive Cash
Consideration will be selected through a lottery. UCU shall issue shares of UCU
Common Stock to holders of Company Common Stock up to a maximum of 19.9% of the
total number of shares of issued and outstanding UCU Common Stock (the "Maximum
Stock Amount"). If the aggregate number of shares of UCU Common Stock payable as
Stock Consideration exceeds the Maximum Stock Amount, UCU shall have
B-1-1
<PAGE>
the option to limit the aggregate Stock Consideration to the Maximum Stock
Amount and to make a corresponding increase in the aggregate Cash Consideration
in accordance with the terms of the Agreement. We understand that the Stock
Consideration will be delivered on a tax free basis.
In connection with rendering our opinion, we have reviewed and analyzed, among
other things, the following; (i) a copy of a draft dated May 9, 1999 of the
Agreement; (ii) certain publicly available information concerning the Company,
including the Annual Reports on Form 10-K of the Company for each of the years
in the three year period ended December 31, 1998; (iii) certain internal
information, primarily financial in nature, including projections, concerning
the business and operations of the Company, furnished to us by the Company for
purposes of our analysis; (iv) certain publicly available information concerning
the trading of, and the trading market for, Company Common Stock; (v) certain
publicly available information concerning UCU, including the Annual Reports on
Form 10-K of UCU for each of the years in the three year period ended December
31, 1998; (vi) certain other information, primarily financial in nature,
including projections, concerning the business and operations of UCU, furnished
to us by UCU for purposes of our analysis; (vii) certain publicly available
information concerning the trading of, and the trading market for, UCU Common
Stock; (viii) certain publicly available information with respect to certain
other companies that we believe to be comparable to the Company or UCU and the
trading markets for certain of such other companies' securities; and (ix)
certain publicly available information concerning the nature and terms of
certain other transactions that we consider relevant to our inquiry. We also
have considered such other information, financial studies, analyses,
investigations and financial, economic and market criteria that we deemed
relevant. We also have met with certain officers and employees of the Company
and UCU to discuss the foregoing as well as other matters that we believe
relevant to our inquiry.
In our review and analysis and in arriving at our opinion, we have assumed and
relied upon the accuracy and completeness of all of the financial and other
information provided to us or publicly available and have neither attempted
independently to verify nor assumed any responsibility for verifying any of such
information and have further relied upon the assurances of management of the
Company that they are not aware of any facts that would make any of such
information inaccurate or misleading. We have not conducted a physical
inspection of any of the properties or facilities of the Company or UCU, nor
have we made or obtained or assumed any responsibility for making or obtaining
any independent evaluations or appraisals of any of such properties or
facilities, nor have we been furnished with any such valuations or appraisals.
With respect to financial projections, we have been advised by the managements
of the Company and UCU and have assumed that they were reasonably prepared and
reflect the best currently available estimates and judgment of the management of
the Company or UCU, as the case may be, as to the future financial performance
of the Company or UCU, as the case may be, and we express no view with respect
to such projections or the assumptions on which they were based. We also have
assumed that the Merger will be consummated in a timely manner and in accordance
with the terms of the Agreement.
In conducting our analysis and arriving at our opinion as expressed herein, we
have considered such financial and other factors as we have deemed appropriate
under the circumstances including, among others, the following: (i) the
historical and current financial position and results of operations of the
Company and UCU; (ii) the business prospects of the Company and UCU; (iii) the
historical and current market for Company Common Stock, UCU Common Stock and for
the equity securities of certain other companies that we believe to be
comparable to the Company or UCU; and (iv) the nature and terms of certain other
merger transactions that we believe to be relevant. We have also taken into
account our assessment of general economic, market and financial conditions as
well as our experience in connection with similar transactions and securities
valuation generally. In arriving at our opinion, we have not ascribed a specific
consolidated range of values to either the Company or UCU. We have not been
asked to consider, and our opinion does not address, the relative merits of the
Merger as compared to any alternative business strategy that might exist for the
Company. Our opinion
B-1-2
<PAGE>
necessarily is based upon conditions as they exist and can be evaluated on the
date hereof, and we assume no responsibility to update or revise our opinion
based upon circumstances or events occurring after the date hereof. Our opinion
is, in any event, limited to the fairness, from a financial point of view, of
the Merger Consideration to the holders of Company Common Stock and does not
address the Company's underlying business decision to effect the Merger or
constitute a recommendation of the Merger to the Company. Our opinion also does
not constitute an opinion or imply any conclusion as to the price at which
Company Common Stock will trade following the announcement or consummation of
the Merger.
