<PAGE>
As filed with the Securities and Exchange Commission on September 9, 1999
Registration No. 333-
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- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
---------------
WISCONSIN ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
---------------
<TABLE>
<CAPTION>
WISCONSIN 6719 39-1391525
<S> <C> <C>
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification Number)
organization)
</TABLE>
231 West Michigan Street
P.O. Box 2949
Milwaukee, Wisconsin 53201
(414) 221-2345
(Address, including ZIP Code, and telephone number, including area code, of
registrant's principal executive offices)
CALVIN H. BAKER
Treasurer
Wisconsin Energy Corporation
231 West Michigan Street
P.O. Box 2949
Milwaukee, Wisconsin 53201
(414) 221-2345
(Name, address, including ZIP Code, and telephone number,
including area code, of agent for service)
---------------
Copies to:
BRUCE C. DAVIDSON JAY O. ROTHMAN
Quarles & Brady LLP Foley & Lardner
411 East Wisconsin Avenue 777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202 Milwaukee, Wisconsin 53202
(414) 277-5000 (414) 271-2400
---------------
Approximate date of commencement of proposed sale of the securities to the
public: As soon as practicable after this registration statement becomes
effective and all conditions prerequisite have been satisfied or waived.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
========================================================================================================
Amount Proposed maximum Proposed maximum Amount of
Title of each class of to be offering price aggregate offering registration
securities to be registered registered(1) per unit price(3) fee(4)
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<S> <C> <C> <C> <C>
Common Stock, $.01 par value..... 35,096,600 (2) $718,514,537 $199,747.05
========================================================================================================
</TABLE>
(1) Based upon (a) 40,853,705 shares, the maximum number of shares of WICOR,
Inc. common stock, $1.00 par value (together with the associated common
stock purchase rights) that may, pursuant to the terms of the merger
agreement, be outstanding immediately prior to the merger of WICOR with a
subsidiary of Wisconsin Energy Corporation to which this registration
statement relates, assuming exercise of all outstanding exercisable
options, (b) multiplied by 60%, the maximum percentage of such shares
which may be converted into shares of Wisconsin Energy common stock under
the merger agreement, (c) multiplied by an assumed exchange ratio of
1.4318, which is $31.50 divided by $22.00. The actual exchange ratio will
not be determined until just prior to the closing date. See "Explanatory
Note" following this cover page.
(2) Not applicable.
(3) Estimated pursuant to Rules 457(f)(1) and 457(c) under the Securities Act,
solely for the purpose of calculating the registration fee, based upon the
$29.3125 average of the high and low sales prices for shares of WICOR
common stock as reported on the New York Stock Exchange Composite Tape on
September 8, 1999; multiplied by 24,512,223, the maximum number of shares
of WICOR common stock, assuming the exercise of all exercisable
outstanding options to purchase WICOR common stock, which may be converted
into Wisconsin Energy common stock under the merger agreement.
(4) Pursuant to Rule 457(b) and Rule 0-11(a)(2) under the Exchange Act, the
registration fee is entirely offset by the fee of $257,378.35 paid to the
Commission on August 11, 1999, upon the joint filing of preliminary proxy
materials of WICOR and Wisconsin Energy with respect to this transaction
under cover of Schedule 14A.
---------------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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<PAGE>
EXPLANATORY NOTE
Under the merger agreement, at the time of the merger, each outstanding
share of WICOR common stock (together with the associated common stock purchase
right issued pursuant to WICOR's rights agreement) will be converted into the
right to receive cash, Wisconsin Energy common stock, or a combination of cash
and shares of Wisconsin Energy common stock (the "Merger Consideration") having
a value of $31.50 per share of WICOR common stock if the closing occurs by July
1, 2000, increased by an amount equivalent to daily simple interest on $31.50
at the rate of six percent per annum for each day after July 1, 2000 through
the closing date if the closing occurs after July 1, 2000 (the "Exchange
Value"). Prior to the closing date, Wisconsin Energy will select the percentage
of the Merger Consideration to be paid in Wisconsin Energy common stock, which
may not be less than 40% or more than 60%; the balance will be paid in cash.
The exchange ratio for each share of WICOR common stock converted into
Wisconsin Energy common stock will be determined by dividing the Exchange Value
by the average of the closing prices of the Wisconsin Energy common stock as
reported on the New York Stock Exchange Composite Tape for the 10 trading days
ending with the fifth trading day prior to the closing date (the "Average
Wisconsin Energy Price"). Each WICOR shareholder will be entitled to elect to
receive cash, Wisconsin Energy common stock or a combination thereof, subject
to proration if the cash or stock elections exceed the maximum amounts
permitted. Cash will be paid in lieu of any fractional shares of Wisconsin
Energy common stock which holders of WICOR common stock would otherwise
receive. If the Average Wisconsin Energy Price is less than $22.00 per share,
Wisconsin Energy may elect to pay the entire Merger Consideration in cash.
<PAGE>
[LOGO OF WISCONSIN ENERGY APPEARS HERE]
MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT
Dear Wisconsin Energy Corporation and WICOR Shareholders:
The boards of directors of Wisconsin Energy Corporation and WICOR, Inc. have
approved a merger agreement that will result in WICOR becoming a subsidiary of
Wisconsin Energy. We believe the merger will give the combined company the
resources needed to compete in the emerging regional energy market and take
advantage of new opportunities as the gas and electric markets converge and the
deregulating energy industry continues to consolidate and diversify. We also
believe this strategic business combination will enhance shareholder value and
customer service, as well as provide additional benefits through
diversification of our non-utility operations.
Under the merger agreement, Wisconsin Energy will acquire all of the
outstanding shares of WICOR common stock for a fixed price of $31.50 for each
WICOR share. We expect that at least 40% of the total acquisition price will be
paid in Wisconsin Energy common stock. Wisconsin Energy will have the option
prior to the closing date to increase that percentage up to 60%. The balance of
the acquisition price will be paid in cash. Prior to the effective time of the
merger, each WICOR shareholder will be given the opportunity to elect to
receive cash, stock or a combination of the two. Wisconsin Energy shareholders
will continue to own their existing shares after the merger.
Although the actual amount will not be known until the merger occurs, as of
June 30, 1999, we estimate that Wisconsin Energy will issue between
approximately 20 million and 30 million shares of its common stock to WICOR
shareholders in the merger at the 40% to 60% stock levels. These shares would
represent approximately 17% to 26% of the outstanding Wisconsin Energy common
stock after the merger. However, if the average price of Wisconsin Energy
common stock on the NYSE prior to the closing date is less than $22.00 per
share, Wisconsin Energy may elect to pay the entire acquisition price in cash.
The common stocks of both Wisconsin Energy and WICOR are listed on the NYSE
under the symbols "WEC" and "WIC."
We cannot complete the merger without your approval and have scheduled
special shareholders' meetings on October 27, 1999, to vote on the merger and
related matters. The accompanying Notices of Special Meetings of Shareholders
show the time and location of each meeting. Your vote is important. Please take
time to vote by completing the enclosed proxy card and returning it in the
envelope provided.
This joint proxy statement/prospectus gives you detailed information about
the proposed merger. We encourage you to read it carefully. In particular, you
should read the "Risk Factors" section beginning on page 18 for a description
of various risks you should consider in evaluating the proposed merger.
We are very enthusiastic about the merger and the strength we expect from
the combined company. We join all of the other members of each company's board
of directors in our strong recommendation that you vote in favor of the merger.
Sincerely,
/s/ Richard A. Abdoo /s/ George E. Wardeberg
Richard A. Abdoo George E. Wardeberg
Chairman of the Board, President and Chief Chairman and Chief Executive
Executive Officer Officer
Wisconsin Energy Corporation WICOR, Inc.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved the Wisconsin Energy common stock to
be issued in the merger or determined if this joint proxy
statement/prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.
This joint proxy statement/prospectus is dated September 10, 1999, and is
first being mailed to shareholders on or about September 15, 1999.
<PAGE>
You should rely only on the information provided in or incorporated by
reference (and not later changed) in this joint proxy statement/prospectus.
Neither Wisconsin Energy nor WICOR has authorized anyone else to provide you
with additional or different information. Wisconsin Energy is not making an
offer of any securities in any state where the offer is not permitted. You
should not assume that the information in this joint proxy statement/prospectus
is accurate as of any date other than the date on the front of this document.
This joint proxy statement/prospectus incorporates important business and
financial information about Wisconsin Energy and about WICOR that is not
included in or delivered with this document. That information is available
without charge to shareholders by calling or writing to us at the following
addresses:
Wisconsin Energy Corporation
231 West Michigan Street
P. O. Box 2949
Milwaukee, Wisconsin 53201
Attn: Mr. Thomas H. Fehring, Corporate Secretary
Telephone: 1-800-881-5882
WICOR, Inc.
626 East Wisconsin Avenue
P. O. Box 334
Milwaukee, Wisconsin 53201
Attn: Mr. Robert A. Nuernberg, Secretary
Telephone: 1-800-236-3453
To obtain timely delivery of this information from us, you must request the
information no later than five business days before the date of your
shareholders' meeting. Therefore, you must request this information on or
before October 20, 1999. The information is also available from the SEC through
its web site at http://www.sec.gov. See "Where You Can Find More Information."
Wisconsin Energy has provided all of the information in this joint proxy
statement/prospectus about Wisconsin Energy and its subsidiary, CEW
Acquisition, Inc. WICOR has provided all of the information about WICOR.
<PAGE>
Wisconsin Energy Corporation
231 West Michigan Street
P. O. Box 2949
Milwaukee, Wisconsin 53201
Notice of Special Meeting of Shareholders
Date: October 27, 1999
Time: 4:00 p.m., local time
Place: Midwest Express Center
400 West Wisconsin Avenue
Milwaukee, Wisconsin
Purpose of the Meeting:
. To consider and vote upon the Agreement and Plan of Merger, dated as of
June 27, 1999, as amended as of September 9, 1999, between Wisconsin
Energy Corporation and WICOR, Inc. Shareholders will be asked to approve
the merger agreement and related transactions contemplated by this
document, including the issuance of additional shares of Wisconsin Energy
common stock.
. To consider any other matters that may be properly brought before the
special meeting or any adjournment or postponement of the special
meeting.
Only shareholders of record at the close of business on September 9, 1999,
are entitled to notice of, and to vote at, this special meeting or any
adjournment or postponement of the special meeting.
Under the merger agreement, the outstanding shares of WICOR common stock
will be converted into the right to receive cash, shares of Wisconsin Energy
common stock, or a combination of cash and shares of Wisconsin Energy common
stock valued at $31.50 per share of WICOR common stock, and WICOR will become a
wholly-owned subsidiary of Wisconsin Energy. However, if the merger occurs
after July 1, 2000, the $31.50 value will be increased daily at the rate of 6%
simple interest per annum.
The board of directors of Wisconsin Energy has adopted and approved the
merger agreement and determined that the merger is in the best interests of
Wisconsin Energy and its shareholders. The board recommends that you vote "for"
approval of the merger agreement and the merger, including the related share
issuance.
The terms of the merger are summarized in the accompanying joint proxy
statement/prospectus, which you are urged to read carefully. A copy of the
merger agreement is attached as Appendix A.
Your vote is important. Whether or not you expect to attend the special
meeting, please complete, sign and date the enclosed proxy card and return it
promptly in the enclosed postage-paid return envelope. You can revoke your
proxy at any time before it is voted by giving written notice to Wisconsin
Energy's corporate secretary or the acting secretary of the special meeting, by
filing another proxy, or by voting in person at the special meeting. Attendance
at the special meeting, by itself, does not revoke your proxy.
/s/ Thomas H. Fehring
By Order of the Board of Directors
Thomas H. Fehring
Corporate Secretary
September 10, 1999
<PAGE>
WICOR, Inc.
626 East Wisconsin Avenue
P. O. Box 334
Milwaukee, Wisconsin 53201
Notice of Special Meeting of Shareholders
Date: October 27, 1999
Time: 1:30 p.m., local time
Place: Midwest Express Center
400 West Wisconsin Avenue
Milwaukee, Wisconsin
Purpose of the Meeting:
. To consider and vote upon the Agreement and Plan of Merger, dated as of
June 27, 1999, as amended as of September 9, 1999, providing for the
merger of CEW Acquisition, Inc., a wholly-owned subsidiary of Wisconsin
Energy Corporation, with WICOR, Inc. Under the merger agreement, the
outstanding shares of WICOR common stock will be converted into the right
to receive cash, shares of Wisconsin Energy common stock, or a
combination of cash and shares of Wisconsin Energy common stock valued at
$31.50 per share of WICOR common stock. However, if the merger occurs
after July 1, 2000, the $31.50 value will be increased daily at the rate
of 6% simple interest per annum.
. To consider any other matters that may be properly brought before the
special meeting or any adjournment or postponement of the special
meeting.
Only shareholders of record at the close of business on September 9, 1999,
are entitled to notice of, and to vote at, this special meeting or any
adjournment or postponement of the special meeting.
The board of directors of WICOR has adopted and approved the merger
agreement and the merger and determined that they are in the best interests of
WICOR and its shareholders. The board recommends that you vote "for" approval
of the merger agreement and the merger.
The terms of the merger are summarized in the accompanying joint proxy
statement/prospectus, which you are urged to read carefully. A copy of the
merger agreement is attached as Appendix A.
Your vote is important. Whether or not you expect to attend the special
meeting, please complete, sign and date the enclosed proxy card and return it
promptly in the enclosed postage-paid return envelope. You can revoke your
proxy at any time before it is voted by giving written notice to WICOR's
corporate secretary or the acting secretary of the special meeting, by filing
another proxy, or by voting in person at the special meeting. Attendance at the
special meeting, by itself, does not revoke your proxy.
/s/ Robert A. Nuernberg
By Order of the Board of Directors
Robert A. Nuernberg
Secretary
September 10, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
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Page
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<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER.................................... 1
SUMMARY................................................................... 3
The Companies........................................................... 3
The Merger and the Merger Agreement..................................... 4
What WICOR Shareholders Will Receive.................................... 4
Material Federal Income Tax Consequences of the Merger.................. 6
Reasons for the Merger.................................................. 7
Opinions of Financial Advisors.......................................... 7
Other Interests of Officers and Directors in the Merger................. 7
Recommendations to Shareholders......................................... 7
Ownership of Wisconsin Energy After the Merger.......................... 8
Directors and Executive Officers of Wisconsin Energy After the Merger... 8
No Appraisal Rights..................................................... 8
Shareholder Votes Required to Approve the Merger........................ 8
Regulatory Approvals.................................................... 9
Other Material Aspects of the Merger and the Merger Agreement........... 9
Accounting Treatment.................................................... 10
Comparison of Shareholder Rights........................................ 10
Comparative Per Share Market Price and Dividend Information............. 10
Wisconsin Energy Selected Consolidated Financial Data................... 11
WICOR Selected Consolidated Financial Data.............................. 12
Unaudited Selected Pro Forma Combined Condensed Financial Data.......... 13
Comparative Per Share Data.............................................. 14
Recent Developments..................................................... 14
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS................. 16
RISK FACTORS.............................................................. 18
Transaction Risks....................................................... 18
Operational Risks....................................................... 19
THE SPECIAL MEETINGS...................................................... 20
Wisconsin Energy Special Meeting........................................ 20
WICOR Special Meeting................................................... 22
Absence of Dissenters' Rights of Appraisal.............................. 24
THE MERGER AND THE MERGER AGREEMENT....................................... 25
General................................................................. 25
Background of the Merger................................................ 25
Wisconsin Energy's Reasons for the Merger; Recommendation of the
Wisconsin Energy Board.................................................. 29
Opinion of Wisconsin Energy's Financial Advisor......................... 32
WICOR's Reasons for the Merger; Recommendation of the WICOR Board....... 39
Opinion of WICOR's Financial Advisor.................................... 40
Interests of Certain Persons in the Merger.............................. 48
Employee Plans.......................................................... 51
Management and Operations of WICOR After the Merger..................... 51
Conduct of Business Pending the Merger.................................. 51
Representations, Warranties and Covenants............................... 53
Conditions to the Merger................................................ 55
No Solicitation; Special Fee............................................ 56
Termination; Amendment; Waiver.......................................... 58
</TABLE>
i
<PAGE>
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Page
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Standstill Provisions............................................................ 60
Fees and Expenses................................................................ 61
Indemnification.................................................................. 61
Elections to Receive Cash or Stock; Conversion of Shares in the Merger........... 61
Exchange of WICOR Certificates; No Fractional Shares............................. 63
Effect of the Merger on the WICOR Plan........................................... 65
Assumption and Conversion of WICOR Stock Options and Stock-Based Awards.......... 66
Regulatory Requirements and Approvals............................................ 66
Resale of Wisconsin Energy Common Stock.......................................... 70
Accounting Treatment............................................................. 71
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER............................. 71
Only Shares of Wisconsin Energy Common Stock Received............................ 72
Only Cash Received............................................................... 72
Shares of Wisconsin Energy Common Stock and Cash Received........................ 72
Fractional Shares................................................................ 74
Only Cash Issued in the Merger................................................... 74
WICOR Companies' Employee Savings Plans.......................................... 74
THE COMPANIES...................................................................... 76
Wisconsin Energy................................................................. 76
WICOR............................................................................ 76
DESCRIPTION OF WISCONSIN ENERGY CAPITAL STOCK...................................... 77
Preferred Stock.................................................................. 77
Common Stock..................................................................... 77
Certain Anti-Takeover Provisions................................................. 78
Transfer Agent................................................................... 79
COMPARISON OF SHAREHOLDER RIGHTS................................................... 79
Authorized Capital Stock......................................................... 79
Voting Rights.................................................................... 79
Board of Directors............................................................... 80
Removal of Directors............................................................. 80
Vacancies on the Board of Directors.............................................. 81
Defensive Provisions............................................................. 81
Amendments to Articles of Incorporation.......................................... 83
Amendments to Bylaws............................................................. 83
Extraordinary Transactions....................................................... 84
Notice of Shareholder Proposals/Nominations...................................... 84
Shareholder Rights Plans......................................................... 84
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION....................... 85
CERTAIN INFORMATION CONCERNING WISCONSIN ENERGY AND WICOR.......................... 92
LEGAL OPINIONS..................................................................... 92
EXPERTS............................................................................ 92
SHAREHOLDER PROPOSALS.............................................................. 92
WHERE YOU CAN FIND MORE INFORMATION................................................ 93
APPENDIX A: MERGER AGREEMENT....................................................... A-1
APPENDIX B: OPINION OF CHASE SECURITIES INC........................................ B-1
APPENDIX C: OPINION OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED.......... C-1
</TABLE>
ii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: What will I receive in the merger?
A: If the merger occurs by July 1, 2000, WICOR shareholders will receive merger
consideration valued at $31.50 per share of WICOR common stock. They will be
able to choose to receive this in cash, in Wisconsin Energy common stock, or in
a combination of cash and Wisconsin Energy common stock, subject to proration.
The merger consideration will increase at a daily rate equivalent to 6% per
annum if the merger is delayed beyond July 1, 2000. Wisconsin Energy will
select the percentage of the merger consideration to be paid in Wisconsin
Energy common stock, which may not be less than 40% or more than 60%; the
balance will be paid in cash. However, Wisconsin Energy may elect to pay the
merger consideration in 100% cash if Wisconsin Energy's average closing common
stock price during a valuation period shortly before the merger closes, when
the exchange ratio will be determined, is less than $22.00 per share. Wisconsin
Energy shareholders will keep their Wisconsin Energy stock, but after the
merger those shares will represent ownership in the combined enterprise.
Q: When will Wisconsin Energy decide what percentage of the merger
consideration (between 40% and 60%) will be paid in Wisconsin Energy common
stock?
A: Wisconsin Energy must make that decision at least three business days prior
to the closing date of the merger. Regardless of the percentage chosen by
Wisconsin Energy, the value of the merger consideration will equal $31.50 per
WICOR common share, unless the closing date is after July 1, 2000, in which
case the $31.50 value will be increased daily at the rate of approximately 6%
simple interest per annum. Therefore, fluctuations in the trading price of
Wisconsin Energy common stock prior to the determination of the exchange ratio
will not affect the value of the merger consideration, although it may affect
Wisconsin Energy's decision with respect to the percentage of the acquisition
price between 40% and 60% that will be paid in Wisconsin Energy common stock.
Q: When and where are the shareholder meetings?
<TABLE>
<CAPTION>
<S> <C>
A: For Wisconsin Energy Shareholders: For WICOR Shareholders:
October 27, 1999, 4:00 p.m., local time October 27, 1999, 1:30 p.m., local time
Midwest Express Center Midwest Express Center
400 West Wisconsin Avenue 400 West Wisconsin Avenue
Milwaukee, Wisconsin Milwaukee, Wisconsin
</TABLE>
Q: What do I need to do now?
A: Please sign and mail in your proxy card in the enclosed return envelope as
soon as possible so that your shares may be represented at your shareholders'
meeting. In order to assure that your vote is recorded, please complete and
sign your proxy as instructed on your proxy card even if you currently plan to
attend your shareholders' meeting in person. The boards of directors of
Wisconsin Energy and WICOR recommend that their respective shareholders vote in
favor of the merger agreement and the merger. Any shares that are not voted at
the WICOR shareholders' meeting have the same effect as shares voted against
the merger.
Q: What do I do if I later want to change my vote?
A: Just send in a later-dated, signed proxy card to your company's corporate
secretary, or attend your shareholders' meeting in person and vote. You may
also revoke your proxy by sending a notice of revocation that is received by
your company's corporate secretary at the address listed on page 93 or page 94
prior to your shareholders' meeting.
Q: Should I send in my WICOR stock certificates and my election to receive cash
or Wisconsin Energy stock now?
A: No. If the shareholders of both companies approve the merger and it appears
all other conditions to the merger will be satisfied, we will then send WICOR
shareholders written instructions for electing to receive
<PAGE>
cash, stock of Wisconsin Energy, or a combination of cash and stock, and for
turning in their WICOR common stock certificates if they hold the certificates
representing their shares. Do not send in your WICOR stock certificates now.
Wisconsin Energy shareholders will keep their existing stock certificates.
Q: If my shares are held in "street name" by my broker, will my broker vote my
shares for me?
A: No, not unless you provide instructions. You should therefore be sure to
provide your broker with instructions on how to vote your shares.
Q: What should I do if my WICOR shares are held in employee benefit plans?
A: The trustee of the employee benefit plans will solicit instructions from each
plan participant regarding the voting of the shares held by the plan and will
vote the shares as directed. At the appropriate time, the trustee will solicit
instructions concerning the cash or stock election. The trustee will then
aggregate all of the participant directions and prepare and deliver an election
form reflecting the aggregate decisions of the participants.
Q: Will I continue to receive dividends?
A: We expect no change in Wisconsin Energy's or WICOR's dividend policies while
the merger is pending. Wisconsin Energy expects to continue to pay dividends
after the merger.
Q: When do you expect the merger to be completed?
A: We are working to complete the merger as soon as possible, and hope to do so
by Spring, 2000. If regulatory approvals have not been obtained by the July 1,
2000, deadline in the merger agreement, the deadline will be automatically
extended to January 1, 2001.
Q: Who do I call if I have questions about the meetings or the merger?
A: Wisconsin Energy shareholders may call 1-800-881-5882 or (414) 221-2788.
WICOR shareholders may call 1-800-236-3453 or (414) 291-7026.
You may also contact:
Wisconsin Energy Shareholders: WICOR Shareholders:
Morrow & Co., Inc. ChaseMellon Shareholder Services
445 Park Avenue, 5th Floor 450 West 33rd Street
New York, NY 10022 New York, NY 10001-2697
Banks and Brokers Call Collect: Banks and Brokers Call Collect:
(212) 754-8000 (212) 273-8035
Call Toll Free: 1-800-566-9061 Call Toll Free: 1-800-684-8823
2
<PAGE>
SUMMARY
This summary highlights selected information contained in this joint proxy
statement/prospectus. It 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 terms of the merger and the actions to be taken in
connection with the merger, you should read this entire document carefully,
together with the other documents to which we refer. See "Where You Can Find
More Information" on page 93. Where appropriate, items in this summary include
page references directing you to a more complete description of that matter.
All references to the WICOR common stock include any associated rights under
WICOR's shareholder rights plan.
The Companies
Wisconsin Energy Corporation (see page 76)
231 West Michigan Street
P. O. Box 2949
Milwaukee, Wisconsin 53201
Tel. (414) 221-2345
Wisconsin Energy Corporation is a public utility holding company which,
through its utility subsidiaries, engages in:
. the generation, purchase, transmission, distribution and sale of
electricity;
. the purchase, transportation, distribution and sale of natural gas; and
. the generation, distribution and sale of steam.
Wisconsin Energy serves approximately 1,013,000 electricity customers in
Wisconsin and the Upper Peninsula of Michigan and approximately 394,000 natural
gas customers in Wisconsin through its two utility subsidiaries: Wisconsin
Electric Power Company, an electric, gas and steam utility headquartered in
Milwaukee, Wisconsin, and Edison Sault Electric Company, an electric utility
located in Sault Ste. Marie, Michigan.
In addition, Wisconsin Energy has subsidiaries engaged in various non-
utility businesses. Wisconsin Energy's non-utility subsidiaries include:
. WISPARK Corporation, which develops business parks and industrial
buildings and invests in real estate;
. WISVEST Corporation, which invests in energy-related entities and
develops energy-related projects; and
. Minergy Corp., which is engaged in the business of developing and
marketing technologies designed to convert high volume industrial and
municipal waste into value-added products, such as converting paper mill
sludge into glass aggregate and steam.
In this joint proxy statement/prospectus, we sometimes refer to Wisconsin
Energy and its subsidiaries collectively as the Wisconsin Energy Companies.
Internet users can obtain information about Wisconsin Energy and its services
at http://www.wisenergy.com. However, the information contained at that site is
not incorporated into this joint proxy statement/prospectus.
3
<PAGE>
WICOR, Inc. (see page 76)
626 East Wisconsin Avenue
P. O. Box 334
Milwaukee, Wisconsin 53201
Tel. (414) 291-7026
WICOR, Inc. is a diversified holding company with two principal business
groups: energy services and pump manufacturing.
WICOR's energy services subsidiaries include:
. Wisconsin Gas Company, the largest natural gas distribution public
utility in Wisconsin with approximately 529,000 natural gas customers,
which is engaged in distributing natural gas and water;
. WICOR Energy Services Company, which is engaged in natural gas purchasing
and energy price risk management; and
. FieldTech, Inc., which is engaged in meter reading and technology
services for natural gas, electric and water utilities.
WICOR's pump manufacturing subsidiaries include:
. Sta-Rite Industries, Inc.;
. SHURflo Pump Manufacturing Co.; and
. Hypro Corporation.
These subsidiaries manufacture pumps and fluid processing and filtration
equipment for residential, agricultural and industrial markets in the United
States and more than 100 countries throughout the world.
In this joint proxy statement/prospectus, we sometimes refer to WICOR and
its subsidiaries collectively as the WICOR Companies. Internet users can obtain
information about WICOR and its operations at http://www.wicor.com. However,
the information contained at that site is not incorporated into this joint
proxy statement/prospectus.
The Merger and the Merger Agreement
Wisconsin Energy will acquire WICOR through a merger of CEW Acquisition,
Inc., a wholly-owned subsidiary of Wisconsin Energy, with WICOR. As a result,
WICOR will become a wholly-owned subsidiary of Wisconsin Energy. CEW
Acquisition, Inc., a new Wisconsin corporation created by Wisconsin Energy to
effect the merger, has no business or operations at this time. The merger
agreement is attached as Appendix A to this joint proxy statement/prospectus.
We encourage you to read the merger agreement because it is the legal document
that governs the merger.
What WICOR Shareholders Will Receive (see page 61)
WICOR shareholders will receive, either in cash, in Wisconsin Energy common
stock, or in a combination of cash and stock, merger consideration valued at
$31.50 for each share of WICOR common stock they hold. However, if the merger
occurs after July 1, 2000, the amount of the merger consideration will increase
daily by an amount computed at the rate of approximately 6% simple interest per
annum.
Shortly before the merger, Wisconsin Energy will select a percentage between
40% and 60% of the total merger consideration that it will pay in Wisconsin
Energy common stock, with the remainder to be paid in cash. The exchange ratio
for the Wisconsin Energy common stock issued in the merger will be based on the
4
<PAGE>
average closing price of Wisconsin Energy common stock as reported on the New
York Stock Exchange Composite Tape for the 10 trading days ending with the
fifth trading day prior to the closing date of the merger. The exchange ratio
will equal the exchange value of $31.50 per WICOR share, or a higher amount if
the merger occurs after July 1, 2000, divided by the average closing price per
share of Wisconsin Energy common stock during the valuation period, carried to
the fourth decimal place. Therefore, the actual exchange ratio will not be
determined until shortly before the merger and fluctuations in the trading
price of Wisconsin Energy common stock prior to the determination of the
exchange ratio will not affect the value of the merger consideration to be
received by WICOR shareholders. If the average closing price of Wisconsin
Energy common stock during the valuation period is less than $22.00 per share,
Wisconsin Energy may elect to pay the entire merger consideration in cash.
WICOR shareholders may elect to receive cash for all of their WICOR shares,
shares of Wisconsin Energy common stock for all of their WICOR shares, or cash
for some of their WICOR shares and shares of Wisconsin Energy common stock for
the remainder, except that:
. cash will be paid in lieu of any fractional shares of Wisconsin Energy
common stock resulting from the merger;
. if total elections for Wisconsin Energy common stock exceed the
percentage to be paid in stock, the amount of the elections of WICOR
shareholders for Wisconsin Energy common stock will be reduced pro rata
so that the resulting amounts approximate the Wisconsin Energy common
stock to be issued in the merger, with the balance of the merger
consideration paid to them in cash;
. if total elections for cash, including the cash paid for fractional
shares of Wisconsin Energy common stock, exceed the percentage to be paid
in cash, the amount of the elections of WICOR shareholders for cash will
be reduced pro rata so that the resulting amounts approximate the cash to
be paid in the merger (after allowing for cash to be paid for fractional
shares of Wisconsin Energy common stock), with the balance of the merger
consideration paid in Wisconsin Energy common stock; and
. if some WICOR shareholders do not make a timely election for either cash
or stock or a combination of cash and stock, we will honor the elections
of the other WICOR shareholders to the extent possible and then divide
the remaining merger consideration (whether cash, shares of Wisconsin
Energy common stock, or both) proportionately among the non-electing
WICOR shareholders.
The formula for stock payouts is:
<TABLE>
<S> <C> <C>
$31.50 divided by the
average closing
price of Wisconsin X Number of WICOR Number of shares of
Energy common shares to be paid in = Wisconsin Energy
stock during the Wisconsin Energy common stock to be
valuation period common stock received by the WICOR
shareholder,
provided that any fractional shares will be paid in cash.
The formula for cash payouts is:
$31.50 X Number of WICOR = Amount of cash to be
shares to be paid in received by the WICOR
cash shareholder.
</TABLE>
5
<PAGE>
For example, suppose the merger closes on or before July 1, 2000, and that
the average closing price of Wisconsin Energy common stock during the valuation
period is $25.0625 per share. The exchange ratio would be $31.50/$25.0625 =
1.2569. If a WICOR shareholder owns 100 shares of WICOR common stock and elects
to be paid in stock, assuming no proration, this would translate into:
1.2569 X 100 = 125.69, or 125 shares of Wisconsin Energy common stock plus a
$17.29 check for the
.69 fractional share (.69 X $25.0625 = $17.29).
If the same shareholder requests and receives all cash, the shareholder
would receive:
$31.50 X 100 = $3,150.00.
If the shareholder requests and receives Wisconsin Energy common stock for
50 WICOR shares and cash for the other 50, this would translate into:
1.2569 X 50 = 62.845, or 62 shares of Wisconsin Energy common stock and a
$21.18 check for the .845
fractional share (.845 X $25.0625 = $21.18),
plus
$31.50 X 50 = $1,575.00 in cash.
The table below shows what a holder of 100 shares of WICOR common stock
would receive based on these assumptions and on various splits between cash and
Wisconsin Energy common stock:
<TABLE>
<CAPTION>
Split between cash and Wisconsin Energy
Wisconsin Energy common stock Cash Received common stock Received
----------------------------- ------------- ---------------------
<S> <C> <C>
100% cash/0% stock $3,150.00 0 shares
60% cash/40% stock $1,896.92 50 shares
50% cash/50% stock $1,596.18 62 shares
40% cash/60% stock $1,270.38 75 shares
0% cash/100% stock $ 17.29 125 shares
</TABLE>
These examples illustrate only a few of the possibilities. The actual
allocation of stock and cash for any particular WICOR shareholder could be
anywhere from 100% stock to 100% cash. Please note that our examples assume an
exchange ratio of 1.2569, based on an assumed average closing price per share
of Wisconsin Energy common stock of $25.0625 during the valuation period, which
was the closing price on June 30, 1999. The market price of Wisconsin Energy
common stock is likely to change between now and the merger.
Material Federal Income Tax Consequences of the Merger (see page 71)
To the extent that Wisconsin Energy stock is issued in the merger, the
merger will be structured as a "tax-free reorganization" for federal income tax
purposes. This means that WICOR shareholders generally will not recognize any
gain or loss for federal income tax purposes to the extent they exchange their
WICOR common stock for Wisconsin Energy common stock in the merger. WICOR
shareholders will recognize gain or loss, however, in connection with the
receipt of any cash in the merger, including cash paid for fractional shares of
Wisconsin Energy stock. The companies themselves, as well as the holders of
Wisconsin Energy stock, will not recognize gain or loss as a result of the
merger. WICOR's outside counsel, Foley & Lardner, has given WICOR a legal
opinion that the merger will be treated as a tax-free reorganization for
federal income tax purposes if at least 40% of the total consideration in the
merger is Wisconsin Energy common stock. It is a condition to WICOR's
obligation to complete the merger that this legal opinion not be withdrawn or
materially modified.
The federal income tax consequences described above may not apply to all
holders of WICOR common stock. Your tax consequences will depend upon your
personal situation. You should consult your tax advisor regarding the tax
consequences of the merger to you.
6
<PAGE>
Reasons for the Merger (see pages 29 and 39)
Both the Wisconsin Energy board and the WICOR board believe that the terms
of the merger and the merger agreement are fair to and in the best interests
of their respective companies and shareholders.
In reaching its decision, the Wisconsin Energy board considered the
following factors, among other things:
. the expected benefits to Wisconsin Energy and its shareholders, as well
as to its customers, employees and the communities in which it does
business;
. the provisions of the merger agreement and the course of negotiations
resulting in the execution of the merger agreement, including the price,
the method of determining the mix of cash and shares of Wisconsin Energy
common stock to be issued in the merger, and the termination provisions;
. the opinion, analysis and presentation of Chase to the effect that the
consideration to be paid was fair to Wisconsin Energy from a financial
point of view; and
. the anticipated timing required to complete the merger, and management's
view of the likelihood of obtaining necessary regulatory approvals
without conditions that would be materially adverse to future operations
of the combined enterprise.
In reaching its decision, the WICOR board considered the following factors,
among other things:
. the expected benefits to WICOR's shareholders, as well as its employees
and customers;
. the terms of the merger agreement, including the price, the fixed
exchange value, the closing conditions and the termination provisions;
. the analysis and presentation of Merrill Lynch and its opinion that the
consideration to be paid to WICOR shareholders was fair from a financial
point of view; and
. the likelihood of completing the merger in the time provided under the
terms of the merger agreement.
Opinions of Financial Advisors (see pages 32 and 40)
WICOR and Wisconsin Energy each engaged an independent financial advisor to
assist in evaluating the proposed transactions. WICOR's financial advisor,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, has concluded that, as of
June 27, 1999, and as of the date of this joint proxy statement/prospectus,
the merger consideration was fair to the WICOR shareholders from a financial
point of view. Wisconsin Energy's financial advisor, Chase Securities Inc.,
has concluded that as of June 27, 1999, and as of the date of this joint proxy
statement/prospectus, the merger consideration was fair to Wisconsin Energy
from a financial point of view.
Other Interests of Officers and Directors in the Merger (see page 48)
In considering the recommendation of the WICOR board that WICOR
shareholders vote in favor of the merger, you should be aware that some of
WICOR's officers and directors have interests in the merger in addition to
their interests as WICOR shareholders. The WICOR board of directors was aware
of these interests and considered them when it approved the merger agreement
and the merger. In connection with the merger, Wisconsin Energy has adopted
severance policies to be effective when the merger occurs providing for
severance benefits to employees of Wisconsin Energy and WICOR who will be
designated as participants.
Recommendations to Shareholders
To WICOR Shareholders (see page 39):
The WICOR board believes that the merger is fair to you and in your best
interest as a WICOR shareholder, and recommends that you vote FOR the merger
agreement and the merger.
7
<PAGE>
To Wisconsin Energy Shareholders (see page 32):
The Wisconsin Energy board believes that the merger is fair to you and in
your best interest as a Wisconsin Energy shareholder, and recommends that you
vote FOR the merger and the issuance of additional shares of Wisconsin Energy
common stock pursuant to the merger agreement.
Ownership of Wisconsin Energy After the Merger
Wisconsin Energy will pay between 40% and 60% of the total merger
consideration by issuing shares of its common stock to the WICOR shareholders,
unless the closing price of Wisconsin Energy's common stock averages less than
$22.00 per share for the 10 consecutive trading days ending with the fifth
trading day prior to the closing of the merger and Wisconsin Energy elects to
pay 100% cash. This means that, unless the merger consideration is paid all in
cash, Wisconsin Energy will issue between approximately 20 million shares and
30 million shares of its common stock to WICOR shareholders in the merger,
which will represent between approximately 17% and 26% of the outstanding
Wisconsin Energy common stock after the merger. This information is based on
the number of Wisconsin Energy and WICOR shares outstanding on June 30, 1999,
and it assumes that all outstanding WICOR options are exercised in full. It
also assumes that the average market price of Wisconsin Energy common stock
during the valuation period before the merger is $25.0625. The actual amount of
shares to be issued will not be known until the merger occurs.
Directors and Executive Officers of Wisconsin Energy After the Merger (see page
50 and page 92)
Following the merger, the Wisconsin Energy board of directors will include
all of the Wisconsin Energy directors then in office, plus Mr. George E.
Wardeberg and another WICOR director to be selected by Wisconsin Energy and who
is reasonably acceptable to WICOR. Wisconsin Energy has agreed to elect Mr.
Wardeberg to serve as vice chairman of the board of directors and to continue
to nominate and solicit proxies to elect Mr. Wardeberg to serve as a director
until the annual meeting in 2005, the year in which he will attain age 70. The
other director will serve until the first annual meeting after the merger and
will then be nominated to serve at least one additional three-year term.
No Appraisal Rights (see page 24)
Under Wisconsin law, neither Wisconsin Energy shareholders nor WICOR
shareholders have appraisal rights in connection with the merger.
Shareholder Votes Required to Approve the Merger
For WICOR Shareholders: Approval of the merger agreement and the merger
requires the affirmative vote of the holders of a majority of the outstanding
shares of WICOR common stock entitled to vote on the matter.
You can vote at the special meeting of WICOR shareholders if you owned
shares of WICOR common stock at the close of business on the record date,
September 9, 1999. As of September 9, 1999, directors and executive officers of
WICOR and their affiliates beneficially owned approximately 1.2% of the
outstanding WICOR Common Stock.
If you do not vote your WICOR shares, the effect will be a vote against the
merger agreement and the merger.
For Wisconsin Energy Shareholders: Approval of the merger and the issuance
of shares of Wisconsin Energy common stock pursuant to the merger agreement
requires a majority of the votes cast by the holders of shares of Wisconsin
Energy common stock represented and entitled to vote at the Wisconsin Energy
special meeting of shareholders, provided that the total vote cast represents
over 50% of all outstanding shares entitled to vote.
8
<PAGE>
You can vote at the special meeting of Wisconsin Energy shareholders if you
owned shares of Wisconsin Energy common stock at the close of business on the
record date, September 9, 1999. As of September 9, 1999, directors and
executive officers of Wisconsin Energy and their affiliates beneficially owned
shares representing approximately 0.1% of the outstanding Wisconsin Energy
common stock.
Regulatory Approvals (see page 66)
In order to complete the merger, we must receive approvals from or make
filings with the appropriate U.S. federal and state governmental agencies.
Other Material Aspects of the Merger and the Merger Agreement
Conditions to the Merger (see page 55). The obligation of Wisconsin Energy
and WICOR to complete the merger depends upon meeting a number of conditions
including, among others, obtaining necessary regulatory approvals or consents,
the absence of litigation in which the completion of the transactions
contemplated by the merger agreement is restrained or enjoined, and the absence
of developments having a material adverse effect on Wisconsin Energy or WICOR
from the date of the merger agreement to the closing.
Termination of the Merger Agreement (see page 58). Wisconsin Energy and
WICOR can mutually agree to terminate the merger agreement. In addition, either
Wisconsin Energy or WICOR can terminate the merger agreement if any of the
following occurs:
(1) the merger is not completed by July 1, 2000; however, this deadline
automatically will be extended to January 1, 2001, if required
government approvals have not yet been obtained;
(2) the Wisconsin Energy special shareholders' meeting or the WICOR special
shareholders' meeting occurs but the shareholders do not approve the
share issuance or the merger or related transactions;
(3) a final court order permanently prohibits the merger;
(4) the other company breaches its representations, warranties or covenants
in the merger agreement in a material way and does not cure the problem
after 45 days' notice; or
(5) the other company materially and adversely changes its recommendation
of the merger.
WICOR also can terminate the agreement if it agrees to a merger or sale of
material assets, or there is a sale, tender offer or acquisition of at least
20% of the outstanding stock of WICOR, its utility subsidiary, or its non-
utility subsidiaries, or if there is a public announcement of a proposal, plan
or agreement to do any of these things. WICOR is permitted to agree to such a
transaction only under limited circumstances described in the merger agreement,
subject to the payment of the special fee described below if required.
Neither Wisconsin Energy nor WICOR can terminate for the reasons described
in clause (1) above if its failure to fulfill any obligation under the merger
agreement causes the delay in closing the merger. If either party terminates
the merger agreement under clause (4) because of a breach by the other party,
the breaching party is required to reimburse the nonbreaching party up to
$3,000,000 to cover out of pocket expenses and fees, except that the $3,000,000
limit does not apply, and other damages may also be available, in the case of a
willful breach.
No Solicitation; Special Fee (see page 56). The merger agreement required
WICOR to terminate any discussions with other parties concerning specified
change of control transactions. The merger agreement also prohibits WICOR from
initiating or conducting new discussions or entering into an agreement for such
a transaction unless the WICOR board of directors determines that doing so is
consistent with its fiduciary duties. WICOR is required to pay Wisconsin Energy
a special fee if the merger agreement is terminated because WICOR enters into
such a transaction or if the merger agreement is terminated and such a
transaction occurs within 21 months thereafter. The amount of the special fee
was reduced from $30,000,000 to $25,000,000 by an amendment to the merger
agreement which is contingent upon the settlement of a WICOR shareholder
lawsuit. See "--Recent Developments" on page 14.
9
<PAGE>
Accounting Treatment (see page 71)
We expect the merger to be treated as a purchase of WICOR by Wisconsin
Energy for financial reporting purposes.
Comparison of Shareholder Rights (see page 79)
Wisconsin Energy and WICOR are both incorporated in Wisconsin and governed
by Wisconsin law, so the rights of WICOR shareholders who become Wisconsin
Energy shareholders will continue to be governed by Wisconsin law. There are
some differences in the rights of the shareholders under the respective
charters and other documents relating to Wisconsin Energy and WICOR.
Comparative Per Share Market Price and Dividend Information
Wisconsin Energy common stock and WICOR common stock are both listed on the
New York Stock Exchange under the symbols "WEC" and "WIC," respectively. The
following table shows, for the periods indicated, the high and low sales prices
per share of Wisconsin Energy common stock and WICOR common stock, as reported
on the NYSE Composite Tape, and the dividends declared per share. The WICOR
information has been adjusted for the two-for-one split of its common stock in
May, 1998. On July 27, 1999, the WICOR board of directors voted to increase the
quarterly dividend on WICOR common stock from $0.22 per share to $0.225 per
share.
<TABLE>
<CAPTION>
Wisconsin Energy WICOR
---------------------------- -----------------------------
High Low Dividends High Low Dividends
--------- -------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
1996
First Quarter......... $32 $27 1/4 $ .3675 $17 7/32 $15 1/16 $0.205
Second Quarter........ 28 7/8 26 0.38 18 7/8 16 3/8 0.205
Third Quarter......... 29 1/8 26 3/8 0.38 18 7/8 16 13/16 0.21
Fourth Quarter........ 28 3/8 26 1/8 0.38 18 7/16 17 0.21
1997
First Quarter......... $27 7/8 $23 1/4 $0.38 $18 15/16 $17 $0.21
Second Quarter........ 25 5/8 23 0.385 19 7/8 16 11/16 0.21
Third Quarter......... 26 1/4 23 1/2 0.385 21 29/32 19 13/32 0.215
Fourth Quarter........ 29 1/16 24 1/8 0.385 23 15/16 20 1/2 0.215
1998
First Quarter......... $31 $27 $0.385 $24 11/32 $21 7/16 $0.215
Second Quarter........ 31 11/16 28 1/2 0.39 24 3/4 21 1/4 0.215
Third Quarter......... 32 27 3/8 0.39 24 5/16 20 1/8 0.22
Fourth Quarter........ 34 30 0.39 25 1/2 19 5/8 0.22
1999
First Quarter......... $31 9/16 $25 1/16 $0.39 $22 1/16 $18 3/4 $0.22
Second Quarter........ 28 1/8 25 1/16 0.39 28 3/16 20 1/8 0.22
Third Quarter (through
September 8, 1999)... 26 24 1/16 0.39 29 5/8 27 3/4 0.225
</TABLE>
In the table below, we provide you with the closing prices of Wisconsin
Energy common stock and WICOR common stock on June 25, 1999, the last trading
day prior to the execution and public announcement of the merger agreement, and
on September 8, 1999, the most recent practicable trading day prior to the date
of this joint proxy statement/prospectus. The table also shows the equivalent
pro forma prices of WICOR common stock on those dates. The equivalent pro forma
prices were determined by multiplying the applicable closing price of Wisconsin
Energy common stock by the exchange ratio that would apply if the average price
10
<PAGE>
of Wisconsin Energy common stock during the valuation period is the same as the
applicable closing price. Because of the "fixed price" nature of the merger
consideration, the WICOR equivalent pro forma price is always $31.50 if the
merger occurs on or before July 1, 2000.
<TABLE>
<CAPTION>
Wisconsin Energy WICOR
Common Common WICOR
Stock Stock Equivalent
---------------- -------- ----------
<S> <C> <C> <C>
June 25, 1999........................ $27.0625 $26.5625 $31.50
September 8, 1999.................... $24.1250 $29.3125 $31.50
</TABLE>
The merger agreement permits Wisconsin Energy and WICOR to pay regular
quarterly cash dividends to their shareholders prior to the closing. We have
agreed to coordinate declaring dividends and the related record dates and
payment dates so that WICOR shareholders do not receive two dividends, or fail
to receive one dividend, for any single calendar quarter with respect to their
WICOR shares and the Wisconsin Energy shares they may receive in the merger.
Wisconsin Energy Selected Consolidated Financial Data
The table below provides selected historical consolidated financial data of
Wisconsin Energy, prepared from its consolidated financial statements as of the
dates and for each of the periods indicated in the table. This information
should be considered along with the audited historical consolidated financial
statements and accompanying notes included in Wisconsin Energy's Annual Report
on Form 10-K for the year ended December 31, 1998, and its Quarterly Report on
Form 10-Q for the quarter ended June 30, 1999. You can obtain these reports by
following the instructions under "Where You Can Find More Information" on page
93 of this joint proxy statement/prospectus. Effective with its June 30, 1999,
financial statements, Wisconsin Energy has adopted a new income statement
presentation. The primary change is the reclassification of the financial
results of the non-utility operating entities from the "other income and
deductions"section to the appropriate line items in operating revenues and
operating expenses. Prior periods have been modified to reflect the new format.
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
--------------------- ---------------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
---------- ---------- ---------- ---------- ---------- ---------- ----------
(Unaudited) (In thousands, except per share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues...... $1,095,725 $ 991,253 $2,039,434 $1,806,929 $1,787,467 $1,776,987 $1,745,527
Net income.............. 102,414 77,902 188,132 60,716(a) 218,135 234,034 180,868(b)
Earnings per average
common share (basic and
diluted)............... 0.88 0.69 1.65 0.54 1.97 2.13 1.67
Total assets............ 5,816,577 5,113,660 5,361,757 5,037,684 4,810,838 4,560,735 4,408,259
Long-term debt and
preferred stock-
redemption required.... 1,979,368 1,725,317 1,749,024 1,532,405 1,416,067 1,367,644 1,283,686
Wisconsin Energy
obligated redeemable
preferred securities of
subsidiary trust....... 200,000 -- -- -- -- -- --
Short-term debt (c)..... 403,842 248,800 405,999 409,957 259,469 208,773 284,586
Cash dividends declared
per common share....... 0.78 0.775 1.56 1.54 1.51 1.46 1.40
Book value per common
share.................. 16.69 16.26 16.46 16.51 17.42 16.89 16.01
</TABLE>
- --------
(a) In June, 1997, Wisconsin Energy recorded a nonrecurring $30.7 million
charge to write-off deferred merger costs related to the terminated merger
agreement with Northern States Power Company. In December, 1997, Wisconsin
Energy recorded a nonrecurring $30.0 million charge to write-down equipment
purchased for the Kimberly Cogeneration Project.
(b) Includes a nonrecurring $73.9 million charge in 1994 ($45 million net of
tax or $.42 per share) related to Wisconsin Electric's Revitalization
Program.
(c) Includes current portion of long-term debt and capitalized lease
obligations.
11
<PAGE>
WICOR Selected Consolidated Financial Data
The table below provides selected historical consolidated financial data of
WICOR, prepared from its consolidated financial statements as of the dates and
for each of the periods indicated in the table. This information should be
considered along with the audited historical consolidated financial statements
and accompanying notes included in WICOR's Annual Report on Form 10-K for the
year ended December 31, 1998, and its amended Quarterly Report on Form 10-Q/A
for the quarter ended June 30, 1999. You can obtain these reports by following
the instructions under "Where You Can Find More Information" on page 93 of this
joint proxy statement/prospectus.
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended December 31,
----------------- --------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
-------- -------- --------- ---------- ---------- --------- --------
(Unaudited) (In thousands, except per share amounts) (a)
<S> <C> <C> <C> <C> <C> <C> <C>
Operating revenues...... $529,573 $523,206 $ 944,183 $1,021,041 $1,012,601 $ 860,594 $867,755
Net income.............. 34,858 30,987 45,495 49,523 46,771 39,527 33,174
Basic earnings per
average common share... 0.93 0.83 1.22 1.34 1.27 1.16 0.99
Diluted earnings per
average common share... 0.92 0.82 1.21 1.33 1.27 1.16 0.99
Total assets............ 982,855 959,357 1,015,196 1,031,332 1,057,652 1,008,514 930,708
Long-term debt.......... 204,524 149,042 188,470 149,110 169,169 174,713 161,669
Short-term debt (b)..... 19,209 69,604 111,181 162,826 118,871 113,213 116,537
Cash dividends declared
per common share....... 0.44 0.43 0.87 0.85 0.83 0.81 0.79
Book value per common
share.................. 11.30 10.85 10.80 10.47 9.96 9.42 8.57
</TABLE>
- --------
(a) Per share amounts are adjusted for a two-for-one stock split effected in
May, 1998.
(b) Includes current portion of long-term debt.
12
<PAGE>
Unaudited Selected Pro Forma Combined Condensed Financial Data
In the table below, we provide you with unaudited selected pro forma
combined condensed financial data for the combined company as if the merger had
been completed on January 1, 1998 for the income statement data and on June 30,
1999, for the balance sheet data. The information is based on adjustments to
the historical consolidated financial statements of Wisconsin Energy and WICOR
to give effect to the merger using the purchase method of accounting.
It is important that when you read this unaudited selected pro forma
combined condensed financial data, you read along with it the separate
historical financial statements and accompanying notes of Wisconsin Energy and
of WICOR, which are incorporated by reference in this joint proxy
statement/prospectus. See "Where You Can Find More Information" on page 93 of
this joint proxy statement/prospectus. It is also important that you read the
unaudited pro forma combined condensed financial information and accompanying
discussion and notes that are included in this joint proxy statement/prospectus
under "Unaudited Pro Forma Combined Condensed Financial Information" beginning
on page 85. You should not rely on the unaudited combined condensed pro forma
financial information as an indication of the results of operations or
financial position that would have been achieved if the merger had taken place
earlier or of the results of operations or financial position of the combined
company after the completion of the merger.
<TABLE>
<CAPTION>
Six Months Ended
June 30, Year Ended
--------------------- December 31,
1999 1998 1998
---------- ---------- ------------
(In thousands, except per share
data)
<S> <C> <C> <C>
Income Statement Data (a)
Operating revenues.................. $1,625,298 $1,514,459 $2,983,616
Net income.......................... 111,491 83,108 182,066
Earnings per average common share
(basic and diluted) (b)............ 0.82 0.62 1.35
Cash dividends declared per common
share.............................. 0.78 0.78 1.56
</TABLE>
<TABLE>
<CAPTION>
June 30, 1999
---------------
(In thousands,
except
per share data)
<S> <C>
Balance Sheet Data (a)
Total assets............................................. $7,663,385
Long-term debt and preferred stock--redemption required
(c)..................................................... 2,905,954
Wisconsin Energy obligated redeemable preferred
securities of subsidiary trust.......................... 200,000
Short-term debt (d)...................................... 423,051
Book value per common share (e).......................... 17.88
</TABLE>
- --------
(a) Purchase price is assumed to be financed with 40% stock and 60% debt.
(b) Assuming the purchase price is paid with 100% cash or 40% cash and 60%
stock, pro forma earnings per share for the year ended December 31, 1998,
would approximate $1.42 and $1.33 per share, respectively. Assuming the
purchase price is paid with 100% cash or 40% cash and 60% stock, pro forma
earnings per share for the six months ended June 30, 1999, would
approximate $0.87 and $0.79 per share, respectively, and for the six months
ended June 30, 1998, $0.64 and $0.61 per share, respectively.
(c) Assuming the purchase price is paid with 100% cash or 40% cash and 60%
stock, pro forma long-term debt and preferred stock-redemption required
would approximate $3,415,915 and $2,650,973, respectively.
(d) Includes current portion of long-term debt and capitalized lease
obligations.
(e) Assuming the purchase price is paid with 100% cash or 40% cash and 60%
stock, pro forma book value per common share would approximate $16.69 and
$18.38, respectively.
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Comparative Per Share Data
In the table below, we provide you with historical per share information for
Wisconsin Energy and WICOR as of June 30, 1999, for the six-month periods ended
June 30, 1999 and 1998, and for the year ended December 31, 1998. We also
provide you with unaudited pro forma per share information for the combined
company and unaudited pro forma equivalent per share information for WICOR,
which we calculated by multiplying the combined company pro forma amounts by an
assumed exchange ratio of 1.2569 Wisconsin Energy shares per WICOR share, which
is $31.50 divided by $25.0625, the closing price of Wisconsin Energy common
stock on the New York Stock Exchange on June 30, 1999. The actual exchange
ratio will depend upon the average of the closing prices of Wisconsin Energy
common stock on the New York Stock Exchange during a valuation period
consisting of the 10 trading days ending with the fifth trading day prior to
the merger. The merger consideration will consist of between 40% and 60%
Wisconsin Energy common stock, with the remainder paid in cash, but could
consist of 100% cash if Wisconsin Energy's average share price during the
valuation period before the merger is less than $22.00 per share and Wisconsin
Energy elects to pay all cash. For purposes of the pro forma and pro forma
equivalent data shown in the table below, we have assumed that the merger
consideration will consist of 40% stock and 60% cash. See "Unaudited Pro Forma
Combined Condensed Financial Information."
It is important that when you read this information, you read along with it
the financial statements and accompanying notes of Wisconsin Energy and WICOR
included in the documents that are described on page 93 of this joint proxy
statement/prospectus under "Where You Can Find More Information" and are
incorporated herein by reference. You should not rely on the unaudited pro
forma financial information as an indication of the results of operations or
financial position that would have been achieved if the merger had taken place
earlier or of the results of operations or financial position of the combined
company after the merger is completed.
<TABLE>
<CAPTION>
Pro Forma WICOR
Wisconsin Combined Pro Forma
Energy WICOR Company Equivalent
--------- ------ --------- ----------
<S> <C> <C> <C> <C>
Book value per common share:
June 30, 1999................... $16.69 $11.30 $17.88 $22.47
December 31, 1998............... 16.46 10.80 17.70 22.25
Basic earnings per common share:
Six months ended June 30, 1999.. 0.88 0.93 0.82 1.03
Six months ended June 30, 1998.. 0.69 0.83 0.62 0.78
Year ended December 31, 1998.... 1.65 1.22 1.35 1.70
Diluted earnings per common share:
Six months ended June 30, 1999.. 0.88 0.92 0.82 1.03
Six months ended June 30, 1998.. 0.69 0.82 0.62 0.78
Year ended December 31, 1998.... 1.65 1.21 1.35 1.70
Dividends declared per common
share:
Six months ended June 30, 1999.. 0.78 0.44 0.78 0.98
Six months ended June 30, 1998.. 0.78 0.43 0.78 0.98
Year ended December 31, 1998.... 1.56 0.87 1.56 1.96
</TABLE>
Recent Developments
On July 2, 1999, an action was filed by a shareholder of WICOR in the
Circuit Court of Milwaukee County, Wisconsin against WICOR, all of the members
of its board of directors, and Wisconsin Energy. The complaint alleges that the
consideration to be received by WICOR shareholders in the proposed merger is
inadequate and unfair to WICOR shareholders. The complaint also alleges that
Wisconsin Energy aided, abetted and assisted in the alleged breaches of the
fiduciary duties of the individual defendants. The complaint seeks
certification as a class action on behalf of all WICOR shareholders, an
injunction against proceeding with the merger, an auction or open bidding
process for the sale of WICOR, and unspecified damages.
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<PAGE>
On September 9, 1999, a stipulation of settlement was entered into with
respect to the shareholder action. The stipulation is subject to final approval
by the court, but is otherwise binding upon the parties to the action. The
stipulation provides that:
. WICOR will amend its rights agreement to increase the triggering
percentages with respect to the rights agreement described under the
caption "Comparison of Shareholder Rights--Shareholder Rights Plans"on
page 84 from 15% to 20%. WICOR has done this.
. WICOR and Wisconsin Energy will amend the merger agreement to remove the
provision regarding resisting certain types of acquisition proposals for
WICOR described in the fourth paragraph under the caption "The Merger and
the Merger Agreement--No Solicitation; Special Fee" on pages 56-58. We
have done this.
. WICOR and Wisconsin Energy will amend the merger agreement to reduce the
amount of the special fee described in the seventh paragraph under the
caption "The Merger and the Merger Agreement--No Solicitation; Special
Fee" from $30,000,000 to $25,000,000. We have done this also.
. The parties agree to use their best efforts to obtain court certification
of a shareholder class for settlement purposes, from which members of the
class cannot opt-out following an opportunity for class members to
address the court regarding the settlement, and which will include all
persons who were shareholders of WICOR from June 27, 1999, through the
effective date of the merger.
. The parties agree to use their best efforts to obtain the dismissal with
prejudice of all claims asserted in the action or which could have been
asserted in the action.
. WICOR and Wisconsin Energy agree not to oppose a petition of plaintiffs'
counsel requesting the award of $430,000 of attorneys' fees and expenses
to be paid by WICOR and Wisconsin Energy upon the consummation of the
settlement.
. The consummation of the settlement is subject to, and the related
amendments to the merger agreement described above are conditioned upon,
final court approval and the consummation of the merger.
Although we believe that final court approval of the settlement will be
received, the court retains discretion to not grant approval or to require
modifications to the proposed settlement. In the event court approval is not
obtained, WICOR and Wisconsin Energy would intend to pursue a vigorous defense
against the action. If the court requires modifications to the settlement,
WICOR and Wisconsin Energy would evaluate the merits of the modifications in
determining whether to accept the modified settlement. Under the terms of the
merger agreement, we could in some circumstances agree to a modified settlement
without seeking additional shareholder approval.
15
<PAGE>
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This joint proxy statement/prospectus and other material to which we refer
or incorporate by reference contain forward-looking statements made by or on
behalf of Wisconsin Energy or WICOR. These are statements of opinion, intention
or belief about future events or conditions, rather than historical facts. The
forward-looking statements are based upon management's current expectations and
are subject to risks and uncertainties that could cause the actual results of
Wisconsin Energy or WICOR to differ materially from those contemplated in the
statements. You should not place undue reliance on the forward-looking
statements. The terms "anticipate," "believe," "estimate," "expect,"
"objective," "plan," "possible," "potential," "project" and similar expressions
are intended to identify forward-looking statements. In addition to the
assumptions and other factors we mention specifically in connection with the
forward-looking statements, factors that could cause Wisconsin Energy's or
WICOR's actual results to differ materially from those contemplated in any
forward-looking statements include, among others, the following:
. Unanticipated costs or difficulties related to the integration of the
businesses of WICOR and Wisconsin Energy, or unexpected difficulties or
delays in realizing anticipated net cost savings or receiving regulatory
authorization to retain the benefit of those savings for the shareholders
of the combined company.
. Regulatory delays or conditions imposed by regulatory bodies in approving
the merger, or adverse regulatory treatment of the merger.
. Legislative or regulatory restrictions or caps on non-utility
acquisitions, investments or projects, including Wisconsin's public
utility holding company law, which could limit Wisconsin Energy's or
WICOR's diversification and growth opportunities after the merger or
require Wisconsin Energy or WICOR to divest of certain existing non-
utility assets.
. Risks associated with non-utility diversification such as: competition;
operating risks; dependence upon certain suppliers and customers; the
cyclical nature of property values that could affect real estate
investments; unanticipated changes in environmental or energy
regulations; risks associated with international investments, including
foreign currency valuations; risks associated with minority investments,
where there is a limited ability to control the development, management
or operation of the project; and the risk of higher interest costs
associated with potentially reduced securities ratings by independent
rating agencies as a result of these and other factors.
. Factors affecting foreign non-utility operations including foreign
governmental actions; foreign economic and currency risks; political
instability; and unanticipated changes in foreign environmental or energy
regulations.
. Factors affecting utility operations such as unusual weather conditions;
catastrophic weather-related damages; availability of electric generating
facilities; unscheduled generation outages, maintenance and repairs;
unanticipated changes in fossil fuel, nuclear fuel, purchased power, gas
supply or water supply costs or availability due to higher demand,
shortages, transportation problems or other developments; nonperformance
by electric energy or natural gas suppliers under existing power purchase
or gas supply contracts; nuclear or environmental incidents; resolution
of spent nuclear fuel storage and disposal issues; electric transmission
or gas pipeline system constraints; unanticipated organizational
structure or key personnel changes; collective bargaining agreements with
union employees or work stoppages; inflation rates; or demographic and
economic factors affecting utility service territories or operating
environment.
. Regulatory factors such as unanticipated changes in rate-setting policies
or procedures; unanticipated changes in regulatory accounting policies
and practices; industry restructuring initiatives; transmission system
operation and/or administration initiatives; recovery of costs of
previous investments made under traditional regulation; required
approvals for new construction; changes in the United States Nuclear
Regulatory Commission's regulations related to Wisconsin Energy's Point
Beach Nuclear Plant; changes in the United States Environmental
Protection Agency's as well as the Wisconsin or Michigan Department of
Natural Resources' regulations related to emissions from fossil-fuel-
fired power plants; or the siting approval process for new generation and
transmission facilities.
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<PAGE>
. The rapidly changing and increasingly competitive electric and gas
utility environment as market-based forces replace strict industry
regulation and other competitors enter the electric and gas markets
resulting in increased wholesale and retail competition.
. Consolidation of the industry as a result of the combination and
acquisition of utilities in the Midwest, nationally and globally.
. Restrictions imposed by various financing arrangements and regulatory
requirements on the ability of the utility and other subsidiaries to
transfer funds to their parent companies in the form of cash dividends,
loans or advances.
. Changes in social attitudes regarding the utility and power industries.
. Customer business conditions including demand for their products and
services and supply of labor and material used in creating their products
and services.
. The cost and other effects of legal and administrative proceedings,
settlements, and investigations, claims and changes in those matters.
. Factors affecting the availability or cost of capital such as changes in
interest rates; market perceptions of the utility industry, Wisconsin
Electric, WICOR or any of their subsidiaries; or security ratings.
. Federal, state or local legislative factors such as changes in tax laws
or rates; changes in trade, monetary and fiscal policies, laws and
regulations; electric and gas industry restructuring initiatives; or
changes in environmental laws and regulations.
. Authoritative generally accepted accounting principle or policy changes
from such standard setting bodies as the Financial Accounting Standards
Board and the SEC.
. Unanticipated technological developments that result in competitive
disadvantages and create the potential for impairment of existing assets.
. Unanticipated developments while implementing the modifications necessary
to mitigate Year 2000 compliance problems, including the availability and
cost of personnel trained in this area, the ability to locate and correct
all relevant computer codes in computer and embedded systems, the
indirect impacts of third parties with whom the Wisconsin Energy
Companies or WICOR Companies do business and who do not mitigate their
Year 2000 compliance problems, and similar uncertainties.
. Other business or investment considerations that may be disclosed from
time to time in filings with the SEC or in other publicly disseminated
written documents.
We undertake no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events, or
otherwise.
17
<PAGE>
RISK FACTORS
In addition to the other information we have included and incorporated by
reference in this joint proxy statement/prospectus, you should carefully read
and consider the following factors in evaluating the proposals to be voted on
at your company's special shareholders' meeting:
Transaction Risks
We may not be able to complete the merger because we may not be able to obtain
required regulatory approvals on satisfactory terms.
Before we can complete the merger, we must obtain final approvals from the
Public Service Commission of Wisconsin under Wisconsin law and from the SEC
under the Public Utility Holding Company Act of 1935, as well as complying with
premerger notification requirements under the antitrust laws that apply to
business combinations generally. Obtaining these regulatory approvals could
delay the merger for a significant period of time after the Wisconsin Energy
and WICOR shareholders have approved the merger and related transactions at the
special meetings. If the approvals are delayed past January 1, 2001, either
company can terminate the merger agreement. We cannot assure you that we will
obtain these and other regulatory approvals, or if we obtain them, whether the
terms and conditions of the approvals will be satisfactory. We also cannot give
any assurance on whether intervenors, if any, will appeal final orders
approving the merger to appropriate courts, which can further delay the merger.
Historically, WICOR has been subject to different, generally more favorable
restrictions under the Wisconsin public utility holding company law than those
applicable to Wisconsin Energy. We are not sure whether or how the merger may
affect those restrictions. Likewise, we cannot be sure whether the proposed
legislation to modify restrictions under the Wisconsin Holding Company Act
(discussed at pages 67-68) will be enacted. Without favorable regulatory
treatment or legislation, the combined company might be required to divest some
assets or might be more limited in acquiring additional non-utility assets in
the future.
We are required to take all reasonable actions necessary to obtain any
required consent, authorization, order, approval or exemption of any
governmental entity in connection with the merger and related transactions.
However, Wisconsin Energy is not required to complete the merger if the
regulators impose conditions which, in its reasonable judgment, are materially
adverse in any manner to either company or their subsidiaries. See "The Merger
and the Merger Agreement--Conditions to the Merger" on page 55 and "--
Regulatory Requirements and Approvals" on page 66.
The merger will not result in increased earnings per share if we are unable to
timely realize the estimated cost savings we expect to achieve, or if the
regulatory treatment of the merger does not permit Wisconsin Energy to retain
the benefit of the savings.
We expect the merger to result in increased earnings per share for Wisconsin
Energy beginning in the first full year following the merger, based on
anticipated results of future operations and on the assumptions used in our pro
forma financial information (see page 85), and assuming timely realization of
the estimated cost savings and avoidances expected to result from the merger
and favorable regulatory treatment. Although no definitive study has been done,
we estimate that we can achieve merger-related cost savings and avoidances in
respect to our combined gas operations of approximately $35 million annually
beginning in the first full year after the merger. In its application for
approval of the merger, Wisconsin Energy has requested the Public Service
Commission of Wisconsin to permit Wisconsin Energy to retain the anticipated
net cost savings that result from the merger to the extent necessary to recover
the acquisition premium paid for and attributable to WICOR's utility assets, in
accordance with established precedent. The merger will not increase Wisconsin
Energy's earnings per share if the expected savings are not timely realized and
permitted to be retained by Wisconsin Energy.
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<PAGE>
For further information, see "The Merger and the Merger Agreement--Wisconsin
Energy's Reasons for the Merger; Recommendation of the Wisconsin Energy Board"
on page 29 and "--Regulatory Requirements and Approvals" on page 66.
WICOR shareholders that exercise their election rights will be unable to sell
their stock in the market pending the merger.
In exchange for their WICOR common stock, WICOR shareholders will have the
opportunity to elect to receive cash, shares of Wisconsin Energy common stock,
or a combination of cash and shares. The election must be made during a period
beginning 45 calendar days prior to the anticipated date of the merger and
ending on the third business day before the merger. All elections will be
irrevocable. See "The Merger and the Merger Agreement--Elections to Receive
Cash or Stock; Conversion of Shares in the Merger" on page 61.
During the time between when the election is made and the merger is
completed, WICOR shareholders will be unable to sell their WICOR stock. If the
merger is unexpectedly delayed for any reason, this period could extend for a
significant period of time.
WICOR shareholders can reduce the period during which they cannot sell their
shares by delivering their election just before the close of the election
period; however, elections received after the close of the election period will
not be accepted or honored.
Operational Risks
We cannot assure you that the operations of the two companies will be
successfully coordinated.
After the merger we will need to coordinate the operations of two large,
diverse companies and their subsidiaries, combining some businesses while
keeping others separate. Coordinating the operations will involve a number of
risks, including:
. difficulties in combining operations and systems, including combining or
coordinating gas utility operations;
. difficulties in retaining employees, customers and suppliers;
. potentially adverse short-term effects on operating results;
. potential diversion of management's attention away from ongoing
operations; and
. the possibility that we will not achieve anticipated cost savings, or
that any savings are offset by utility rate reductions and so do not
benefit the shareholders.
The nonregulated businesses of both companies are riskier than traditional
utilities businesses.
We expect the combined company's nonregulated businesses will contribute a
greater proportion of the combined company's earnings than Wisconsin Energy's
nonregulated businesses currently contribute to its earnings. Nonregulated
businesses generally operate with a higher level of risk than regulated utility
businesses. As a result, the operating results of these businesses may exhibit
more variability than our regulated utility businesses. This variability may
also adversely affect our securities ratings and so increase our borrowing
costs.
An investment in Wisconsin Energy, unlike WICOR, is subject to risks arising
from electric generation.
WICOR shareholders, who may receive Wisconsin Energy common stock in the
merger, should carefully consider the fact that Wisconsin Energy operates
electric generating facilities, including fossil and nuclear fueled operations.
Some of the risks associated with the operation and cost of operation of
electric generating facilities differ from those relating to WICOR's utility
and non-utility businesses, including risks relating to regulatory action,
unscheduled outages, and changing environmental requirements.
19
<PAGE>
THE SPECIAL MEETINGS
This joint proxy statement/prospectus is being furnished to the holders of
Wisconsin Energy and WICOR common stock, for the solicitation of proxies for
use at the special meetings that will be held by each company.
Wisconsin Energy Special Meeting
Date and Location. The special meeting of shareholders of Wisconsin Energy
will be held at 4.00 p.m. on Wednesday, October 27, 1999, at the Midwest
Express Center located at 400 West Wisconsin Avenue, Milwaukee, Wisconsin.
Purpose. At the Wisconsin Energy special meeting, the shareholders of
Wisconsin Energy will consider and vote on a proposal to approve the merger
agreement and the issuance of additional shares of Wisconsin Energy common
stock as provided in the merger agreement.
The Wisconsin Energy board has determined that the merger and the issuance
of shares of common stock as contemplated by the merger agreement are in the
best interests of Wisconsin Energy and its shareholders and has approved the
merger agreement. The Wisconsin Energy board recommends that the shareholders
of Wisconsin Energy vote in favor of the merger agreement and the issuance of
its shares in the merger. See "The Merger and the Merger Agreement--Wisconsin
Energy's Reasons for the Merger; Recommendation of the Wisconsin Energy Board."
The Wisconsin Energy board is not aware, as of the date of mailing of this
joint proxy statement/prospectus, of any other matters which may properly come
before the Wisconsin Energy special meeting. Wisconsin law provides that only
business within the purposes described in the notice of the Wisconsin Energy
special meeting may be conducted at the Wisconsin Energy special meeting. If
any other matters properly come before the Wisconsin Energy special meeting, or
any adjournment or postponement of the meeting, the persons named in the proxy
intend to vote the proxies in accordance with their best judgment.
Under the merger agreement, completion of the merger is conditioned upon
approval by the shareholders of Wisconsin Energy of the issuance of shares of
Wisconsin Energy common stock pursuant to the merger agreement. The approval of
Wisconsin Energy shareholders is required under the NYSE's shareholder approval
policy because the number of shares of Wisconsin Energy common stock to be
issued pursuant to the merger agreement may exceed 20% of the number of shares
outstanding before the merger.
Record Date; Voting Rights. Only holders of record of Wisconsin Energy
common stock at the close of business on the Wisconsin Energy record date,
September 9, 1999, are entitled to receive notice of and to vote at the
Wisconsin Energy special meeting. At the close of business on the Wisconsin
Energy record date, there were 117,589,619 shares of Wisconsin Energy common
stock outstanding and entitled to vote. Each share entitles the registered
holder to one vote.
Quorum. A majority of the votes entitled to be cast by the shares entitled
to vote must be represented in person or by proxy at the Wisconsin Energy
special meeting in order for a quorum to be present. Shares of Wisconsin Energy
common stock represented by proxies that are marked "abstain" will be counted
as shares present for purposes of determining the presence of a quorum. In the
event that a quorum is not present at the Wisconsin Energy special meeting, it
is expected that the meeting will be adjourned or postponed to solicit
additional proxies.
Proxies. All shares of Wisconsin Energy common stock represented by properly
executed proxies that are received in time for the Wisconsin Energy special
meeting and have not been revoked will be voted in accordance with the
instructions indicated in the proxies. If no instructions are indicated, the
shares will be voted in favor of the issuance of shares of Wisconsin Energy
common stock as contemplated by the merger agreement. In addition, the persons
designated in the proxy will have discretion to vote on matters incident to
20
<PAGE>
the conduct of the Wisconsin Energy special meeting. If Wisconsin Energy
proposes to adjourn the Wisconsin Energy special meeting, the persons named in
the enclosed proxy card will vote all shares for which they have voting
authority (other than those that have been voted against the issuance of shares
of Wisconsin Energy common stock as contemplated by the merger agreement) in
favor of adjournment.
Any proxy in the enclosed form may be revoked by the shareholder executing
it at any time prior to its exercise by giving written notice to the corporate
secretary of Wisconsin Energy, by signing and returning a later-dated proxy or
by voting in person at the Wisconsin Energy special meeting. However, mere
attendance at the Wisconsin Energy special meeting will not in and of itself
have the effect of revoking the proxy.
If you are a participant in Wisconsin Energy's Stock Plus Investment Plan
("Stock Plus") or own shares through investments in the Wisconsin Energy common
stock fund of Wisconsin Electric's Employee Retirement Savings Plan (the
"401(k) plan"), your proxy will serve as voting instructions for your shares in
those plans. The administrator for Stock Plus and the trustee for the 401(k)
plan will vote shares as you direct. If a proxy is not returned for shares held
in Stock Plus, the administrator will not vote those shares. If a proxy is not
returned for shares held in the 401(k) plan, the trustee will vote those shares
in the same proportion that all shares in the plan fund for which voting
instructions have been received are voted.
Proxies will be received by Wisconsin Energy's agent, EquiServe. EquiServe
has been appointed inspector of election for the Wisconsin Energy special
meeting and any adjournment or postponement thereof, and will conduct and
tabulate the results of the voting at such meeting.
If the Wisconsin Energy special meeting is postponed or adjourned for any
reason, at any subsequent reconvening of the Wisconsin Energy special meeting
all proxies will be voted in the same manner as they would have been voted at
the initial convening of the Wisconsin Energy special meeting, except for any
proxies that have been revoked or withdrawn, notwithstanding that they may have
been effectively voted on the same or any other matter at a previous meeting.
Solicitation of Proxies. Proxies are being solicited on behalf of the
Wisconsin Energy board. Pursuant to the merger agreement, the entire cost of
proxy solicitation for the Wisconsin Energy special meeting will be borne by
Wisconsin Energy, except that Wisconsin Energy and WICOR will share equally all
printing expenses and filing fees related to this joint proxy
statement/prospectus. In addition to solicitation by mail, officers and regular
employees of Wisconsin Energy may solicit proxies personally or by telephone,
facsimile transmission or otherwise. The officers and regular employees will
not be additionally compensated for soliciting proxies, but may be reimbursed
for their out-of-pocket expenses. If undertaken, the expense of any
solicitation would be nominal. Wisconsin Energy has retained Morrow & Co.,
Inc., at an estimated cost of approximately $8,500, plus reimbursement of out-
of-pocket expenses, to assist in its solicitation of proxies. Arrangements will
be made with custodians, nominees and fiduciaries for the forwarding of proxy
solicitation materials to beneficial owners of shares of Wisconsin Energy
common stock held of record by the custodians, nominees and fiduciaries, and
Wisconsin Energy will reimburse the custodians, nominees and fiduciaries for
their reasonable out-of-pocket expenses.
Required Vote. Approval of the issuance of shares of Wisconsin Energy common
stock pursuant to the merger agreement will require the affirmative vote of a
majority of the votes cast, provided that the total number of votes cast on the
proposal represents more than 50% of the outstanding shares of Wisconsin Energy
common stock entitled to vote at the Wisconsin Energy special meeting.
Abstentions will have no effect on the vote so long as enough votes are cast
for or against the proposal to satisfy the 50% requirement mentioned above.
Brokers who hold shares of Wisconsin Energy common stock as nominees will not
have discretionary authority to vote the shares on the proposal in the absence
of instructions from the beneficial owners of the shares. Any votes that are
not cast because the nominee-broker lacks such discretionary authority will not
be counted as votes cast on such proposal and will have no effect on the vote.
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<PAGE>
Share Ownership of Management. At the close of business on the Wisconsin
Energy record date, directors and executive officers of Wisconsin Energy and
their affiliates were the beneficial owners of an aggregate of approximately
0.1% of the shares of Wisconsin Energy common stock then outstanding and
eligible to vote. All of the directors and executive officers of Wisconsin
Energy have indicated their intention to vote their shares for approval of the
issuance of shares of Wisconsin Energy common stock as contemplated by the
merger agreement.
WICOR Special Meeting
Date and Location. The special meeting of shareholders of WICOR will be held
at 1:30 p.m. on Wednesday, October 27, 1999, at the Midwest Express Center
located at 400 West Wisconsin Avenue, Milwaukee, Wisconsin.
Purpose. At the WICOR special meeting, the shareholders of WICOR will
consider and vote on a proposal to approve and adopt the merger agreement.
The WICOR board has determined that the merger is in the best interests of
WICOR and its shareholders and has approved the merger agreement. The WICOR
board recommends that the shareholders of WICOR vote in favor of approval and
adoption of the merger agreement at the WICOR special meeting. See "The Merger
and the Merger Agreement--WICOR's Reasons for the Merger; Recommendation of the
WICOR Board." For a discussion of the interests that certain directors and
executive officers of WICOR have with respect to the merger, in addition to
their interests as shareholders of WICOR generally, see "The Merger and the
Merger Agreement--Interests of Certain Persons in the Merger" and "--Assumption
and Conversion of WICOR Stock Options and Stock-Based Awards." Those interests,
together with other relevant factors, were considered by the WICOR board in
making its recommendation and approving the merger agreement.
The WICOR board is not aware, as of the date of mailing of this joint proxy
statement/prospectus, of any other matters which may properly come before the
WICOR special meeting. Wisconsin law provides that only business within the
purposes described in the notice of the WICOR special meeting may be conducted
at the WICOR special meeting. If any other matters properly come before the
WICOR special meeting, or any adjournment or postponement of the special
meeting, the persons named in the proxy intend to vote the proxies in
accordance with their best judgment.
Approval of the merger agreement by the shareholders of WICOR is a condition
to completion of the merger.
Record Date; Voting Rights. Only holders of record of WICOR common stock at
the close of business on the WICOR record date, September 9, 1999, are entitled
to receive notice of and to vote at the WICOR special meeting. At the close of
business on the WICOR record date, there were 37,602,800 shares of WICOR common
stock outstanding and entitled to vote. Each share entitles the registered
holder thereof to one vote.
Quorum. A majority of the outstanding shares of WICOR common stock entitled
to vote must be represented in person or by proxy at the WICOR special meeting
in order to constitute a quorum for the transaction of business. Shares of
WICOR common stock represented by proxies that are marked "abstain" will be
counted as shares present for purposes of determining the presence of a quorum.
In the event that a quorum is not present at the WICOR special meeting, WICOR
intends to adjourn or postpone the meeting to solicit additional proxies.
Proxies. All shares of WICOR common stock represented by properly executed
proxies that are received in time for the WICOR special meeting and have not
been revoked will be voted in accordance with the instructions indicated in the
proxies. If no instructions are indicated, the shares will be voted in favor of
the merger agreement and the transactions contemplated thereby. In addition,
the persons designated in such proxy
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<PAGE>
will have discretion to vote on any matters incident to the conduct of the
WICOR special meeting. If WICOR proposes to adjourn the WICOR special meeting,
the persons named in the enclosed proxy card will vote all shares for which
they have voting authority (other than those that have been voted against
approval of the merger agreement) in favor of the adjournment.
Any proxy in the enclosed form may be revoked by the shareholder executing
it at any time prior to its exercise by giving written notice thereof to the
corporate secretary of WICOR, by signing and returning a later-dated proxy or
by voting in person at the WICOR special meeting. However, mere attendance at
the WICOR special meeting will not in and of itself have the effect of revoking
the proxy.
If you are a participant in WICOR's Direct Stock Purchase and Dividend
Reinvestment Plan ("WICOR Plan"), your proxy will serve as voting instructions
for your shares in that plan. If you are a participant in a WICOR savings plan
and own shares through investments in the WICOR common stock fund of the WICOR
Master Savings Trust ("401(k) Trust"), you are receiving a voting authorization
card which, when completed and returned, will serve as voting instructions for
your shares in those plans. (The savings plans covered by the 401(k) Trust
include the Wisconsin Gas Company Employees Savings Plan, the Wisconsin Gas
Company Local 6-18 Savings Plan, the Wisconsin Gas Company Local 6-18-1 Savings
Plan, the Sta-Rite Industries Incentive Savings Plan, the Hypro Corporation
401(k) and Profit Sharing Plan, and the SHURflo 401(k) Profit Sharing Plan.)
The administrator for the WICOR Plan and the trustee of the 401(k) Trust will
vote the shares attributable to your account as you direct. If a proxy or
voting authorization card is not returned, the administrator or trustee will
not vote those shares.
Proxies will be received by WICOR's transfer agent, ChaseMellon Shareholder
Services LLC, and the vote will be certified by independent inspectors.
ChaseMellon Shareholder Services is an affiliate of the parent of Chase
Securities, Wisconsin Energy's financial advisor.
If the WICOR special meeting is postponed or adjourned for any reason, at
any subsequent reconvening of the WICOR special meeting, all proxies will be
voted in the same manner as they would have been voted at the initial convening
of the WICOR special meeting (except for any proxies that have been revoked or
withdrawn), notwithstanding that they may have been effectively voted on the
same or any other matter at a previous meeting.
Solicitation of Proxies. Proxies are being solicited on behalf of the WICOR
board. Pursuant to the merger agreement, the entire cost of proxy solicitation
for the WICOR special meeting will be borne by WICOR, except that WICOR and
Wisconsin Energy will share equally all printing expenses and filing fees
related to this joint proxy statement/prospectus. In addition to solicitation
by mail, directors, officers and employees of WICOR may solicit proxies
personally or by telephone, facsimile transmission or otherwise. The directors,
officers and employees will not receive additional compensation for soliciting
proxies, but they may be reimbursed for their out-of-pocket expenses incurred
in connection with doing so. If undertaken, the anticipated expense of the
solicitation would be nominal. WICOR has retained ChaseMellon Shareholder
Services, at an estimated cost of approximately $9,500, plus reimbursement of
out-of-pocket expenses, to assist in its solicitation of proxies. Arrangements
will be made with custodians, nominees and fiduciaries for the forwarding of
proxy solicitation materials to beneficial owners of shares of WICOR common
stock held of record by the custodians, nominees and fiduciaries, and WICOR
will reimburse the custodians, nominees and fiduciaries for their reasonable
out-of-pocket expenses incurred in connection with doing so.
Holders of WICOR common stock should not return to WICOR any stock
certificates with their proxy cards. Approximately 45 days before the
anticipated effective date of the merger, shareholders will receive
instructions and a form of letter of transmittal and election for submitting
their stock certificates and indicating whether they would like to receive
their portion of the merger consideration in the form of cash, Wisconsin Energy
common stock, or a combination of cash and Wisconsin Energy stock.
Required Vote. Approval and adoption of the merger agreement will require
the affirmative vote of holders of a majority of the outstanding shares of
WICOR common stock entitled to vote thereon at the WICOR special meeting.
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An abstention will have the effect of a vote cast against the merger
agreement. Brokers who hold shares of WICOR common stock as nominees will not
have discretionary authority to vote such shares in the absence of instructions
from the beneficial owners of the shares. Broker non-votes will have the same
effect as votes cast against the merger agreement.
Share Ownership of Management. At the close of business on the WICOR record
date, directors and executive officers of WICOR and their affiliates were the
beneficial owners of an aggregate of approximately 1.2% of the shares of WICOR
common stock then outstanding and eligible to vote. All of the directors and
executive officers of WICOR have indicated their intention to vote their shares
for approval of the merger agreement.
Absence of Dissenters' Rights of Appraisal
Under Wisconsin law, the shareholders of Wisconsin Energy are not entitled
to dissenters' rights with respect to the issuance of shares of Wisconsin
Energy common stock as contemplated by the merger agreement. Similarly, the
shareholders of WICOR are not entitled to dissenters' rights with respect to
the merger.
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THE MERGER AND THE MERGER AGREEMENT
The discussion of the merger and the merger agreement contained in this
joint proxy statement/prospectus includes the material terms of the merger
agreement, but, because it is a summary, it may not contain all of the
information that is important to you. You should refer to the merger agreement
itself, a copy of which is attached as Appendix A to this joint proxy
statement/prospectus, for the complete terms of the merger.
General
Subject to the terms and conditions of the merger agreement, each share of
WICOR common stock outstanding immediately prior to the effective time of the
merger will be converted into and become the right to receive cash or Wisconsin
Energy common stock, or a combination of cash and Wisconsin Energy common
stock, as described below. Each share of Wisconsin Energy common stock
outstanding immediately prior to the effective time of the merger will continue
to be outstanding and will not be affected by the merger, but the shares will
then represent interests in the combined company.