We have acted as financial advisors to the Company in connection with the Merger
and will receive a fee for such services, a substantial portion of which is
contingent upon consummation of the Merger. In addition, in the ordinary course
business, we and our affiliates may actively trade the securities of the Company
and UCU for our own account and for the accounts of customers and, accordingly,
may at any time hold a long or short position in such securities. We and our
affiliates (including Citigroup Inc.) may have other business relationships with
the Company or UCU.
This opinion is intended solely for the benefit and use of the Company
(including the management and directors of the Company) in considering the
transaction to which it relates and may not be used for any other purpose or
reproduced, disseminated, quoted or referred to (other than in the Agreement) at
any time, in any manner or for any purpose, without the prior written consent of
Salomon Smith Barney, except that this opinion may be reproduced in full in, and
references to this opinion and to Salomon Smith Barney and its relationship with
the Company (in each case in such form as Solomon Smith Barney shall approve)
may be included in, the proxy statement the Company distributes to its
shareholders in connection with the Merger.
Based upon and subject to the foregoing, it is our opinion as investment bankers
that as of the date hereof, the Merger Consideration is fair, from a financial
point of view, to the holders of Company Common Stock.
Very truly yours,
/s/ Salomon Smith Barney
<TABLE>
<S> <C> <C>
SALOMON SMITH BARNEY
</TABLE>
B-1-3
<PAGE>
ANNEX B-2
CONFIRMATION OF SALOMON SMITH BARNEY INC.
[Letterhead of Salomon Smith Barney]
August 2, 1999
Board of Directors
The Empire District Electric Company
602 Joplin Street
Joplin, MO 64801
Ladies and Gentlemen:
You have requested a confirmation of our opinion dated May 10, 1999 (the
"Opinion"), as investment bankers as to the fairness, from a financial point of
view, to the holders of common stock, par value $1.00 per share ("Company Common
Stock"), of The Empire District Electric Company (the "Company") of the Merger
Consideration (as defined in the Opinion) to be received by such holders in
connection with the merger (the "Merger") of the Company with and into UtiliCorp
United Inc. ("UCU"), pursuant to the Agreement and Plan of Merger, dated as of
May 10, 1999 (the "Agreement"), between the Company and UCU.
In conducting our review and analysis to provide you this confirmation, we
undertook to update the factors we considered in rendering the Opinion
(including reviewing and analyzing the executed Agreement).
This confirmation is intended solely for the benefit and use of the Company
(including the management and directors of the Company) and may not be used for
any other purpose or reproduced, disseminated, quoted or referred to (other than
in the Agreement) at any time, in any manner or for any purpose, without the
prior written consent of Salomon Smith Barney, except that this confirmation may
be reproduced in full in, and references to this confirmation and to Salomon
Smith Barney and its relationship with the Company (in each case in such form as
Salomon Smith Barney shall approve) may be included in, the proxy statement the
Company distributes to its shareholders in connection with the Merger.
Based upon the foregoing and subject to all of the conditions, qualifications
and caveats set forth in the Opinion, we confirm our Opinion as investment
bankers that, as of the date hereof, the Merger Consideration is fair, from a
financial point of view, to the holders of Company Common Stock.
Very truly yours,
/s/ Salomon Smith Barney
<TABLE>
<S> <C> <C>
SALOMON SMITH BARNEY
</TABLE>
B-2-1
<PAGE>
ANNEX C
KANSAS DISSENTERS' RIGHTS STATUTE--
SECTION 17-6712 OF THE KANSAS GENERAL CORPORATION CODE
17-6712 PAYMENT FOR "STOCK" OF "STOCKHOLDER" OBJECTING TO MERGER OR
CONSOLIDATION; "STOCKHOLDER," "STOCK" AND "SHARE" DEFINED; NOTICE TO OBJECTING
STOCKHOLDERS; DEMAND FOR PAYMENT; APPRAISAL AND DETERMINATION OF VALUE BY
DISTRICT COURT, WHEN; TAXATION OF COSTS; RIGHTS OF OBJECTING STOCKHOLDERS;
STATUS OF STOCK; SECTION INAPPLICABLE TO CERTAIN SHARES OF STOCK.--(a) When used
in this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation.