The amount of merger consideration to be received for each share of WICOR
common stock will be:
. $31.50 per share of WICOR common stock, if the merger occurs on or
before July 1, 2000, or
. $31.50 per share of WICOR common stock, plus an additional daily amount
computed at the rate of approximately 6% simple interest per annum for
every day after July 1, 2000, until the merger occurs, if the merger
occurs after July 1, 2000.
Whenever Wisconsin Energy common stock is used to pay all or any part of the
merger consideration, it will be valued at the average closing price of
Wisconsin Energy common stock as reported on the NYSE Composite Tape on each of
the 10 consecutive trading days ending with the fifth trading day immediately
preceding the closing date of the merger.
Several factors will determine whether a WICOR shareholder will receive
cash, Wisconsin Energy common stock, or a combination of cash and Wisconsin
Energy common stock in the merger. If the average closing price of Wisconsin
Energy common stock mentioned above is less than $22.00, then Wisconsin Energy
may elect to pay the merger consideration entirely in cash. Otherwise,
Wisconsin Energy has discretion to select a portion of the aggregate merger
consideration between and including 40% and 60% to be paid in the form of
Wisconsin Energy common stock (excluding fractional share interests to be paid
in cash), with the remainder paid in cash. Wisconsin Energy must make this
election at least three business days prior to the closing date of the merger.
Beginning approximately 45 days before the anticipated closing date of the
merger, and ending on the third business day prior to the effective time of the
merger, WICOR shareholders will have an opportunity to elect to receive cash,
stock, or a combination of cash and stock in exchange for their shares of WICOR
stock, subject to proration if necessary to cause the aggregate merger
consideration to be paid in the proportions selected by Wisconsin Energy as
described above. See "--Elections to Receive Cash or Stock; Conversion of
Shares in the Merger."
Background of the Merger
Overview. We both believe that a combination of market forces, regulatory
and legislative initiatives and technological changes has caused the utility
industry to experience rapid change in recent years, and that these changes
will continue for the foreseeable future. A number of gas and electric industry
restructuring initiatives are being considered or implemented by regulatory
agencies with jurisdiction over our utility subsidiaries.
These changes in the energy utility industry are bringing increased
competition to various sectors of the business and are putting pressure on
utilities to lower their costs. We believe that utilities that achieve
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significant size and scope of operations, efficient, reliable and low cost
sources of energy supply and a diverse customer base will be best positioned to
compete in an increasingly deregulated and competitive energy market.
We recognized that a combination with another financially strong utility
would enable the combined entity to deliver energy more economically and
efficiently and thereby remain a premier supplier of energy within its markets
in an increasingly deregulated industry. Each company also recognized that
combining with an entity with significant non-utility operations and expertise
offered additional benefits of diversification and experience in operating in a
non-regulated environment.
Over the past three years, Wisconsin Energy has aggressively searched for
compatible acquisition transactions. Wisconsin Energy's strategy is to become a
leading energy company in the Midwest. To achieve that goal, Wisconsin Energy
is committed to a strategy of prudent growth, internally in its utility and
non-utility operations and through business acquisitions and combinations. In
May, 1998, Wisconsin Energy acquired ESELCO, Inc., the parent company of Edison
Sault Electric Company, an electric utility operating in the Upper Peninsula of
Michigan.
As the largest electric utility and largest gas utility, respectively, in
Wisconsin, both headquartered in Milwaukee, Wisconsin Energy and WICOR have
long cooperated on civic and community issues and have had frequent
interactions on industry and regulatory issues. As a result, each company was
generally familiar with the other's utility and non-utility businesses,
experience, technical capabilities, growth objectives and vision of the future
of the regional energy market. Each was also aware of the other's commitment to
provide safe, reliable energy services to the customers and communities in
which it operates, while expanding to provide new services and add new
customers in an increasingly competitive environment.
Discussions Between Wisconsin Energy and WICOR. On July 30, 1998, Mr.
Richard Abdoo, the chairman of the board, president and chief executive officer
of Wisconsin Energy, met informally with Mr. George Wardeberg, the chairman and
chief executive officer of WICOR. Mr. Abdoo suggested the possibility of
combining the two companies in light of their common goals and visions for the
future. Mr. Wardeberg indicated that WICOR was not interested in such a
combination, explaining to Mr. Abdoo that the WICOR board of directors had a
policy that WICOR should remain independent.
In November, 1998, Mr. Abdoo again approached Mr. Wardeberg about a possible
business combination. He emphasized that, by combining, the companies could
achieve improved efficiency and profitability without layoffs of employees at
either company and that the combined company could benefit from the financial
and technical strengths and the new opportunities they could realize together.
The two chief executives talked several times to discuss the impact of any
transaction on employees, customers and communities served by both companies,
and the compatibility of the companies' respective management styles and
corporate cultures. Mr. Wardeberg agreed to discuss the matter with the WICOR
board of directors.
At a meeting on December 15, 1998, the WICOR board of directors discussed
the businesses in which WICOR was engaged, its prospects for growth, customer
demands and its strategic alternatives. The WICOR board directed its management
to consider the feasibility of a business combination with Wisconsin Energy and
to pursue exploratory discussions if the parties could negotiate an appropriate
confidentiality agreement.
On January 14, 1999, we executed a confidentiality agreement to permit the
exchange of confidential information. Mr. Abdoo and Mr. Wardeberg continued
discussions throughout the remainder of January and February about the possible
structure and terms for a business combination and the organization and
management of the resulting entity.
At a meeting on January 26, 1999, the WICOR board of directors discussed a
possible business combination with Wisconsin Energy and encouraged management
to pursue discussions with Wisconsin Energy management. Management updated the
WICOR board on the status of the discussions at its meeting on February 25,
1999.
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At a meeting on January 28, 1999, the Wisconsin Energy board of directors
discussed a possible business combination with WICOR and encouraged management
to pursue discussions with WICOR management. Management updated the Wisconsin
Energy board on the status of the discussions at its meeting on February 16,
1999.
By early March discussions had progressed sufficiently that we each
determined to retain independent financial advisors to assist in analyzing a
possible transaction. On March 8, 1999, WICOR engaged Merrill Lynch, Pierce,
Fenner & Smith Incorporated and on March 14, 1999, Wisconsin Energy engaged
Chase Securities Inc. The parties also began to exchange confidential
information to assist both parties in evaluating a possible business
combination.
Discussions in person and by telephone between our representatives continued
throughout March and April 1999. During this period, we exchanged financial
data, and our management representatives and legal and financial advisors began
business investigations of the other company. At the end of March and in April,
1999, senior management of Wisconsin Energy and WICOR met to review operations
and financial data of both companies and to consider possible operations for
the combined enterprise. Discussions continued between Messrs. Abdoo and
Wardeberg during this period on the principal terms of a possible transaction,
governance matters, regulatory approvals and timing issues.
The Wisconsin Energy board of directors received another update concerning
the status of the discussions at its regularly scheduled board meeting on April
27, 1999. After presentations by members of its senior management and its
outside consultants, the board again authorized management to continue
discussions with WICOR. Specifically, the board discussed a proposal in which
WICOR shareholders would receive a fixed price of $30 per share (plus interest
at the rate of 6% per annum if the closing occurred more than 12 months after
signing) payable, at Wisconsin Energy's option, all in cash or in a combination
of cash and stock based on the average closing price of Wisconsin Energy's
stock for the 10 trading days prior to the merger. Wisconsin Energy would have
the right to terminate the agreement if its stock price was less than $18 per
share. The proposed agreement would have included an option for Wisconsin
Energy to purchase up to 19.9% of WICOR's outstanding shares in the event of a
competing transaction and a break-up fee of $33,000,000. Mr. Wardeberg would
become a director of Wisconsin Energy, and he and three other WICOR executives
would receive employment agreements.
On May 16, 1999, the senior management of the two companies met for detailed
discussion of structure, management and employee issues arising from a business
combination of the two companies.
On May 20, 1999, the WICOR board of directors met to discuss the proposed
transaction. The board heard from its legal advisors regarding its fiduciary
duties in considering a proposed business combination and from management
regarding the industries in which WICOR operates and its opportunities for
growth and strategic alternatives. Merrill Lynch representatives also described
the recent merger environment for natural gas distribution utilities in
particular, and utilities and other companies generally, and their views as to
the fairness of Wisconsin Energy's recent offer to WICOR's shareholders from a
financial point of view. The board indicated that it was willing to consider a
business combination with Wisconsin Energy, but only in a transaction valued at
not less than $31.50 per share of WICOR common stock. Following the meeting,
the parties continued to exchange information and proposals concerning the
structure and financial terms of a possible transaction.
Management updated the WICOR board on the status of the discussions at its
meeting on June 1, 1999. The board considered whether a business combination at
a price of less than $31.50 per share of WICOR common stock was appropriate,
but decided that a transaction at a lower price was not advisable.
At Wisconsin Energy's board of directors meeting on June 2, 1999, Mr. Abdoo
reported on the status of discussions regarding the proposed transaction with
WICOR. He advised that WICOR's current position was a fixed price of $31.50 per
share. He also reported that the parties had not yet reached an understanding
on a break-up fee, board positions and employment agreements. The Wisconsin
Energy board concluded that a fixed
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price of $31.50 per share of WICOR common stock might be acceptable, provided
that the other outstanding issues could be satisfactorily resolved. The board
directed management to continue the discussions.
On June 3, 1999, Wisconsin Energy provided to WICOR a proposed merger
agreement. The senior financial staff of both companies met on June 15 and 17
to discuss the due diligence process and WICOR's domestic and international
operations. Legal counsel and management for Wisconsin Energy and WICOR also
met on several occasions during June to negotiate the terms of the proposed
merger agreement.
A special meeting of the Wisconsin Energy board of directors to consider the
proposed transaction was held on June 25, 1999. At the meeting, the terms and
conditions of the merger agreement and the proposed transaction were reviewed
in detail by Wisconsin Energy management and legal counsel. In addition, both
management and Wisconsin Energy's financial advisor described the benefits and
rationale for the transaction. Representatives of Chase made a detailed
financial presentation to the Wisconsin Energy board and advised the Wisconsin
Energy board that, in its opinion, as of that date and based upon and subject
to the factors and assumptions it described, the consideration to be paid in
the merger was fair to Wisconsin Energy from a financial point of view.
Extensive discussion and questions and comments from the Wisconsin Energy board
members followed the presentations. After considering the matters described in
"--Wisconsin Energy's Reasons for the Merger; Recommendation of the Wisconsin
Energy Board," the Wisconsin Energy board of directors concluded that the
proposed transaction was in the best interests of Wisconsin Energy and its
shareholders and authorized further negotiations with WICOR to attempt to
finalize outstanding issues on the proposed merger agreement.
A special meeting of the WICOR board of directors to consider the proposed
transaction was held on June 25, 1999. At the meeting, the terms and conditions
of the proposed transaction were reviewed in detail by WICOR management and
legal counsel. Legal counsel also reviewed with the directors their fiduciary
responsibilities in considering the proposed business combination. In addition,
management described the benefits and rationale for the transaction.
Representatives of Merrill Lynch made a detailed financial presentation to the
WICOR board and orally advised the WICOR board that, in Merrill Lynch's
opinion, as of that date and based upon and subject to the factors and
assumptions it described, the consideration to be received by the WICOR
shareholders in the merger was fair, from a financial point of view, to the
holders of WICOR common stock. Merrill Lynch's opinion was subsequently
confirmed in writing on June 27, 1999. After extensive discussion and
consideration of the matters described in "--WICOR's Reasons for the Merger;
Recommendation of the WICOR Board," the WICOR board of directors concluded that
the proposed transaction was in the best interests of WICOR and its
shareholders and authorized management and its advisors to continue to
negotiate with Wisconsin Energy to attempt to finalize outstanding issues with
regard to the proposed transaction.
On the afternoon of June 27, 1999, there was a telephonic meeting of the
Wisconsin Energy board. At that meeting, management and legal counsel reported
that they had finalized all outstanding issues relating to the merger
agreement. The Wisconsin Energy board reviewed the final terms of the proposed
transaction and Chase delivered its written opinion to the Wisconsin Energy
board to the effect that, as of that date and based upon and subject to the
factors and assumptions described therein, the consideration to be paid by
Wisconsin Energy in the merger was fair, from a financial point of view, to
Wisconsin Energy. The Wisconsin Energy board adopted and approved the merger
agreement and the transactions contemplated by the agreement and recommended
that the Wisconsin Energy shareholders approve the issuance of shares of
Wisconsin Energy common stock pursuant to the agreement. All eight board
members that were able to attend this meeting voted in favor of the merger. One
director was unable to attend and subsequently concurred with the decision of
the other directors.
On the same afternoon, there was a telephonic meeting of the WICOR board. At
that meeting, the WICOR board reviewed the final terms of the proposed
transaction and Merrill Lynch delivered its written opinion to the WICOR board
to the effect that, as of that date and based upon and subject to the factors
and assumptions described therein, the consideration to be received by the
WICOR shareholders in the merger was fair, from a financial point of view, to
the holders of WICOR common stock. The WICOR board of directors adopted and
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approved (by the affirmative vote of all seven directors participating in the
meeting, with the one director who was unable to participate subsequently
concurring) the merger agreement and recommended that the WICOR shareholders
approve the merger agreement, including the plan of merger, and the
transactions contemplated by the merger agreement.
We executed the merger agreement on the afternoon of June 27, 1999 and
subsequently announced that we had entered into the merger agreement.
On July 2, 1999, an action was filed by a WICOR shareholder against WICOR,
the members of its board of directors and Wisconsin Energy. On September 9,
1999, we entered into a stipulation of settlement with the plaintiff with
respect to that action. See "Summary--Recent Developments."
On September 9, 1999, we amended the merger agreement in order to fulfill
certain of our obligations under the stipulation of settlement.
Wisconsin Energy's Reasons for the Merger; Recommendation of the Wisconsin
Energy Board
Expected Benefits. Wisconsin Energy believes the emerging energy marketplace
will reward companies that have the size and financial strength to take full
advantage of opportunities for efficiency without sacrificing service, safety
or reliability and that are able to move quickly to provide new products and
services as new needs arise. WICOR is a well run business with approximately
529,000 gas customers in Wisconsin, many of whom are located in Wisconsin
Energy's electric utility service territories. WICOR also has very strong non-
utility operations, both in Wisconsin and elsewhere, and a corporate commitment
to growth, diversification, efficiency and good corporate citizenship
compatible with that of Wisconsin Energy. Wisconsin Energy believes that the
complementary services and Wisconsin base of the two companies' utilities
businesses will help the combined company meet its objectives and will permit
cost savings over time without reducing service, safety or reliability. As a
result of the merger, shareholders will own a financially stronger company with
enhanced earnings and growth potential. We expect the transaction to result in
increased earnings per share for Wisconsin Energy beginning in the first full
year following the merger, assuming timely realization of the estimated cost
savings and avoidances expected to result from the merger and assuming
favorable regulatory treatment. Wisconsin Energy believes the merger offers the
following significant strategic and financial benefits to each company and to
its shareholders, as well as to their employees and customers and the
communities in which they do business:
. Maintenance of Competitive Rates. Wisconsin Energy and WICOR are both low
cost providers of the energy services they offer. The combined company
will be able to meet the challenges of the increasingly competitive
energy utility industry more effectively than either company standing
alone. The merger will create opportunities for strategic, financial and
operational benefits for customers in the form of gas rates that will be
lower over the long term than they would have been on a stand-alone
basis, and benefits for shareholders in the form of greater size and
financial flexibility.
. Benefits to Gas Utility Customers. Gas utility customers are expected to
realize immediate and ongoing benefits from the transaction. Savings are
projected to come from lower costs for purchased gas resulting from
enhanced purchasing power and gas portfolio management. Much of these
cost savings will be passed through to the customers under the purchased
gas adjustment mechanisms of Wisconsin Electric and Wisconsin Gas.
Additionally, gas utility operations will be improved by coordinated use
of the resources and skill sets of the two companies and adoption of best
practices, which will enhance gas system reliability and result in a
variety of system benefits. We expect that the gas utility customers of
the combined company will continue to enjoy high quality, safe, reliable
service, delivered by a seasoned, capable workforce. In addition, we
believe that the combination will make more likely an expansion of gas
supplies into Wisconsin, including extension of gas service to as yet
unserved retail customers sooner than would otherwise be the case. Such
an expansion of gas supply has positive implications for economic growth
in Wisconsin.
. Expanded Management Resources; Benefits to Employees. Wisconsin Energy
and WICOR will be able to draw on a larger and more diverse pool of
experienced management personnel to lead the combined
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company into the increasingly competitive environment for the delivery of
energy and related services. Its increased size should help the combined
company attract and retain the most qualified employees, who will benefit
from new opportunities in the expanded organization. The companies'
employees will benefit by becoming part of an organization that is better
equipped to compete and maintain its independence in the rapidly changing
energy business. No layoffs are expected to result from the merger. Any
workforce reductions resulting from the merger will occur through
attrition and all union contracts will be honored.
. Purchasing Economies. The combination of the two companies should result
in improved purchasing power for various items. For example, the combined
enterprise will have improved purchasing power with which to negotiate
more favorable rates for natural gas and other products and services
acquired from outside parties.
. Increased Size and Enhanced Financial Strength. The increased size of the
combined company should provide a capital base and infrastructure capable
of fostering more efficient utility operations, non-utility business
activities and corporate services. Expansion of the customer base creates
opportunities for improving competitive position through more stable
rates resulting from operating efficiencies and improved customer
service. The combined company will have a significantly increased market
capitalization that is expected to result in a stronger financial base
and increased financial flexibility and access to additional capital for
non-utility operations.
. Anticipated Cost Savings. While no definitive synergies study has been
done, net merger-related cost savings are anticipated to be approximately
$35 million annually beginning in the first full year after the merger.
Savings are expected from lower costs for fuel, materials and services
through enhanced purchasing power, elimination of duplication through
attrition, and sharing of resources. We also anticipate that some cost
savings will result from logical consolidation of common functions over
time. In addition, some savings in areas such as insurance and regulatory
costs and legal, audit and consulting fees should be realized. Estimated
savings include only those cost savings and avoidance items management
reasonably expects to achieve as a result of the merger.
. Diversification Programs. Wisconsin Energy and WICOR each have
significant non-utility subsidiaries, and each is committed to expanding
its non-utility operations. The combined entity should be able to manage
and pursue both the existing businesses and new opportunities more
efficiently and effectively, assuming Wisconsin's current limitations on
non-utility assets of holding company systems, as applied to the combined
company, are relaxed.
. Community Benefits. The merger directly benefits Wisconsin and Milwaukee.
The transaction combines two premier Wisconsin-based companies, both of
which have deep roots in the state and in the communities they serve.
Both companies have long traditions of making significant contributions
to regional economic development and of generously supporting
educational, cultural and charitable activities. The merger will ensure
that this tradition continues. The headquarters of the post-merger entity
and associated jobs will remain in Wisconsin and critical decisions
affecting energy policy in Wisconsin will continue to be made in
Wisconsin.
Potential Cost Savings and Avoidances. As discussed above, Wisconsin Energy
believes that the merger will result in cost savings and avoidances that will
benefit customers and shareholders which would not be available absent the
merger. Wisconsin Energy's estimates of the potential cost savings and
avoidances from combining the companies' operations are based on amounts
estimated by our management, without any definitive synergies analysis. These
estimates are net of costs to achieve the potential savings and avoidances,
reflect the estimated time required to integrate operations, and do not
include savings and avoidances that might be achieved without the merger.
Management's estimates of potential savings as a result of the merger are
necessarily based upon assumptions that involve judgments with respect to
various factors and uncertainties, many of which are beyond our control.
Accordingly, Wisconsin Energy cannot assure you that these assumptions will
approximate actual experience or that the savings will be realized. Any
savings in costs are expected to benefit both shareholders and customers. The
treatment of any benefits and cost savings will
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depend upon the results of regulatory proceedings in connection with the
merger, particularly the disposition of Wisconsin Energy's application to the
Public Service Commission of Wisconsin for approval of the merger. That
application requests authorization to permit Wisconsin Energy to recover the
portion of the acquisition premium paid by Wisconsin Energy attributable to
WICOR's utility assets, but only through retention of the cost savings and
avoidances resulting from the merger. See "--Regulatory Requirements and
Approvals."
Other Factors. During the course of its deliberations relating to the merger
agreement and the merger, the Wisconsin Energy board considered the following
factors in addition to the expected benefits described above:
. Wisconsin Energy's Operating and Financial Condition. The Wisconsin
Energy board's familiarity with, and review of the business, assets,
management and prospects of Wisconsin Energy, including its competitive
position, its ability to grow without making acquisitions and the risks
associated with engaging or not engaging in a transaction like the
merger.
. WICOR's Operating and Financial Condition. The business, operations,
financial condition, operating results and prospects of the utility and
non-utility businesses of WICOR.
. Provisions of the Merger Agreement. The terms and conditions of the
merger agreement and the course of negotiations resulting in the
execution of the merger agreement, including the provisions for the
conversion of WICOR common stock into cash and an amount of Wisconsin
Energy common stock to be determined, within the limits fixed by the
merger agreement, at Wisconsin Energy's option, the termination
provisions and the amount and circumstances in which a fee could become
payable by WICOR, and other strategic alternatives potentially available
to Wisconsin Energy.
. Timing and Achievability. The anticipated timing required to complete the
merger, including the expected timing to obtain required regulatory
approvals and management's view as to the likelihood of obtaining the
required approvals without conditions that would materially and adversely
affect the combined company following the merger.
. Fixed Exchange Value. The fact that the value at which shares of WICOR
common stock will be exchanged for shares of Wisconsin Energy common
stock or cash is fixed, and will increase if the merger is not completed
by July 1, 2000. Therefore, the value of the shares of Wisconsin Energy
common stock held by Wisconsin Energy's shareholders at the time of the
merger may increase or decrease, while the value to be received by
shareholders of WICOR in the merger is fixed. The exchange ratio at which
WICOR shares will be converted into Wisconsin Energy shares in the merger
will not be determined until the valuation period just prior to the
merger based upon the average market price of Wisconsin Energy common
stock at that time.
. Compatibility and Fit. Wisconsin Energy's and WICOR's strategic fit,
overlapping service territories, compatible corporate cultures and
visions of the future of the energy industry and related businesses.
. Non-Utility Diversification. While recognizing that diversification
presents potential risks as well as potential rewards that differ from
those of its utility operations, Wisconsin Energy believes that further
diversification into appropriate non-utility businesses is in the best
interests of the company and its shareholders. WICOR's non-utility
operations will be a significant component of the total enterprise.
Assuming regulatory limits on non-utility assets and operations are not
applied to the combined company in a restrictive way, Wisconsin Energy
believes these WICOR operations will provide substantial benefits. See
"--Regulatory Requirements and Approvals."
. Fairness Opinion. The opinion, analysis and presentation of Chase given
to the Wisconsin Energy board on June 25, 1999, and the written opinion
from Chase dated June 27, 1999, to the effect that, as of that date and
based upon and subject to factors and assumptions referred to therein,
the consideration to be paid in the merger was fair to Wisconsin Energy
from a financial point of view.
. Dilutive Effects. The possible dilution to earnings per share of
Wisconsin Energy common stock resulting from the merger, including the
effect on earnings per share at fixed values of $25.00 to $32.50 per
share of WICOR common stock. Wisconsin Energy did not request that Chase
perform a dilution
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analysis at higher values because senior management of Wisconsin Energy
was unwilling to recommend to the board a merger at a price in excess of
these levels based on the unacceptable levels of dilution.
. Accounting and Tax Treatment. The fact that the merger will be accounted
for as a purchase transaction and the expectation that the merger will
qualify as a tax-free reorganization under the Internal Revenue Code to
the extent that shares of WICOR common stock are exchanged for shares of
Wisconsin Energy common stock.
Recommendation. The Wisconsin Energy board has adopted and approved the
merger agreement and believes that the merger and the related share issuance
are fair to and in the best interests of Wisconsin Energy and its
shareholders. The Wisconsin Energy board recommends that the shareholders of
Wisconsin Energy vote in favor of the merger agreement, including the related
share issuance, at the Wisconsin Energy special meeting.
In reaching its decision to approve the merger agreement, the Wisconsin
Energy board considered the expected benefits and other factors described
above taken as a whole. It did not assign specific or relative weights to
particular factors, although individual members of the board may have given
different weights to different factors.
Opinion of Wisconsin Energy's Financial Advisor
Wisconsin Energy retained Chase to act as financial advisor in connection
with the merger and to render its opinion as to the fairness, from a financial
point of view, to Wisconsin Energy of the consideration to be paid in the
merger. On June 27, 1999, and again on the date of this joint proxy
statement/prospectus, Chase rendered its opinion to the Wisconsin Energy board
to the effect that, as of those dates, the consideration valued at $31.50 per
WICOR share to be paid in the merger was fair, from a financial point of view,
to Wisconsin Energy. Chase's opinion, dated as of the date of this joint proxy
statement/prospectus, is attached as Appendix B.
In conducting its investigation and analysis and in arriving at its
opinion, Chase reviewed information and took into account financial and
economic factors it deemed relevant under the circumstances. Among other
things, Chase:
. reviewed the merger agreement;
. reviewed certain publicly available business and financial information
that Chase deemed relevant relating to Wisconsin Energy and WICOR and the
respective industries in which they operate;
. reviewed certain internal non-public financial and operating data
provided to Chase relating to such businesses, including certain forecast
and projection information as to future financial results of such
businesses, and solely with respect to the data provided to Chase by the
management of Wisconsin Energy, information as to the amount and timing
of the cost savings and the related expenses and synergies expected to
result from the merger;
. discussed with members of Wisconsin Energy's and WICOR's senior
management, Wisconsin Energy's and WICOR's operations, historical
financial statements and future prospects, before and after giving effect
to the merger, as well as their views of the business, operational and
strategic benefits and other implications of the merger, including,
solely with respect to the members of Wisconsin Energy's management,
their views of the expected synergies, and such other matters as Chase
deemed necessary or appropriate;
. compared the financial and operating performance of Wisconsin Energy and
WICOR with publicly available information concerning other companies
Chase deemed comparable and reviewed the relevant historical stock prices
and trading volumes of Wisconsin Energy common stock, WICOR common stock
and publicly traded securities of the other companies;
. reviewed the financial terms of recent business combinations and
acquisition transactions Chase deemed reasonably comparable to the merger
and otherwise relevant to Chase's inquiry; and
32
<PAGE>
. made other analyses and examinations as Chase deemed necessary or
appropriate.
Chase assumed and relied upon, without assuming any responsibility for
verification, the accuracy and completeness of all of the financial and other
information provided to, discussed with, or reviewed by or for Chase, or
publicly available, for purposes of Chase's opinion. Chase neither made nor
obtained any independent evaluations or appraisals of the assets or liabilities
of Wisconsin Energy or WICOR and did not conduct a physical inspection of the
properties and facilities of Wisconsin Energy or WICOR. Chase assumed that the
financial forecast and projection information and the expected synergies
provided to or discussed with Chase by or on behalf of Wisconsin Energy and
WICOR were reasonably determined on bases reflecting the best currently
available estimates and judgments of the managements of Wisconsin Energy and
WICOR as to the future financial performance of Wisconsin Energy and WICOR, as
the case may be, and the expected synergies. Chase further assumed that, in all
material respects, such forecasts, projections and expected synergies will be
realized in the amounts and times indicated. Chase expressed no view as to the
forecast or projection information or the expected synergies or the assumptions
on which they were based.
For purposes of rendering its opinion, Chase assumed, in all respects
material to its analysis:
. that the representations and warranties of each party contained in the
merger agreement were true and correct;
. that each party would perform all of the covenants and agreements
required to be performed by it under the merger agreement; and
. that all conditions to the consummation of the merger would be satisfied
without waiver.
Chase also assumed:
. that all material governmental, regulatory or other consents and
approvals would be obtained; and
. that in the course of obtaining any necessary governmental, regulatory or
other consents and approvals, or any amendments, modifications or waivers
to any documents to which either of Wisconsin Energy or WICOR are a
party, as contemplated by the merger agreement, no restrictions would be
imposed or amendments, modifications or waivers made that would have any
materially adverse effect on the contemplated benefits to Wisconsin
Energy of the merger.
Chase's opinion necessarily was based on market, economic and other
conditions as they existed and could be evaluated on the dates of its opinion.
Chase's opinion was limited to the fairness, from a financial point of view, to
Wisconsin Energy of the consideration to be paid in the merger. Chase expressed
no opinion as to the merits of the underlying decision by Wisconsin Energy to
engage in the merger.
The following is a summary of certain analyses performed by Chase in
connection with rendering its opinion.
Historical Common Stock Performance. Chase's analysis of WICOR's and
Wisconsin Energy's common stock performance consisted of a historical analysis
of closing prices over the period of June 21, 1998, to June 21, 1999. During
that period, based on closing prices on the New York Stock Exchange, WICOR
common stock achieved a high of $26.00 and a low of $18.75 and Wisconsin Energy
common stock achieved a high of $34.00 and a low of $25.06.
Relative Stock Price Performance. Chase performed a historical analysis of
closing prices from June 25, 1996 to June 21, 1999 of WICOR common stock,
Wisconsin Energy common stock, the S&P Natural Gas Index and the S&P 500.
33
<PAGE>
The following table presents the change in performance from the beginning to
the end of the period for these groups.
<TABLE>
<CAPTION>
Percentage Change from
June 25, 1996 to June 21, 1999
------------------------------
<S> <C>
WICOR common stock......................... +36%
Wisconsin Energy common stock.............. - 1%
S&P Natural Gas Index...................... + 81%
S&P 500.................................... +102%
</TABLE>
Comparative Company Analysis. Chase reviewed certain publicly available
financial information as of the most recently reported period and stock market
information as of June 21, 1999, for WICOR and selected publicly traded
companies. Chase reviewed financial information including the equity value per
share to book value per share, latest twelve months ("LTM") earnings per share
multiples and 1999 estimated earnings per share multiples, and market
capitalization to LTM earnings before interest, taxes, depreciation and
amortization ("EBITDA") multiples.
The financial information was based on a compilation of earnings projections
by I/B/E/S mean earnings estimates for the period ending December 31, 1999.
Chase reviewed these WICOR comparable company multiples and other factors it
deemed appropriate to determine the value of the shares of WICOR. The tables
below summarize these determinations and the relevant statistics for WICOR as
of June 21, 1999.
WICOR Comparable Companies
Pump Manufacturing Companies
Local Distribution Companies
Franklin Electric Co., Inc.
New Jersey Resources Corp. Idex Corp.
Indiana Energy, Inc. Pentair Inc.
Southern Union, Co. Flowserve Corp.
Atmos Energy Corp. Gorman-Rupp Co.
UGI Corp. Graco Inc.
Eastern Enterprises
Northwest Natural Gas Co.
Laclede Gas Co.
Local Distribution Companies
<TABLE>
<CAPTION>
Multiples from WICOR
Comparable Companies WICOR
-------------------- -----
<S> <C> <C>
Equity value per share to Book Value per share...... 1.5x-2.1x 2.2x
Market capitalization to LTM EBITDA................. 6.4x-9.3x 7.9x
Equity value per share to LTM earnings per share.... 15.9x-25.1x 18.8x
Equity value per share to 1999 forecasted earnings
per share.......................................... 14.2x-17.3x 15.6x
</TABLE>
Pump Manufacturing Companies
<TABLE>
<CAPTION>
Multiples from WICOR
Comparable Companies WICOR
-------------------- -----
<S> <C> <C>
Equity value per share to Book Value per share...... 1.7x-4.0x 2.2x
Market capitalization to LTM EBITDA................. 5.6x-8.4x 7.9x
Equity value per share to LTM earnings per share.... 11.9x-17.6x 18.8x
Equity value per share to 1999 forecasted earnings
per share.......................................... 11.4x-15.9x 15.6x
</TABLE>
The equity values per share were calculated by multiplying these ranges by
book value per share, LTM EPS and 1999 forecasted EPS. Market capitalization
was calculated by multiplying LTM EBITDA. Based on this analysis and other
factors Chase deemed appropriate, Chase calculated the per share equity values
for WICOR from $22.00 to $27.00 (rounded to the nearest $0.10).
34
<PAGE>
In addition, Chase reviewed certain publicly available financial information
as of the most recently reported period and stock market information as of June
21, 1999 for Wisconsin Energy and selected publicly traded companies. Chase
reviewed financial information including the equity value per share to book
value per share, LTM earnings per share multiples and 1999 estimated earnings
per share multiples, and market capitalization to LTM EBITDA multiples. The
financial information was based on a compilation of earnings projections by
I/B/E/S mean earnings estimates for the period ending December 31, 1999. Chase
reviewed these Wisconsin Energy comparable company multiples and other factors
it deemed appropriate to determine the value of the shares of Wisconsin Energy.
The tables below summarize these determinations and the relevant statistics for
Wisconsin Energy as of June 21, 1999.
Wisconsin Energy Comparable Companies (Electric Utilities)
LG&E Energy Corp.
DPL Inc.
Ameren Corp.
New Century Energies, Inc.
DTE Energy Co.
Northern States Power Co.
WPS Resources Corp.
Alliant Energy Corp.
<TABLE>
<CAPTION>
Multiples from Wisconsin Energy
Comparable Companies Wisconsin Energy
------------------------------- ----------------
<S> <C> <C>
Equity value per share to Book
Value per share.............. 1.4x-2.3x 1.7x
Market capitalization to LTM
EBITDA....................... 6.2x-8.2x 8.0x
Equity value per share to LTM
earnings per share........... 12.8x-16.3x 16.7x
Equity value per share to 1999
forecasted earnings per
share........................ 11.9x-15.0x 13.9x
</TABLE>
The equity values per share were calculated by multiplying these ranges by
book value per share, LTM EPS and 1999 forecasted EPS. Market capitalization
was calculated by multiplying LTM EBITDA. Based on this analysis, Chase
calculated the per share equity values for Wisconsin Energy from $24.00 to
$31.50 (rounded to the nearest $0.10).
Precedent Transaction Analysis. Chase analyzed publicly available
information for 26 transactions involving acquisitions of businesses and/or
assets in the utilities industry that had been completed or were pending since
January 3, 1994. Chase used these 26 transactions in its valuation analysis of
WICOR. The precedent transactions were chosen based on a review of acquired
companies and/or assets that had general business, operating and financial
characteristics representative of companies in the industry in which WICOR
operates.
WICOR Precedent Transactions
Local Distribution Companies
. Northeast Utilities/Yankee Energy System, Inc.
. Indiana Energy, Inc./SIGCORP Inc.
. NiSource Inc./Columbia Energy Group
. Southern Union Co./Pennsylvania Enterprises Inc.
. Energy East Corp./Connecticut Energy Corp.
. Dominion Resources Corp./Consolidated Natural Gas Co.
35
<PAGE>
. Scana Corp./Public Service Company of North Carolina Inc.
. Oneok Inc./Southwest Gas Corp.
. Carolina Power & Light Co./North Carolina Natural Gas Corp.
. Eastern Enterprises/Colonial Gas Co.
. NIPSCO Industries, Inc./Bay State Gas Co.
. PP&L Resources Inc. /Pennsylvania Fuel Gas
. Brooklyn Union Gas Co./Long Island Lighting Co.
. Enova/Pacific Enterprises Inc.
. Atmos Energy Corp./United Cities Gas
. Puget Sound Energy Inc./Washington Energy
Pump Manufacturing Companies
. Pentair Inc./Essef Corp.
. Textron Atlantic/David Brown
. United Dominion Industries Ltd./Core Industries Inc.
. Tyco International Ltd./Keystone International Inc.
. Durco International Inc./BW/IP
. ITT Industries Inc./Goulds Pumps Inc.
. Daniel Industries Inc./Bettis Corp.
. Precision Castparts Corp./NEWFLO
. FMC Corp./Moorco International Corp.
. Crane Co./Mark Controls Corp.
Chase reviewed financial information including LTM book value multiples, LTM
EBITDA multiples and LTM net income multiples for the WICOR precedent
transactions. Chase reviewed these WICOR precedent transactions to value shares
of WICOR. Chase also determined that it would be appropriate to use WICOR's
1998 EBITDA, 1998 net income and 1998 book value to value shares of WICOR. The
table below summarizes these analyses.
Local Distribution Companies
<TABLE>
<CAPTION>
Multiples
from WICOR
Precedent Transactions
----------------------
<S> <C>
LTM EBITDA......................................... 9.0x-11.3x
LTM Net Income..................................... 20.5x-22.0x
LTM Book Value..................................... 2.0x- 3.0x
</TABLE>
Pump Manufacturing Companies
<TABLE>
<CAPTION>
Multiples
from WICOR
Precedent Transactions
----------------------
<S> <C>
LTM EBITDA......................................... 9.0x-11.0x
LTM Net Income..................................... 15.0x-20.0x
LTM Book Value..................................... 2.5x- 3.5x
</TABLE>
36
<PAGE>
Chase applied these multiples from the WICOR precedent transactions to
WICOR's corresponding financial and market statistics for 1998. Based on this
analysis, Chase calculated per share equity values for WICOR from $26.00 to
$36.00 (rounded to the nearest $0.10).
In addition, Chase analyzed publicly available information for 17
transactions involving acquisitions of businesses and/or assets in the
utilities industry that had been completed or were pending since August 14,
1995. Chase used these 17 transactions in its valuation analysis of Wisconsin
Energy. The precedent transactions were chosen based on a review of acquired
companies and/or assets that had general business, operating and financial
characteristics representative of companies in the industry in which Wisconsin
Energy operates.
Wisconsin Energy Precedent Transactions
. Energy East Corp./CMP Group Inc.
. Northern States Power Co./New Century Energies, Inc.
. New England Electric System/Eastern Utilities Associates
. National Grid/New England Electric System
. Scottish Power plc/PacifiCorp
. BEC Energy/Commonwealth Energy System
. The AES Corp./CILCORP Inc.
. CalEnergy/MidAmerican Energy Holdings Co.
. Consolidated Edison Inc./Orange and Rockland Utilities
. Sierra Pacific Resources Corp./Nevada Power Co.
. American Electric Power Co./Central & SouthWest Corp.
. Ohio Edison/Centerior Energy Corp.
. Delmarva Power & Light Co./Atlantic Energy
. Western Resources Inc./Kansas City Power & Light Co.
. WPL Holdings, Inc./IES Industries Inc./Interstate Power Company
. Public Service Company of Colorado/Southwest Public Service Co.
. Union Electric Co./CIPSCO Inc.
Chase reviewed financial information including LTM book value, LTM EBITDA
and LTM net income for the Wisconsin Energy precedent transactions. Chase
reviewed these Wisconsin Energy precedent transactions to value shares of
Wisconsin Energy. The table below summarizes this analysis.
<TABLE>
<CAPTION>
Multiples from
Wisconsin Energy
Precedent Transactions
----------------------
<S> <C>
LTM Book Value..................................... 0.8x- 2.5x
LTM EBITDA......................................... 5.4x-10.4x
LTM Net Income..................................... 9.9x-26.8x
</TABLE>
Chase applied these multiples from the Wisconsin Energy precedent
transactions to Wisconsin Energy's corresponding and financial and market
statistics. Based on this analysis, Chase calculated per share equity values
for Wisconsin Energy from $26.50 to $36.00 (rounded to the nearest $0.10).
Chase noted that none of the precedent transactions reviewed was identical
to the merger and that, accordingly, the analysis of the precedent transactions
necessarily involved complex considerations and judgments concerning
differences in financial and operating characteristics of the target companies
and/or assets and other factors (including the general market conditions
prevailing in the equity capital markets at the time of the transaction) that
would affect the acquisition values of the precedent transactions.
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<PAGE>
Discounted Cash Flow Analysis. Chase performed a discounted cash flow
analysis of WICOR and Wisconsin Energy, each on a stand-alone basis, using
projections provided by the respective companies' management. Wisconsin Energy
provided projections through 2004. WICOR provided projections through 2003 and
Chase extrapolated for 2004 based on these management projections. In
connection with this analysis, Chase assumed a range of terminal EBITDA
multiples of 9.0x to 11.0x and discount rates of 6% to 8% for the local
distribution companies and terminal EBITDA multiples to 8.0x to 9.0x and
discount rates of 10% to 12% for pump manufacturing companies to value WICOR.
In addition, Chase assumed a range of terminal EBITDA multiples of 7.0x to 8.0x
and discount rates of 6.0% to 7.0% to value Wisconsin Energy. Based on this
analysis, Chase calculated the per share equity value for WICOR from $35.00 to
$45.50 for the management case and $37.00 to $48.00 for the management case
with synergies, and from $29.00 to $37.50 for Wisconsin Energy (rounded to the
nearest $0.10). The discounted cash flow analysis resulted in assumed values
for WICOR significantly in excess of the other methodologies Chase employed.
The discounted cash flow analysis involves complex considerations and judgments
regarding appropriate discount rates and multiples and is dependent on the
accuracy of projections and estimated synergies. In performing its discounted
cash flow analysis, Chase was not asked nor did it prepare a dilution analysis
reflecting the consequences of completing the merger at the price ranges
established by the discounted cash flow analysis. As a result, Chase's analysis
does not reflect the potential dilution that would result from completing the
merger at a price above $31.50. See "--Wisconsin Energy's Reasons for the
Merger; Recommendation of the Wisconsin Energy Board--Other Factors--Dilutive
Effects" on pages 31-32.
Pro Forma Contribution Analysis. Based on assumed synergies of $25 million
in 2000 and $35 million in 2001 and beyond as provided by Wisconsin Energy
management, the transaction valued at $31.50 per WICOR share would be dilutive
to Wisconsin Energy earnings by $0.09 (or 4.2%) per share in 2000 and would
cease to be dilutive and would begin to be accretive to Wisconsin Energy in
2001.
The foregoing summary does not purport to be a complete description of the
analyses performed by Chase. The preparation of a fairness opinion is a complex
process and is not susceptible to partial analyses or summary description.
Chase believes that its analyses must be considered as a whole, and that
selecting portions of such analyses without considering all analyses and
factors would create an incomplete view of the processes underlying its
opinion. Chase did not attempt to assign specific weights to particular
analyses. Analyses based upon forecasts of future results are not necessarily
indicative of actual values, which may be significantly more or less favorable
than suggested by the analyses. They do not necessarily reflect the prices at
which companies may actually be sold, and such estimates are inherently subject
to uncertainty. None of the comparative companies is identical to Wisconsin
Energy or WICOR, and none of the precedent transactions is identical to the
proposed merger. Accordingly, an analysis of the comparative companies and
precedent transactions is not mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics and other factors. Based upon and subject to the foregoing,
Chase was of the opinion, as of June 27, 1999, and the date of this joint proxy
statement/prospectus, that the consideration valued at $31.50 per WICOR share
to be paid in the merger was fair, from a financial point of view, to Wisconsin
Energy.
Pursuant to an engagement letter dated March 14, 1999, between Wisconsin
Energy and Chase, Wisconsin Energy agreed to pay Chase a signing fee of
$437,500 which has already been paid and an approval fee of $437,500 which is
due when the merger is approved by the WICOR shareholders. Wisconsin Energy
also agreed to pay to Chase a transaction fee of at least $2,625,000, but up to
$3,625,000 in Wisconsin Energy's discretion, upon completion of the merger.
Wisconsin Energy has also agreed to reimburse Chase's reasonable expenses, but
not more than $100,000. These fees are payable regardless of the conclusions
reached by Chase in its fairness opinion.
Wisconsin Energy has also agreed to indemnify Chase, its affiliates and
their respective directors, officers, employees and agents and controlling
persons against certain liabilities relating to or arising out of its
engagement, including liabilities under the federal securities laws. In the
past, The Chase Manhattan Corporation and its affiliates, including Chase, have
provided commercial and investment banking services to Wisconsin Energy and
WICOR, for which they have received customary compensation. Chase, as part of
its
38
<PAGE>
investment banking business, is engaged in the evaluation of businesses and
their securities in connection with mergers and acquisitions, negotiated
underwritings, competitive biddings, secondary distributions of listed and
unlisted securities, private placements, and valuations for estate, corporate
and other purposes. Wisconsin Energy retained Chase because of Chase's
experience and expertise in the valuation of businesses and their securities in
connection with mergers and acquisitions. In the ordinary course of business,
Chase and its affiliates may from time to time trade securities of Wisconsin
Energy and WICOR for its own account and for accounts of its customers and,
accordingly, may at any time hold a long or short position in such securities.
WICOR's Reasons for the Merger; Recommendation of the WICOR Board
The WICOR board has approved and adopted the merger agreement, determined
that the merger is fair to, and in the best interests of, WICOR and its
shareholders, and recommends that holders of shares of WICOR common stock vote
FOR approval and adoption of the merger agreement.
Benefits of the Merger. The WICOR board of directors believes that the
merger will join two companies with complementary operations as well as a
common vision of the future of the retail and wholesale energy markets in the
upper midwestern region of the United States. As a result of utility
deregulation and the increasing competitive pressures faced by electric and
natural gas utility companies, the WICOR board of directors believes that in
order to succeed in such a market, WICOR must be an efficient, low cost
supplier of energy and energy-related services with a diverse customer base.
The merger is expected to allow WICOR to achieve these goals and to provide
substantial financial and strategic benefits to the shareholders of WICOR, as
well as to its employees, the customers which it serves and the communities in
which it operates. The WICOR board of directors believes that such benefits
include:
. Financial Benefits. The $31.50 per WICOR share value of the merger
consideration is a fair price that provides a substantial market premium
to WICOR's shareholders.
. Strategic Position. The combination of the companies' complementary
expertise and infrastructure, including WICOR's competitive natural gas
distribution franchise in Wisconsin and Wisconsin Energy's electric and
natural gas businesses in Wisconsin and the Upper Peninsula of Michigan,
will provide the combined company with the size and scope to be an
effective participant in the emerging and increasingly competitive
electric and natural gas utility markets. In particular, the combined
company will be able to offer the "one-stop shopping" for electric and
natural gas services that customers, particularly industrial and
commercial customers, are increasingly demanding.
. Cost Competitive. Both WICOR and Wisconsin Energy are among the most
efficient providers of their respective services in the upper Midwest.
The merger will enable the combined company to create efficiencies
through which it will be able to provide even more cost-effective
services to customers.
. New Products and Services. The combined company will use its distribution
channels to market a portfolio of energy-related services throughout
Wisconsin and the Upper Peninsula of Michigan. The merger will create a
company with the ability to develop and market competitive new products
and services and to provide integrated energy solutions for its
customers.
. Increased Financial Strength and Customer Base. The combined company will
be financially stronger and will have a broader customer base than WICOR
or Wisconsin Energy as independent entities. Based on the 1998 results
for WICOR and Wisconsin Energy, the total annual revenues for the
combined company will be approximately $3.0 billion. In addition, the
combined company will serve approximately 1,013,000 electric customers in
Wisconsin and the Upper Peninsula of Michigan and approximately 923,000
natural gas customers in Wisconsin. The increased financial strength will
provide WICOR's manufacturing operations additional resources and enhance
their strategic position in the consolidating water and fluid pumping and
processing industries.
39
<PAGE>
WICOR Factors Considered. During the course of its deliberations relating to
the merger agreement and the merger, the WICOR board considered the following
factors in addition to the expected benefits described above:
. WICOR's Operating and Financial Condition. The WICOR board's familiarity
with, and review of, the business, assets, management and prospects of
WICOR, including its competitive position, its ability to grow its energy
business without making acquisitions, its ability to expand its
manufacturing business and the risks associated with engaging or not
engaging in a transaction like the merger.
. Wisconsin Energy's Operating and Financial Condition. The business,
operations, financial condition, operating results and prospects of the
utility and non-utility businesses of Wisconsin Energy.
. Provisions of the Merger Agreement. The terms and conditions of the
merger agreement, including the price, the closing conditions and the
termination provisions and the amount and circumstances in which a
termination fee could become payable by WICOR, and other strategic
alternatives potentially available to WICOR.
. Fixed Exchange Value. The fact that the value at which shares of WICOR
common stock will be exchanged for shares of Wisconsin Energy common
stock or cash is fixed, and will increase if the merger is not completed
by July 1, 2000. Therefore, the value to be received by shareholders of
WICOR in the merger will not be affected by fluctuations in the market
price of Wisconsin Energy common stock between the date of the merger
agreement and the determination of the exchange ratio shortly before the
closing of the merger.
. Compatibility and Fit. Wisconsin Energy's and WICOR's strategic fit,
overlapping service territories, compatible corporate cultures and
visions of the future of the energy industry and related businesses.
. Other Constituencies. The expected effect of the merger on the employees
of WICOR, on WICOR's customers and on the communities in which WICOR
operates.
. Fairness Opinion. The analysis and presentation of Merrill Lynch given to
the WICOR board on June 25, 1999, and the written opinion of Merrill
Lynch dated June 27, 1999, to the effect that, as of such date, and based
upon the assumptions made, matters considered and limits of review set
forth in such opinion the proposed consideration to be received by the
holders of WICOR common stock in the merger was fair from a financial
point of view to the holders of WICOR common stock.
. Timing and Achievability. The anticipated timing required to complete the
merger, including the expected timing to obtain required regulatory
approvals and management's view as to the likelihood of obtaining the
required approvals.
. Tax Treatment. The expectation that the merger will qualify as a tax-free
reorganization under the Internal Revenue Code to the extent that shares
of WICOR common stock are exchanged for shares of Wisconsin Energy common
stock.
The WICOR board recommends that the holders of WICOR common stock vote "For"
approval and adoption of the merger agreement.
In reaching its decision to approve the merger agreement, the WICOR board
considered the expected benefits and other factors described above taken as a
whole. It did not assign specific or relative weights to particular factors,
although individual members of the board may have given different weights to
different factors.
Opinion of WICOR's Financial Advisor
On June 27, 1999, Merrill Lynch, Pierce, Fenner & Smith Incorporated
delivered its opinion to the WICOR board of directors to the effect that, as of
such date, and based upon the assumptions made, matters considered and limits
of review set forth in such opinion, the proposed consideration to be received
by the holders of WICOR common stock in the merger was fair from a financial
point of view to the holders of WICOR common stock. Merrill Lynch has delivered
to the WICOR board of directors an update of its opinion, which is dated as of
the date of this joint proxy statement/prospectus, which confirms Merrill
Lynch's opinion as of that date and which is attached as Appendix C.
40
<PAGE>
The Merrill Lynch opinion included as Appendix C to this document sets forth
the assumptions made, matters considered and certain limitations on the scope
of review undertaken by Merrill Lynch. Each holder of WICOR common stock is
urged to read this opinion in its entirety. The Merrill Lynch opinions were
intended for the use and benefit of the WICOR board of directors, were directed
only to the fairness of the merger consideration from a financial point of view
to the holders of WICOR common stock, did not address the merits of the
underlying decision by WICOR to engage in the merger and do not constitute a
recommendation to any shareholder as to how that shareholder should vote on the
proposed merger or any related matter. The merger consideration was determined
on the basis of negotiations between WICOR and Wisconsin Energy and was
approved by the WICOR board. This summary of the Merrill Lynch opinion, dated
as of the date of this joint proxy statement/prospectus, is qualified in its
entirety by reference to the full text of the opinion included as Appendix C.
In arriving at its opinions, Merrill Lynch, among other things:
1. Reviewed certain publicly available business and financial information
relating to WICOR and Wisconsin Energy that Merrill Lynch deemed to be
relevant;
2. Reviewed certain information, including financial forecasts, relating to
the business, earnings, cash flow, assets, liabilities and prospects of
WICOR and Wisconsin Energy, furnished to Merrill Lynch by WICOR and
Wisconsin Energy;
3. Conducted discussions with members of senior management and
representatives of WICOR and Wisconsin Energy concerning the matters
described in clauses 1 and 2 above, as well as their respective
businesses and prospects before and after giving effect to the merger;
4. Reviewed the market prices and valuation multiples for the WICOR common
stock and the Wisconsin Energy common stock and compared them with those
of certain publicly traded companies that Merrill Lynch deemed to be
relevant;
5. Reviewed the results of operations of WICOR and Wisconsin Energy and
compared them with those of certain publicly traded companies that
Merrill Lynch deemed to be relevant;
6. Compared the proposed financial terms of the merger with the financial
terms of certain other transactions that Merrill Lynch deemed to be
relevant;
7. Participated in certain discussions and negotiations among
representatives of WICOR and Wisconsin Energy and their financial and
legal advisors;
8. Reviewed the potential pro forma impact of the merger;
9. Reviewed the merger agreement; and
10. Reviewed such other financial studies and analyses and took into
account other matters as Merrill Lynch deemed necessary, including
Merrill Lynch's assessment of general economic, market and monetary
conditions.
In preparing its opinions, Merrill Lynch assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to
Merrill Lynch, discussed with or reviewed by or for Merrill Lynch, or publicly
available. Merrill Lynch did not assume any responsibility for independently
verifying that information or for undertaking an independent evaluation or
appraisal of any of the assets or liabilities of WICOR or Wisconsin Energy and
was not furnished with any such evaluation or appraisal. In addition, Merrill
Lynch did not assume any obligation to conduct any physical inspection of the
properties or facilities of WICOR or Wisconsin Energy. With respect to the
financial forecast information furnished to or discussed with Merrill Lynch by
WICOR or Wisconsin Energy, Merrill Lynch assumed that they were reasonably
prepared and reflected the best currently available estimates and judgment of
WICOR's or Wisconsin Energy's management as to the expected future financial
performance of WICOR or Wisconsin Energy, as the case may be. Merrill Lynch
further assumed that if any Wisconsin Energy common stock were to be issued
pursuant to the merger, the merger would qualify as tax-free reorganization for
U.S. federal income tax purposes.
41
<PAGE>
Merrill Lynch's opinions were necessarily based upon market, economic and
other conditions as they existed and could be evaluated on, and on the
information made available to Merrill Lynch as of, the dates of the opinions.
Merrill Lynch assumed that in the course of obtaining the necessary regulatory
or other consents or approvals (contractual or otherwise) for the merger, no
restrictions, including any divestiture requirements or amendments or
modifications, would be imposed that would have a material adverse effect on
the contemplated benefits of the merger.
In connection with the preparation of the Merrill Lynch opinions, Merrill
Lynch was not authorized by WICOR or the WICOR board of directors to solicit,
nor did Merrill Lynch solicit, third-party indications of interest for the
acquisition of all or any part of WICOR.
The following is a summary of the material portions of the financial and
comparative analyses performed by Merrill Lynch which were presented to WICOR's
board of directors in connection with the opinion delivered to WICOR's board of
directors, dated June 27, 1999.
WICOR Analysis:
Discounted Cash Flow Analysis. Merrill Lynch performed separate discounted
cash flow, or "DCF", analyses for WICOR's energy group and WICOR's
manufacturing group, using projections provided by the WICOR management.
The discounted cash flow for the energy group was calculated assuming
discount rates ranging from 7.25% to 8.25% and was comprised of the sum of the
present values of:
1. the projected cash flows for the years 2000 through 2003; and
2. the 2003 terminal value based upon a range of multiples of (A) from
15.0x to 17.0x estimated 2003 net income; and (B) from 1.50x to 2.00x
estimated 2003 book value.
The discounted cash flow for the manufacturing group was calculated assuming
discount rates ranging from 9.75% to 10.75% and was comprised of the sum of the
present values of:
1. the projected cash flows for the years 2000 through 2003; and
2. the 2003 terminal value based upon a range of multiples of from 11.5x to
15.5x estimated 2003 net income.
These analyses resulted in the following ranges of implied equity value per
share of WICOR common stock (as compared to the merger consideration of $31.50
per WICOR common share):
WICOR Implied Equity Value Per Share
<TABLE>
<CAPTION>
DCF Method Low High
---------- ------ ------
<S> <C> <C>
2003 net income........... $26.22 $32.49
2003 book value........... $24.25 $32.14
</TABLE>
For purposes of each discounted cash flow analysis, however, the
manufacturing group was valued using a 2003 terminal value based upon estimated
2003 net income.
Comparable Acquisitions Analysis. In order to value WICOR's energy group,
Merrill Lynch reviewed certain publicly available information regarding nine
selected business combinations in the natural gas distribution industry since
November 1997 (collectively, the "Comparable Natural Gas Distribution Company
Transactions") that Merrill Lynch deemed to be relevant in evaluating the
merger. The Comparable Natural Gas Distribution Company Transactions and the
dates these transactions were announced are as follows:
. Yankee Energy System, Inc. and Northeast Utilities (June 1999);
. Columbia Energy Group and NiSource Inc. (June 1999);
42
<PAGE>
. Connecticut Energy Corporation and Energy East Corporation (April 1999);
. Public Service Company of North Carolina, Incorporated and Scana Corp.
(February 1999);
. Southwest Gas Corporation and Oneok, Inc. (December, 1998);
. North Carolina Natural Gas Corporation and Carolina Power & Light Company
(November 1998);
. Colonial Gas Company and Eastern Enterprises (October 1998);
. Essex County Gas Company and Eastern Enterprises (December 1997); and
. Bay State Gas Company and Nipsco Industries, Inc. (December 1997).
With respect to the Comparable Natural Gas Distribution Company
Transactions, Merrill Lynch compared the "offer value" of each such
transaction:
1. as a multiple of the next four quarters' estimated earnings per share of
the acquired company at the date of announcement ("Forward EPS"); and
2. as a multiple of the book value of the acquired company.
The "offer value" is generally defined as the per share offer price for the
acquired company multiplied by the sum of the number of acquired company shares
outstanding and the number of acquired company options outstanding (net of
option proceeds).
The results of these analyses were as follows:
Comparable Natural Gas Distribution Company Transactions
<TABLE>
<CAPTION>
Low High Mean Median
----- ----- ----- ------
<S> <C> <C> <C> <C>
Multiples of offer value to:
Forward EPS.................................... 18.5x 24.5x 21.1x 20.2x
Book value..................................... 1.90x 3.08x 2.54x 2.66x
</TABLE>
In order to value WICOR's manufacturing group, Merrill Lynch reviewed
certain publicly available information regarding eleven selected business
combinations in the pump industry announced since April 1994 (collectively, the
"Comparable Manufacturing Company Transactions") that Merrill Lynch deemed
relevant in evaluating the merger. The Comparable Manufacturing Company
Transactions and the dates these transactions were announced are as follows:
. Essef Corp. and Pentair Inc. (April 1999);
. David Brown Group plc and Textron Inc. (September 1998);
. Union Pump Co. and David Brown Group plc (November 1997);
. Keystone International, Inc. and Tyco International, Inc. (May 1997);
. BW/IP, Inc. and Durco International, Inc. (May 1997);
. Goulds Pumps, Incorporated and ITT Industries, Inc. (April 1997);
. Bettis Corporation and Daniel Industries, Inc. (September 1996);
. Newflo Corporation and Precision Castparts Corp. (July 1996);
. Triconex Corp. and Siebe plc (November 1994);
. EnviroTech Pumpsystems Group and Weir Group PLC (September 1994); and
. Mark Controls Corporation and Crane Co. (April 1994).
43
<PAGE>
With respect to the Comparable Manufacturing Company Transactions, Merrill
Lynch compared the "transaction value" of each such transaction:
1. as a multiple of the latest twelve months' earnings before interest,
taxes, depreciation and amortization ("LTM EBITDA") of the acquired
company, and
2. as a multiple of the latest twelve months' earnings before interest and
taxes ("LTM EBIT") of the acquired company.
The "transaction value" is defined as the sum of the offer value, the
preferred equity at liquidation value, the short term debt, the long term debt
and any minority interests less cash, marketable securities and exercisable
options proceeds.
The results of these analyses were as follows:
Comparable Manufacturing Company Transactions
<TABLE>
<CAPTION>
Low High Mean Median
---- ----- ----- ------
<S> <C> <C> <C> <C>
Multiples of transaction value to:
LTM EBITDA...................................... 7.3x 13.0x 9.8x 10.2x
LTM EBIT........................................ 9.9x 18.0x 13.4x 14.0x
</TABLE>
Using these analyses, Merrill Lynch derived the following ranges of per
share value of WICOR common stock (based on approximately 37.7 million shares
of WICOR common stock outstanding and assuming net debt of $71 million as of
December 31, 1998):
<TABLE>
<CAPTION>
Low High
------ ------
<S> <C> <C>
Energy group................................................ $15.29 $17.15
Manufacturing group......................................... $10.61 $13.18
------ ------
Total................................................... $25.90 $30.33
====== ======
</TABLE>
This compares to the consideration in the merger of $31.50 per share of
WICOR common stock.
Comparable Public Company Analysis. Using publicly available information,
Merrill Lynch compared selected historical stock, financial and operating data
and ratios for WICOR's energy group and WICOR's manufacturing group with
corresponding data and ratios of similar publicly traded companies. These
companies were selected by Merrill Lynch based upon Merrill Lynch's views as to
the comparability of the financial and operating characteristics of these
companies to the energy group and the manufacturing group, respectively.
The companies included in the energy group comparable company analysis were:
. Atmos Energy Corporation,
. Eastern Enterprises,
. Indiana Energy Inc.,
. New Jersey Resources Corporation, and
. Northwest Natural Gas Company.
The companies included in the manufacturing group comparable company
analysis were:
. Franklin Electric Co., Inc.,
. The Gorman-Rupp Company,
. Idex Corporation, and
. Pentair, Inc.
44
<PAGE>
Merrill Lynch derived an estimated valuation range for the energy group by
comparing market value as a multiple of estimated 1999 earnings per share,
estimated 2000 earnings per share and book value. The earnings estimates were
obtained from First Call, a data service that monitors and publishes a
compilation of earnings estimates produced by selected research analysts on
companies of interest to investors, as of June 23, 1999. The results of these
analyses were as follows:
Comparable Energy Companies
<TABLE>
<CAPTION>
Low High Mean WICOR
----- ----- ----- -----
<S> <C> <C> <C> <C>
Market value as a multiple of:
Estimated 1999 EPS.............................. 14.0x 17.2x 15.8x 16.7x
Estimated 2000 EPS.............................. 13.0x 15.4x 13.8x 15.2x
Book value...................................... 1.49x 2.12x 1.82x 2.30x
</TABLE>
Merrill Lynch derived an estimated valuation range for the manufacturing
group by comparing market value as a multiple of estimated 1999 earnings per
share, estimated 2000 earnings per share, earnings before interest and taxes
for the last twelve months and earnings before interest, taxes, depreciation
and amortization for the last twelve months. The earnings estimates were
obtained from First Call as of June 23, 1999. The results of these analyses
were as follows:
Comparable Manufacturing Companies
<TABLE>
<CAPTION>
Low High Mean WICOR
----- ----- ----- -----
<S> <C> <C> <C> <C>
Market value as a multiple of:
Estimated 1999 EPS.............................. 11.4x 16.2x 14.3x 16.7x
Estimated 2000 EPS.............................. 10.6x 14.1x 12.4x 15.2x
LTM EBIT........................................ 7.5x 11.4x 9.7x 12.8x
LTM EBITDA...................................... 5.5x 8.5x 7.5x 9.3x
</TABLE>
Using these analyses, Merrill Lynch derived the following ranges of per
share values of the WICOR common stock (based on approximately 37.7 million
shares of WICOR common stock outstanding and assuming net debt of $71 million
as of December 31, 1998):
<TABLE>
<CAPTION>
Low High
------ ------
<S> <C> <C>
Energy group................................................ $11.06 $13.36
Manufacturing group......................................... $ 8.23 $11.41
------ ------
Total................................................... $19.29 $24.77
====== ======
</TABLE>
This compares to the consideration in the merger of $31.50 per share of
WICOR common stock.
Wisconsin Energy Analysis:
Discounted Cash Flow Analysis. Merrill Lynch performed a discounted cash
flow analysis for Wisconsin Energy, using projections provided by the Wisconsin
Energy management.
The discounted cash flow for Wisconsin Energy was calculated assuming
discount rates ranging from 6.5% to 7.5% and was comprised of the sum of the
present values of:
1. the projected cash flows for the years 2000 through 2003; and
2. the 2003 terminal value based upon a range of multiples of (A) from
13.0x to 14.0x estimated 2003 net income; and (B) from 1.40x to 1.80x
estimated 2003 book value.
45
<PAGE>
This analysis resulted in the following ranges of implied equity value per
share of Wisconsin Energy common stock:
Wisconsin Energy Implied Equity Value Per Share
<TABLE>
<CAPTION>
DCF Method Low High
---------- ------ ------
<S> <C> <C>
2003 net income............................................. $26.11 $29.99
2003 book value............................................. $23.70 $32.23
</TABLE>
This compares to the per share price of Wisconsin Energy common stock on
June 24, 1999 of $27.19.
Comparable Public Company Analysis. Using publicly available information,
Merrill Lynch compared selected historical stock, financial and operating data
and ratios for Wisconsin Energy with corresponding data and ratios of similar
publicly traded companies. These companies were selected by Merrill Lynch based
upon Merrill Lynch's views as to the comparability of the financial and
operating characteristics of these companies to Wisconsin Energy.
The companies included in the Wisconsin Energy comparable company analysis
were:
. Ameren Corporation,
. Alliant Energy Corporation
. Madison Gas & Electric Co.,
. Northern States Power Co., and
. WPS Resources Corporation.
Merrill Lynch derived an estimated valuation range for Wisconsin Energy by
comparing market value as a multiple of estimated 1999 earnings per share,
estimated 2000 earnings per share and book value. The earnings estimates were
obtained from First Call as of June 23, 1999. The results of these analyses
were as follows:
Comparable Wisconsin Energy Companies
<TABLE>
<CAPTION>
Low High Mean Wisconsin Energy
----- ----- ----- ----------------
<S> <C> <C> <C> <C>
Market value as a multiple of:
Estimated 1999 EPS................... 12.8x 13.6x 13.3x 13.9x
Estimated 2000 EPS................... 12.0x 13.0x 12.7x 12.8x
Book value........................... 1.37x 1.79x 1.62x 1.64x
</TABLE>
This analysis resulted in a range of implied equity value per share of
Wisconsin Energy common stock from $25.07 to $28.72. This compares to the per
share price of Wisconsin Energy common stock on June 24, 1999 of $27.19.
Pro Forma Combination Analysis. Merrill Lynch also analyzed certain pro
forma effects resulting from the merger. Using the projected earnings for the
years 2000 through 2002 provided by the respective managements of WICOR and
Wisconsin Energy, including estimates of annual pre-tax synergies expected to
be achieved as a result of the merger, Merrill Lynch compared the projected
earnings per share and dividends per share of WICOR on a stand alone basis
(assuming the merger did not occur) to the per share earnings of a WICOR
shareholder, as a holder of Wisconsin Energy common stock, assuming the merger
occurs with the merger consideration contemplated by the merger agreement (and
assuming that at least some stock consideration would be paid in the merger).
46
<PAGE>
Using the assumptions detailed above and depending on the mix of cash and
Wisconsin Energy common stock paid in the merger and a price of the Wisconsin
Energy common stock ranging from $22.00 to $28.00 per share at the time of the
merger, the analysis indicated that the merger would be accretive to the
projected earnings per share and dividends per share in each year in the period
in a range, as follows :
. from 12.0% to 54.7% for projected earnings; and
. from 94.0% to 151.5% for projected dividends.
The summary of analyses performed by Merrill Lynch set forth above does not
purport to be a complete description of the analyses performed by Merrill Lynch
in arriving at its opinions. The preparation of a fairness opinion is a complex
process and is not necessarily susceptible to partial or summary description.
Accordingly, Merrill Lynch believes that its analyses must be considered as a
whole and that selecting portions of its analyses and the factors considered by
Merrill Lynch, without considering all analyses and factors, could create an
incomplete view of the processes underlying the Merrill Lynch opinions. Merrill
Lynch did not assign relative weights to any of its analyses in preparing its
opinions. The matters considered by Merrill Lynch in its analyses were based on
numerous macroeconomic, operating and financial assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond WICOR's and Merrill Lynch's control and
involve the application of complex methodologies and educated judgment. Any
estimates contained in the Merrill Lynch analyses are not necessarily
indicative of actual past or future results or values, which may be
significantly more or less favorable than the estimates. Estimated values do
not purport to be appraisals and do not necessarily reflect the prices at which
businesses or companies may be sold in the future. The estimates are inherently
subject to uncertainty.
No company utilized as a comparison in the analyses described above is
identical to WICOR or Wisconsin Energy and none of the comparable transactions
utilized as a comparison is identical to the proposed merger. In addition,
various analyses performed by Merrill Lynch incorporate projections prepared by
research analysts using only publicly available information. These estimates
may or may not prove to be accurate. An analysis of publicly traded comparable
companies and comparable business combinations is not mathematical; rather it
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the comparable companies and other
factors that could affect the public trading value of the comparable companies
to which they are being compared.
The WICOR board selected Merrill Lynch to act as its financial advisor
because of Merrill Lynch's reputation as an internationally recognized
investment banking firm with substantial experience in transactions similar to
the merger and because Merrill Lynch is familiar with WICOR and its business.
As part of Merrill Lynch's investment banking businesses, Merrill Lynch is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, leveraged buyouts, negotiated
underwritings, secondary distributions of listed and unlisted securities and
private placements.
Pursuant to the terms of a letter agreement between WICOR and Merrill Lynch
dated March 8, 1999, WICOR has agreed to pay Merrill Lynch a fee in an amount
equal to approximately $5,736,000 in cash. This fee is payable in three
installments as follows: (a) 1/8 of such fee was paid upon the execution of the
merger agreement; (b) 1/8 of such fee is payable upon the successful vote of
the shareholders of WICOR approving the merger; and (c) the balance of the fee
is payable upon the closing of the merger.
WICOR has agreed to reimburse Merrill Lynch for its reasonable out-of-pocket
expenses incurred in connection with its engagement (including the reasonable
fees and disbursements of legal counsel) and to indemnify Merrill Lynch and
related parties from and against specified liabilities, including liabilities
under the federal securities laws, arising out of its engagement.
Merrill Lynch has, in the past, provided financial advisory and financing
services to WICOR and Wisconsin Energy and may continue to do so and has
received, and may receive, fees for the rendering of those services. In
addition, in the ordinary course of Merrill Lynch's business, Merrill Lynch and
its affiliates may actively trade WICOR shares and other securities of WICOR,
as well as Wisconsin Energy shares and other securities of Wisconsin Energy,
for their own accounts and for the accounts of customers. Accordingly, Merrill
Lynch and its affiliates may at any time hold a long or short position in such
securities.
47
<PAGE>
Interests of Certain Persons in the Merger
In considering the recommendation of the merger by the WICOR board, the
shareholders of WICOR should be aware that some directors and executive
officers of WICOR have interests in the completion of the merger that are
described below and that may be considered different from, or in addition to,
the interests of holders of WICOR common stock generally. The WICOR board was
aware of these interests and considered them when it approved the merger
agreement and the merger.
Employment Matters. Under the merger agreement, after the merger WICOR will
have the obligation to honor all employment agreements, consulting agreements,
severance agreements and collective bargaining agreements to which it or its
subsidiaries are parties, including employee benefit plans. Some of these
agreements include a "change of control" provision that will be triggered by
the merger, which means that specified employees of WICOR may be entitled to
terminate employment under their employment agreements and receive change of
control severance benefits.
Severance Agreements. Five executives, George E. Wardeberg, the Chairman and
Chief Executive Officer of WICOR, Thomas F. Schrader, the President and Chief
Operating Officer of WICOR, Joseph P. Wenzler, the Senior Vice President and
Chief Financial Officer of WICOR, Bronson Haase, a Vice President of WICOR and
the President and Chief Executive Officer of Wisconsin Gas, and James C.
Donnelly, a Vice President of WICOR and the President and Chief Executive
Officer of Sta-Rite, are covered by existing WICOR change of control severance
agreements. All of them except Mr. Wardeberg will be covered by the Wisconsin
Energy severance policies described below. Mr. Wardeberg will waive his
existing WICOR change of control severance agreement in connection with his
employment agreement described below. In general, besides protection in the
event of termination by the company without cause and voluntary termination by
the executive in certain circumstances with good reason, the change of control
severance agreements and the severance policies also allow the executive to
voluntarily resign, for any reason, during a limited window period commencing
one year after the effective time of the merger. In such event, the executive
would be generally eligible for a lump sum payment of projected future salary
and bonus, a lump sum payment of projected pension benefits, and continuation
of health and life insurance. However, in no event would the aggregate benefits
under the change of control severance agreements and the severance policies
after the merger exceed the amount that would trigger excise taxes under the
"parachute payment" provision of the tax laws.
The "parachute payment" limitation is based on the average of taxable income
reported on Form W-2 for the five calendar years ending prior to the effective
time of the merger. Therefore, the precise "parachute payment" restriction
applicable after the expected closing of the merger in the Spring of 2000
cannot be determined at this time because taxable income for 1999 is not known.
In particular, the amount, if any, of reportable income that may result from
any exercise of vested stock options prior to the end of 1999 cannot be
determined. For purposes of providing an estimated amount of the maximum
benefits payable to the executives, the following list is the estimated
parachute payment limit, based on actual 1995 through 1998 data and estimated
1999 data using solely the current base salary and the 1998 bonus paid in 1999
and stock options exercised between January 1st and August 31st of 1999:
<TABLE>
<CAPTION>
Estimated
Name Limit
---- ----------
<S> <C>
Thomas Schrader................................................ $2,415,000
Joseph Wenzler................................................. 1,381,000
James Donnelly................................................. 1,273,000
Bronson Haase.................................................. 1,019,000
</TABLE>
If Mr. Wardeberg had not agreed to waive his existing change of control
severance agreement, the estimated "parachute payment" limit applicable to him
under that agreement as described above would have been approximately
$2,000,000.
48
<PAGE>
Wardeberg Employment Agreement. Wisconsin Energy will enter into an
employment agreement with Mr. Wardeberg as of the effective time of the merger
pursuant to which Mr. Wardeberg will serve as vice chairman of the Wisconsin
Energy board of directors for a two-year term. The agreement provides for a
base salary of not less than the greater of his base salary from WICOR
immediately before the effective time of the merger or 90% of the base salary
then payable to the chairman of the board of Wisconsin Energy. Mr. Wardeberg's
base salary at the date of this joint proxy statement/prospectus is $540,000.
The agreement also provides for a bonus of not less than 90% of that payable to
the chairman, with the total of base salary and bonus in no event to be less
than Mr. Wardeberg's total base salary and bonus from WICOR for the calendar
year ending on or immediately prior to the effective time of the merger. Mr.
Wardeberg's total base salary and bonus for 1998 was $636,232. The base salary
of the chairman of the board of Wisconsin Energy at the date of this joint
proxy statement/prospectus is $615,000, and his bonus for 1998 was $210,000.
The employment agreement includes a grant of options for 100,000 shares of
Wisconsin Energy common stock, vesting over a three-year period and exercisable
over a period ending five years after he ceases to serve as an officer or
director of Wisconsin Energy, with an exercise price equal to the fair market
value as of the effective time of the merger. It also includes a special
pension benefit provision under Wisconsin Energy's Supplemental Executive
Retirement Plan, calculated as if Mr. Wardeberg had been employed by Wisconsin
Energy since age 25, offset by any WICOR pension benefits. Severance benefits
are provided if his employment is terminated by Wisconsin Energy other than for
cause or by Mr. Wardeberg for good reason. The agreement provides for a "gross-
up" payment should any payments to Mr. Wardeberg trigger federal excise taxes
under the "parachute payment" provisions of the tax law.
Severance Policies and Deferred Compensation Plans. Wisconsin Energy has
adopted severance policies to be effective when the merger occurs providing for
severance benefits to designated employees of Wisconsin Energy, WICOR and
participating subsidiaries if within two years after the merger covered
executives are discharged without cause or quit with good reason. Varying
levels of benefits are provided, depending on the level of benefits for which
the individual has been designated. An overall limit is placed on benefits to
avoid federal excise taxes under the "parachute payment" provisions of the tax
law. Tier 1 and 2 benefits provide generally for lump sum severance payments
equal to three times the sum of current base salary and the highest bonus in
the last three years (or the then current target bonus, if higher), a pension
lump sum for the equivalent of three years' worth of additional service and
three years' continuation of medical and life insurance coverages. The
circumstances under which a Tier 1 participant may become entitled to benefits
include a voluntary separation from service within six months after completion
of one year of service following the effective time of the merger; otherwise,
the Tier 1 and Tier 2 conditions and benefits are the same.
Tier 3 and 4 benefits are similar to those provided in Tier 2 except that:
. the lump sum severance payments use a multiplier of two and one,
respectively;
. the lump sum pension payments is for the equivalent of two years' and one
year's additional service, respectively; and
. the welfare benefits continuation period is for two years and one year,
respectively.
WICOR is to notify Wisconsin Energy shortly before the merger of the
identity of those employees of the WICOR Companies that are to participate in
the severance policies, not to exceed four individuals in Tier 1, four
individuals in Tier 2, 10 individuals in Tier 3, and 30 individuals in Tier 4.
Wisconsin Energy has not determined the number or identity of participants it
will designate as eligible for the severance policies. If the merger has not
been completed by January 1, 2001, the severance policies become void.
Wisconsin Energy also has an existing severance policy covering approximately
20 executives which expires on April 28, 2000, providing benefits similar to
the Tier 2 benefits described above. However, any benefits payable under Tier
1, 2, 3 or 4 above are subject to an offset for benefits that might become
payable under this existing severance policy. Mr. Abdoo does not participate in
Wisconsin Energy's severance policy. He has a separate change of control
severance agreement.
49
<PAGE>
Amendments have also been made to two deferred compensation programs for Mr.
Schrader that will be effective upon the completion of the merger. Under both
programs supplemental retirement benefits are provided if Mr. Schrader remains
with the WICOR Companies until retirement age. The amendments protect Mr.
Schrader by adding eligibility provisions for the supplemental benefits in the
event Mr. Schrader is discharged without cause or quits with good reason. One
of the plans provides an annual benefit of $25,000 for 15 years. The other
provides an aggregate benefit of approximately $150,000 annually for 10 years,
a portion of which has already been earned regardless of whether the merger is
completed or whether he remains employed until retirement age. The benefits
under both plans generally commence as of the later of age 65 or termination of
employment. These supplemental benefits are subject to the aggregate "parachute
payments" limitations of the tax law that are described above under the caption
"--Severance Agreements."
New Directors. Under the merger agreement, Wisconsin Energy has promised to
take all action necessary to elect Mr. Wardeberg as vice chairman of Wisconsin
Energy's board of directors from the date of the merger throughout the term of
his employment agreement and until a successor is duly elected or appointed.
Wisconsin Energy has promised to nominate and solicit proxies in good faith to
elect Mr. Wardeberg as a director of Wisconsin Energy at each annual meeting at
which his term expires until the annual meeting of Wisconsin Energy
shareholders held in the year 2005, the year in which he attains age 70.
Wisconsin Energy has also promised to take all action necessary to elect as a
director of Wisconsin Energy another person selected by Wisconsin Energy and
reasonably acceptable to WICOR who is director of WICOR at the effective time
of the merger. This new director will hold office for a term expiring at the
first annual meeting of Wisconsin Energy shareholders after the effective time
of the merger. Wisconsin Energy has promised to nominate and solicit proxies in
good faith to elect this new director to a full term at that meeting. He or she
will continue as a director until a successor is duly elected or appointed. As
of the date of this joint proxy statement/prospectus, the person to be elected
as a director of Wisconsin Energy has not been selected.
Conversion of Stock Options and Stock-Based Awards. Under the merger
agreement, at the effective time of the merger, each then outstanding option to
purchase shares of WICOR common stock and each then outstanding WICOR equity-
based award or account will be assumed by Wisconsin Energy and converted into
an award or account of Wisconsin Energy or an option to purchase shares of
Wisconsin Energy common stock on terms adjusted to reflect the terms of the
merger. However, all options granted on or before June 27, 1999 (the date of
the merger agreement), will automatically become fully vested when the merger
becomes effective and the restrictions applicable to awards of restricted stock
made on or before June 27, 1999, will terminate. The unrestricted stock will be
converted into cash, shares of Wisconsin Energy common stock, or both, in the
merger. See "--Assumption and Conversion of WICOR Stock Options and Stock-Based
Awards." Assuming the merger is effective in the Spring of 2000, the number of
WICOR common shares subject to options whose vesting will accelerate as a
result of the merger, the weighted average exercise price of such options, and
the number of restricted WICOR common shares whose restrictions will terminate
as a result of the merger are shown for each WICOR executive officer in the
following table.
<TABLE>
<CAPTION>
Number of
Number of WICOR Restricted
Common Shares Weighted Average WICOR
Subject to Exercise Price Common Shares Which
Options Which Of Options Will Become
Name Will Vest Which Will Vest Unrestricted
---- --------------- ---------------- -------------------
<S> <C> <C> <C>
George Wardeberg.... 66,667 $23.63 14,400
Joseph Wenzler...... 40,000 $20.83 6,000
Thomas Schrader..... 60,000 $20.83 8,000
Bronson Haase....... 140,000 $22.62 --
James Donnelly...... 40,000 $20.83 6,000
</TABLE>
Consistent with the terms of the merger agreement, on July 27, 1999, the
board of directors of WICOR adopted a new one-time election applicable to
WICOR's directors' stock option plan. Under the terms of the directors' stock
option plan, former WICOR directors can only exercise stock options for up to
two years after the date they cease to be WICOR directors, but in any event not
later than the ten-year expiration date of the options. Most of the WICOR
directors will cease to be WICOR directors at the effective time of the merger.
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The new one-time election provides WICOR directors with the opportunity to
convert their options into stock units in the WICOR directors deferred
compensation plan. The election must have been made by August 31, 1999, but is
only effective at the completion of the merger. In addition, it is only
effective with respect to options outstanding at the completion of the merger.
The intention and net effect of the one-time election is to provide each WICOR
director the opportunity to delay the income tax consequences that would
otherwise apply upon the exercise of the director's stock options not more than
two years after the completion of the merger. One outside director of WICOR
made this election.
Employee Plans
In the merger agreement, Wisconsin Energy has agreed that all existing
employee benefit plans of the WICOR Companies or plans substantially comparable
in the aggregate will be maintained for the benefit of the employees or former
employees of the WICOR Companies for at least one year after the merger.
However, WICOR will terminate the Wisconsin Gas Company Employee Stock
Ownership Plan at the time of the merger, and the WICOR common stock it holds
will be exchanged for cash or shares of Wisconsin Energy common stock, or both,
on the same terms as for other WICOR shareholders. The cash or Wisconsin Energy
common stock it receives will then be distributed to the participants of that
plan. Under some of the employee benefit plans the merger will constitute a
"change in control" of WICOR that may entitle some WICOR employees to terminate
their employment agreements and receive change of control severance benefits.
See "--Interests of Certain Persons in the Merger." All eligible Wisconsin
Energy employee benefit plans will treat a person's prior service with the
WICOR Companies as service to the Wisconsin Energy Companies for purposes of
eligibility and vesting, but not necessarily for benefit accrual.
Management and Operations of WICOR After the Merger
After the merger, WICOR will be a wholly owned subsidiary of Wisconsin
Energy. The other WICOR Companies will become indirect subsidiaries of
Wisconsin Energy. Wisconsin Energy will designate the directors of the
surviving corporation, and Mr. Abdoo will be elected as chairman of the board
of the surviving corporation. The WICOR articles of incorporation and bylaws as
in effect immediately prior to the merger will be the articles of incorporation
and bylaws of the surviving corporation until amended in accordance with law.
Conduct of Business Pending the Merger
WICOR has agreed, pending completion of the merger, unless Wisconsin Energy
otherwise consents in writing, that it and the other WICOR Companies will do
certain things and not do other things in the conduct of their businesses.
Specifically, WICOR has promised:
. to carry on its business in the regular course and in substantially the
same manner as it was conducted prior to the date of the merger
agreement;
. to use, operate, maintain and repair all of its assets and properties in
a normal business manner;
. not to do or permit any act or omission which will cause a breach of any
of the material contracts identified in the merger agreement;
. not to grant any increase in the rate of pay of any of its employees,
directors or officers; not to institute or, except as required by law,
amend any employee benefit plan; and not to enter into or modify any
written employment arrangements; in each case except as disclosed in
connection with the merger agreement, as consistent with its normal past
business practices or as permitted under its bonus or incentive
compensation plans as in effect on the date of the merger agreement;
. not to create, incur or assume any indebtedness, except for:
(1) indebtedness incurred in the ordinary course of business by the
WICOR Companies consistent with past practice;
(2) indebtedness incurred to refinance or replace existing
indebtedness;
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(3) indebtedness of up to $50,000,000 in original principal amount for
transactions closed prior to the date of the merger agreement; and
(4) indebtedness of up to $125,000,000 in original principal amount
incurred in connection with permitted acquisitions by the WICOR
Companies;
. to use reasonable best efforts to preserve its business organization
intact, to retain the services of its present officers and key employees
and to preserve the goodwill of suppliers, customers, creditors and
others having business relationships with it;
. to comply in all material respects with all applicable laws;
. to timely and properly file all tax returns which are required to be
filed, and pay or make provision for the payment of all taxes owed by it;
. not to amend its articles of incorporation or bylaws;
. not to issue any additional shares of stock of any class (including any
shares of preferred stock) except for:
(1) issuances of shares of WICOR common stock upon the exercise of
options outstanding under the WICOR option plans;
(2) issuances of shares of WICOR common stock in connection with
permitted acquisitions in an amount not exceeding $10,000,000, with
the WICOR stock issued in the acquisitions valued at not less than
$31.50 per share, and
(3) issuances of not more than 38,000 restricted shares of WICOR common
stock in any fiscal year of WICOR from and after January 1, 2000,
through awards on specified terms granted to employees of the WICOR
Companies;
. not to grant any warrants, options or rights to subscribe for or acquire
any additional shares of stock of any class, except that WICOR may grant
options for not more than 630,000 shares of WICOR common stock in any
fiscal year of WICOR from and after January 1, 2000, on specified terms
and in a manner consistent with its past practices;
. not to declare or pay any dividend or make any capital or surplus
distributions of any nature, except for:
(1) cash dividends by subsidiaries of WICOR to WICOR; or
(2) regular quarterly cash dividends by WICOR on the outstanding WICOR
common stock with usual record and payment dates not exceeding,
during any fiscal year of WICOR, 102.3% of the cash dividends paid
by WICOR on the WICOR common stock during the immediately preceding
fiscal year of WICOR;
. not to redeem, purchase or otherwise acquire any of its capital stock,
except for market purchases of WICOR common stock:
(1) by the WICOR dividend reinvestment and stock purchase plan;
(2) for distribution pursuant to the terms of WICOR's deferred
compensation plans for directors;
(3) for issuance upon the exercise of options granted under WICOR's
director option plan; and
(4) to satisfy the needs or requirements for shares of WICOR common
stock of the 401(k) plans maintained by the WICOR Companies;
. not to recapitalize or reclassify any of its capital stock or liquidate
in whole or in part;
. not to sell, lease, license, encumber or otherwise dispose of any of its
assets:
(1) except in the ordinary course of business consistent with past
practice; and
(2) except for transactions which individually involve a purchase price
of less than $10,000,000 and collectively involve an aggregate
purchase price of less than $25,000,000;
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. not to acquire, or publicly propose or agree to acquire, by merger or by
purchase or otherwise, an equity interest in, all or any portion of the
assets of any person:
(1) except as disclosed in connection with the merger agreement; and
(2) except for transactions which do not involve any utility assets or
a public utility and which individually involve a purchase price of
less than $30,000,000 and collectively involve an aggregate
purchase price of less than $100,000,000;
. not to make capital expenditures in any fiscal year in excess of the
budgeted amounts;
. not to enter into any transactions involving electric power marketing
under federal authorization, and to apply for, and use reasonable best
efforts to obtain, the cancellation of the authorization for one of its
subsidiaries to engage in electric power marketing; and
. not to agree to take any of the actions described above.