(b) The corporation surviving or resulting from any merger or consolidation,
within 10 days after the effective date of the merger or consolidation, shall
notify each stockholder of any corporation of this state so merging or
consolidating who objected thereto in writing and whose shares either were not
entitled to vote or were not voted in favor of the merger or consolidation, and
who filed such written objection with the corporation before the taking of the
vote on the merger or consolidation, that the merger or consolidation has become
effective. If any such stockholder, within 20 days after the date of mailing of
the notice, shall demand in writing, from the corporation surviving or resulting
from the merger or consolidation, payment of the value of the stockholder's
stock, the surviving or resulting corporation shall pay to the stockholder,
within 30 days after the expiration of the period of 20 days, the value of the
stockholder's stock on the effective date of the merger or consolidation,
exclusive of any element of value arising from the expectation or accomplishment
of the merger or consolidation.
(c) If during a period of 30 days following the period of 20 days provided
for in subsection (b), the corporation and any such stockholder fail to agree
upon the value of such stock, any such stockholder, or the corporation surviving
or resulting from the merger or consolidation, may demand a determination of the
value of the stock of all such stockholders by an appraiser or appraisers to be
appointed by the district court, by filing a petition with the court within four
months after the expiration of the thirty-day period.
(d) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the corporation, which shall file with the clerk of
such court, within 10 days after such service, a duly verified list containing
the names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the corporation. If the petition shall be filed by the corporation,
the petition shall be accompanied by such duly verified list. The clerk of the
court shall give notice of the time and place fixed for the hearing of such
petition by registered or certified mail to the corporation and to the
stockholders shown upon the list at the addresses therein stated and notice
shall also be given by publishing a notice at least once, at least one week
before the day of the hearing, in a newspaper of general circulation in the
county in which the court is located. The court may direct such additional
publication of notice as it deems advisable. The forms of the notices by mail
and by publication shall be approved by the court.
(e) After the hearing on such petition the court shall determine the
stockholders who have complied with the provisions of this section and become
entitled to the valuation of and payment for their shares, and shall appoint an
appraiser or appraisers to determine such value. Any such appraiser may examine
any of the books and records of the corporation or corporations the stock of
which such appraiser is charged with the duty of valuing, and such appraiser
shall make a determination of the value of the shares upon such investigation as
seems proper to the appraiser. The appraiser or appraisers shall also afford a
reasonable opportunity to the parties interested to submit to the appraiser
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<PAGE>
pertinent evidence on the value of the shares. The appraiser or appraisers,
also, shall have the powers and authority conferred upon masters by K.S.A.
60-253 and amendments thereto.
(f) The appraiser or appraisers shall determine the value of the stock of
the stockholders adjudged by the court to be entitled to payment therefor and
shall file a report respecting such value in the office of the clerk of the
court, and notice of the filing of such report shall be given by the clerk of
the court to the parties in interest. Such report shall be subject to exceptions
to be heard before the court both upon the law and facts. The court by its
decree shall determine the value of the stock of the stockholders entitled to
payment therefor and shall direct the payment of such value, together with
interest, if any, as hereinafter provided, to the stockholders entitled thereto
by the surviving or resulting corporation. Upon payment of the judgment by the
surviving or resulting corporation, the clerk of the district court shall
surrender to the corporation the certificates of shares of stock held by the
clerk pursuant to subsection (g). The decree may be enforced as other judgments
of the district court may be enforced, whether such surviving or resulting
corporation be a corporation of this state or of any other state.
(g) At the time of appointing the appraiser or appraisers, the court shall
require the stockholders who hold certificated shares and who demanded payment
for their shares to submit their certificates of stock to the clerk of the
court, to be held by the clerk pending the appraisal proceedings. If any
stockholder fails to comply with such direction, the court shall dismiss the
proceedings as to such stockholder.
(h) The cost of any such appraisal, including a reasonable fee to and the
reasonable expenses of the appraiser, but exclusive of fees of counsel or of
experts retained by any party, shall be determined by the court and taxed upon
the parties to such appraisal or any of them as appears to be equitable, except
that the cost of giving the notice by publication and by registered or certified
mail hereinabove provided for shall be paid by the corporation. The court, on
application of any party in interest, shall determine the amount of interest, if
any, to be paid upon the value of the stock of the stockholders entitled
thereto.
(i) Any stockholder who has demanded payment of the stockholder's stock as
herein provided shall not thereafter be entitled to vote such stock for any
purpose or be entitled to the payment of dividends or other distribution on the
stock, except dividends or other distributions payable to stockholders of record
at a date which is prior to the effective date of the merger or consolidation,
unless the appointment of an appraiser or appraisers shall not be applied for
within the time herein provided, or the proceeding be dismissed as to such
stockholder, or unless such stockholder with the written approval of the
corporation shall deliver to the corporation a written withdrawal of the
stockholder's objections to and an acceptance of the merger or consolidation, in
any of which cases the right of such stockholder to payment for the
stockholder's stock shall cease.