Similarly, Wisconsin Energy has agreed, pending completion of the merger,
unless WICOR otherwise consents in writing, that it and the other Wisconsin
Energy Companies will do certain things and not do other things in the conduct
of their businesses. Specifically, Wisconsin Energy has promised:
. to use reasonable best efforts to preserve intact its business
organization, to keep available the services of its current officers and
key employees and to preserve its material business relationships with
customers and suppliers and to preserve goodwill, except as described in
its SEC reports filed prior to the date of the merger agreement and
except for the possible transfer of transmission assets or nuclear
assets, or both, of Wisconsin Electric for equity interests of another
entity;
. not to amend its articles of incorporation in a manner that changes the
fundamental attributes of the Wisconsin Energy common stock and not to
amend in any material respect the articles of incorporation of CEW
Acquisition;
. not to declare or pay any extraordinary cash dividends, excluding any
extraordinary cash dividends by a subsidiary of Wisconsin Energy to
Wisconsin Energy;
. not to take any action that is material and adverse to WICOR and the
WICOR shareholders as prospective shareholders of Wisconsin Energy and
that affects the WICOR shareholders disproportionately as compared to the
current Wisconsin Energy shareholders; and
. not to agree to take any of the actions described above.
WICOR and Wisconsin Energy have agreed to cooperate with each other
regarding the declaration of dividends with the intention that holders of WICOR
common stock will not receive two dividends and will not fail to receive one
dividend for any single calendar quarter with respect to their shares of WICOR
common stock and any shares of Wisconsin Energy common stock they receive in
the merger.
Representations, Warranties and Covenants
The merger agreement contains various representations and warranties by
Wisconsin Energy, CEW Acquisition and WICOR that are customary for a
transaction of this kind. The representations and warranties relate to:
. the respective organization, existence, and corporate power and authority
of each of the Wisconsin Energy Companies and each of the WICOR
Companies, and similar corporate matters;
. the capitalization of each company;
. the authorization, execution, delivery and performance and the
enforceability of the merger agreement;
. the absence of conflicts with, and violations of, law, the articles of
incorporation and bylaws, and certain contracts and agreements of each
company;
. the absence of adverse material litigation and litigation challenging the
transactions contemplated by the merger agreement;
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. reports and financial statements filed by each company with the SEC;
. the absence of any event, condition or fact which is, or reasonably may
be expected to be, materially adverse to the financial condition,
properties, business, results of operations or prospects of the WICOR
Companies taken as a whole;
. the existence, performance and legal effect of contracts relating to
employment, collective bargaining or indebtedness to which any of the
WICOR Companies is a party or is bound;
. insurance coverage and claims involving the WICOR Companies;
. the employee benefit plans of the WICOR Companies;
. the absence of any violations of law by any of the WICOR Companies;
. the lack of brokers', finders' or similar fees in connection with the
transactions contemplated by the merger agreement, except for the fees to
the respective financial advisors of Wisconsin Energy and WICOR;
. the filing of tax returns, payment of taxes and other tax matters with
respect to the WICOR Companies;
. governmental and regulatory approvals in connection with the merger
agreement and the merger;
. the absence for WICOR of:
(1) any pending merger, consolidation, share exchange, exchange of
securities, reorganization, business transaction or other similar
transaction;
(2) any sale lease, transfer or other disposition of all or
substantially all of the assets, in a single transaction or series
of related transactions of either the WICOR Companies, taken as a
whole, or WICOR's Wisconsin Gas or WICOR Industries subsidiaries;
(3) any sale of or tender offer or exchange offer for, or acquisition
by any person or group of beneficial owners of, 20% or more of the
outstanding capital stock of WICOR, Wisconsin Gas or WICOR
Industries in a single transaction or series of related
transactions; or
(4) any public announcement of a proposal, plan, intention or agreement
to do any of the things in items (1) through (3);
. labor matters with respect to the WICOR Companies;
. the accuracy and completeness of the statements of fact made by each of
Wisconsin Energy and WICOR in the merger agreement;
. the accuracy and completeness of information supplied by each of
Wisconsin Energy and WICOR for inclusion or incorporation by reference in
this joint proxy statement/prospectus and the registration statement of
which it is a part;
. that the votes described in this joint proxy statement/prospectus are the
only votes of the Wisconsin Energy shareholders and of the WICOR
shareholders required in connection with the merger agreement and related
transactions;
. the delivery of a fairness opinion by Chase, in the case of Wisconsin
Energy, and by Merrill Lynch, in the case of WICOR;
. compliance with applicable environmental laws, possession of material
environment, health and safety permits and other environmental issues
with respect to the WICOR Companies;
. Year 2000 compliance;
. the inapplicability of the supermajority/fair price provisions, business
combination provisions and control share acquisition provisions of
Wisconsin law or similar provisions of WICOR's articles of incorporation
or bylaws;
. a representation by WICOR that it will promptly take any actions
necessary to render the WICOR rights and rights plan inapplicable to the
merger and the other transactions contemplated by the merger agreement;
and
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. representations by both Wisconsin Energy and WICOR that neither
beneficially owns any shares of the common stock of the other.
In addition to the covenants described under "--Conduct of Business Pending
the Merger," the merger agreement contains covenants that:
. the WICOR Companies will afford Wisconsin Energy and its representatives
access to their books, records, financial information, facilities, key
personnel and other documents and materials and will consult with
Wisconsin Energy on a regular basis concerning operational, regulatory
and transition matters and the general status of ongoing business
operations;
. each party to the merger agreement will use reasonable best efforts, to
the extent within its control, to cause its representations and
warranties contained in the merger agreement to be true and correct in
all respects on the closing date of the merger, will take all reasonable
actions necessary to comply promptly with all legal requirements which
may be imposed on it with respect to the merger, will provide customary
"cold comfort" letters from its auditors dated within two business days
before the effective date of the registration statement of which this
joint proxy statement/prospectus is a part, and will take all reasonable
actions necessary to obtain any consents or approvals required in
connection with the merger or the taking of any action contemplated by
the merger agreement; and
. in determining whether to combine the business and operations of the
Wisconsin Gas subsidiary of WICOR and the gas distribution business of
Wisconsin Electric after the merger, Wisconsin Energy will make
reasonable, good faith efforts to maintain the name of the WICOR
subsidiary as the principal name of the combined businesses and will
appropriately consider other relevant business and regulatory factors in
making those decisions.
All representations, warranties and covenants of the parties (other than
covenants which relate to continuing matters) terminate at the effective time
of the merger.
Conditions to the Merger
The obligations of Wisconsin Energy and WICOR to close the merger are
subject to the fulfillment of the following conditions at or prior to the
closing:
. The other party must have performed and complied in all respects with its
obligations under the merger agreement that are required to be performed
or complied with prior to or on the closing date of the merger.
. There must not be any pending suit, action or other proceeding that
restrains or enjoins the merger and related transactions.
. The representations and warranties of the other party in the merger
agreement must have been accurate both when made and as of the closing
date of the merger, except where the effect of any breaches would not be
or would not be reasonably expected to be materially adverse to the
aggregate financial condition, properties, business, results of
operations or prospects of the breaching company and its subsidiaries
taken as a whole.
. During the period from the date of the merger agreement to the closing
date of the merger there must not have occurred and be continuing on the
closing date, any matter, event or state of facts that is or reasonably
may be expected to be materially adverse to the aggregate financial
condition, properties, business, results of operations or prospects of
the breaching company and its subsidiaries taken as a whole.
.The shareholders of WICOR and Wisconsin Energy must have approved the
merger agreement by the required vote, and WICOR and CEW Acquisition must
have executed and delivered the articles of merger.
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. The parties must have received all permissions, approvals, determinations,
consents and waivers from all appropriate state and federal regulatory
authorities, including the Public Service Commission of Wisconsin and the
SEC that are required (a) in order for the parties to complete the merger
and related transactions and (b) as a condition to the obligations of
Wisconsin Energy, so that Wisconsin Energy continues to be an exempt
holding company under the Public Utility Holding Company Act.
. The registration statement must continue to be effective.
. The parties must have complied with the federal antitrust premerger
notification requirements, and any "waiting periods" applicable to the
merger and to the transactions described in the merger agreement must have
expired or been terminated.
. As a condition to the obligations of Wisconsin Energy, no governmental
approval shall contain conditions which, in Wisconsin Energy's reasonable
judgment, are materially adverse to the WICOR Companies or the Wisconsin
Energy Companies.
. The New York Stock Exchange must have approved for listing, subject to
official notice of issuance, the shares of Wisconsin Energy common stock
to be issued or reserved for issuance pursuant to the merger agreement.
. Wisconsin Energy and WICOR must have received officers' certificates from
each other stating that the conditions set forth in the merger agreement
have been satisfied.
. As a condition to WICOR's obligations, Foley & Lardner, counsel to WICOR,
must have delivered its legal opinion to the effect that the merger will be
treated for federal income tax purposes as a tax-free organization within
the meaning of Section 368(a) of the Code, which it has done (see "Certain
Federal Income Tax Consequences of the Merger"), and the opinion must not
have been withdrawn or modified in any material respect as of the closing
date of the merger.
. As a condition to the obligations of Wisconsin Energy, Arthur Andersen
LLP, WICOR's independent public accountants, must have delivered an
independent public accountants' cold comfort letter in form and substance
reasonably satisfactory to Wisconsin Energy.
. As a condition to the obligations of Wisconsin Energy, Wisconsin Energy
must have received letter agreements relating to sales or transfers of
Wisconsin Energy common stock received in the merger (substantially in
the form attached as an exhibit to the merger agreement), duly executed
by each affiliate of WICOR (see "--Resale of Wisconsin Energy Common
Stock").
No Solicitation; Special Fee
The merger agreement required WICOR to immediately terminate any discussions
with any other parties with respect to certain types of proposals that may be
inconsistent with the merger. The types of proposals covered include:
. any merger, consolidation, share exchange, exchange of securities,
reorganization, business combination or other similar transaction
involving WICOR;
. any sale, lease, transfer or other disposition of all or substantially
all of the assets, in a single transaction or series of related
transactions, of either the WICOR Companies, taken as a whole, or WICOR's
Wisconsin Gas or nonregulated holding company subsidiaries;
. any sale of, or tender offer or exchange offer for, or acquisition by any
person or group of beneficial owners of, 20% or more of the outstanding
shares of capital stock of WICOR, Wisconsin Gas or WICOR's non-utility
holding company subsidiaries in a single transaction or a series of related
transactions; or
. any public announcement of a proposal, plan, intention or agreement to do
any of those things.
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The merger agreement also provides that WICOR and its subsidiaries or
officers, directors, employees, agents or other representatives will not
discuss or agree to any transaction of the types mentioned in this section
(other than the merger), on or prior to the date which is 21 months after the
date of termination of the merger agreement. This obligation applies if (a) the
merger agreement is terminated pursuant to provisions which permit Wisconsin
Energy to terminate upon the failure of WICOR to fulfill its obligations under
the merger agreement and (b) there is an offer relating to a covered
transaction at the time of the termination. This obligation also applies if the
merger agreement is terminated pursuant to other provisions which permit WICOR
or Wisconsin Energy to terminate if (1) WICOR's shareholders do not approve the
merger and (2) there is an offer of a covered transaction at the time of the
termination. However, WICOR is permitted to pursue and agree to transactions of
the types mentioned in this section if the WICOR board, after consultation with
its outside legal counsel, determines in good faith that doing so is consistent
with its fiduciary duties under applicable law.
The merger agreement generally prohibits WICOR from seeking or responding to
any request for information, expression of interest, inquiry, proposal or offer
relating in any manner to the types of transaction mentioned in this section.
The general prohibition is subject to an exception which permits the WICOR
board to respond to a proposal, after consultation with its outside legal
counsel, if the WICOR board determines in good faith that doing so is
consistent with its fiduciary duties under applicable law. This exception
applies only to a written bona fide unsolicited proposal concerning a
transaction of the any of the types mentioned in this section. Also, the
exception applies only if the WICOR board determines in good faith and in the
exercise of reasonable judgment, based in part on advice of its independent
nationally recognized financial advisors, that the proposal is more favorable
to the WICOR shareholders than the merger from a financial point of view and is
capable of being completed without undue delay taking into account all relevant
factors, including the financial ability of the other parties to complete the
proposal and the likelihood of regulatory approvals for the proposal. WICOR is
also expressly permitted to comply with its obligations under the federal
securities laws with respect to any proposal by means of a tender offer.
In the event the settlement of the shareholder litigation described under
the caption "Summary--Recent Developments" is not consummated, then the merger
agreement will provide that if WICOR receives a proposal of the types mentioned
in this section that is not permitted by the exception described in the
preceding paragraph and the proposal becomes public information, WICOR is
required to use reasonable best efforts to resist the proposal and take all
appropriate steps to have the WICOR board approve defensive measures,
including, but not limited to, adopting a shareholder rights plan or amendments
to existing shareholder rights plans.
WICOR must notify Wisconsin Energy within 24 hours following receipt by
WICOR of any proposal covered by this section, including the terms and
conditions of the proposal and the person making it. WICOR must also give
Wisconsin Energy at least five calendar days advance notice of any agreement
proposed to be entered into by WICOR with any person making a proposal covered
by this section.
After complying with these provisions, WICOR may, by notice to Wisconsin
Energy at any time prior to the effective time of the merger, terminate the
merger agreement if WICOR enters into, executes or agrees to a transaction of
the types described in this section following a good faith determination by the
WICOR board, after consulting with outside legal counsel, that entering into,
executing or agreeing to the other transaction is consistent with its fiduciary
duties under applicable law.
In order to induce Wisconsin Energy to enter into the merger agreement and
to compensate Wisconsin Energy for the time and expenses incurred in connection
with the merger agreement and the merger and the losses suffered by Wisconsin
Energy from foregone opportunities, the merger agreement provides that WICOR
will pay a special fee of $25,000,000 to Wisconsin Energy under the
circumstances described in this paragraph.
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In the event the settlement of the shareholder litigation described under the
caption "Summary--Recent Developments" is not consummated, the amount of the
special fee will be $30,000,000. The special fee is due only if specified
events occur on or prior to that date which is 21 months after the date of
termination of the merger agreement, provided that the termination is pursuant
to certain provisions of the merger agreement. The specified events that
trigger the special fee are:
. a person unrelated to Wisconsin Energy closes a transaction with WICOR of
any of the types mentioned in this section, or has publicly announced or
proposed that kind of transaction and closes the transaction more than 21
months after termination of the merger agreement;
. WICOR enters into an agreement with respect to a transaction of any of
the types mentioned in this section; or
. WICOR terminates the merger agreement for the purpose of pursuing a
proposal or transaction of the types described in this section.
However, no special fee is due with respect to mergers or similar
transactions unless:
(a) if WICOR is the actual party to the transaction:
(1) the persons who are WICOR shareholders immediately prior to the
transaction own 50% or less of the outstanding common stock of the
surviving entity after the transaction; and
(2) the directors of WICOR immediately prior to the transaction do not
constitute a majority of the directors of the surviving entity
immediately after the transaction; or
(b) if a direct or indirect subsidiary of WICOR is the actual party to the
transaction:
(1) the persons who are WICOR shareholders immediately prior to the
transaction own 50% or less of the outstanding WICOR common stock
after the transaction;
(2) WICOR, either directly or indirectly, owns 50% or less of the
surviving or resulting entity after the transaction; and
(3) the directors of WICOR immediately prior to the transaction do not
constitute a majority of the directors of WICOR immediately after
the transaction.
The special fee is to be paid in immediately available funds within five
business days after the occurrence of any of the specified events. If WICOR
does not pay the special fee when due, the merger agreement provides that the
unpaid portion of the special fee (including accrued interest) will accrue
interest at the annual rate of 12%, compounding monthly, until paid in full,
and that WICOR will pay all costs and expenses of Wisconsin Energy in
connection with any action taken by Wisconsin Energy to collect payment.
Termination; Amendment; Waiver
The merger agreement may be terminated and the transactions contemplated
thereby may be abandoned at any time prior to the closing, whether before or
after approval of the merger agreement by the WICOR shareholders or the
Wisconsin Energy shareholders or both, as follows:
(a) By mutual written agreement of Wisconsin Energy and WICOR, duly
authorized by the Wisconsin Energy and WICOR boards.
(b) By either Wisconsin Energy or WICOR by written notice to the other
party if:
(1) any court of competent jurisdiction shall have issued an order,
judgment, or decree permanently restraining, enjoining or otherwise
prohibiting the merger and such order, judgment, or decree shall
have become final and nonappealable; or
(2) if the merger has not occurred on or before July 1, 2000. However,
the deadline is automatically extended to January 1, 2001, if
required governmental approvals have not been obtained. Also, the
right to terminate under clause (2) will not be available to any
party whose failure to fulfill any obligation under the merger
agreement causes or results in the failure to complete the merger
on or before that date.
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(c) By Wisconsin Energy by written notice to WICOR if:
(1) there are one or more breaches of the representations and
warranties of WICOR made in the merger agreement as of the date of
the merger agreement, those breaches would or would be reasonably
likely to be materially adverse to the aggregate financial
condition, properties, business, results of operations or prospects
of WICOR and its subsidiaries taken as a whole, and the breaches
are not remedied within 45 calendar days after receipt by WICOR of
written notice from Wisconsin Energy specifying the nature of the
breaches and requesting that they be remedied;
(2) WICOR doesn't perform and comply in all respects with all of its
other agreements and covenants contained in the merger agreement
and the failures to perform or comply would or would be reasonably
likely to be materially adverse to the aggregate financial
condition, properties, business, results of operations or prospects
of WICOR and its subsidiaries taken as a whole, and the failures to
perform or comply are not remedied within 45 calendar days after
receipt by WICOR of written notice from Wisconsin Energy specifying
the nature of the failures to perform or comply and requesting that
they be remedied;
(3) Wisconsin Energy has held the Wisconsin Energy special meeting to
vote upon the issuance of Wisconsin Energy common stock under the
merger agreement and it does not receive the required vote of the
Wisconsin Energy shareholders;
(4) WICOR has held the WICOR special meeting to vote upon the merger
agreement and it does not receive the required vote of the WICOR
shareholders; or
(5) the WICOR board or any committee thereof: (A) withdraws or modifies
in any manner adverse to Wisconsin Energy its approval or
recommendation of the merger agreement or the merger, (B) fails to
reaffirm such approval or recommendation upon Wisconsin Energy's
request, or (C) approves or recommends any other transaction of the
types described above under "No Solicitation; Special Fee"; and
(d) by WICOR by written notice to Wisconsin Energy if:
(1) there are one or more breaches of the representations and
warranties of Wisconsin Energy made in the merger agreement as of
the date of the merger agreement, those breaches would or would be
reasonably likely to be materially adverse to the aggregate
financial condition, properties, business, results of operations or
prospects of Wisconsin Energy and its subsidiaries taken as a
whole, and the breaches are not remedied within 45 calendar days
after receipt by Wisconsin Energy of written notice from WICOR
specifying the nature of the breaches and requesting that they be
remedied;
(2) Wisconsin Energy doesn't perform and comply in all respects with
all of its agreements and covenants contained in the merger
agreement, the failures to perform or comply would or would be
reasonably likely to be materially adverse to the aggregate
financial condition, properties, business, results of operations or
prospects of Wisconsin Energy and its subsidiaries taken as a
whole, and the failures to perform or comply are not remedied
within 45 calendar days after receipt by Wisconsin Energy of
written notice from WICOR specifying the nature of the failures and
requesting that they be remedied;
(3) Wisconsin Energy has held the Wisconsin Energy special meeting to
vote upon the issuance of Wisconsin Energy common stock under the
merger agreement and it does not receive the required vote of the
Wisconsin Energy shareholders;
(4) WICOR has held the WICOR special meeting to vote on the merger
agreement and it does not receive the required vote of the WICOR
shareholders;
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(5) WICOR enters into, executes or agrees to a transaction of any of
the types described under "--No Solicitation; Special Fee" in
accordance with the merger agreement and following a good faith
determination by the WICOR board, partly based upon the advice of
outside legal counsel that entering into executing or agreeing to
the transaction is consistent with its fiduciary duties under
applicable law; or
(6) the Wisconsin Energy board or any committee thereof: (A) withdraws
or modifies in any manner adverse to WICOR its approval or
recommendation of the merger agreement or the merger, or (B) fails
to reaffirm such approval or recommendation upon WICOR's request.
If either Wisconsin Energy or WICOR terminates the merger agreement as
provided above, there will be no further obligation or liability of any party
(including its directors, officers, employees, agents, advisors or other
representatives) to the others except that:
. If the merger agreement is terminated by Wisconsin Energy as described
paragraphs (c) (1) or (2) above, then WICOR is required to promptly pay
Wisconsin Energy in cash an amount equal to Wisconsin Energy's documented
out of pocket expenses and fees, but not more than $3,000,000. In the
case of a willful breach by WICOR the $3,000,000 limit would not apply
and Wisconsin Energy would also be entitled to any additional amounts
that may be available as damages for the breach.
. If the merger agreement is terminated by WICOR as described paragraphs
(d) (1) or (2) above, then Wisconsin Energy is required to promptly pay
WICOR in cash an amount equal to WICOR's documented out of pocket
expenses and fees, but not more than $3,000,000. In the case of a willful
breach by Wisconsin Energy the $3,000,000 limit would not apply and WICOR
would also be entitled to any additional amounts that may be available as
damages for the breach.
. WICOR is required to pay Wisconsin Energy the special fee if the merger
agreement is terminated under the circumstances described under "--No
Solicitation; Special Fee," above.
. The obligations of Wisconsin Energy, CEW Acquisition and WICOR under the
confidentiality agreement dated January 14, 1999, and under the
provisions of the merger agreement regarding other expenses will not
terminate, and each party shall retain any and all remedies which it may
have for breach of contract provided by law based on another party's
willful failure to comply with the terms of the merger agreement.
The merger agreement may be amended by the parties at any time before or
after approval of the merger agreement by the holders of WICOR common stock and
by the holders of Wisconsin Energy common stock. However, after approval by the
WICOR shareholders, no amendment may be made without the further approval of
the holders of WICOR common stock if such amendment changes the merger
consideration or materially adversely affects the rights of the WICOR
shareholders, and after approval by the Wisconsin Energy shareholders, no
amendment may be made without the further approval of the holders of Wisconsin
Energy common stock if such amendment changes the merger consideration or
materially adversely affects the rights of the Wisconsin Energy shareholders.
If any of the conditions to the respective parties' obligations to
consummate the merger pursuant to the merger agreement have not been satisfied,
a party may nevertheless elect to proceed with the transactions contemplated by
the merger agreement (unless the condition relates to a non-waivable legal
requirement). Any election to proceed must be evidenced by a certificate signed
on behalf of the waiving party by an officer of that party.
Standstill Provisions
In the confidentiality agreement dated January 14, 1999, Wisconsin Energy
and WICOR each agreed that, during the negotiations leading up to the merger
and for a period of two years after negotiations have terminated, neither of
them will, directly or indirectly, without the prior written consent of the
other party:
. acquire, offer to acquire or agree to acquire any voting securities or
assets of the other party;
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. solicit proxies from shareholders of the other party or otherwise seek to
advise or influence any shareholder with respect to the voting of any
voting securities of the other party;
. make any public announcement with respect to, or submit a proposal or
offer of an extraordinary transaction involving the other party or any of
its securities or assets; or
. otherwise act, alone or with others, to seek to control or influence the
management, board of directors or policies of the other party, or advise,
assist or encourage others to do so.
The merger agreement provides that the confidentiality agreement remains in
effect.
Fees and Expenses
Except as otherwise described under "--Termination; Amendment; Waiver" and
except for (a) the filing fee relating to the antitrust premerger notification,
which will be paid by Wisconsin Energy and (b) printing expenses for this joint
proxy statement/prospectus and the registration statement, and the filing fee
relating thereto, which will be shared equally, Wisconsin Energy and WICOR will
each pay its own costs and expenses in connection with the merger agreement and
the transactions contemplated thereby.
Indemnification
The merger agreement provides that, after the merger, Wisconsin Energy will
indemnify specified people against certain risks and obligations. The people
covered by the indemnity are:
. all present and former officers, directors and employees of any of the
WICOR Companies, and
. the heirs and representatives of such persons.
The risks and obligations covered by the indemnity are:
. any losses, expenses, damages, liabilities or settlement amounts they
incur in connection with any claim arising out of actions or omissions
occurring at or prior to the effective time of the merger, whenever the
claim may be asserted, and
. any losses, expenses, damages, liabilities or settlement amounts incurred
in connection with any claim arising out of or pertaining to transactions
contemplated by the merger agreement.
The indemnity obligation applies only if the claims are, in whole or in
part, based on or arising out of the fact that the person is or was a director,
officer or employee of any of the WICOR Companies.
The merger agreement also provides that Wisconsin Energy will assume the
obligations of the WICOR Companies pursuant to their articles of incorporation
or bylaws and any indemnification agreement in effect as of the date of the
merger agreement. In addition, for at least six years after the effective time
of the merger, Wisconsin Energy will maintain in effect directors' and
officers' insurance covering those persons covered by WICOR's directors' and
officers' insurance as of the date of the merger agreement, with at least the
same coverage and amounts as the insurance that WICOR had in effect covering
such directors and officers on the date of the merger agreement, provided that
Wisconsin Energy will not be required to expend more than twice the amount
currently spent by WICOR for the insurance coverage.
Elections to Receive Cash or Stock; Conversion of Shares in the Merger
At the effective time of the merger, by virtue of the merger and without any
action on the part of WICOR, Wisconsin Energy or holders of their securities:
. each issued and outstanding share of common stock of Wisconsin Energy
will remain one share of common stock of Wisconsin Energy;
. any shares of WICOR common stock that are owned by any of the WICOR
Companies will be canceled and retired and cease to exist, and no
Wisconsin Energy common stock or other consideration will be issued or
delivered in exchange for those shares; and
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. each share of WICOR common stock issued and outstanding (other than any
shares to be canceled as described above) will be converted into and
become the right to receive the merger consideration in the form of cash,
Wisconsin Energy common stock, or a combination of cash and Wisconsin
Energy common stock, all as more fully described below. Whenever
Wisconsin Energy common stock is used to pay all or any part of the
merger consideration, it will be valued at, and the exchange ratio will
be determined by, the average closing sale price of Wisconsin Energy
common stock as reported on the NYSE Composite Tape on each of the 10
consecutive trading days ending with the fifth trading day immediately
preceding the closing date of the merger.
The amount of merger consideration to be received for each share of WICOR
common stock will be:
. $31.50 per share of WICOR common stock, if the merger occurs on or before
July 1, 2000, or
. $31.50 per share of WICOR common stock, plus an additional daily amount
computed at the rate of approximately 6% simple interest per annum
($31.50 x .0001644) for every day after July 1, 2000, until the merger
occurs, if the merger occurs after July 1, 2000.
Several factors will determine whether a WICOR shareholder will receive
cash, Wisconsin Energy common stock, or a combination of cash and Wisconsin
Energy common stock for the WICOR common stock surrendered in the merger. If
the average closing price of Wisconsin Energy common stock mentioned above is
less than $22.00, then Wisconsin Energy may elect to pay the merger
consideration entirely in cash. Otherwise, Wisconsin Energy has discretion to
select a portion of the aggregate merger consideration between and including
40% and 60% to be paid in the form of Wisconsin Energy common stock (excluding
fractional share interests to be paid in cash), with the remainder paid in
cash. Wisconsin Energy must make this election at least three business days
prior to the closing date of the merger. If any shares of Wisconsin Energy
common stock are issued in the merger, at least 40% of the shares of WICOR
common stock issued and outstanding immediately prior to the effective time of
the merger must be converted into whole shares of Wisconsin Energy common
stock, exclusive of all fractional share interests to be paid in cash.
Approximately 45 days before the date that we anticipate the merger will
become effective, Wisconsin Energy and WICOR will send a letter of transmittal
and form of election to WICOR shareholders of record for their use in
indicating that they have no preference between receiving cash or stock or
electing whether they wish to receive:
. cash for all of their WICOR shares;
. shares of Wisconsin Energy common stock for all of their WICOR shares; or
. cash for some of their WICOR shares and shares of Wisconsin Energy common
stock for the others.
Holders will generally be required to make a single election (including an
election split between cash and shares of Wisconsin Energy common stock).
Nominees, trustees and others who hold shares of WICOR common stock in
representative capacities may submit multiple forms of election so long as each
election form covers all of the shares of WICOR common stock held for a
particular beneficial owner. If any WICOR shareholder doesn't provide any
specification by the close of business on the third business day prior to the
effective time of the merger, we will treat that shareholder as not having a
preference between receiving cash or stock. All elections will be irrevocable.
If the aggregate requests for cash are less than or equal to the portion of
the aggregate merger consideration to be paid in cash, including payments of
cash in lieu of fractional shares, we will satisfy all of the requests for cash
in full and WICOR shareholders who requested stock may be required to take a
portion of their merger consideration in cash. If the aggregate requests for
cash are greater than the portion of the aggregate merger consideration to be
paid in cash, we will divide the available cash (after adjustment for cash to
be paid in lieu of fractional shares) proportionately among the WICOR shares
for which cash was requested (with the balance of the merger consideration for
those shares paid in Wisconsin Energy common stock), and we will pay the merger
consideration entirely in Wisconsin Energy common stock for all of the other
WICOR shares.
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If the aggregate requests for stock are less than or equal to the portion of
the aggregate merger consideration to be paid in stock, we will satisfy all of
the requests for stock in full and WICOR shareholders who requested cash may be
required to accept a portion of their merger consideration in stock. If the
aggregate requests for stock are greater than the portion of the aggregate
merger consideration to be paid in stock we will divide the available stock
proportionately among the shares for which stock was requested (with the
balance of the merger consideration for those shares paid in cash), and we will
pay the merger consideration entirely in cash for all of the other WICOR
shares.
We will pay cash in lieu of any fractional share of Wisconsin Energy common
stock, after aggregating all fractional share interests of any shareholder who
holds more than one certificate for WICOR common stock. However, accounts
established for WICOR shareholders in connection with the merger under the
Wisconsin Energy "Stock Plus" dividend reinvestment plan will record both whole
shares and any fraction of a share. See "--Exchange of WICOR Certificates; No
Fractional Shares" and "--Effect of the Merger on the WICOR Plan," below.
All shares of WICOR common stock converted as provided above will no longer
be outstanding and will automatically be canceled and retired and will cease to
exist. Each holder of a certificate representing, immediately prior to the
effective time of merger, any such shares of WICOR common stock will cease to
have any rights with respect those shares, except the right to receive the
merger consideration as described above. See "--Exchange of WICOR Certificates;
No Fractional Shares."
Marshall & Ilsley Trust Company, as trustee of various "401(k)"-type
employee benefit plans for the employees of the WICOR Companies, is the holder
of record of a number of shares of WICOR common stock. M&I will solicit the
instructions of each plan participant concerning the cash or stock decision
with respect to the portion of the WICOR common stock attributable to the
participant's plan account. M&I will then aggregate all of the participant
directions and elect on behalf of the eligible plans in total the portion of
WICOR common stock to be converted into cash and the portion to be converted
into Wisconsin Energy common stock. M&I has not yet determined what action it
will take with respect to WICOR common stock attributable to the plan accounts
of participants who do not provide instructions. However, the solicitation
materials provided to participants approximately 45 days before the anticipated
date for the merger to become effective will identify the action M&I will take
with respect to that stock. When the proceeds of the merger are received from
Wisconsin Energy by M&I, M&I will in turn invest the applicable proceeds for
the account of each participant. Any cash will automatically be invested in the
Stable Value Fund, the default fund for the plans, and any Wisconsin Energy
common stock will be invested in the company stock fund. Pursuant to the terms
of the plans, the participants will thereafter be entitled to change their
investment elections on a daily basis.
Exchange of WICOR Certificates; No Fractional Shares
Wisconsin Energy will designate a bank or trust company reasonably
acceptable to WICOR to act as Exchange Agent under the merger agreement. As of
the effective time of the merger, Wisconsin Energy will deposit with the
Exchange Agent, for the benefit of the holders of shares of WICOR common stock,
for exchange through the Exchange Agent, cash and certificates representing the
shares of Wisconsin Energy common stock issuable pursuant to the merger
agreement in exchange for outstanding shares of WICOR common stock. That cash
and those certificates for shares of Wisconsin Energy common stock, together
with any dividends or distributions and together with any cash to be paid for
fractional share interests, will be held as an exchange fund by the Exchange
Agent until paid to the former WICOR shareholders or otherwise transferred as
described in this section.
Approximately 45 calendar days before the anticipated effective time of the
merger, Wisconsin Energy will cause the Exchange Agent to mail to each holder
of record of a stock certificate representing WICOR shares a form of election
and letter of transmittal and instructions for surrendering the WICOR stock
certificate in exchange for cash or shares of Wisconsin Energy common stock or
both. Nominees, trustees and others who hold shares of WICOR common stock in
representative capacities may submit multiple forms of election so long as each
election form covers all of the shares of WICOR common stock held for a
particular beneficial owner.
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Please note that shareholders of WICOR should not submit their WICOR stock
certificates for exchange until the letter of transmittal and form of election,
with instructions, are received.
Upon surrender of a WICOR stock certificate for cancellation to the Exchange
Agent, together with a duly executed form of election and letter of transmittal
and any other documents the Exchange Agent may reasonably require, the holder
of a WICOR stock certificate will be entitled to receive in exchange:
. a certificate representing that number of whole shares of Wisconsin
Energy common stock into which the shares of WICOR common stock formerly
represented by the WICOR stock certificate surrendered have been
converted in the merger and cash in lieu of any fractional share of
Wisconsin Energy common stock to which such holder would otherwise be
entitled;
. cash into which the shares of WICOR common stock formerly represented by
the WICOR stock certificate surrendered have been converted in the
merger; or
. a combination of cash and shares of Wisconsin Energy common stock;
and the surrendered WICOR stock certificate will be canceled, all as more fully
described below.
At the effective time of the merger, the stock transfer books of WICOR will
be closed and there will be no further registration of transfers of shares of
WICOR common stock thereafter on the records of WICOR. After the effective time
of the merger, the holders of WICOR stock certificates outstanding immediately
prior to the effective time of the merger will cease to have any rights with
respect to the shares of WICOR common stock formerly represented by those
certificates except as otherwise provided in the merger agreement or by law.
In the event of a transfer of ownership of shares of WICOR common stock
which is not registered in the transfer records of WICOR, a certificate
representing the proper number of shares of Wisconsin Energy common stock, a
check in the proper amount of cash that the holder is entitled to receive in
respect of the WICOR shares pursuant to the merger agreement, and any cash in
lieu of a fractional share, will be delivered to the transferee if the WICOR
stock certificate which represented the shares of WICOR common stock is
presented to the Exchange Agent, accompanied by all documents required to make
the transfer and by evidence that any applicable stock transfer taxes have been
paid.
Until surrendered as contemplated by the merger agreement after the merger,
each WICOR stock certificate will represent only the right to receive the
merger consideration in cash or shares of Wisconsin Energy common stock, or
both, and cash in lieu of any fractional share interest as contemplated by the
merger agreement.
Wisconsin Energy will not pay dividends or make other distributions to the
holder of any unsurrendered WICOR stock certificate with respect to any shares
of Wisconsin Energy common stock represented by the WICOR stock certificate
after the merger, and no cash payment, including cash in lieu of a fractional
share, will be paid to the holder, until the holder sends in the WICOR stock
certificate. Subject to the effect of any applicable law, after we receive a
WICOR stock certificate, we will promptly pay to the holder of the certificate,
without interest:
. the amount of any cash payable with respect to the surrendered WICOR
stock certificate, including cash with respect to any fractional share of
Wisconsin Energy common stock to which the holder is otherwise entitled;
and
. the amount of any such dividends or distributions to which the holder is
entitled.
All shares of Wisconsin Energy common stock issued and cash paid upon
conversion of the WICOR common stock in accordance with the terms of the merger
agreement, and any cash paid in lieu of fractional share interests, will be
issued and paid in full satisfaction of all rights pertaining to the WICOR
common stock.
Wisconsin Energy will not issue fractional shares of its common stock in the
merger. Instead, all fractional share interests of a holder of more than one
WICOR stock certificate will be combined to maximize the number of whole shares
of Wisconsin Energy common stock to be issued and minimize the fractional
interests to be paid in cash. If a fractional share interest results after the
combination, Wisconsin Energy will pay the holder of
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a fractional share interest an amount in cash equal to the product obtained by
multiplying the fractional share interest by the average of the closing price
per share of Wisconsin Energy common stock as reported on the NYSE Composite
Tape on each of the 10 consecutive trading days ending on and including the
fifth trading day immediately preceding the closing date of the merger.
Promptly after the Exchange Agent determines the amount of cash to be paid to
holders of fractional share interests, the Exchange Agent will notify Wisconsin
Energy and Wisconsin Energy will deliver the cash to the Exchange Agent to be
paid to the holders as provided in the merger agreement.
If any portion of the exchange fund hasn't been paid or delivered to the
WICOR shareholders 12 months after the effective time of merger, Wisconsin
Energy will be entitled to receive it upon demand. If that occurs, any WICOR
shareholders who have not yet delivered their WICOR stock certificates to the
Exchange Agent must instead look only to Wisconsin Energy for payment of their
claim for cash or shares of Wisconsin Energy common stock, or both, and any
dividends or distributions with respect to Wisconsin Energy common stock.
Neither the Exchange Agent nor any party to the merger agreement will be liable
to any WICOR shareholder for any property delivered to any public official
pursuant to any abandoned property, escheat or similar law.
Wisconsin Energy will be entitled to deduct and withhold from the
consideration otherwise payable pursuant to the merger agreement to any WICOR
shareholder any amount that Wisconsin Energy is required to deduct and withhold
under any provision of federal, state, local or foreign tax law. Any withheld
amounts will be treated for all purposes of the merger agreement as having been
paid to the WICOR shareholder in respect of which the deduction and withholding
was made by Wisconsin Energy.
Effect of the Merger on the WICOR Plan
Upon completion of the merger, WICOR's Direct Stock Purchase and Dividend
Reinvestment Plan (the "WICOR Plan") will terminate and participants in the
plan will be enrolled in Wisconsin Energy's Stock Plus Investment Plan (the
"Wisconsin Energy Stock Plus"). Wisconsin Energy shares issued in exchange for
WICOR shares held by the WICOR Plan will be held in book-entry form by the
administrator of the Wisconsin Energy Stock Plus and cash dividends paid by
Wisconsin Energy on those shares will be reinvested in additional Wisconsin
Energy shares. Participants in the Wisconsin Energy Stock Plus can obtain
certificates for their plan shares, change dividend reinvestment levels, make
additional cash investments or withdraw from the plan by following specified
procedures. WICOR Plan participants will receive more information on the
Wisconsin Energy Stock Plus in connection with the completion of the merger.
ChaseMellon Shareholder Services LLC, as administrator of the WICOR Plan, is
the holder of record of the shares of WICOR common stock beneficially owned by
participants in the WICOR Plan. Approximately 45 days before the anticipated
date for the merger to become effective and in conjunction with the
distribution of election materials to holders of record of WICOR common stock,
ChaseMellon will solicit the instructions of each WICOR Plan participant
concerning the cash or stock decision with respect to the portion of the WICOR
common stock attributable to that participant's WICOR Plan account. ChaseMellon
will then aggregate all of the participant directions and elect on behalf of
the WICOR Plan the portion of WICOR common stock to be converted into cash and
the portion to be converted into Wisconsin Energy common stock. Participants in
the WICOR Plan who do not provide timely instructions to ChaseMellon concerning
the cash or stock election will be treated as not having a preference between
receiving cash or stock. When the proceeds of the merger are received from
Wisconsin Energy by ChaseMellon, ChaseMellon will in turn forward any cash
proceeds directly to the applicable participants, and will forward any shares
of Wisconsin Energy common stock directly to the administrator of the Wisconsin
Energy Stock Plus on the participants' behalf.
Accounts established under the Wisconsin Energy Stock Plus for participants
in the WICOR Plan and for other WICOR shareholders who elect to establish a
Wisconsin Energy Stock Plus account in connection with the merger will be
credited with the number of whole shares and any fractional share of Wisconsin
Energy common stock resulting from the conversion of these persons' WICOR
shares in the merger, instead of having any fractional share interest paid in
cash.
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Assumption and Conversion of WICOR Stock Options and Stock-Based Awards
At the effective time of the merger, each outstanding option to purchase
shares of WICOR common stock, whether vested or not vested, will be deemed to
be assumed by Wisconsin Energy and thereafter to constitute an option to
acquire shares of Wisconsin Energy common stock on the same terms and
conditions as were applicable under the WICOR option. Each converted option
will constitute the right to acquire the same number of shares of Wisconsin
Energy common stock as the holder of the WICOR option would have been entitled
to receive pursuant to the merger had the holder exercised the WICOR option in
full immediately prior to the merger and received entirely Wisconsin Energy
common stock (rounded to the nearest whole number). The exercise price per
share will be rounded to the nearest whole cent and will be equal to:
. the aggregate exercise price for the shares of WICOR common stock
otherwise purchasable pursuant to the WICOR option; divided by
. the number of full shares of Wisconsin Energy common stock deemed
purchasable pursuant to the WICOR option as described above.
At the effective time of the merger, each then outstanding equity-based
award or account, including stock equivalents, stock units and restricted
shares of WICOR common stock awarded after the date of the merger agreement but
excluding stock options, will be deemed to have been assumed by Wisconsin
Energy and thereafter will be deemed to be an award or account on the same
terms and conditions as were applicable under the WICOR award. The converted
award will constitute the number (rounded to the nearest whole number) of
shares or phantom shares, as the case may be, of Wisconsin Energy common stock
equal to the product of the number of WICOR shares or phantom shares times the
exchange ratio for converting WICOR common stock into Wisconsin Energy common
stock in the merger.
The restrictions applicable to awards of restricted stock that were
outstanding on June 27, 1999 (the date of the merger agreement), will cease at
the effective time of the merger, and the resulting unrestricted shares will be
converted in the merger into cash or shares of Wisconsin Energy common stock,
or both, as described above. See "--Elections to Receive Cash or Stock;
Conversion of Shares in the Merger."
At the effective time of the merger, Wisconsin Energy will assume each WICOR
option and award in accordance with the terms of the WICOR plan or agreement
under which it was issued or granted, adjusted as described above. Options that
were issued before June 27, 1999, will all become fully vested. Wisconsin
Energy will take all corporate action necessary to reserve for issuance a
sufficient number of shares of Wisconsin Energy common stock for delivery upon
exercise of the WICOR options and awards. Wisconsin Energy will file a
registration statement or a post-effective amendment to a registration
statement to register the Wisconsin Energy common stock subject to the WICOR
options and awards where registration is necessary to permit issuance of the
shares free of restrictive legends under the federal securities laws, and will
use its reasonable best efforts to keep that registration statement effective
for so long as the WICOR options or awards remain outstanding.
As of the WICOR record date, there were WICOR options outstanding to
purchase an aggregate of 2,833,637 shares of WICOR common stock, of which
options to purchase 1,649,833 shares were vested and options to purchase
1,183,804 shares were not vested. All of the non-vested options were granted
prior to June 27, 1999, and will vest automatically at the effective time of
the merger. On the same date, there were WICOR awards for an aggregate of
72,400 shares of restricted common stock, all of which were granted prior to
June 27, 1999. The restrictions applicable to all of these shares will lapse
automatically at the effective time of the merger.
Regulatory Requirements and Approvals
Before we complete the merger, we must obtain the necessary regulatory
approvals, as described below. We currently expect to receive those approvals
in time for the transaction to be completed by the Spring of 2000.
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State Approvals and Related Matters. Wisconsin Gas is regulated as a public
utility in the State of Wisconsin and is subject to the jurisdiction of the
Public Service Commission of Wisconsin (the "Wisconsin Commission").
Wisconsin Electric is regulated as a public utility in the States of
Wisconsin and Michigan and is subject to the jurisdiction of the Wisconsin
Commission and the Michigan Public Service Commission (the "Michigan
Commission"). Edison Sault is regulated as a public utility in the State of
Michigan and is subject to the jurisdiction of the Michigan Commission.
As a result of its ownership of Wisconsin Electric, Wisconsin Energy is a
public utility holding company (a "holding company") under Section 196.795 of
the Wisconsin Statutes, Wisconsin's public utility holding company law (the
"Wisconsin Holding Company Act"), and is subject to the jurisdiction of the
Wisconsin Commission as such. As a result of its ownership of Wisconsin Gas,
WICOR is also a public utility holding company and is subject to the
jurisdiction of the Wisconsin Commission. However, it is exempt from certain
provisions of the Wisconsin Holding Company Act as a "grandfathered" holding
company formed before the November 28, 1985 effective date of that Act.
The Wisconsin Holding Company Act prohibits any person from forming a
holding company, or acquiring or holding more than 10% of the outstanding
voting securities of a holding company, without prior approval of the Wisconsin
Commission. Accordingly, the merger requires the prior approval of the
Wisconsin Commission under the Wisconsin Holding Company Act because it will
result in Wisconsin Energy acquiring all of the outstanding voting securities
of WICOR. Wisconsin Energy filed an application with the Wisconsin Commission
for approval of the merger on July 20, 1999. In its application, Wisconsin
Energy has asked the Wisconsin Commission to permit it to recover the portion
of the acquisition premium that Wisconsin Energy will pay in the merger which
is attributable to WICOR's regulated utility assets. Recovery of the
acquisition premium would not require any increase in rates. Wisconsin Energy
proposes only that the Wisconsin Commission continue to apply to Wisconsin
Energy the principle stated by its staff and applied previously by the
Wisconsin Commission, which is that the acquiror, Wisconsin Energy, should be
allowed to retain the anticipated net cost savings that result from the merger
for a period of time adequate to recover the acquisition premium it is paying
to make those savings possible.
In order to approve the merger, the Wisconsin Commission must determine,
after investigation and an opportunity for hearing, that the merger is in the
best interests of utility consumers, investors and the public. The Wisconsin
Commission may attach to its approval conditions that it deems necessary,
including mechanisms for sharing benefits from the merger. No approval or
authorization of the Michigan Commission is required for the merger.
The following is a brief summary of some other provisions of the Wisconsin
Holding Company Act that apply to Wisconsin Energy.
The Wisconsin Commission, if it finds the capital of any public utility
affiliate will be impaired by payment of a dividend, may order the utility
affiliate to limit or cease payment of dividends to the holding company.
Various transactions by a public utility affiliate with others in the holding
company system are prohibited, including lending money, guaranteeing
obligations, combining advertising, providing utility service on terms
different from those for other consumers in the same class, and, without
Wisconsin Commission approval after it is established that the utility
affiliate will be paid at fair market value, certain sales or leases of real
property and use of services of utility employees.
The Wisconsin Holding Company Act limits non-utility diversification for
most utility holding companies, including Wisconsin Energy. Stated generally,
the book value of the assets as of December 31 of each year (net of valuation
accounts such as depreciation and excluding investments in system affiliates)
of all non-utility affiliates may not exceed the sum of:
. 25% of the book value of the assets of all public utility affiliates
engaged in the generation, transmission or distribution of electric
power;
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. a percentage, to be determined by the Wisconsin Commission, but not less
than 25%, of the book value of all assets of all public utility
affiliates engaged in providing utility service other than the
generation, transmission or distribution of electric power; and
. for public utility affiliates which engage in the provision of more than
one type of utility service, such as Wisconsin Electric, a percentage, to
be determined by the Wisconsin Commission, but not less than 25%, of the
book value of all assets devoted to providing utility service other than
the generation, transmission or distribution of electric power, plus 25%
of all of its remaining assets.
At December 31, 1998, the book value of the assets of Wisconsin Energy's
non-utility affiliates was approximately 12% of the book value of Wisconsin
Energy's utility affiliates. At June 30, 1999 (after the acquisition of the
United Illuminating assets by a non-utility subsidiary), the book value of the
assets of Wisconsin Energy's non-utility affiliates approximated 21% of the
book value of the assets of Wisconsin Energy's utility affiliates. As a
grandfathered holding company, WICOR is not subject to the same limits. By way
of a separate order, the Wisconsin Commission has limited WICOR's non-utility
investments to not more than 60% of WICOR's total capitalization calculated
using a 13-month rolling average. As of June 30, 1999, WICOR's non-utility
investments were approximately 39% of its total capitalization, and it could
invest an additional $344 million in non-utility assets without exceeding the
60% limitation. The effect of these non-utility diversification limitations
after the merger will depend upon how they are interpreted to apply and upon
the outcome of the legislative initiative to modify these limitations discussed
below. Without favorable regulatory treatment or legislation, the combined
company might be required to divest some assets or might be more limited in
acquiring additional non-utility assets in the future.
Wisconsin Energy is currently working with a broad-based group in an effort
to modify the asset cap provisions of the Wisconsin Holding Company Act.
Legislation is pending in both state legislative chambers which would provide
substantial flexibility to Wisconsin utility holding companies to engage in
certain non-utility businesses without the asset cap's restrictions on growth.
This flexible treatment would be available to a utility holding company that
transferred its electric utility transmission assets to a for-profit company,
the purpose of which would be to construct and maintain the electric
transmission system in Wisconsin. Each utility would own a share of the new
company proportional to the relative value of its asset contribution. This
legislation has the support of a broad-based coalition of utilities, consumer
groups, public power advocates, labor unions and state officials. It is being
considered as part of the biannual budget process currently underway in the
legislature. However, we cannot assure you that the current asset cap
restrictions will be modified or that the restrictions will not affect
Wisconsin Energy's future non-utility diversification activities.
In addition, the Wisconsin Holding Company Act requires the Wisconsin
Commission to periodically investigate the impact of the operation of the
holding company system on every public utility affiliate in the system. The
purpose of the investigation is to determine whether each non-utility affiliate
does, or can reasonably be expected to, foster business activities or develop
or operate commercial or industrial parks in the service territory of any
public utility affiliate, promote energy conservation or conduct a business
functionally related to the provision of utility service or the development of
energy resources. This requirement applies to Wisconsin Energy, but it does not
currently apply to WICOR.
The Wisconsin Commission also is authorized to order a holding company to
terminate its interest in a public utility affiliate if the Wisconsin
Commission finds that, based upon clear and convincing evidence, termination of
the interest is necessary to protect the interest of utility investors in a
financially healthy utility and the interest of consumers in reasonably
adequate utility service at a just and reasonable price.
Public Utility Holding Company Act. Wisconsin Energy and WICOR are each a
holding company that is exempt from most provisions of the federal Public
Utility Holding Company Act of 1935. However, Wisconsin Energy is required to
obtain SEC approval to indirectly acquire the voting securities of Wisconsin
Gas in the merger.
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Accordingly, the SEC must approve the merger under the Public Utility
Holding Company Act. We expect to file our application for that approval by the
end of August, 1999.
The Public Utility Holding Company Act directs the SEC to approve the merger
unless it finds that (1) the merger would tend to create detrimental
interlocking relations or a detrimental concentration of control, (2) the
consideration to be paid in the merger is not reasonable, or (3) the merger
would unduly complicate the capital structure of the holding company system
after the merger or would be detrimental to the proper functioning of that
holding company system. The SEC must also find that the merger complies with
applicable state law, tends toward the development of an integrated public
utility system and otherwise conforms to the Public Utility Holding Company
Act's integration and corporate simplification standards.
The Public Utility Holding Company Act requires the registration of entities
that are holding companies and are not otherwise exempt from the registration
requirements. It pervasively regulates the activities of registered holding
companies and their subsidiaries. Wisconsin Energy is currently exempt from the
registration and other requirements of the Public Utility Holding Company Act,
other than the requirement for prior SEC approval of the acquisition of 5% or
more of the voting securities of a public utility company. WICOR is also an
exempt holding company subject to the same exception. The basis of the
exemption for Wisconsin Energy and WICOR is that each of them and their public
utility subsidiaries are predominantly intrastate in character and carry on
their business substantially in a single state in which they are organized--
Wisconsin. The SEC may revoke the exemption if it finds the exemption to be
detrimental to the public interest or the interest of investors or consumers.
At this time, several legislative initiatives are being considered in the
United States Congress that would, among other things, repeal the Public
Utility Holding Company Act.
WICOR and Wisconsin Gas are both Wisconsin corporations and the service
territory of Wisconsin Gas is wholly within Wisconsin. Accordingly, we believe
that, after the merger, Wisconsin Energy will continue to qualify for its
current exemption under the Public Utility Holding Company Act and that WICOR
will also continue to be an exempt holding company.
Our application to obtain SEC approval of the merger will also request the
SEC to confirm that, following the merger, we will be entitled to maintain our
respective exemptions from registration under the Public Utility Holding
Company Act. Wisconsin Energy's obligation to complete the merger is
conditioned upon the continuation of its status as an exempt holding company.
Federal Power Act. We do not believe that the merger is subject to review by
the Federal Energy Regulatory Commission ("FERC") under the Federal Power Act.
The Federal Power Act requires FERC approval if a public utility seeks to
directly or indirectly sell or otherwise dispose of its facilities subject to
FERC jurisdiction of a value in excess of $50,000 or to merge or consolidate
those facilities with those of any other person or acquire any security of any
other public utility without first having obtained authorization from the FERC.
Assets subject to FERC jurisdiction are defined as facilities for the
transmission of electric energy in interstate commerce or for the sale of
electric energy at wholesale in interstate commerce or books and records for
transmission or wholesale sales in interstate commerce. A "public utility" is
defined under the Federal Power Act as any person who owns or operates
facilities subject to the jurisdiction of the FERC, with certain exceptions not
relevant here.
One of WICOR's subsidiaries has an electric power marketing tariff which is
a FERC jurisdictional asset. The WICOR subsidiary has never made sales of
electricity pursuant to its FERC tariff, and consequently the value of the
subsidiary's jurisdictional facilities should not exceed $50,000. In addition,
WICOR has filed with FERC to cancel its tariff. If it is determined that FERC
approval is required for the merger, we believe that approval should be
obtained within the same time frame as the other regulatory approvals.
Antitrust Clearance. The Hart-Scott-Rodino Antitrust Improvements Act and
the related rules and regulations provide that acquisition transactions like
the merger may not be completed until specified information has been submitted
to the Antitrust Division of the United States Department of Justice and the
Federal Trade Commission and specified waiting period requirements have been
satisfied. Wisconsin Energy
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and WICOR will file appropriate notifications under the HSR Act. The waiting
period under the HSR Act expires or terminates 30 days after the filing unless
early termination is received or a request for additional information is made
by either the Antitrust Division or the FTC. The expiration or early
termination of the HSR Act waiting period does not preclude the Antitrust
Division or the FTC, or any state, from challenging the merger on antitrust
grounds at any time before or after the effective time of the merger. Private
persons may also seek to take legal action under the antitrust laws under
certain circumstances.
If the merger is not completed within 12 months after the expiration or
early termination of the initial HSR Act waiting period, we would be required
to submit new information to the Antitrust Division and the FTC, and a new HSR
Act waiting period would have to expire or be earlier terminated before the
merger could be completed.
Other. Under the merger agreement, each party has agreed to take all
reasonable actions necessary to obtain, and to cooperate with the other parties
in obtaining, any consent, authorization, order or approval of, or any
exemption by, any governmental entity or other public or private person
required to be obtained in connection with the merger. To the parties' present
knowledge, the satisfaction of the HSR Act notification requirements, the
requirement that the registration statement shall have been declared effective
under the Securities Act, the approval of the Wisconsin Commission under the
Wisconsin Holding Company Act and the approval of the SEC under the Public
Utility Holding Company Act are the only material regulatory requirements
applicable to the merger.
We believe that we will receive the requisite regulatory approvals for the
merger, but there can be no assurance that those approvals will be received or
that, if received, the approvals will be obtained on terms which satisfy the
applicable conditions to the merger agreement. In this regard, Wisconsin Energy
may choose to not complete the merger in the event that regulatory approvals
are received, but those regulatory approvals impose conditions which in
Wisconsin Energy's reasonable judgment are materially adverse to the WICOR
Companies or the Wisconsin Energy Companies. See "--Conditions to the Merger."
If the merger were to require filings and approvals in certain foreign
jurisdictions where Wisconsin Energy or WICOR does business, the parties would
expect to make the required filings and to receive all necessary approvals. If
it appears that any approval which Wisconsin Energy and WICOR deem to be
material will not be obtained by the anticipated effective time of the merger,
the parties may, subject to the provisions of the merger agreement, delay the
effective time until the approvals are obtained.
Resale of Wisconsin Energy Common Stock
All shares of Wisconsin Energy common stock received by WICOR shareholders
in the merger will be freely transferable, except that shares of Wisconsin
Energy common stock received by persons who are deemed to be "affiliates" (as
that term is defined under the Securities Act) of Wisconsin Energy or WICOR
prior to the merger may be resold by them only in transactions permitted by the
resale provisions of Rule 145 promulgated under the Securities Act or as
otherwise permitted under the Securities Act. Persons who may be deemed to be
affiliates of Wisconsin Energy or WICOR generally include their executive
officers and directors as well as their principal shareholders. The merger
agreement requires WICOR to use reasonable best efforts to cause each of its
affiliates to execute a written letter agreement in substantially the form
attached to the merger agreement to the effect that the affiliate will not
sell, assign or transfer any of the shares of Wisconsin Energy common stock
received pursuant to the merger except as permitted by the Securities Act and
the rules and regulations of the SEC thereunder. It is a condition to the
obligations of Wisconsin Energy to complete the merger that Wisconsin Energy
shall have received the required letter agreement from each person who is an
affiliate of WICOR.
This joint proxy statement/prospectus does not cover resales of Wisconsin
Energy common stock received by any person who may be deemed to be an affiliate
of Wisconsin Energy or WICOR.
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Accounting Treatment
The merger is expected to be accounted for as a purchase of WICOR by
Wisconsin Energy in accordance with generally accepted accounting principles.
Under this method of accounting, the merger consideration will be allocated to
the fair value of the net assets acquired. The amount by which the total merger
consideration received by WICOR shareholders plus the total liabilities of
WICOR as of the effective time of the merger exceeds the fair market value of
its identifiable assets will initially be allocated to goodwill by Wisconsin
Energy for accounting purposes, or to an acquisition adjustment account if
reported in regulatory accounts.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following is a discussion of certain material federal income tax
consequences of the merger to Wisconsin Energy, WICOR and the holders of WICOR
common stock who are citizens or residents of the United States or that are
domestic corporations. This discussion is for general information only and does
not address all tax consequences of the merger. The summary may not apply to
WICOR shareholders in special situations (such as dealers in securities or
currencies, traders in securities, financial institutions, tax-exempt
organizations, insurance companies, persons holding shares of WICOR common
stock as part of a hedging, "straddle," conversion or other integrated
transaction, non-United States persons, persons whose functional currency is
not the United States dollar or persons who acquired their shares of WICOR
common stock pursuant to the exercise of employee stock options or warrants, or
otherwise as compensation). The discussion assumes that the shares of WICOR
common stock are held as capital assets. In addition, no information is
provided with respect to the tax consequences of the merger under applicable
foreign, state or local laws.
The completion of the merger is conditioned upon the receipt by WICOR of an
opinion from Foley & Lardner prior to the mailing of the joint proxy
statement/prospectus and the opinion not having been withdrawn or materially
modified prior to the closing date that the merger will be treated for federal
income tax purposes as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code, and that Wisconsin Energy, CEW Acquisition and WICOR
will each be a party to that reorganization within the meaning of Section
368(b) of the Code. Foley & Lardner has provided its opinion based upon the
assumption that Wisconsin Energy selects a stock percentage of at least 40% and
certain other customary assumptions and representations of fact, including
representations of fact contained in letters of Wisconsin Energy and WICOR to
Foley & Lardner, all of which must be true, correct and complete in all
material respects as of the effective time of the merger. No ruling has been
sought from the Internal Revenue Service as to the U.S. federal income tax
consequences of the merger. Although the Internal Revenue Service ordinarily
does not give rulings on merger transactions, its ruling policy would require
that at least 50% of the consideration to be paid in the merger be in the form
of Wisconsin Energy stock for the merger to be a tax-free reorganization.
However, the IRS's ruling policy is not necessarily its interpretation of
existing law, and there are court decisions that have upheld tax-free
reorganization treatment where less than 40% of the consideration was in the
form of stock. The opinion of Foley & Lardner is not binding upon the Internal
Revenue Service or any court. Accordingly, we cannot assure you that the
Internal Revenue Service will not contest the conclusions expressed in Foley &
Lardner's opinion or, if it does so, that a court will not agree with the IRS's
position.
Assuming the merger will qualify as a reorganization, no gain or loss will
be recognized by Wisconsin Energy, CEW Acquisition or WICOR as a result of the
merger. The pre-merger holders of Wisconsin Energy stock will not recognize
gain or loss as a result of the merger.
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The following discussion addresses certain federal income tax consequences
of the merger to a WICOR shareholder, assuming that the merger will qualify as
a reorganization.
Only Shares of Wisconsin Energy Common Stock Received
Except as discussed below with respect to cash received in lieu of a
fractional share of Wisconsin Energy common stock, a WICOR shareholder that
receives only shares of Wisconsin Energy common stock in exchange for the
holder's shares of WICOR common stock will not recognize gain or loss. The tax
basis of the shares of Wisconsin Energy common stock received in the merger
will be the same as the tax basis of the shares of WICOR common stock exchanged
in the merger. The holding period of the shares of Wisconsin Energy common
stock received will include the holding period of shares of WICOR common stock
exchanged in the merger.
Only Cash Received
A WICOR shareholder that receives solely cash in the merger in exchange for
the shareholder's shares of WICOR common stock generally will recognize capital
gain or loss measured by the difference between the amount of cash received
with respect to each share of WICOR common stock and the tax basis of each
share of WICOR common stock exchanged in the merger. If, however, any such
shareholder actually or constructively owns shares of Wisconsin Energy common
stock after the merger (as the result of constructive ownership of shares of
WICOR common stock that are exchanged for shares of Wisconsin Energy common
stock in the merger, prior, actual or constructive ownership of shares of
Wisconsin Energy common stock, or otherwise), the cash received by the
shareholder may, in certain circumstances, be taxed as a dividend. The
circumstances under which dividend treatment may apply and the resulting
consequences are similar to those discussed under "--Shares of Wisconsin Energy
Common Stock and Cash Received--Treatment of Gain Recognized," except that the
amount treated as a dividend would not be limited to the amount of the
shareholder's gain recognized in the transaction, and it is possible that there
would be some variation in the manner in which the tests under Section 302 of
the Code would be applied. See also "--Effect of Overlapping or Constructive
Ownership," for a general discussion of the effect of a shareholder's
overlapping ownership on the dividend/capital gain issue.
Shares of Wisconsin Energy Common Stock and Cash Received
General. Except as discussed below with respect to cash received in lieu of
a fractional share of Wisconsin Energy common stock, a WICOR shareholder that
receives both shares of Wisconsin Energy common stock and cash in the exchange
for shares of WICOR common stock will not recognize loss in the exchange.
However, under Section 356(a)(1) of the Code, the shareholder will recognize
gain (if any) with respect to each share of WICOR common stock exchanged
(measured by the sum of the fair market value of the portion of a share of
Wisconsin Energy common stock received for the share of WICOR common stock,
plus the amount of any cash received for the share of WICOR common stock, minus
the tax basis of such share of WICOR common stock) but only to the extent of
the amount of any cash received in exchange for the share of WICOR common
stock.
A WICOR shareholder may receive both shares of Wisconsin Energy common stock
and cash as the result of (a) making an election to receive some shares and
some cash, (b) making an election to receive all shares and being prorated (if
the election to receive all shares is oversubscribed), (c) making an election
to receive all cash and being prorated (if the election to receive all cash is
oversubscribed) or (d) failing to make any election (and neither the election
to receive all cash or all shares is oversubscribed).
Treatment of Gain Recognized. Any gain recognized will be taxed as either
gain from the sale or exchange of stock (i.e., capital gain) or as a dividend
(to the extent of the shareholder's ratable share of earnings and profits),
based upon whether, in the transaction described in the next sentence, the
shareholder's interest in Wisconsin Energy was reduced sufficiently so that the
cash received was not treated as a dividend under the tests of Section 302 of
the Code. For purposes of this determination, a WICOR shareholder will be
treated as if the shareholder had engaged in a hypothetical transaction in
which the shareholder and all other WICOR
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shareholders (a) received solely shares of Wisconsin Energy common stock in
exchange for all of their shares of WICOR common stock, and (b) thereafter had
a portion of the shares of Wisconsin Energy common stock redeemed for the cash
portion of the merger consideration. A WICOR shareholder's hypothetical
interest in Wisconsin Energy after step (a) is compared to the shareholder's
interest in Wisconsin Energy subsequent to the deemed redemption in step (b).
In each case, subject to limited exceptions, shares of Wisconsin Energy common
stock actually or constructively owned (under the constructive ownership rules
described in "--Effect of Overlapping or Constructive Ownership" below) by the
shareholder will be considered owned for purposes of applying this test, even
if the shares of Wisconsin Energy common stock were not received or deemed
received in the merger. If a shareholder is subjected to dividend treatment,
the entire cash portion of the merger consideration received by the shareholder
will be treated as a dividend to the extent of the shareholder's ratable share
of earnings and profits.
Under Section 302(b) of the Code, a distribution in redemption of stock will
not be treated as a dividend if, insofar as is here pertinent, (1) the
shareholder's interest in Wisconsin Energy is completely terminated as a result
of the transaction, (2) the shareholder's percentage interest in Wisconsin
Energy is reduced more than 20% in the redemption described above and after
considering all similar redemptions of other shareholders, or (3) the
shareholder's interest was "meaningfully reduced" by virtue of such redemption
(collectively, the "302 Tests"). While prong (3) of the 302 Tests requires a
determination based on a shareholder's particular facts and circumstances, the
IRS has indicated in published rulings that a distribution that results in any
actual reduction in interest of an extremely small, minority shareholder in a
publicly held corporation will meaningfully reduce the shareholder's interest
in the corporation, if the shareholder exercises no control with respect to
corporate affairs.
Application of 302 Tests--General. The application of the 302 Tests to a
shareholder that receives a combination of cash and Wisconsin Energy common
stock will depend upon, in addition to the type of election made by the
shareholder, the extent to which (1) the cash or stock portion of the merger
consideration is oversubscribed, (2) the shareholder actually or constructively
owns after the merger any shares of Wisconsin Energy common stock which the
shareholder did not receive, actually or constructively, in the merger (e.g.,
shares of Wisconsin Energy common stock which the shareholder owned actually or
constructively before the merger) and (3) the shareholder constructively owns
shares of WICOR common stock immediately prior to the effective time of the
merger.
Effect of Overlapping or Constructive Ownership. A WICOR shareholder that
(a) actually or constructively owns after the merger any shares of Wisconsin
Energy common stock which the shareholder did not receive, actually or
constructively, in the merger (e.g. shares of Wisconsin Energy common stock
which the shareholder owned actually or constructively before the merger), or
(b) constructively owns shares of WICOR common stock immediately prior to the
effective time of the merger or shares of Wisconsin Energy common stock
immediately after the effective time of the merger, will be required to take
those shares into account for purposes of applying the 302 Tests. Under the
applicable constructive ownership rules of Section 318 of the Code, a
shareholder will, in general, be treated as owning shares that are owned by
certain family members and other related entities, or that are subject to
options owned or deemed owned by the person. The actual or constructive
ownership of shares of WICOR common stock may, in some circumstances, have the
effect of causing a WICOR shareholder that would otherwise qualify for capital
gain treatment under the 302 Tests to fail to qualify and subject the
shareholder to dividend treatment on the entire cash portion of the merger
consideration paid to the shareholder (to the extent of the shareholder's
ratable share of earnings and profits), even if the shareholder receives solely
cash in the merger. Therefore, WICOR shareholders that (1) constructively own
shares of WICOR common stock or (2) actually or constructively own shares of
Wisconsin Energy common stock should consult their tax advisors as to the tax
consequences of receiving cash, whether the shareholder intends to make a cash
election, a stock election or a part cash and part stock election.
Treatment of Dividends to Corporate Shareholders. To the extent that cash
received in exchange for shares of WICOR common stock is treated as a dividend
to a corporate shareholder, the corporate shareholder will be (a) eligible for
a dividends received deduction (subject to applicable limitations) and (b)
subject to the "extraordinary dividend" provisions of the Code. Any cash which
is treated as a dividend to a corporate
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shareholder will constitute an extraordinary dividend, except as otherwise
provided in Treasury regulations which have yet to be adopted. Consequently,
the non-taxed portion of any such dividend would reduce a corporate
shareholder's adjusted tax basis in the shares of Wisconsin Energy common stock
received in the merger, but not below zero, and would thereafter be taxable as
capital gain.
Tax Basis and Holding Period of Shares of Wisconsin Energy Common Stock
Received in the Merger. The tax basis of each share of Wisconsin Energy common
stock received in the merger will be the same as the tax basis of the shares of
WICOR common stock exchanged, increased by the amount of gain recognized on the
exchange with respect to those shares of WICOR common stock (including any such
gain that is treated as a dividend), decreased by any portion of the shares of
WICOR common stock which are converted into cash in lieu of receipt of a
fractional share of Wisconsin Energy common stock, and further decreased by the
amount of cash received with respect to the shares of WICOR common stock (other
than cash received in lieu of a fractional share interest). As discussed above,
corporate shareholders are subject to special adjustments with respect to the
portion of any cash received in the merger which is taxable as a dividend. See
"--Treatment of Dividends to Corporate Shareholders." The holding period of the
shares of Wisconsin Energy common stock received will include the holding
period of the shares of WICOR common stock exchanged in the merger.
Fractional Shares
If a WICOR shareholder receives cash in lieu of a fractional share of
Wisconsin Energy common stock in the merger, the cash amount will be treated as
received in exchange for the fractional share of Wisconsin Energy common stock.
Gain or loss recognized as a result of that exchange will be equal to the cash
amount received for the fractional share of Wisconsin Energy common stock
reduced by the proportion of the shareholder's tax basis in shares of WICOR
common stock exchanged and allocable to the fractional share of Wisconsin
Energy common stock.
Only Cash Issued in the Merger
If only cash is issued to WICOR shareholders in the merger, the WICOR
shareholders generally will recognize capital gain or loss measured by the
difference between the amount of cash received with respect to each share of
WICOR common stock and the tax basis of each share of WICOR common stock
exchanged in the merger. The merger in such circumstances will be structured so
that neither WICOR nor Wisconsin Energy will recognize gain or loss as a result
of the merger and the basis of the assets of WICOR will not change. The holders
of Wisconsin Energy stock will not recognize gain or loss as a result of the
merger.
WICOR Companies' Employee Savings Plans
The WICOR Companies maintain various employee benefit plans in which
participant accounts may be invested in WICOR common stock. The instruction by
a plan participant to Marshall & Ilsley Trust Company, the plan trustee, to
convert that stock into cash, into Wisconsin Energy common stock, or partly
into cash and partly into Wisconsin Energy stock pursuant to the merger will
not result in a taxable event for the plan participant at the time of the
merger. However, the decision may have a long-term tax impact on the
participant.
Under the terms of the plans, company stock may be distributed in kind at
the election of the plan participant. In the event that company stock is
distributed in kind as part of a benefit payment which qualifies as a "lump sum
distribution" and the participant so elects, only the trust's original cost or
basis of the company stock will be taxed at that time to the participant; any
unrealized appreciation will not be taxed until such time as the company stock
is disposed of in a subsequent taxable transaction. To the extent the gain
recognized from the disposition does not exceed the net unrealized appreciation
at the time of the distribution from the plan, the gain recognized will be
taxed as long term capital gain. Any additional unrealized appreciation (i.e.,
growth in value subsequent to the distribution) will also be taxed as long term
capital gain if the stock has been held for more than one year after the
distribution date.
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The net unrealized appreciation rules provide an option for a plan
participant who receives company stock in a lump sum distribution. For any
participant interested in maximizing the portion of share value that is
attributed to "appreciation" as opposed to "basis" in the stock, the
instruction to M&I concerning the election to convert the WICOR common stock
into cash or Wisconsin Energy stock will be important. A conversion into cash
and subsequent investment by the participant in Wisconsin Energy common stock
will result in a new, presumably higher, basis and lower future appreciation. A
conversion into Wisconsin Energy common stock will result in the transfer in
basis by M&I from the participant's allocable interest in WICOR common stock to
the participant's allocable interest in Wisconsin Energy common stock.
The preceding discussion is intended only as a summary of certain federal
income tax consequences of the merger. It is not a complete analysis or
discussion of all potential tax effects that may be important to you. Thus, we
urge WICOR shareholders to consult their own tax advisors as to the specific
tax consequences to them of the merger, including tax return reporting
requirements, the applicability and effect of federal, state, local, and other
applicable tax laws and the effect of any proposed changes in the tax laws.
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THE COMPANIES
Wisconsin Energy
Wisconsin Energy was incorporated in Wisconsin in 1981 and became a holding
company in 1986. Its principal subsidiary is Wisconsin Electric Power Company,
an electric, gas and steam utility. Wisconsin Energy also has subsidiaries
engaged in various non-utility businesses. Wisconsin Energy's operations are
conducted in the following four business segments.
. Electric Operations: Wisconsin Energy's Wisconsin electric operations
generate, transmit, distribute and sell electric energy in a territory of
approximately 12,000 square miles with population estimated at 2,300,000
in southeastern (including the metropolitan Milwaukee area), east central
and northern Wisconsin and in the Upper Peninsula of Michigan. In May
1998, Wisconsin Energy acquired Edison Sault Electric Company, an
electric utility which serves approximately 21,000 residential,
commercial and industrial customers in a territory of approximately 2,000
square miles in Michigan's eastern Upper Peninsula. Wisconsin Energy
operates Wisconsin Electric and Edison Sault as separate utility
subsidiaries within their existing historical service territories.
Wisconsin Electric and Edison Sault continue to be separately regulated
by their respective states.
. Gas Operations: Wisconsin Energy's Wisconsin gas operations purchase,
distribute and sell natural gas to retail customers and transport
customer-owned gas in four distinct service areas of about 3,800 square
miles in Wisconsin: west and south of the City of Milwaukee, the Appleton
area, the Prairie due Chien area and portions of the counties in northern
Wisconsin. The gas service territory, which has an estimated population
of approximately 1,200,000, is largely within Wisconsin Electric's
electric service area.
. Steam Operations: Wisconsin Energy's steam operations generate,
distribute and sell steam supplied by Wisconsin Electric's Valley and
Milwaukee County Power Plants. Steam is used by customers for space
heating and process applications in the metropolitan Milwaukee area.
. Non-Utility Operations: Wisconsin Energy's non-utility operations seek to
grow shareholder value by leveraging on their core competencies.
Wisconsin Energy's non-utility subsidiaries are involved in various
activities, among which are development, ownership and operation of
electric generating facilities; waste/energy by-product utilization; and
real estate development.
Wisconsin Energy has its principal executive offices at 231 West Michigan
Street, P.O. Box 2949, Milwaukee, Wisconsin 53201; telephone number (414) 221-
2345. Additional information concerning Wisconsin Energy is included in the
Wisconsin Energy documents filed with the SEC which are incorporated by
reference in this joint proxy statement/prospectus. See "Where You Can Find
More Information."
WICOR
WICOR is a diversified holding company incorporated in Wisconsin in 1980
with two principal business groups: energy services and pump manufacturing.
WICOR's energy services subsidiaries include:
. Wisconsin Gas Company. Wisconsin Gas is the largest natural gas
distribution public utility in Wisconsin with approximately 529,000
residential, commercial and industrial customers in 524 communities
throughout Wisconsin. Its service area has a population of approximately
two million people. Wisconsin Gas' total throughput of natural gas for
1998 was approximately 1,145,000 therms, with each therm equal to 100,000
BTUs. In 1998 Wisconsin Gas secured approximately 98% of all new
residential heating, approximately 88% of existing residential and
commercial retrofit and approximately 70% of all new commercial
construction customers in its service territory, for a total net increase
of 8,000 customers in 1998 and more than 43,000 since 1993.
. WICOR Energy Services Company. WICOR Energy sells natural gas on a for-
profit basis and supplies gas to many large interruptible customers.
WICOR Energy operates primarily in Wisconsin.
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. FieldTech, Inc. FieldTech provides meter reading, billing services and
other technology services for natural gas, electric and water utilities
in 13 states.
WICOR's pump manufacturing subsidiaries include:
. Sta-Rite Industries, Inc., WICOR's first manufacturing subsidiary,
acquired in 1982.
. SHURflo Pump Manufacturing Co., which was acquired by WICOR in 1993.
. Hypro Corporation, which was acquired by WICOR in 1995.
WICOR's manufacturing subsidiaries manufacture pumps and fluid processing
and filtration equipment for residential, agricultural and industrial markets
worldwide. In the United States, manufactured products include jet,
centrifugal, sump, submersible and submersible turbine water pumps, water
storage and pressure tanks, residential and in-line pool and spa filters, pool
heaters and pump and tank systems. These products are used in a variety of
markets including the drinking water delivery system, livestock watering,
swimming pool, spa and hot tub, restaurant, recreational vehicle, marine,
agricultural and industrial markets. Internationally, manufacturing and
assembly are carried out in Australia, China, Germany, India, Italy, Mexico,
and New Zealand. Products manufactured in the United States and these countries
are sold in approximately 100 countries throughout the world. International
products are generally similar to those sold in the United States, but in many
instances have distinct features required for particular overseas markets.
WICOR has its principal executive offices at 626 East Wisconsin Avenue, P.O.
Box 334, Milwaukee, Wisconsin 53201; telephone (414) 291-7026. Additional
information concerning WICOR is included in the WICOR documents filed with the
SEC which are incorporated by reference in this joint proxy
statement/prospectus. See "Where You Can Find More Information."
DESCRIPTION OF WISCONSIN ENERGY CAPITAL STOCK
At September 9, 1999, the authorized capital stock of Wisconsin Energy
consisted of 325,000,000 shares of common stock, $.01 par value per share, of
which 117,589,619 shares were outstanding, and 15,000,000 shares of preferred
stock, $.01 par value per share, of which none were outstanding. The following
summary may not include all of the information that is important to you. If so,
we encourage you to read Wisconsin Energy's restated articles of incorporation
and bylaws and the appropriate provisions of the Wisconsin Business Corporation
Law because they will govern your legal rights. See "Where You Can Find More
Information."
Preferred Stock
Under the Wisconsin Energy articles, subject to any approval of the SEC
which may be required under the Public Utility Holding Company Act of 1935
should Wisconsin Energy become a registered holding company under that Act, the
Wisconsin Energy board is authorized to divide the Wisconsin Energy preferred
stock into series, to issue shares of any series and, within the limitations
set forth in the Wisconsin Energy articles or prescribed by law, to fix and
determine the relative rights and preferences of the shares of any series so
established, including the dividend rate, redemption price and terms, amount
payable upon liquidation, and any sinking fund provisions, conversion
privileges and voting rights. There are no present plans to issue any Wisconsin
Energy preferred stock.
Common Stock
The holders of Wisconsin Energy common stock are entitled to receive any
dividends that the Wisconsin Energy board may from time to time declare,
subject to any rights of holders of Wisconsin Energy preferred stock, if any is
issued. Each holder of Wisconsin Energy common stock is entitled to one vote
per share on each matter submitted to a vote at a meeting of shareholders,
subject to any class or series voting rights of holders of any Wisconsin Energy
preferred stock. The holders of Wisconsin Energy common stock are not entitled
to cumulate votes for the election of directors. In the event of any
liquidation, dissolution or winding-up of Wisconsin Energy, the holders of
Wisconsin Energy common stock, subject to any rights of the holders of
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any Wisconsin Energy preferred stock, will be entitled to receive the
remainder, if any, of the assets of Wisconsin Energy after the discharge of its
liabilities. Holders of Wisconsin Energy common stock are not entitled to
preemptive rights to subscribe for or purchase any part of any new or
additional issue of stock or securities convertible into stock. The Wisconsin
Energy common stock does not have any redemption provisions or conversion
rights.
The shares of Wisconsin Energy common stock to be issued pursuant to the
terms of the merger agreement, when so issued, will be fully paid and
nonassessable. Shareholders are subject to potential personal liability under
section 180.0622(2)(b) of the Wisconsin Business Corporation Law, as judicially
interpreted, for debts owing to employees of the company for services performed
for the company, but not exceeding six months' service in any one case.
Wisconsin Energy's ability to pay dividends depends primarily upon the
ability of its subsidiaries to pay dividends or otherwise transfer funds to it.
Various financing arrangements, charter provisions and regulatory requirements
may impose restrictions on the ability of Wisconsin Energy's public utility
subsidiaries to transfer funds to Wisconsin Energy in the form of cash
dividends, loans or advances. Under the Wisconsin Holding Company Act,
Wisconsin Energy's public utility affiliates are prohibited from loaning funds,
either directly or indirectly, to Wisconsin Energy. The Wisconsin Commission
has the power to preclude the payment of dividends by Wisconsin Energy's public
utility affiliates to Wisconsin Energy. If Wisconsin Energy were to become a
registered holding company under the Public Utility Holding Company Act, the
SEC would have the power to preclude the payment of dividends to Wisconsin
Energy by its public utility subsidiaries and would also have the power to
preclude the payment of dividends by Wisconsin Energy. See "The Merger and the
Merger Agreement--Regulatory Requirements and Approvals."
Certain Anti-Takeover Provisions
Wisconsin Energy's articles and bylaws contain provisions which may have the
effect of discouraging persons from acquiring large blocks of Wisconsin Energy
stock or delaying or preventing a change in control of Wisconsin Energy. The
material provisions which may have such an effect are:
. an anti-greenmail provision prohibiting the purchase of shares of
Wisconsin Energy common stock at a market premium from any person whom
the Wisconsin Energy board believes to be a beneficial owner of more than
5% of the outstanding shares of Wisconsin Energy common stock unless such
holder owned the shares for at least two years, the purchase was approved
by a majority of the combined voting power of the shareholders, or the
purchase is pursuant to a tender offer to all holders of Wisconsin Energy
common stock on the same terms;
. classification of the Wisconsin Energy board into three classes with the
term of only one class expiring each year;
. a provision permitting removal of a director without cause only by at
least an 80% shareholder vote;
. authorization for the Wisconsin Energy board, subject to any required
regulatory approval, to issue Wisconsin Energy preferred stock in series
and to fix rights and preferences of the series, including, among other
things, whether, and to what extent, the shares of any series will have
voting rights and the extent of the preferences of the shares of any
series with respect to dividends and other matters;
. advance notice procedures with respect to shareholder nominations of
directors or shareholder proposals at a meeting of shareholders, other
than those adopted or recommended by the Wisconsin Energy board; and
. provisions permitting amendment of some of these and related provisions
only by at least an 80% shareholder vote at a meeting.
In addition, Wisconsin law, under which Wisconsin Energy is incorporated,
contains supermajority voting/"fair price" provisions and business combination
provisions that would be applicable to certain mergers, share exchanges or
sales of substantially all assets involving Wisconsin Energy or a subsidiary
and a significant shareholder, and which could have the effect of substantially
increasing the cost to the acquiror and thus discouraging any such transaction.
See "Comparison of Shareholder Rights--Defensive Provisions."
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Wisconsin law permits shareholders to adopt an amendment to a corporation's
articles of incorporation opting out of the supermajority voting/"fair price"
provisions but not the business combination provisions. The Wisconsin Energy
articles do not opt out of the supermajority voting/"fair price" provisions and
require an 80% shareholder vote to do so, but do opt out of the control share
acquisition provisions of Wisconsin law. See "Comparison of Shareholder
Rights--Defensive Provisions."
The Wisconsin Holding Company Act also provides that the approval of the
Public Service Commission of Wisconsin is necessary for any acquisition or
holding of more than 10% of the outstanding voting shares of a public utility
holding company such as Wisconsin Energy. Certain acquisitions of outstanding
voting shares of Wisconsin Energy would also require approval of the SEC under
the Public Utility Holding Company Act. See "The Merger and the Merger
Agreement--Regulatory Requirements and Approvals" and "Comparison of
Shareholder Rights."
Transfer Agent
Wisconsin Energy's common stock is listed on the NYSE. The transfer agent
and registrar for Wisconsin Energy's common stock is BankBoston, N.A.
COMPARISON OF SHAREHOLDER RIGHTS
Both Wisconsin Energy and WICOR are incorporated in the State of Wisconsin.
A shareholder of WICOR, whose rights are currently governed by Wisconsin law
and the WICOR articles of incorporation and bylaws will, when the merger
occurs, become a shareholder of Wisconsin Energy unless the shareholder
receives only cash in the merger. The shareholder's rights will then be
governed by Wisconsin law and the Wisconsin Energy articles of incorporation
and bylaws.
Certain differences between the rights of shareholders of Wisconsin Energy
and shareholders of WICOR, and certain other important provisions of Wisconsin
law affecting shareholder rights, are described below. Because this is a
summary, it may not include all of the information that is important to you.
You are encouraged to review the articles and bylaws of Wisconsin Energy and
WICOR, and the applicable provisions of Wisconsin law, because these are the
legal documents that determine your rights. Copies of each company's articles
of incorporation and bylaws have been filed with the SEC. See "Where You Can
Find More Information."
Authorized Capital Stock
The Wisconsin Energy articles of incorporation authorize the issuance of
325,000,000 shares of Wisconsin Energy common stock, of which 117,589,619
shares were issued and outstanding as of the Wisconsin Energy record date, and
the issuance of 15,000,000 shares of Wisconsin Energy preferred stock, none of
which were issued and outstanding as of the record date. The Wisconsin Energy
board of directors is authorized to divide the preferred stock into series, to
issue shares of any series and to determine the relative rights and preferences
of the shares of any series.
The WICOR articles of incorporation authorize the issuance of 120,000,000
shares of WICOR common stock, of which 37,602,800 shares were issued and
outstanding as of the WICOR record date, and the issuance of 1,500,000 shares
of WICOR preferred stock, none of which were issued and outstanding as of the
record date. The WICOR board of directors is authorized to divide the preferred
stock into series, to issue shares of any series and to determine the relative
rights and preferences of the shares of any series, including dividend rates,
redemption prices, liquidation rights and preferences, conversion rights, if
any, sinking fund provisions, if any, and voting rights, if any.