(j) The shares of the surviving or resulting corporation into which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
(k) This section shall not apply to the shares of any class or series of a
class of stock, which, at the record date fixed to determine the stockholders
entitled to receive notice of and to vote at the meeting of stockholders at
which the agreement of merger or consolidation is to be acted on, were either
(1) registered on a national securities exchange or designated as a national
market system security on an interdealer quotation system by the national
association of securities dealers, inc., or (2) held of record by not less than
2,000 stockholders, unless the articles of incorporation of the corporation
issuing such stock shall otherwise provide; nor shall this section apply to any
of the shares of stock of the constituent corporation surviving a merger, if the
merger did not require for its approval the vote of the stockholders of the
surviving corporation, as provided in subsection (f) of K.S.A. 17-6701 and
amendments thereto. This subsection shall not be applicable to the holders of a
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<PAGE>
class or series of a class of stock of a constituent corporation if under the
terms of a merger of consolidation pursuant to K.S.A. 17-6701 or 17-6702, and
amendments thereto, such holders are required to accept for such stock anything
except (i) stock or stock and cash in lieu of fractional shares of the
corporation surviving or resulting from such merger or consolidation, or (ii)
stock or stock and cash in lieu of fractional shares of any other corporation,
which at the record date fixed to determine the stockholders entitled to receive
notice of and to vote at the meeting of stockholders at which the agreement of
merger or consolidation is to be acted on, were either registered on a national
securities exchange or held of record by not less than 2,000 stockholders, or
(iii) a combination of stock or stock and cash in lieu of fractional shares as
set forth in (i) and (ii) of this subsection.
C-3
<PAGE>
[LOGO]
YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.
VOTE YOUR PROXY
TRIANGLE FOLD AND DETACH HERE TRIANGLE
- -----------------------------------------------------------------------------
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS OF
THE EMPIRE DISTRICT ELECTRIC COMPANY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned hereby constitutes
P and appoints M.W. McKINNEY, R.B. FANCHER and J.S.WATSON, or any one of
them, with power of substitution, as attorneys and proxies to appear and
R vote all shares of Common Stock standing in the name of the undersigned,
with all the powers the undersigned would possess if personally present, at
O a Special Meeting of Stockholders of The Empire District Electric Company
to be held at the Holiday Inn, 3615 South Range Line, in the City of Joplin,
X State of Missouri, on the 3rd day of September, 1999 at 10:00 a.m., Joplin
time, and at any and all adjournments and postponements thereof, in the
Y manner indicated on the reverse hereof.
(CONTINUED ON THE REVERSE SIDE)
<PAGE>
[LOGO]
Dear Stockholder:
We will hold a special meeting of the stockholders of The Empire District
Electric Company on Friday, September 3, 1999, at 10:00 a.m., at the Holiday
Inn, 3615 South Range Line (Intersection of Highway 71 and Interstate 44),
Joplin, Missouri. I cordially invite you to attend.
Whether or not you plan to attend the meeting, it is important that every
stockholder be represented regardless of the number of shares owned. Please
detach the proxy card below, complete it and promptly return it in the
envelope provided. Your vote is important to us.
Sincerely,
/s/ Myron W. McKinney
------------------------------------
Myron W. McKinney
PRESIDENT AND CHIEF EXECUTIVE OFFICER
TRIANGLE FOLD AND DETACH HERE TRIANGLE
- -------------------------------------------------------------------------------
/X/ PLEASE MARK VOTE ---
AS IN THIS EXAMPLE. |
- -------------------------------------------------------------------------------
| THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF THE COMPANY. |
| THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" ITEM 1. |
- -------------------------------------------------------------------------------
1. Adoption of the merger agreement and approval FOR AGAINST ABSTAIN
of the merger with UtiliCorp United Inc. / / / / / /
2. Upon any other matter which may properly come
before the meeting in their discretion.
EVERY PROPERLY SIGNED PROXY WILL BE VOTED IN THE MANNER SPECIFIED HEREON AND,
IN THE ABSENCE OF SPECIFICATION, WILL BE VOTED FOR ITEM 1.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING
OF STOCKHOLDERS AND PROXY STATEMENT ANNEXED THERETO.
Dated:
----------------------------------------, 1999
- ----------------------------------------------------
Signature
- ----------------------------------------------------
Signature
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