Voting Rights
The WICOR articles of incorporation and the Wisconsin Energy articles of
incorporation each provide that each share of their respective common stock is
entitled to one vote on each matter properly submitted to a vote of
shareholders. The voting rights of holders of WICOR preferred stock and of
Wisconsin Energy preferred stock, if any were to be issued, would be determined
by the board of directors of the respective company at the
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time the preferred stock is issued, except under the limited circumstances when
Wisconsin law may require voting rights with respect to the preferred stock of
either company. Neither the WICOR articles of incorporation nor the Wisconsin
Energy articles of incorporation provide for cumulative voting in the election
of directors. A provision of Wisconsin law that is applicable to WICOR but not
to Wisconsin Energy restricts the voting power of shares held by any person in
excess of 20% of the voting power in the election of directors to 10% of the
normal voting power of those shares under certain circumstances.
See "--Defensive Provisions--Control Share Acquisitions," below.
Board of Directors
The WICOR articles of incorporation provide that the general powers, number,
classification, tenure and qualifications of its directors will be as set forth
in the WICOR bylaws. The articles of incorporation specify that those bylaw
provisions may be amended only by the affirmative vote of shareholders holding
at least 75% of the voting power of the then outstanding shares generally
possessing voting rights in the election of directors, or by the number of
directors in the two largest classes of directors provided in the bylaws plus
one director (i.e., currently by 7 of the 8 directors). The WICOR bylaws
provide that the corporation will have eight directors divided into three
classes consisting of four directors, two directors and two directors,
respectively, with the term of one class expiring each year. Each director
holds office for a term expiring at the third annual meeting of shareholders
following election and until the director's successor is elected and qualified.
The WICOR bylaws also provide that the retirement or resignation of a director
who is an officer of WICOR or an affiliated corporation, but not the chief
executive officer of WICOR, will take effect at the time he or she ceases to be
an officer, and that any other director will resign from the board of directors
effective at the annual meeting of shareholders next following the date on
which he or she attains the age of 70 years.
The Wisconsin Energy articles of incorporation provide that the number of
directors will be fixed from time to time in the manner provided in the
Wisconsin Energy bylaws, which may provide that the directors will be divided
into three classes as permitted by Wisconsin law. The Wisconsin Energy bylaws
provide that the number of directors will be fixed from time to time by the
Wisconsin Energy board of directors, but will not be less than three. The
Wisconsin Energy directors are divided into three classes, with the term of one
class expiring each year. The classes are required to be as nearly equal in
number of directors as possible. The Wisconsin Energy board of directors
currently consists of nine directors. At the effective time of the merger the
size of the Wisconsin Energy board of directors will be adjusted, as
appropriate, to include Mr. Wardeberg and one other WICOR director selected by
Wisconsin Energy and reasonably acceptable to WICOR. Wisconsin Energy's
directors' retirement and tenure policy contemplates that an independent
director will resign after the annual meeting in the year in which the director
attains the age of 70 and that no employee director will serve as a director
after ceasing to be an employee, unless requested to do so.
Removal of Directors
The WICOR articles of incorporation provide that any director may be removed
from office, but only for cause, by the affirmative vote of shareholders
holding at least a majority of the voting power of the then outstanding shares
generally possessing voting rights in the election of directors. "Cause" is
defined to exist only if the director whose removal is proposed:
. has been convicted of a felony; or
. has been adjudged liable for willful misconduct in the performance of his
or her duties to WICOR in a matter which has a material adverse effect on
the business of WICOR;
and the matter is no longer subject to direct appeal.
However, if the board of directors has recommended removal of a director by
a resolution adopted by at least the number of directors in the two largest
classes of directors provided in the bylaws plus one director (i.e., currently
by 7 of the 8 directors), then the shareholders may remove the director from
office without cause by the affirmative vote of shareholders holding at least a
majority of the voting power of the then outstanding
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shares generally possessing voting rights in the election of directors. In
addition, effective April 22, 1999, any non-employee director is required to
submit his or her resignation as a director for consideration, and for
acceptance or rejection by the board of directors in the best interests of the
corporation, if the director:
. has a material change in his or her position or employment;
. is the subject of medical attention that might reflect unfavorably on his
or her continued service on the board of directors; or
. finds himself or herself to be in a situation that may present, or appear
to present, a conflict of interest with the corporation.
The Wisconsin Energy bylaws provide that directors may be removed for cause
(which is not defined by the bylaws) by a majority vote of the combined voting
power of the shareholders. Removal without cause requires an 80% vote of the
combined voting power of the shareholders.
Vacancies on the Board of Directors
The WICOR articles of incorporation provide that vacancies on the WICOR
board will be filled by appointment made by a majority of the remaining
directors, even if less than a quorum. The Wisconsin Energy bylaws provide that
all vacancies may be filled by the shareholders or by a majority of the
remaining directors, even if less than a quorum. Both the WICOR articles of
incorporation and the Wisconsin Energy bylaws provide that any new director
elected to fill a vacancy will serve for the remainder of the then present term
of the class of directors in which the vacancy is being filled.
Defensive Provisions
Control Share Acquisitions. Wisconsin law provides that, unless a
corporation's articles of incorporation provide otherwise, the voting power of
shares of a "resident domestic corporation" such as WICOR or Wisconsin Energy
held by any person (including two or more persons acting as a group) in excess
of 20% of the voting power in the election of directors is limited (in voting
on any matter) to 10% of the full voting power of those shares. This
restriction does not apply to shares acquired directly from the resident
domestic corporation, or in certain specified transactions, or incident to a
transaction in which the corporation's shareholders have approved restoration
of the full voting power of the otherwise restricted shares.
The WICOR articles of incorporation make no reference to the control share
acquisition provisions of the Wisconsin law, so they apply to WICOR. Wisconsin
Energy has opted out of this statutory provision in its articles of
incorporation.
Anti-Greenmail Provisions. Wisconsin law restricts the ability of certain
publicly held corporations, such as WICOR and Wisconsin Energy, to repurchase
voting shares at above market value from certain large shareholders, absent
approval from the shareholders as a whole, unless an identical or better offer
to purchase is made to all owners of voting shares and securities which may be
converted into voting shares. These provisions apply during a takeover offer to
purchases of more than 5% of the corporation's shares from a person or group
that holds more than 3% of the corporation's voting shares and has held the
shares for less than two years.
The WICOR articles of incorporation make no reference to the anti-greenmail
provisions, so they apply to WICOR. They also apply to Wisconsin Energy. In
addition, the Wisconsin Energy articles of incorporation contain a somewhat
different anti-greenmail provision that prohibits Wisconsin Energy from
purchasing shares of Wisconsin Energy common stock from a 5% holder at a market
premium, unless the holder has owned the shares for at least two years, the
purchase was approved by a majority of the combined voting power of the
shareholders, or the purchase is pursuant to a tender offer to all holders on
the same terms.
Wisconsin law also provides that shareholder approval is required for the
corporation during a takeover offer to sell or option assets of the corporation
which amount to at least 10% of the market value of the corporation, unless the
corporation has at least three independent directors (directors who are not
officers or employees) and a majority of the independent directors vote not to
have this provision apply to the corporation.
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The Wisconsin Energy articles of incorporation require an 80% shareholder
vote for any amendment to the articles of incorporation that would have the
effect of opting out of the provisions described above.
Fair Price Provisions. Wisconsin law provides that in addition to any
approval otherwise required, certain mergers, share exchanges or sales, leases,
exchanges or other dispositions involving a resident domestic corporation, such
as WICOR or Wisconsin Energy, and any significant shareholder are subject to a
super-majority vote of shareholders unless certain fair price standards have
been met. For this purpose a significant shareholder is defined as either a 10%
shareholder or an affiliate of the resident domestic corporation who was a 10%
shareholder at any time within the preceding two years. The super-majority vote
that is required by the statute consists of:
. approval of 80% of the total voting power of the corporation, and
. approval of at least 66 2/3% of the voting power not beneficially owned
by the significant shareholder or its affiliates or associates.
However, a supermajority vote is not required if the following "fair price"
standards are satisfied:
. the consideration is in cash or in the form of consideration used to
acquire the greatest number of shares, and
. the amount of the consideration equals the greater of:
(a) the highest price paid by the significant shareholder within the
prior two-year period;
(b) in the case of a tender offer, the market value of the shares on
the date the significant shareholder commences the tender offer; or
(c) the highest liquidation or dissolution distribution to which the
shareholders would be entitled.
The WICOR articles of incorporation make no reference to the fair price
provisions, so they apply to WICOR. They also apply to Wisconsin Energy. The
Wisconsin Energy articles of incorporation require an 80% shareholder vote for
any amendment to the articles of incorporation that would have the effect of
opting out of the fair price provisions.
Business combination provisions. Wisconsin law restricts resident domestic
corporations, such as WICOR and Wisconsin Energy, from engaging in specified
business combinations involving an "interested stockholder" or an affiliate or
associate of an interested stockholder. For this purpose an "interested
stockholder" is a shareholder who beneficially owns at least 10% of the voting
power of the outstanding stock of the resident domestic corporation, or is an
affiliate or associate of the resident domestic corporation and beneficially
owned at least 10% of the voting power of the then outstanding stock within the
preceding three years. The specified business combinations include:
. a merger or statutory share exchange;
. a sale or other disposition of assets having a market value equal to at
least 5% of the market value of the assets or outstanding stock of the
corporation or representing at least 10% of its earning power or income;
. the issuance or transfer of stock or rights to purchase stock with a
market value equal to at least 5% of the outstanding stock;
. the adoption of a plan or proposal for liquidation or dissolution;
. receipt by the interested stockholder or the interested stockholder's
affiliates or associates of a disproportionate direct or indirect benefit
of a loan of other financial benefit provided by or through the resident
domestic corporation or its subsidiaries; or
. certain other transactions that have the direct or indirect effect of
materially increasing the proportionate share of voting stock
beneficially owned by the interested stockholder or the interested
stockholder's affiliates or associates.
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For a period of three years following the date that the interested
stockholder becomes an interested stockholder, the resident domestic
corporation is prohibited from engaging in any of the specified transactions
with an interested stockholder unless the specified transaction or the purchase
of stock by the interested stockholder is approved by the board of directors of
the resident domestic corporation before the share acquisition date. Following
the three year period, a specified transaction is permitted only if:
. the acquisition of shares by the interested stockholder was approved by
the board of directors of the resident domestic corporation before the
share acquisition date;
. the specified transaction is approved by a majority of the voting stock
of the resident domestic corporation that is not owned by the interested
stockholder; or
. the consideration to be received by the corporation's shareholders
satisfies the "fair price" provisions of the statute as to form and
amount.
Both WICOR and Wisconsin Energy are subject to these provisions.
Wisconsin Public Utility Holding Company Provisions. The Wisconsin Holding
Company Act provides that no person may take, hold or acquire, directly or
indirectly, more than 10% of the outstanding voting securities of a public
utility holding company, with the unconditional power to vote those securities,
unless the Public Service Commission of Wisconsin has determined that the
acquisition is in the best interests of utility consumers, investors and the
public. Persons acquiring 10% or more of the voting securities of WICOR common
stock or Wisconsin Energy common stock are subject to the provisions of the
statute. The merger will require approval of the Wisconsin Commission under
this statute. See "The Merger and the Merger Agreement--Regulatory Requirements
and Approvals."
Amendments to Articles of Incorporation
Wisconsin law generally provides that amendments to the articles of
incorporation may be approved by a majority of the votes cast by each class or
series of shares entitled to vote separately on the amendment, if a quorum
exists, unless a greater proportion is required by statute, by the articles of
incorporation or by the bylaws.
The Wisconsin Energy articles of incorporation generally provide that
amendments require the affirmative vote of a majority of the votes entitled to
be cast on the amendment. However, amendments to certain sections, including
those relating to the preferred stock provisions, restrictions on greenmail,
the voting requirements for amending the articles of incorporation and any
provision that would have the effect of rendering inapplicable to Wisconsin
Energy the supermajority/fair price and anti-greenmail provisions of the law,
require the affirmative vote of 80% of the votes entitled to be cast thereon.
The WICOR articles of incorporation generally provide that amendments
require the affirmative vote of a majority of the shares entitled to vote on
the amendment. However, amendments to certain sections, including those
relating to the powers, number, classification, removal and appointment of
directors, require the affirmative vote of the shareholders holding at least
75% of the voting power of all outstanding stock generally possessing voting
rights in the election of directors, considered for this purpose as a single
class.
Amendments to Bylaws
Under Wisconsin law and the articles of incorporation of Wisconsin Energy,
the bylaws generally may be amended or repealed by either the board of
directors or by a majority of the votes cast at a shareholders meeting at which
a quorum is present, except that no bylaw adopted by the shareholders may be
amended by the board of directors if the bylaw so provides. However, the WICOR
bylaws require the affirmative vote of a majority of the voting power of the
outstanding shares present or represented at a meeting of the shareholders at
which a quorum is in attendance in order to amend or repeal the bylaws.
Certain provisions of the WICOR bylaws, including those relating to the
powers, number and classification of directors, may generally be amended only
by the affirmative vote of shareholders holding at least 75% of the voting
power of the outstanding stock generally possessing voting rights in the
election of directors. See "--Board of Directors," above.
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Amendments to certain provisions of the Wisconsin Energy bylaws require the
approval of holders of 80% of the combined voting power of the then outstanding
shares of common stock and preferred stock, if any. Those provisions include:
. provisions authorizing shareholder action by unanimous consent;
. provisions fixing the number of directors;
. provisions providing for a classified board of directors;
. provisions establishing procedures for removing directors;
. provisions requiring notice for board meetings;
. provisions providing indemnification rights for officers and directors;
and
. provisions setting forth the vote required for certain amendments.
Extraordinary Transactions
Wisconsin law provides that the approval by holders of a majority of all
votes entitled to be cast is required for a Wisconsin corporation to effect
certain extraordinary transactions, including the sale of all or substantially
all of its assets, or a merger, share exchange or dissolution, unless a greater
vote or a vote by voting groups is otherwise required by statute or by the
corporation's articles of incorporation or bylaws. Approval of extraordinary
transactions by shareholders of either WICOR or Wisconsin Energy requires only
the majority vote described above.
Notice of Shareholder Proposals/Nominations
Wisconsin Energy's bylaws require a specified advance notice of the
nomination by a shareholder of a person for election as a director or the
introduction by shareholders of business at annual or special meetings of
shareholders. The WICOR articles of incorporation and bylaws do not contain
similar provisions.
Shareholder Rights Plans
WICOR has a shareholder rights plan. This rights plan and the rights will
not interfere with the merger with Wisconsin Energy, which was fully negotiated
by WICOR and has been approved by the WICOR board of directors. The rights
issued under the rights plan are designed to provide WICOR with additional
protection against abusive takeover tactics such as partial tender offers,
selective open-market purchases and offers for all of the shares of WICOR at
less than full value or at an inappropriate time. The rights are intended to
assure that the WICOR board of directors has the ability to protect WICOR
shareholders and WICOR if efforts are made to gain control of WICOR in a manner
that is not in the best interests of WICOR and all of its shareholders.
The rights will be exercisable only if a person or group acquires 20% or
more of the WICOR's common stock or announces a tender offer that would result
in ownership by a person or group of 20% or more of WICOR's common stock. Any
such person or group is referred to as an "Acquiring Person." Each right will
initially entitle shareholders to buy one-half of one share of WICOR's common
stock at an initial exercise price of $75 per full share (equivalent to $37.50
for each one-half share), subject to adjustment. If any person becomes an
Acquiring Person, each right (subject to certain limitations) will entitle its
holder (other than the Acquiring Person, whose rights are canceled) to
purchase, at the rights' then-current exercise price, a number of common shares
of WICOR or of the acquiror having a market value at the time of twice the
right's per full share exercise price. The WICOR board of directors is also
authorized to reduce the 20% thresholds referred to above to not less than 10%.
The rights plan and the rights will expire on August 29, 2009, subject to
extension.
The rights are redeemable by WICOR at a price of $.001 per right at any time
prior to any person or group becoming an Acquiring Person. Additionally, at any
time after a person or group becomes an Acquiring Person and prior to the
acquisition of 50% or more of the outstanding WICOR common stock, WICOR can
exchange the rights (other than rights owned by the Acquiring Person, which
become void), in whole or in part, at an exchange ratio of one WICOR share per
right.
Wisconsin Energy does not have a shareholder rights plan.
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UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma combined condensed financial information
for the combined company after the merger are based on the historical
consolidated financial statements of Wisconsin Energy and WICOR, combined and
adjusted to give effect to the merger and related transactions (including the
related financing), as described in the notes to this information. Certain
amounts in the WICOR financial statements have been reclassified to conform to
Wisconsin Energy's presentation. The allocation of the estimated cost savings
from the merger, net of costs incurred to achieve such estimated cost savings,
will be subject to regulatory review and approval. None of the estimated cost
savings, the costs to achieve such savings, nor transaction costs (other than
estimated debt issue costs) are reflected in the unaudited pro forma combined
condensed income statement information. It is important that you read this pro
forma information in conjunction with the historical financial statements and
notes thereto which are incorporated by reference in this joint proxy
statement/prospectus. See "Where You Can Find More Information."
The unaudited pro forma combined condensed income statements for the year
ended December 31, 1998 and for the six months ended June 30, 1999 and 1998
present the results for Wisconsin Energy and WICOR as if the merger had
occurred on January 1, 1998. The unaudited pro forma combined condensed balance
sheet as of June 30, 1999 gives effect to the merger as of that date.
The merger consideration will consist of between 40% and 60% Wisconsin
Energy common stock, with the remainder paid in cash, but could consist of 100%
cash if Wisconsin Energy's average share price during the valuation period
before the merger is less than $22.00 and Wisconsin Energy elects to pay all
cash. We have assumed that the merger consideration will consist of 40% stock
and 60% cash and have described in the footnotes the pro forma differences that
would occur should the merger consideration consist of either 60% stock and 40%
cash or of 100% cash. We have also assumed: (a) the exercise prior to the
merger of all outstanding options to purchase WICOR common stock; and (b) that
the exchange ratio is 1.2569 Wisconsin Energy shares per WICOR share, which is
$31.50 divided by $25.0625, the closing price of Wisconsin Energy common stock
on June 30, 1999. The actual exchange ratio will depend upon the average of the
closing prices of Wisconsin Energy common stock on the New York Stock Exchange
during a valuation period consisting of the 10 trading days ending with the
fifth trading day prior to the merger; therefore, it will not be determined
until shortly before the closing.
The pro forma adjustments are based upon preliminary estimates, information
currently available and assumptions that management believes are reasonable
under the circumstances. Wisconsin Energy's actual consolidated financial
statements will reflect the results of the merger on and after its effective
date rather than the dates indicated above. You should not rely on the
unaudited combined condensed pro forma financial data as an indication of the
results of operations or financial position that would have been achieved if
the merger had taken place earlier or of the results of operations or financial
position of the combined company after completion of the merger.
The merger will be accounted for by the purchase method and, therefore,
assets and liabilities of WICOR will be recorded at their fair values. The
excess of the purchase price over the fair value of the net assets at the
effective time of the merger will be recorded as goodwill. Allocations included
in the pro forma information are based on analysis which is not yet completed.
Accordingly, the final allocation of the purchase price may differ, perhaps
significantly, from the amounts shown in this pro forma information.
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WISCONSIN ENERGY CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
REFLECTING COMPLETION OF THE MERGER
Six Months Ended June 30, 1999
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Wisconsin Pro Forma Pro Forma
Energy (a) WICOR Adjustments Combined
---------- -------- ----------- ----------
<S> <C> <C> <C> <C>
Operating Revenues........... $1,095,725 $529,573 $ -- $1,625,298
Operating Expenses:
Fuel....................... 164,944 -- -- 164,944
Purchased Power............ 102,701 -- -- 102,701
Cost of Gas Sold........... 96,606 159,380 -- 255,986
Cost of Goods Sold......... -- 178,788 -- 178,788
Other Operation and
Maintenance Expenses...... 360,855 103,599 500 (c)
1,757 (b) 466,711
Depreciation and
Amortization.............. 131,399 18,313 8,616 (d)
4,350 (e) 162,678
Property and Revenue Taxes. 36,873 4,223 (1,757)(b) 39,339
---------- -------- -------- ----------
Pretax Operating Income...... 202,347 65,270 (13,466) 254,151
Interest Charges and Other... (69,514) (8,173) (22,835)(f) (100,522)
Other Income and Deductions.. 23,434 (119) -- 23,315
---------- -------- -------- ----------
Income Before Income Taxes... 156,267 56,978 (36,301) 176,944
Provision (Benefit) for
Income Taxes................ 53,853 22,120 (10,520)(g) 65,453
---------- -------- -------- ----------
Net Income................... $ 102,414 $ 34,858 $(25,781) $ 111,491
========== ======== ======== ==========
Weighted Average Common
Shares...................... 116,272 20,348 (h) 136,620
Earnings Per Share (Basic and
Diluted).................... $ 0.88 $ 0.82(i)
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Information
86
<PAGE>
WISCONSIN ENERGY CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
REFLECTING COMPLETION OF THE MERGER
Six Months Ended June 30, 1998
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Wisconsin
Energy Pro Forma Pro Forma
(a) WICOR Adjustments Combined
--------- -------- ----------- ----------
<S> <C> <C> <C> <C>
Operating Revenues............ $991,253 $523,206 $ -- $1,514,459
Operating Expenses:
Fuel........................ 154,108 -- -- 154,108
Purchased Power............. 79,283 -- -- 79,283
Cost of Gas Sold............ 103,406 171,498 -- 274,904
Cost of Goods Sold.......... -- 174,818 -- 174,818
Other Operation and
Maintenance Expenses....... 340,792 97,770 500 (c)
1,888 (b) 440,950
Depreciation and
Amortization............... 122,021 17,404 8,616 (d)
4,350 (e) 152,391
Property and Revenue Taxes.. 31,276 4,827 (1,888)(b) 34,215
-------- -------- -------- ----------
Pretax Operating Income....... 160,367 56,889 (13,466) 203,790
Interest Charges and Other.... (58,964) (8,585) (22,835)(f) (90,384)
Other Income and Deductions... 15,824 1,666 -- 17,490
-------- -------- -------- ----------
Income Before Income Taxes.... 117,227 49,970 (36,301) 130,896
Provision (Benefit) for Income
Taxes........................ 39,325 18,983 (10,520)(g) 47,788
-------- -------- -------- ----------
Net Income.................... $ 77,902 $ 30,987 $(25,781) $ 83,108
======== ======== ======== ==========
Weighted Average Common
Shares....................... 113,279 20,348 (h) 133,627
Earnings Per Share (Basic and
Diluted) .................... $ 0.69 $ 0.62 (i)
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Information
87
<PAGE>
WISCONSIN ENERGY CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT
REFLECTING COMPLETION OF THE MERGER
Year Ended December 31, 1998
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Wisconsin Pro Forma Pro Forma
Energy (a) WICOR Adjustments Combined
---------- -------- ----------- ----------
<S> <C> <C> <C> <C>
Operating Revenues.......... $2,039,433 $944,183 $ -- $2,983,616
Operating Expenses:
Fuel...................... 308,385 -- -- 308,385
Purchased Power........... 177,852 -- -- 177,852
Cost of Gas Sold.......... 175,475 295,601 -- 471,076
Cost of Goods Sold........ -- 329,248 -- 329,248
Other Operation and
Maintenance Expenses..... 691,535 190,674 1,000 (c)
3,295 (b) 886,504
Depreciation and
Amortization............. 248,337 35,038 17,232 (d)
8,700 (e) 309,307
Property and Revenue
Taxes.................... 63,095 9,039 (3,295)(b) 68,839
---------- -------- -------- ----------
Pretax Operating Income..... 374,754 84,583 (26,932) 432,405
Interest Charges and Other.. (121,221) (16,746) (45,669)(f) (183,636)
Other income and Deductions. 26,765 3,706 -- 30,471
---------- -------- -------- ----------
Income Before Income Taxes.. 280,298 71,543 (72,601) 279,240
Provision (Benefit) for
Income Taxes............... 92,166 26,048 (21,040)(g) 97,174
---------- -------- -------- ----------
Net Income.................. $ 188,132 $ 45,495 $(51,561) $ 182,066
========== ======== ======== ==========
Weighted Average Common
Shares..................... 114,315 20,348 (h) 134,663
Earnings Per Share (Basic
and Diluted)............... $ 1.65 $ 1.35 (i)
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Information
88
<PAGE>
WISCONSIN ENERGY CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
REFLECTING COMPLETION OF THE MERGER
June 30, 1999
(In Thousands)
<TABLE>
<CAPTION>
Wisconsin Pro Forma Pro Forma
Energy (a) WICOR Adjustments Combined
---------- -------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS:
Property, Plant & Equipment....... $3,798,985 $445,976 $ 87,000 (j) $4,331,961
Other Property and Investments.... 864,800 -- 7,737 (b) 872,537
Current Assets
Cash & cash equivalents......... 35,369 8,752 -- 44,121
Accounts receivable-net,
including accrued utility
revenues....................... 305,882 162,480 -- 468,362
Materials, supplies and
inventory...................... 209,852 102,915 12,700 (j)
6,798 (b) 332,265
Prepayments and other current
assets......................... 79,988 32,939 (6,798)(b) 106,129
---------- -------- -------- ----------
Total Current Assets.......... 631,091 307,086 12,700 950,877
---------- -------- -------- ----------
Deferred Charges and Other Assets.
Goodwill........................ -- 83,024 689,297 (k) 772,321
Regulatory assets............... 208,384 56,082 -- 264,466
Accumulated deferred income
taxes.......................... 206,010 -- 20,056 (b) 226,066
Other assets, including prepaid
pension costs.................. 107,307 90,687 54,900 (l)
(7,737)(b) 245,157
---------- -------- -------- ----------
Total Deferred Charges and
Other Assets................. 521,701 229,793 756,516 1,508,010
---------- -------- -------- ----------
Total Assets.................. $5,816,577 $982,855 $863,953 $7,663,385
========== ======== ======== ==========
CAPITALIZATION AND LIABILITIES:
Capitalization
Common stock equity............. $1,951,907 $423,826 $ 80,135 (m) $2,455,868
Preferred stock................. 30,450 -- -- 30,450
Long-term debt.................. 1,979,368 204,524 722,062 (m) 2,905,954
Wisconsin Energy obligated
redeemable preferred securities
of subsidiary trust............ 200,000 -- -- 200,000
---------- -------- -------- ----------
Total Capitalization.......... 4,161,725 628,350 802,197 5,592,272
---------- -------- -------- ----------
Current Liabilities
Short-term debt, including long-
term debt due currently........ 403,842 19,209 -- 423,051
Accounts payable................ 162,182 73,999 -- 236,181
Accrued liabilities and other... 152,522 92,451 20,500 (j) 265,473
---------- -------- -------- ----------
Total Current Liabilities..... 718,546 185,659 20,500 924,705
---------- -------- -------- ----------
Deferred Credits and Other
Liabilities
Accumulated deferred income
taxes.......................... 582,080 49,347 68,900 (j)
20,056 (b) 720,383
Regulatory liabilities.......... 142,478 29,553 -- 172,031
Other, including postretirement
benefit obligation............. 211,748 89,946 (47,700)(j) 253,994
---------- -------- -------- ----------
Total Deferred Credits and
Other Liabilities............ 936,306 168,846 41,256 1,146,408
---------- -------- -------- ----------
Total Capitalization and
Liabilities.................. $5,816,577 $982,855 $863,953 $7,663,385
========== ======== ======== ==========
</TABLE>
See Accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Information
89
<PAGE>
WISCONSIN ENERGY CORPORATION
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
(In Thousands)
The unaudited pro forma financial information gives effect to the
acquisition by Wisconsin Energy of WICOR in a transaction to be accounted for
as a purchase.
Wisconsin Energy's Unaudited Pro Forma Combined Condensed Financial
Information assumes the WICOR acquisition occurred (1) as of January 1, 1998,
for purposes of the Unaudited Pro Forma Combined Condensed Income Statements
and (2) on June 30, 1999, for purposes of the Unaudited Pro Forma Combined
Condensed Balance Sheet.
a. Due to recent acquisitions by Wisconsin Energy that have increased the size
of Wisconsin Energy's non-utility operations, Wisconsin Energy has modified
its income statement and balance sheet presentations. The primary
modification includes reclassifying the results of the non-utility
operations from Other Income and Deductions to the various lines within
operating income (i.e., Operating Revenues and Operating Expenses). This
modification does not change net income. The primary balance sheet
modification includes reclassifying the nonutility property, plant and
equipment and related accumulated provision for depreciation from
investments to include utility investments. This modification does not
change total assets.
b. Reclassification of amounts to conform the companies' historical
presentation.
c. Based upon revised actuarial information, WICOR's annual pension income will
increase by $1.5 million and will be offset by an additional $2.5 million of
annual postretirement benefit expense.
d. Amortization of goodwill over 40 years ($689.3 million/40 years = $17.2
million per year or $4.3 million per quarter).
e. Additional depreciation resulting from the increased fair value of
machinery, equipment and buildings acquired based on estimated useful lives
of 10 years ($87 million/10 years = $8.7 million per year or $2.2 million
per quarter).
f. Incremental interest expense based upon an assumed rate of 6.25% ($722.1
million x 6.25% = $45.1 million per year or $11.3 million per quarter). A
1/8 percent increase (or decrease) in the interest rate would increase (or
decrease) annual interest expense by approximately $0.9 million. Estimated
debt issue cost of $5.4 million will be amortized over ten years.
g. Reduction of income taxes relating to the foregoing adjustments.
h. Shares to be issued assuming the purchase price is paid with 40% stock,
including outstanding stock options. The closing price of Wisconsin Energy's
common stock on June 30, 1999, was $25 1/16 .
i. Assuming the purchase price is paid with 100% cash or 60% stock and 40%
cash, pro forma earnings per share for the year ended December 31, 1998,
would approximate $1.42 and $1.33 per share, respectively. Assuming the
purchase price is paid with 100% cash or 60% stock and 40% cash, pro forma
earnings per share for the six months ended June 30, 1999 would approximate
$0.87 and $0.79, respectively, and for the six months ended June 30, 1998,
$0.64 and $0.61 per share, respectively.
j. Adjustments to net assets of WICOR to reflect fair value, purchase
accounting adjustments and related tax effects.
90
<PAGE>
k. The excess of cost over fair value of net assets acquired resulting from the
preliminary purchase price allocation is assumed to be as follows:
<TABLE>
<S> <C>
Pro forma purchase price..................................... $1,220,623
Pro forma historical net book value of assets acquired....... 423,826
----------
Excess of purchase price over net book value of assets
acquired.................................................... 796,797
Allocated to:
Inventories................................................ (12,700)
Property, Plant & Equipment................................ (87,000)
Prepaid Pension Asset...................................... (49,500)
Deferred Tax Liabilities................................... 68,900
Other Current Liabilities.................................. 20,500
Postretirement Obligation.................................. (47,700)
----------
Remaining excess of cost over fair value of net assets
acquired (goodwill)....................................... $ 689,297
==========
</TABLE>
The foregoing preliminary purchase price allocation is based on available
information and certain assumptions Wisconsin Energy considers reasonable.
The final purchase price allocation will be based upon a determination of
the fair value of the net assets acquired at the date of the acquisition.
The final purchase price allocation may differ from the preliminary
allocation.
l. Amount consists of an adjustment of $49.5 million to fair value WICOR's
prepaid pension asset and $5.4 million in estimated debt issue costs.
m. Purchase price is assumed to be financed with 40% stock and 60% debt.
91
<PAGE>
CERTAIN INFORMATION CONCERNING WISCONSIN ENERGY AND WICOR
For information regarding the names, ages, positions and business
backgrounds of the executive officers and directors of Wisconsin Energy, as
well as additional information, including executive compensation, security
ownership of certain beneficial owners and management and certain relationships
and related transactions, please refer to Items 10, 11, 12 and 13 of Wisconsin
Energy's Annual Report on Form 10-K for the fiscal year ended December 31, 1998
(which incorporates portions of Wisconsin Energy's Proxy Statement, dated April
16, 1999, for its Annual Meeting of Stockholders held on June 2, 1999), which
are incorporated by reference.
For information regarding the names, ages, positions and business
backgrounds of the executive officers and directors of WICOR, as well as
additional information, including executive compensation, security ownership of
certain beneficial owners and management and certain relationships and related
transactions, please refer to Items 10, 11, 12 and 13 of WICOR's Annual Report
on Form 10-K for the fiscal year ended December 31, 1998 (which incorporates
portions of WICOR's Proxy Statement, dated March 15, 1999, for its Annual
Meeting of Stockholders held on April 22, 1999), which are incorporated by
reference.
LEGAL OPINIONS
The legality of the Wisconsin Energy common stock to be issued in the merger
will be passed upon for Wisconsin Energy by Quarles & Brady LLP, Milwaukee,
Wisconsin. Larry J. Martin, a partner in Quarles & Brady LLP, serves as general
counsel of Wisconsin Energy. Members of Quarles & Brady LLP working on the
merger and related transactions own an aggregate of 5,200 shares of Wisconsin
Energy common stock.
EXPERTS
The consolidated financial statements incorporated in this joint proxy
statement/prospectus by reference from the Annual Report on Form 10-K of
Wisconsin Energy 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 that firm as experts in
auditing and accounting.
The consolidated financial statements incorporated in this joint proxy
statement/prospectus by reference from the Annual Report on Form 10-K of WICOR
for the year ended December 31, 1998, have been so incorporated in reliance on
the report of Arthur Andersen LLP, independent public accountants, given on the
authority of that firm as experts in auditing and accounting.
SHAREHOLDER PROPOSALS
Wisconsin Energy will hold an annual meeting of shareholders in 2000 whether
or not the merger is completed before the time of the meeting. Shareholders who
intend to have a proposal considered for inclusion in Wisconsin Energy's annual
meeting proxy statement for presentation at the 2000 annual meeting must submit
the proposal to Wisconsin Energy no later than December 18, 1999. Shareholders
who intend to present a proposal at the 2000 annual meeting without having it
considered for inclusion in Wisconsin Energy's proxy materials are required to
provide notice of the proposal to Wisconsin Energy at least 70 days and not
more than 100 days prior to May 25, 2000, the scheduled date of the 2000 annual
meeting.
WICOR will hold a 2000 annual meeting only if the merger has not been
completed by the time of the meeting. Proposals which shareholders of WICOR
intend to present at the 2000 annual meeting and to have included in WICOR's
annual meeting proxy statement pursuant to Rule 14a-8 must be received by WICOR
by the close of business on November 12, 1999. If WICOR receives notice of a
shareholder proposal that is submitted other than pursuant to Rule 14a-8 after
January 29, 2000, the notice will be deemed untimely and the persons named in
proxies solicited by the WICOR board of directors for the 2000 annual meeting
may exercise discretionary voting power with respect to the shareholder
proposal.
92
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Wisconsin Energy and WICOR each file annual, quarterly and special reports,
proxy statements and other information with the SEC. These SEC filings are
available to the public over the Internet at the SEC's web site at
http://www.sec.gov. and through our own web sites at http://www.wisenergy.com
and http://www.wicor.com, respectively. You may also read and copy any document
we file at the SEC's public reference rooms in Washington, D.C., New York, and
Chicago, as well as at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York, 10005, where Wisconsin Energy's common stock is
listed under the symbol "WEC" and WICOR's common stock is listed under the
symbol "WIC." You can call the SEC at 1-800-732-0330 for further information
about the public reference rooms.
The SEC allows both Wisconsin Energy and WICOR to "incorporate by reference"
the information we file with them, which means we are assumed to have disclosed
important information to you when we refer you to documents that are on file
with the SEC. The information we have incorporated by reference is an important
part of this joint proxy statement/prospectus, and information that we file
later with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future documents we
file with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act
until the date of our respective shareholders' meetings.
Wisconsin Energy:
. Annual Report on Form 10-K for the fiscal year ended December 31, 1998,
as amended by Amendments No. 1 and 2 on Form 10-K/A.
. Quarterly Reports on Form 10-Q for the quarters ended March 31, 1999 and
June 30, 1999.
. Current Reports on Form 8-K dated March 16, 1999, March 25, 1999, June
27, 1999, June 29, 1999, July 14, 1999 and September 1, 1999.
. The description of Wisconsin Energy's common stock contained in Item 5 of
Wisconsin Energy's Current Report on Form 8-K dated September 1, 1999
(which updates and supersedes the description in its Registration
Statement on Form 8-B dated January 7, 1987, as previously updated),
including any amendment or report filed for the purpose of updating that
description. The description is also included in this joint proxy
statement/prospectus under "Description of Wisconsin Energy Capital
Stock."
You may request a copy of these documents at no cost by writing to us at the
following address:
Wisconsin Energy Corporation
231 West Michigan Street
P. O. Box 2949
Milwaukee, Wisconsin 53201
Attn: Mr. Thomas H. Fehring, Corporate Secretary
Telephone: 1-800-881-5882
WICOR
. Annual Report on Form 10-K for the fiscal year ended December 31, 1998.
. Quarterly Report on Form 10-Q for the quarter ended March 31, 1999 and
amended Quarterly Report on Form 10-Q/A for the quarter ended June 30,
1999.
. Current Reports on Form 8-K dated June 27, 1999, June 29, 1999 and July
27, 1999.
. The description of WICOR's common stock contained in Item 1 of WICOR's
Registration Statement on Form 8-B, dated March 31, 1980, including any
amendment or report filed for the purpose of updating that description.
93
<PAGE>
. The description of WICOR's common stock purchase rights contained in Item
1 of WICOR's Registration Statement on Form 8-A, dated July 29, 1999,
including any amendment or report filed for the purpose of updating that
description.
You may request a copy of these documents at no cost by writing to us at the
following address:
WICOR, Inc.
626 East Wisconsin Avenue
P. O. Box 334
Milwaukee, Wisconsin 53201
Attn: Mr. Robert A. Nuernberg, Secretary
Telephone: 1-800-236-3453
You should rely only on the information provided in or incorporated by
reference (and not later changed) in this joint proxy statement/prospectus.
Neither Wisconsin Energy nor WICOR has authorized anyone else to provide you
with additional or different information. Wisconsin Energy is not making an
offer of any securities in any state where the offer is not permitted. You
should not assume that the information in this joint proxy statement/prospectus
is accurate as of any date other than the date on the front of this document.
94
<PAGE>
APPENDIX A
Agreement and Plan of Merger
By and among
WISCONSIN ENERGY CORPORATION
and
WICOR, INC.
and
CEW ACQUISITION, INC.
Dated as of June 27, 1999,
as amended as of September 9, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
RECITALS.................................................................. A-1
ARTICLE I DEFINITIONS................................................... A-1
1.1 Acquisition................................................... A-1
1.2 Agreement..................................................... A-1
1.3 Closing....................................................... A-1
1.4 Closing Date.................................................. A-1
1.5 Code.......................................................... A-2
1.6 Confidentiality Agreement..................................... A-2
1.7 Disclosure Schedule........................................... A-2
1.8 ERISA......................................................... A-2
1.9 Exchange Act.................................................. A-2
1.10 HSR Act....................................................... A-2
1.11 Knowledge of WICOR............................................ A-2
1.12 Knowledge of Wisconsin Energy................................. A-2
1.13 Law........................................................... A-2
1.14 Merger........................................................ A-2
1.15 Person........................................................ A-2
1.16 Proxy Statement............................................... A-2
1.17 PSCW.......................................................... A-2
1.18 PUHCA......................................................... A-2
1.19 Registration Statement........................................ A-3
1.20 SEC........................................................... A-3
1.21 Securities Act................................................ A-3
1.22 Subsidiary.................................................... A-3
1.23 WBCL.......................................................... A-3
1.24 WICOR......................................................... A-3
1.25 WICOR Certificates............................................ A-3
1.26 WICOR Common Stock............................................ A-3
1.27 WICOR Companies............................................... A-3
1.28 WICOR Material Adverse Effect................................. A-3
1.29 WICOR Right................................................... A-3
1.30 WICOR Rights Agreement........................................ A-3
1.31 WICOR Shareholders............................................ A-3
1.32 WICOR Special Meeting......................................... A-3
1.33 Wisconsin Electric............................................ A-3
1.34 Wisconsin Energy.............................................. A-3
1.35 Wisconsin Energy Common Stock................................. A-3
1.36 Wisconsin Energy Companies.................................... A-4
1.37 Wisconsin Energy Material Adverse Effect...................... A-4
1.38 Wisconsin Energy Shareholders................................. A-4
1.39 Wisconsin Energy Special Meeting.............................. A-4
1.40 Wisconsin Gas................................................. A-4
ARTICLE II THE MERGER.................................................... A-4
2.1 The Merger.................................................... A-4
2.2 Effective Time of Merger...................................... A-4
2.3 Corporate Matters............................................. A-4
2.4 Conversion of WICOR Common Stock.............................. A-5
</TABLE>
A-i
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
2.5 Acquisition Common Stock..................................... A-8
2.6 Exchange of WICOR Certificates............................... A-8
2.7 Reorganization............................................... A-11
2.8 No Dissenting Shares......................................... A-11
2.9 WICOR Options and WICOR Awards............................... A-11
ARTICLE III OTHER AGREEMENTS............................................. A-12
3.1 Proxy Statement and Registration Statement................... A-12
3.2 Approval of Shareholders..................................... A-13
3.3 HSR Act...................................................... A-13
3.4 Access....................................................... A-13
3.5 Disclosure Schedule.......................................... A-14
3.6 Conditions to Merger......................................... A-14
3.7 Deliveries of Information; Consultation...................... A-14
3.8 Affiliates................................................... A-15
3.9 Other Transactions; Expenses; Other Remedies................. A-15
3.10 Letter of WICOR's Accountants................................ A-18
3.11 Letter of Wisconsin Energy's Accountants..................... A-18
3.12 Stock Exchange Listing....................................... A-18
3.13 Public Announcements......................................... A-18
3.14 Indemnification; Directors' and Officers' Insurance.......... A-19
3.15 Employee and Employee Benefit Plan Matters................... A-20
3.16 Directors.................................................... A-21
3.17 WICOR DRIP................................................... A-21
3.18 Acknowledgments.............................................. A-22
3.19 Other Workforce Matters...................................... A-22
3.20 Payment of Dividends......................................... A-22
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF WICOR...................... A-22
4.1 Organization; Business....................................... A-22
4.2 Capitalization............................................... A-23
4.3 Authorization; Enforceability................................ A-23
4.4 No Violation or Conflict..................................... A-23
4.5 Litigation................................................... A-23
4.6 WICOR SEC Reports and Financial Statements................... A-24
4.7 Absence of Certain Changes................................... A-24
4.8 Contracts.................................................... A-24
4.9 Employee Benefit Plans....................................... A-25
4.10 No Violation of Law.......................................... A-26
4.11 Brokers...................................................... A-26
4.12 Taxes........................................................ A-26
4.13 Governmental Approvals....................................... A-26
4.14 No Pending Other Transactions................................ A-27
4.15 Labor Matters................................................ A-27
4.16 Disclosure................................................... A-27
4.17 Information Supplied......................................... A-27
4.18 Vote Required................................................ A-27
4.19 Opinion of Financial Advisor................................. A-27
4.20 Environmental Protection..................................... A-27
4.21 Year 2000 Compliance......................................... A-29
</TABLE>
A-ii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
4.22 Takeover Provisions........................................ A-29
4.23 Rights Agreement........................................... A-29
4.24 Ownership of Wisconsin Energy Common Stock................. A-29
ARTICLE V REPRESENTATIONS AND WARRANTIES OF WISCONSIN ENERGY AND
ACQUISITION................................................ A-30
5.1 Organization............................................... A-30
5.2 Capitalization............................................. A-30
5.3 Authorization; Enforceability.............................. A-30
5.4 No Violation or Conflict................................... A-31
5.5 Litigation................................................. A-31
5.6 Wisconsin Energy SEC Reports and Financial Statements...... A-31
5.7 Brokers.................................................... A-31
5.8 Governmental Approvals..................................... A-31
5.9 Disclosure................................................. A-32
5.10 Information Supplied....................................... A-32
5.11 Vote Required.............................................. A-32
5.12 Opinion of Financial Advisor............................... A-32
5.13 Ownership of WICOR Common Stock............................ A-32
5.14 Year 2000 Compliance....................................... A-32
ARTICLE VI COVENANTS PENDING THE MERGER............................... A-32
6.1 Covenants of WICOR......................................... A-32
6.2 Covenants of Wisconsin Energy.............................. A-35
ARTICLE VII CONDITIONS PRECEDENT TO THE OBLIGATIONS OF WISCONSIN ENERGY
AND ACQUISITION............................................ A-36
7.1 Compliance with Agreement.................................. A-36
7.2 No Litigation.............................................. A-36
7.3 Representations and Warranties of WICOR.................... A-36
7.4 No WICOR Material Adverse Effect........................... A-36
7.5 Approval of WICOR Shareholders and Wisconsin Energy
Shareholders; Articles of Merger........................... A-36
7.6 Closing Certificate........................................ A-36
7.7 Governmental Approvals..................................... A-37
7.8 Listing.................................................... A-37
7.9 Accountant Letter.......................................... A-37
7.10 Affiliate Letters.......................................... A-37
ARTICLE VIII CONDITIONS PRECEDENT TO THE OBLIGATIONS OF WICOR........... A-37
8.1 Compliance with Agreement.................................. A-37
8.2 No Litigation.............................................. A-37
Representations and Warranties of Wisconsin Energy and
8.3 Acquisition................................................ A-37
8.4 No Wisconsin Energy Material Adverse Effect................ A-38
8.5 Approval of WICOR Shareholders and Wisconsin Energy
Shareholders; Articles of Merger........................... A-38
8.6 Closing Certificate........................................ A-38
8.7 Governmental Approvals..................................... A-38
8.8 Listing.................................................... A-38
8.9 Tax Opinion................................................ A-38
</TABLE>
A-iii
<PAGE>
<TABLE>
<CAPTION>
Page
----
<C> <S> <C>
ARTICLE IX TERMINATION; MISCELLANEOUS.................................... A-39
9.1 Termination................................................... A-39
9.2 Rights on Termination; Waiver................................. A-40
9.3 Survival of Representations, Warranties and Covenants......... A-40
9.4 Entire Agreement; Amendment................................... A-40
9.5 Expenses...................................................... A-41
9.6 Governing Law................................................. A-41
9.7 Assignment.................................................... A-41
9.8 Notices....................................................... A-42
9.9 Counterparts; Headings........................................ A-42
9.10 Interpretation................................................ A-42
9.11 Severability.................................................. A-43
9.12 Specific Performance.......................................... A-43
9.13 No Reliance................................................... A-43
9.14 Exhibits and Disclosure Schedule.............................. A-43
9.15 Further Assurances............................................ A-43
9.16 Waiver of Jury Trial.......................................... A-43
SIGNATURES................................................................ A-43
EXHIBITS:
1. Form of Affiliate Letter...................................... A-44
2. Form of Employment Agreement of George E. Wardeberg........... A-47
3. Form of Wisconsin Energy Special Executive Severance Policy... A-56
4. Form of Wisconsin Energy Executive Severance Policy........... A-66
</TABLE>
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<PAGE>
INDEX TO DEFINED TERMS
<TABLE>
<CAPTION>
Term Section
- ---- -------
<S> <C>
Acquisition....................................................... 1.1
Affiliates........................................................ 3.8(a)
Affiliate Letter.................................................. 3.8(b)
Agreement......................................................... 1.2
Articles of Merger................................................ 2.2
Average Wisconsin Energy Price.................................... 2.4(a)(i)
Cash Election..................................................... 2.4(e)
Cash Election Shares.............................................. 2.4(f)
Cash Fraction..................................................... 2.4(f)(ii)(A)
Cash Percentage................................................... 2.4(a)(ii)
Closing........................................................... 1.3
Closing Date...................................................... 1.4
Code.............................................................. 1.5
Confidentiality Agreement......................................... 1.6
Conversion Notice................................................. 2.4(b)
CERCLA............................................................ 4.20(f)
Disclosure Schedule............................................... 1.7
Disclosure Schedule Change........................................ 3.5(b)
Effective Time of Merger.......................................... 2.2
Election Deadline................................................. 2.4(l)
Employee Benefit Plans............................................ 4.9(a)
Environmental Claim............................................... 4.20(a)(i)
Environmental Hazardous Material.................................. 4.20(a)(ii)
Environmental Laws................................................ 4.20(a)(iii)
Environmental Permits............................................. 4.20(c)
Environmental Release............................................. 4.20(a)(iv)
ERISA............................................................. 1.8
Exchange Act...................................................... 1.9
Exchange Agent.................................................... 2.6(a)
Exchange Fund..................................................... 2.6(a)
Exchange Ratio.................................................... 2.4(a)(iii)
Exchange Value.................................................... 2.4(a)(iv)
Existing Contracts................................................ 4.8(a)
Existing Litigation............................................... 4.5
Existing Plans.................................................... 4.9(b)
Form of Election.................................................. 2.4(e)
HSR Act........................................................... 1.10
Indebtedness...................................................... 4.8(a)(iii)
Indemnified Liabilities........................................... 3.14(a)(i)
Indemnified Party................................................. 3.14(a)
Indemnified Parties............................................... 3.14(a)
Initial Mailing Record Date....................................... 2.4(i)
Initial Termination Date.......................................... 9.1(b)(ii)
Insurance Amount.................................................. 3.14(c)
Knowledge of WICOR................................................ 1.11
Knowledge of Wisconsin Energy..................................... 1.12
Law............................................................... 1.13
Letter of Transmittal............................................. 2.6(b)(i)(A)
Maximum Cash Number............................................... 2.4(a)(v)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Term Section
- ---- -------
<S> <C>
Maximum Stock Number.............................................. 2.4(a)(vi)
Merger............................................................ 1.14
Merger Consideration.............................................. 2.4(a)(vii)
Minimum Average Wisconsin Energy Price............................ 2.4(a)(viii)
Non-Election...................................................... 2.4(e)
Non-Election Shares............................................... 2.4(f)(i)
Other Proposal.................................................... 3.9(a)(i)
Other Transaction................................................. 3.9(a)(ii)
Person............................................................ 1.15
Proxy Statement................................................... 1.16
PSCW.............................................................. 1.17
PUHCA............................................................. 1.18
Registration Statement............................................ 1.19
Representative.................................................... 2.4(e)
SEC............................................................... 1.20
Securities Act.................................................... 1.21
Special Date...................................................... 3.9(a)(iii)
Special Event..................................................... 3.9(a)(iv)
Special Fee....................................................... 3.9(e)
Stock Election.................................................... 2.4(e)
Stock Election Shares............................................. 2.4(f)(i)
Stock Fraction.................................................... 2.4(g)(ii)(A)
Stock Percentage.................................................. 2.4(a)(viii)
Subsidiary........................................................ 1.22
Superior Proposal................................................. 3.9(a)(v)
Surviving Corporation............................................. 2.1
WBCL.............................................................. 1.23
WICOR............................................................. 1.24
WICOR Advisors.................................................... 3.9(c)
WICOR Award....................................................... 2.9(b)
WICOR Certificates................................................ 1.25
WICOR Common Stock................................................ 1.26
WICOR Companies................................................... 1.27
WICOR Director Option Plan........................................ 2.9(a)
WICOR DRIP........................................................ 3.17
WICOR ESOP........................................................ 3.15(e)
WICOR Material Adverse Effect..................................... 1.28
WICOR New Restricted Stock........................................ 6.1(j)(iii)
WICOR Option...................................................... 2.9(a)
WICOR Option Plans................................................ 2.9(a)
WICOR Performance Plan............................................ 2.9(a)
WICOR Right....................................................... 1.29
WICOR Rights Agreement............................................ 1.30
WICOR SEC Reports................................................. 4.6(a)
WICOR Shareholders................................................ 1.31
WICOR Special Meeting............................................. 1.32
Wisconsin Electric................................................ 1.33
Wisconsin Energy.................................................. 1.34
Wisconsin Energy Common Stock..................................... 1.35
Wisconsin Energy Companies........................................ 1.36
Wisconsin Energy Designee......................................... 3.16(b)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Term Section
- ---- -------
<S> <C>
Wisconsin Energy Material Adverse Effect................................ 1.37
Wisconsin Energy SEC Reports............................................ 5.6(a)
Wisconsin Energy Severance Policies..................................... 3.15(f)
Wisconsin Energy Shareholders........................................... 1.38
Wisconsin Energy Special Meeting........................................ 1.39
Wisconsin Gas........................................................... 1.40
Year 2000 Compliant..................................................... 4.21
</TABLE>
A-vii
<PAGE>
AGREEMENT AND PLAN OF MERGER
This Agreement And Plan Of Merger is made as of this 27th day of June, 1999
by and among Wisconsin Energy Corporation, Wicor, Inc. and Cew Acquisition,
Inc.
RECITALS
Whereas, the respective Boards of Directors of Wisconsin Energy, WICOR and
Acquisition have: (a) determined that the merger of WICOR and Acquisition
pursuant to, and subject to all of the terms and conditions of, this Agreement
is advisable, fair and in the best interests of Wisconsin Energy, WICOR and
Acquisition and their respective shareholders; and (b) approved the Merger,
this Agreement and the transactions contemplated by this Agreement; and
Whereas, the Board of Directors of WICOR has directed that this Agreement
and the transactions described in this Agreement be submitted for approval at
the WICOR Special Meeting; and
Whereas, the Board of Directors of Wisconsin Energy has directed that the
issuance of Wisconsin Energy Common Stock pursuant to this Agreement and the
transactions described in this Agreement be submitted for approval at the
Wisconsin Energy Special Meeting; and
Whereas, Wisconsin Energy, WICOR and Acquisition desire to make certain
representations, warranties, covenants and agreements in connection with the
Merger; and
Whereas, if any Wisconsin Energy Common Stock is to be issued pursuant to
this Agreement, Wisconsin Energy, WICOR and Acquisition intend, by executing
this Agreement, to adopt a plan of reorganization within the meaning of Section
368 of the Code and to cause the Merger to qualify as a reorganization under
the provisions of Sections 368(a) of the Code to the extent that shares of
WICOR Common Stock are exchanged for shares of Wisconsin Energy Common Stock;
and
Now, therefore, in consideration of the Recitals and of the mutual
covenants, conditions and agreements set forth herein and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, it is hereby agreed that:
ARTICLE I
Definitions
When used in this Agreement, the following terms shall have the meanings
specified:
1.1 Acquisition. "Acquisition" shall mean CEW Acquisition, Inc., a Wisconsin
corporation and a wholly-owned Subsidiary of Wisconsin Energy.
1.2 Agreement. "Agreement" shall mean this Agreement and Plan of Merger,
together with the Exhibits attached hereto and together with the Disclosure
Schedule, as the same may be amended from time to time in accordance with the
terms hereof.
1.3 Closing. "Closing" shall mean the conference to be held at 10:00 A.M.,
Central Time, on the Closing Date at the offices of Quarles & Brady LLP, 411
East Wisconsin Avenue, Milwaukee WI 53202, or such other time and place as the
parties may mutually agree to in writing, at which the transactions
contemplated by this Agreement shall be consummated.
1.4 Closing Date. "Closing Date" shall mean:
(a) that date which is two (2) business days after satisfaction or
waiver of all of the conditions set forth in Article VII and Article VIII
of this Agreement; or
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(b) such other date as the parties may mutually agree to in writing.
1.5 Code. "Code" shall mean the Internal Revenue Code of 1986, as amended,
and the regulations promulgated thereunder, as the same may be in effect from
time to time.
1.6 Confidentiality Agreement. "Confidentiality Agreement" shall mean the
Confidentiality Agreement between Wisconsin Energy and WICOR dated January 14,
1999.
1.7 Disclosure Schedule. "Disclosure Schedule" shall mean the Disclosure
Schedule dated the date of this Agreement delivered by WICOR to Wisconsin
Energy contemporaneously with the execution and delivery of this Agreement and
as the same may be amended or updated from time to time after the date of this
Agreement and prior to the Closing Date in accordance with the terms of this
Agreement.
1.8 ERISA. "ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as the same may be in effect from time to time.
1.9 Exchange Act. "Exchange Act" shall mean the Securities Exchange Act of
1934, as the same may be in effect from time to time.
1.10 HSR Act. "HSR Act" shall mean the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as the same may be in effect from time to time.
1.11 Knowledge of WICOR. "Knowledge of WICOR" shall mean, for purposes of
this Agreement, when any fact or matter is stated to be "to the Knowledge of
WICOR" or words of similar import, the actual knowledge of the existence or
nonexistence of such fact or matter by the officers and employees of the WICOR
Companies listed on the Disclosure Schedule.
1.12 Knowledge of Wisconsin Energy. "Knowledge of Wisconsin Energy" shall
mean, for purposes of this Agreement, when any fact or matter is stated to be
"to the Knowledge of Wisconsin Energy" or words of similar import, the actual
knowledge of the existence or nonexistence of such fact or matter by the
executive officers of Wisconsin Energy and that of the Person holding the
position of Law Director--Regulatory of Wisconsin Electric.
1.13 Law. "Law" shall mean any federal, state, local, foreign, or other
law, rule, regulation or governmental requirement of any kind, judicial
interpretations thereof, and the rules, regulations and orders promulgated
thereunder by any regulatory agencies.
1.14 Merger. "Merger" shall mean the merger of WICOR and Acquisition
pursuant to this Agreement.
1.15 Person. "Person" shall mean a natural person, corporation, trust,
partnership, limited liability company, joint venture, association,
unincorporated organization, governmental entity, agency or branch or
department thereof, or any other legal entity.
1.16 Proxy Statement. "Proxy Statement" shall mean the joint proxy
statement of Wisconsin Energy and WICOR to be filed with the SEC and to be
distributed to the WICOR Shareholders in connection with the WICOR Special
Meeting and the approval of the Merger by the WICOR Shareholders and to be
distributed to the Wisconsin Energy Shareholders in connection with the
Wisconsin Energy Special Meeting, which shall also constitute the prospectus
of Wisconsin Energy filed as a part of the Registration Statement.
1.17 PSCW. "PSCW" shall mean the Public Service Commission of Wisconsin.
1.18 PUHCA. "PUHCA" shall mean the Public Utility Holding Company Act of
1935, as the same may be in effect from time to time.
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<PAGE>
1.19 Registration Statement. "Registration Statement" shall mean a
registration statement on Form S-4 to be filed under the Securities Act by
Wisconsin Energy in connection with the Merger for purposes of registering any
shares of Wisconsin Energy Common Stock to be issued in the Merger pursuant to
Article II of this Agreement.
1.20 SEC. "SEC" shall mean the Securities and Exchange Commission.
1.21 Securities Act. "Securities Act" shall mean the Securities Act of 1933,
as the same may be in effect from time to time.
1.22 Subsidiary. "Subsidiary" of any Person shall mean another Person, an
amount of the voting securities, other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its board of
directors or other governing body (or, if there are no such voting interests,
50% or more of the equity interests of which) is owned directly or indirectly
by such first Person.
1.23 WBCL. "WBCL" shall mean the Wisconsin Business Corporation Law, as the
same shall be in effect from time to time.
1.24 WICOR. "WICOR" shall mean WICOR, Inc., a Wisconsin corporation.
1.25 WICOR Certificates. "WICOR Certificates" shall mean a certificate or
certificates which represent outstanding shares of WICOR Common Stock on the
relevant date.
1.26 WICOR Common Stock. "WICOR Common Stock" shall mean shares of the
common stock, $1.00 par value, of WICOR.
1.27 WICOR Companies. "WICOR Companies" shall mean WICOR and all
Subsidiaries of WICOR.
1.28 WICOR Material Adverse Effect. "WICOR Material Adverse Effect" shall
mean any event, condition or fact which is, or reasonably may be expected to
be, materially adverse to the aggregate financial condition, properties,
business, results of operations or prospects of the WICOR Companies taken as a
whole.
1.29 WICOR Right. "WICOR Right" shall mean a right to purchase shares of
WICOR Common Stock issued by WICOR pursuant to the WICOR Rights Agreement.
1.30 WICOR Rights Agreement. "WICOR Rights Agreement" shall mean the Rights
Agreement dated as of August 29, 1989 between WICOR and Manufacturers Hanover
Trust Company (now The Chase Manhattan Bank) as Rights Agent, as amended, and
any successor or replacement agreements thereto.
1.31 WICOR Shareholders. "WICOR Shareholders" shall mean all Persons owning
shares of WICOR Common Stock on the relevant date.
1.32 WICOR Special Meeting. "WICOR Special Meeting" shall mean a special
meeting of the WICOR Shareholders for the purpose of approving the Merger, this
Agreement and the transactions contemplated by this Agreement.
1.33 Wisconsin Electric. "Wisconsin Electric" shall mean Wisconsin Electric
Power Company, a Wisconsin corporation and a Subsidiary of Wisconsin Energy.
1.34 Wisconsin Energy. "Wisconsin Energy" shall mean Wisconsin Energy
Corporation, a Wisconsin corporation.
1.35 Wisconsin Energy Common Stock. "Wisconsin Energy Common Stock" shall
mean shares of the common stock, $.01 par value, of Wisconsin Energy.
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<PAGE>
1.36 Wisconsin Energy Companies. "Wisconsin Energy Companies" shall mean
Wisconsin Energy and all Subsidiaries of Wisconsin Energy.
1.37 Wisconsin Energy Material Adverse Effect. "Wisconsin Energy Material
Adverse Effect" shall mean any event, condition or fact which is, or reasonably
may be expected to be, materially adverse to the aggregate financial condition,
properties, business, results of operations or prospects of the Wisconsin
Energy Companies taken as a whole.
1.38 Wisconsin Energy Shareholders. "Wisconsin Energy Shareholders" shall
mean all Persons owning shares of Wisconsin Energy Common Stock on the relevant
date.
1.39 Wisconsin Energy Special Meeting. "Wisconsin Energy Special Meeting"
shall mean a special meeting of the Wisconsin Energy Shareholders for the
purpose of approving the issuance of Wisconsin Energy Common Stock pursuant to
this Agreement and the transactions contemplated by this Agreement.
1.40 Wisconsin Gas. "Wisconsin Gas" shall mean Wisconsin Gas Company, a
Wisconsin corporation and a Subsidiary of WICOR.
ARTICLE II
The Merger
2.1 The Merger. At the Effective Time of Merger and upon and subject to the
terms and conditions of this Agreement, WICOR and Acquisition will be merged as
follows: (a) if the Stock Percentage is zero (0), then Acquisition shall be
merged with and into WICOR, which will be the surviving corporation in the
Merger and shall continue to be governed by the Laws of the State of Wisconsin
and the separate existence of Acquisition shall thereupon cease; or (b) if the
Stock Percentage is any percentage other than zero (0), then WICOR shall be
merged with and into Acquisition, which will be the surviving corporation in
the Merger and shall continue to be governed by the Laws of the State of
Wisconsin and the separate existence of WICOR shall thereupon cease. The
corporation which is the surviving corporation in the Merger pursuant to
Section 2.1(a) or 2.1(b) of this Agreement is referred to in this Agreement as
the "Surviving Corporation". The Merger shall be pursuant to the provisions of,
and shall be with the effects provided in, the WBCL.
2.2 Effective Time of Merger. Subject to the terms and conditions of this
Agreement, on the Closing Date, Acquisition and WICOR will cause Articles of
Merger in a form approved for filing in accordance with the WBCL (the "Articles
of Merger") to be executed, delivered and filed as provided in the WBCL. The
Merger shall become effective at the time of the receipt of the Articles of
Merger by the Wisconsin Department of Financial Institutions or at such later
time as Wisconsin Energy and WICOR may agree and as may be set forth in the
Articles of Merger. The date and time on which the Merger shall become
effective is referred to in this Agreement as the "Effective Time of Merger".
2.3 Corporate Matters.
(a) Articles of Incorporation of Surviving Corporation. (i) If WICOR is the
Surviving Corporation in the Merger, the Restated Articles of Incorporation of
WICOR as in effect immediately prior to the Effective Time of Merger shall be
the Restated Articles of Incorporation of the Surviving Corporation until
amended in accordance with Law. (ii) If Acquisition is the Surviving
Corporation in the Merger, the Articles of Incorporation of Acquisition shall,
by virtue of the Merger, be amended and restated at the Effective Time of
Merger to be in the form of the Restated Articles of Incorporation of WICOR as
in effect immediately prior to the Effective Time of Merger until amended in
accordance with Law.
(b) Bylaws of Surviving Corporation. (i) If WICOR is the Surviving
Corporation in the Merger, the Bylaws of WICOR as in effect immediately prior
to the Effective Time of Merger shall be the Bylaws of the
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<PAGE>
Surviving Corporation until amended in accordance with Law. (ii) If Acquisition
is the Surviving Corporation in the Merger, the Bylaws of Acquisition shall, by
virtue of the Merger, be amended and restated at the Effective Time of Merger
to be in the form of the Bylaws of WICOR as in effect immediately prior to the
Effective Time of Merger until amended in accordance with Law.
(c) Directors and Officers of Surviving Corporation. The duly qualified and
acting directors and officers of WICOR immediately prior to the Effective Time
of Merger shall be the directors and officers of the Surviving Corporation, to
hold office as provided in the Bylaws of the Surviving Corporation. Immediately
after the Effective Time of Merger, Wisconsin Energy and the Surviving
Corporation shall take all action necessary to: (i) elect as directors of the
Surviving Corporation designees of Wisconsin Energy so that such designees
constitute a majority in number of the Board of Directors of the Surviving
Corporation; and (ii) elect Mr. Richard A. Abdoo as Chairman of the Board of
the Surviving Corporation.
2.4 Conversion of WICOR Common Stock.
(a) Definitions. As used in this Agreement:
(i) "Average Wisconsin Energy Price" shall mean the average of the
closing sale price per share of Wisconsin Energy Common Stock as reported
on the New York Stock Exchange Composite Tape on each of the ten (10)
consecutive trading days ending with the fifth trading day immediately
preceding the Closing Date.
(ii) "Cash Percentage" shall mean that percentage equal to: (A) 100%;
minus (B) the Stock Percentage.
(iii) "Exchange Ratio" shall mean that number (carried to the fourth
decimal place) obtained by dividing: (A) the Exchange Value; by (B) the
Average Wisconsin Energy Price.
(iv) "Exchange Value" shall mean:
(A) if the Closing occurs on or prior to July 1, 2000, $31.50; or
(B) if the Closing occurs after July 1, 2000: (1) $31.50; plus (2)
the amount (carried to the fourth decimal place) obtained by
multiplying $31.50 by .0001644 for each calendar day after July 1, 2000
through and including the Closing Date.
(v) "Maximum Cash Number" shall mean that number equal to:
(A) (1) the Cash Percentage; multiplied by (2) the number of shares
of WICOR Common Stock issued and outstanding immediately prior to the
Effective Time of Merger; minus
(B) the number of shares of WICOR Common Stock to be exchanged for
cash in lieu of fractional shares pursuant to Section 2.6(e) of this
Agreement.
(vi) "Maximum Stock Number" shall mean that number equal to: (A) the
Stock Percentage; multiplied by (B) the number of shares of WICOR Common
Stock issued and outstanding immediately prior to the Effective Time of
Merger.
(vii) "Merger Consideration" shall mean the shares of Wisconsin Energy
Common Stock issuable pursuant to this Section 2.4 of this Agreement and
cash payable pursuant to this Section 2.4 of this Agreement.
(viii) "Stock Percentage" shall mean that percentage selected by
Wisconsin Energy in the Conversion Notice which shall be (at the option of
Wisconsin Energy) any percentage between and including 40% and 60%;
provided that, if the Average Wisconsin Energy Price is less than $22.00
(the "Minimum Average Wisconsin Energy Price"), then Wisconsin Energy may
select zero (0) as the Stock Percentage.
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<PAGE>
(b) Conversion Notice. At least three (3) business days prior to the
Closing Date, Wisconsin Energy shall send a notice to WICOR (the "Conversion
Notice") which specifies Wisconsin Energy's election as to the amounts of the
Cash Percentage and the Stock Percentage. The parties shall then proceed to
close the transactions described in this Agreement on the basis of the
election made by Wisconsin Energy in the Conversion Notice.
(c) Conversion. At the Effective Time of Merger, by virtue of the Merger
and without any action on the part of Acquisition, WICOR, Wisconsin Energy or
the holders of WICOR Common Stock, each share of WICOR Common Stock (together
with the associated WICOR Right) issued and outstanding at the Effective Time
of Merger (except for treasury stock which shall be canceled as described in
Section 2.4(m) of this Agreement and except for WICOR New Restricted Stock
which shall be converted as described in Section 2.9(b) of this Agreement)
shall be converted into and become the right to receive:
(i) if the Stock Percentage is zero (0), cash in the amount of the
Exchange Value; or
(ii) if the Stock Percentage is any percentage other than zero (0) and
subject to the election and allocation procedures set forth in this Section
2.4 of this Agreement:
(A) cash in the amount of the Exchange Value; or
(B) that number of shares of Wisconsin Energy Common Stock equal to
the Exchange Ratio; or
(C) a combination of cash and shares of Wisconsin Energy Common Stock
determined in accordance with the provisions of this Section 2.4 of this
Agreement.
(d) Maximum Numbers. The number of shares of WICOR Common Stock to be
converted into the right to receive Wisconsin Energy Common Stock in the
Merger shall equal the Maximum Stock Number. The number of shares of WICOR
Common Stock to be converted into the right to receive cash in the Merger
shall equal the Maximum Cash Number. Notwithstanding any other provisions of
this Agreement, if the Stock Percentage is a percentage other than zero (0),
at least 40% of the number of shares of WICOR Common Stock issued and
outstanding immediately prior to the Effective Time of Merger shall be
converted into whole shares of Wisconsin Energy Common Stock exclusive of
fractional share interests to be paid in cash pursuant to Section 2.6(e) of
this Agreement.
(e) Elections. If the Stock Percentage is a percentage other than zero (0)
and subject to the allocation and election procedures set forth in this
Section 2.4 of this Agreement, each record holder immediately prior to the
Effective Time of Merger of shares of WICOR Common Stock will be entitled in
respect to each share of WICOR Common Stock owned by such holder: (i) to elect
to receive cash for such share (a "Cash Election"); (ii) to elect to receive
Wisconsin Energy Common Stock for such share (a "Stock Election"); or (iii) to
indicate that such record holder has no preference as to the receipt of cash
or Wisconsin Energy Common Stock for such share (a "Non-Election"). All such
elections shall be made on a form designed by Wisconsin Energy, which is
reasonably satisfactory to WICOR, for that purpose (a "Form of Election").
Holders of record of shares of WICOR Common Stock who hold such shares as
nominees, trustees or in other representative capacities (a "Representative")
may submit multiple Forms of Election, provided that such Representative
certifies that each such Form of Election covers all the shares of WICOR
Common Stock held by each Representative for a particular beneficial owner.
(f) Cash Elections in Excess of Maximum Cash Number. If the aggregate
number of shares covered by Cash Elections (the "Cash Election Shares")
exceeds the Maximum Cash Number:
(i) each share of WICOR Common Stock covered by a Stock Election (the
"Stock Election Shares") and each share of WICOR Common Stock covered by a
Non-Election (the "Non-Election Shares") shall be converted into the right
to receive a number of shares of Wisconsin Energy Common Stock equal to the
Exchange Ratio; and
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(ii) each Cash Election Share shall be converted into the right to
receive:
(A) an amount in cash, without interest, equal to: (1) the Exchange
Value; multiplied by (2) a fraction (the "Cash Fraction"), the
numerator of which shall be the Maximum Cash Number and the denominator
of which shall be the total number of Cash Election Shares; and
(B) a number of shares of Wisconsin Energy Common Stock equal to:
(1) the Exchange Ratio; multiplied by (2) a fraction equal to one minus
the Cash Fraction.
(g) Stock Elections in Excess of Maximum Stock Number. If the aggregate
number of Stock Election Shares exceeds the Maximum Stock Number:
(i) each Cash Election Share and each Non-Election Share shall be
converted into the right to receive cash in the amount of the Exchange
Value; and
(ii) each Stock Election Share shall be converted into the right to
receive:
(A) a number of shares of Wisconsin Energy Common Stock equal to:
(1) the Exchange Ratio; multiplied by (2) a fraction (the "Stock
Fraction"), the numerator of which shall be the Maximum Stock Number
and the denominator of which shall be the total number of Stock
Election Shares, and
(B) an amount in cash, without interest, equal to: (1) the Exchange
Value; multiplied by (2) a fraction equal to one minus the Stock
Fraction.
(h) Other. In the event that neither Section 2.4(f) or 2.4(g) of this
Agreement is applicable: (i) each Cash Election Share shall be converted into
the right to receive cash in the amount of the Exchange Value; (ii) each Stock
Election Share shall be converted into the right to receive a number of shares
of Wisconsin Energy Common Stock equal to the Exchange Ratio; and (iii) each
Non-Election Share shall be converted into the right to receive shares of
Wisconsin Energy Common Stock and the right to receive cash on a proportionate
basis so that the total number of shares of WICOR Common Stock converted into
the right to receive shares of Wisconsin Energy Common Stock and cash,
respectively, approximate the Maximum Stock Number and the Maximum Cash Number,
respectively, as closely as possible.
(i) Initial Mailing. Wisconsin Energy and WICOR will mail a Form of Election
to all holders of record of shares of WICOR Common Stock as of a date mutually
agreed to by WICOR and Wisconsin Energy (the "Initial Mailing Record Date")
which shall be approximately 45 calendar days prior to the anticipated
Effective Time of Merger. Elections shall be made by holders of WICOR Common
Stock by mailing to the Exchange Agent a Form of Election. To be effective, a
Form of Election must be properly completed, signed and submitted to the
Exchange Agent and accompanied by the certificates representing the shares of
WICOR Common Stock as to which the election is being made (or by an appropriate
guarantee of delivery of such certificates as set forth in such Form of
Election from a member of any registered national securities exchange or of the
National Association of Securities Dealers, Inc. or a commercial bank or trust
company having an office or correspondent in the United States, provided such
certificates are in fact delivered by the time set forth in such guarantee of
delivery). Wisconsin Energy will 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 Wisconsin Energy (or
the Exchange Agent) in such matters shall be conclusive and binding. Neither
Wisconsin Energy nor the Exchange Agent will 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 2.4 of this Agreement and all such computations shall be conclusive and
binding on the holders of WICOR Common Stock absent manifest error in any such
computation.
(j) Nonsubmittal. For the purposes hereof, a holder of WICOR Common Stock
who does not submit a Form of Election which is received by the Exchange Agent
prior to the Election Deadline shall be deemed to have made a Non-Election. If
Wisconsin Energy or the Exchange Agent shall determine that any purported
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Cash Election or Stock Election was not properly made, such purported Cash
Election or Stock Election shall be deemed to be of no force and effect and the
Person making such purported Cash Election or Stock Election shall, for all
purposes hereof, be deemed to have made a Non-Election.
(k) Subsequent Mailings. Wisconsin Energy and WICOR shall each use its
reasonable best efforts to promptly mail the Form of Election to all Persons
who become holders of WICOR Common Stock during the period between the Initial
Mailing Record Date and 10:00 a.m. New York time, on the date ten calendar days
prior to the anticipated Effective Time of Merger and to make the Form of
Election available to all Persons who become holders of WICOR Common Stock
subsequent to such day and no later than the close of business on the third
business day prior to the Effective Time of Merger.
(l) Election Deadline. A Form of Election must be received by the Exchange
Agent by the close of business on the third business day prior to the Effective
Time of Merger (the "Election Deadline") in order to be effective. All
elections will be irrevocable.
(m) Treasury Stock. Any shares of WICOR Common Stock (together with the
associated WICOR Right) that are owned by any of the WICOR Companies at the
Effective Time of Merger shall be canceled and retired and cease to exist and
no cash or shares of Wisconsin Energy Common Stock shall be issued or delivered
in exchange therefor.
(n) Adjustment. In the event that, prior to the Effective Time of Merger,
there is a reclassification, stock split or stock dividend with respect to
outstanding Wisconsin Energy Common Stock or outstanding WICOR Common Stock, an
appropriate and proportionate adjustment, if any, shall be made to any or one
or more of the Exchange Value, the Exchange Ratio or the Minimum Average
Wisconsin Energy Price.
2.5 Acquisition Common Stock.
(a) WICOR as Surviving Corporation. If WICOR is the Surviving Corporation in
the Merger, each outstanding share of capital stock of Acquisition issued and
outstanding at the Effective Time of Merger, by virtue of the Merger and
without any action on the part of Acquisition, WICOR or Wisconsin Energy, shall
be converted into and become one share of WICOR Common Stock.
(b) Acquisition as Surviving Corporation. If Acquisition is the Surviving
Corporation in the Merger, all outstanding shares of capital stock of
Acquisition issued and outstanding at the Effective Time of Merger shall remain
issued and outstanding and not be affected in any way by the Merger.
2.6 Exchange of WICOR Certificates.
(a) Exchange Agent. As of the Effective Time of Merger, Wisconsin Energy
shall deposit, or shall cause to be deposited, with a bank or trust company
designated by Wisconsin Energy and reasonably acceptable to WICOR (the
"Exchange Agent"), for the benefit of the holders of shares of WICOR Common
Stock, for exchange in accordance with this Article II of this Agreement
through the Exchange Agent: (i) certificates representing the aggregate number
of shares of Wisconsin Energy Common Stock issuable pursuant to Section 2.4 of
this Agreement; and (ii) cash representing the aggregate amount of cash payable
pursuant to Section 2.4 of this Agreement; (such certificates for shares of
Wisconsin Energy Common Stock, together with any dividends or distributions
with respect thereto, such cash and any cash for fractional share interests
paid pursuant to Section 2.6(e) of this Agreement, being hereinafter referred
to as the "Exchange Fund").
(b) Exchange Procedures.
(i) At or promptly after the Effective Time of Merger, Wisconsin
Energy shall cause the Exchange Agent to mail to each holder of record
of a WICOR Certificate which immediately prior to the Effective Time of
Merger represented outstanding shares of WICOR Common Stock and which
was not submitted to the Exchange Agent with a duly executed and
completed Form of Election: (A) a letter of transmittal ("Letter of
Transmittal") which shall specify that delivery shall be effected, and
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risk of loss and title to the WICOR Certificates shall pass, only upon
delivery of the WICOR Certificates to the Exchange Agent and which
shall be in such form and have such other customary provisions as
Wisconsin Energy may reasonably specify and which are reasonably
acceptable to WICOR; and (B) instructions to effect the surrender of
the WICOR Certificates in exchange for cash or shares of Wisconsin
Energy Common Stock, or both, as described in this Agreement.
(ii) Upon surrender of a WICOR Certificate for cancellation to the
Exchange Agent together with either a Form of Election or a Letter of
Transmittal, in each case duly executed, and with such other documents
as the Exchange Agent may reasonably require, the holder of such WICOR
Certificate shall be entitled to receive, and Wisconsin Energy shall
cause the Exchange Agent to promptly deliver in exchange therefor after
the Effective Time of Merger: (A) a certificate representing that
number of whole shares of Wisconsin Energy Common Stock to which such
holder is entitled to receive in respect of such WICOR Certificate
pursuant to Section 2.4 of this Agreement; and (B) a check representing
the cash that such holder is entitled to receive in respect of such
WICOR Certificate pursuant to Section 2.4 of this Agreement; and (C) a
check for any cash in lieu of any fractional share interest in
accordance with Section 2.6(e) of this Agreement. The WICOR Certificate
so surrendered shall forthwith be canceled; provided, however, that
fractional share interests of any one holder shall be aggregated to
maximize the number of whole shares of Wisconsin Energy Common Stock to
be issued and minimize the fractional interests to be paid in cash as
provided in Section 2.6(e) of this Agreement.
(iii) In the event of a transfer of ownership of shares of WICOR
Common Stock which is not registered in the transfer records of WICOR,
a certificate representing the proper number of shares of Wisconsin
Energy Common Stock, a check for the proper amount of cash that such
holder is entitled to receive in respect of such WICOR Certificate
pursuant to Section 2.4 of this Agreement and any cash in lieu of any
fractional share interests in accordance with Section 2.6(e) of this
Agreement, shall be delivered to the transferee if the WICOR
Certificate which represented such shares of WICOR Common Stock is
presented to the Exchange Agent, accompanied by all documents required
to evidence and effect such transfer and by evidence that any
applicable stock transfer taxes have been paid.
(iv) No interest will be paid or accrued on the cash and shares of
Wisconsin Energy Common Stock to be issued pursuant to this Agreement,
the cash in lieu of fractional shares, if any, and unpaid dividends and
distributions on the shares of Wisconsin Energy Common Stock, if any,
payable to WICOR Shareholders.
(v) If any WICOR Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person
claiming such WICOR Certificate to be lost, stolen or destroyed and, if
required by Wisconsin Energy in its reasonable discretion, the posting
by such Person of a bond in such reasonable amount as Wisconsin Energy
may direct as indemnity against any claim that may be made against it
with respect to such WICOR Certificate, the Exchange Agent will deliver
in exchange for such lost, stolen or destroyed WICOR Certificate, a
certificate representing the proper number of shares of Wisconsin
Energy Common Stock and a check for the cash, in each case that such
WICOR Shareholder has the right to receive pursuant to Section 2.4 of
this Agreement, and the cash to be paid in lieu of fractional shares,
if any, with respect to the shares of WICOR Common Stock formerly
represented thereby, and unpaid dividends and distributions on the
shares of Wisconsin Energy Common Stock, if any, as provided in this
Article II of this Agreement.
(vi) Until surrendered as contemplated by this Section 2.6 of this
Agreement, each WICOR Certificate shall be deemed at all times after
the Effective Time of Merger to represent only the right to receive
upon surrender only the cash or shares of Wisconsin Energy Common
Stock, or both, and cash in lieu of any fractional share interest as
contemplated by this Agreement.
(c) Distributions with Respect to Unexchanged Shares. If any Wisconsin
Energy Common Stock is issued pursuant to the Merger, no dividends or other
distributions declared or made after the Effective Time of Merger with respect
to Wisconsin Energy Common Stock with a record date after the Effective Time of
Merger shall
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be paid to the holder of any unsurrendered WICOR Certificate with respect to
the shares of Wisconsin Energy Common Stock represented thereby, and no cash
payment in lieu of a fractional share shall be paid to any such holder pursuant
to Section 2.6(e) of this Agreement, until the holder of such WICOR Certificate
has surrendered such WICOR Certificate to the Exchange Agent. Subject to the
effect of any applicable Law, following the surrender of any such WICOR
Certificate, there shall be paid to the holder of the surrendered WICOR
Certificate, without interest: (i) promptly, the amount of any cash payable
with respect to a fractional share interest to which such holder is entitled
pursuant to Section 2.6(e) of this Agreement and the amount of dividends or
other distributions with a record date after the Effective Time of Merger
theretofore paid with respect to such whole shares of Wisconsin Energy Common
Stock; and (ii) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time of Merger but
prior to surrender and a payment date occurring after surrender payable with
respect to such whole shares of Wisconsin Energy Common Stock.
(d) No Further Rights in WICOR Common Stock. All shares of Wisconsin Energy
Common Stock issued and cash paid upon conversion of the WICOR Common Stock in
accordance with the terms of this Agreement (and any cash paid pursuant to
Section 2.6(e) of this Agreement) shall be deemed to have been issued and paid
in full satisfaction of all rights pertaining to the WICOR Common Stock.
(e) No Fractional Shares. No fractional shares of Wisconsin Energy Common
Stock shall be issued in the Merger. All fractional share interests of a holder
of more than one WICOR Certificate at the Effective Time of Merger shall be
aggregated. If a fractional share interest results after such aggregation, each
holder of a fractional share interest shall be paid an amount in cash equal to
the product obtained by multiplying such fractional share interest by the
Average Wisconsin Energy Price. Promptly after the determination of the amount
of cash, if any, to be paid to holders of fractional share interests, the
Exchange Agent shall notify Wisconsin Energy and Wisconsin Energy shall deliver
such amounts to such holders subject to and in accordance with the terms of
Section 2.6(c) of this Agreement.
(f) Investment of Exchange Fund. The Exchange Agent shall invest any cash
included in the Exchange Fund, as directed by Wisconsin Energy, on a daily
basis. Any interest and other income resulting from such investments shall be
paid to Wisconsin Energy upon termination of the Exchange Fund pursuant to
Section 2.6(g) of this Agreement. In the event the cash in the Exchange Fund
shall be insufficient to fully satisfy all of the payment obligations to be
made by the Exchange Agent hereunder, then Wisconsin Energy shall promptly
deposit cash into the Exchange Fund in an amount which is equal to the
deficiency in the amount of cash required to fully satisfy such payment
obligations.
(g) Termination of Exchange Fund. Any portion of the Exchange Fund which
remains undistributed to the WICOR Shareholders after twelve (12) months after
the Effective Time of Merger shall be delivered to Wisconsin Energy, upon
demand, and any WICOR Shareholders who have not theretofore complied with this
Article II of this Agreement shall thereafter look only to Wisconsin Energy for
payment of their claim for cash or shares of Wisconsin Energy Common Stock, or
both, any cash in lieu of fractional share interests and any dividends or
distributions with respect thereto.
(h) No Liability. Neither the Exchange Agent nor any party to this Agreement
shall be liable to any WICOR Shareholder for any shares of WICOR Common Stock
or Wisconsin Energy Common Stock (or dividends or distributions with respect
thereto) or cash delivered in accordance with applicable Law to a public
official pursuant to any abandoned property, escheat or similar Law. If any
WICOR Certificates shall not have been surrendered prior to seven years after
the Effective Time of Merger (or immediately prior to such earlier date on
which any shares of Wisconsin Energy Common Stock, cash, any cash in lieu of
fractional shares of Wisconsin Energy Common Stock in respect of such WICOR
Certificates would otherwise escheat to or become the property of any
governmental Person), any shares of Wisconsin Energy Common Stock, cash and
dividends or distributions in respect of such WICOR Certificates shall, to the
extent permitted by applicable Laws, become the property of Wisconsin Energy,
free and clear of all claims or interest of any Person previously entitled
thereto.
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(i) Withholding Rights. Wisconsin Energy shall be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement to
any WICOR Shareholder such amounts as Wisconsin Energy is required to deduct
and withhold with respect to the making of such payment under the Code, or any
provision of state, local or foreign tax Law. To the extent that amounts are so
withheld by Wisconsin Energy, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the WICOR Shareholder in
respect of which such deduction and withholding was made by Wisconsin Energy.
(j) Book Entry. Notwithstanding any other provision of this Agreement, the
Form of Election and the Letter of Transmittal may, at the option of Wisconsin
Energy, provide for the ability of a holder of one or more WICOR Certificates
to elect that the Wisconsin Energy Common Stock to be received in exchange for
the WICOR Common Stock formerly represented by such surrendered WICOR
Certificates be issued in uncertificated form or to elect that such Wisconsin
Energy Common Stock be credited to an account established for the holder under
the dividend reinvestment and stock purchase plan of Wisconsin Energy.
(k) Stock Transfer Books. At the Effective Time of Merger, the stock
transfer books of WICOR shall be closed and there shall be no further
registration of transfers of shares of WICOR Common Stock thereafter on the
records of WICOR. From and after the Effective Time of Merger, the holders of
WICOR Certificates outstanding immediately prior to the Effective Time of
Merger shall cease to have any rights with respect to such shares of WICOR
Common Stock except as otherwise provided in this Agreement or by Law.
2.7 Reorganization. If any Wisconsin Energy Common Stock is to be issued
pursuant to the Merger, the parties intend that this Agreement be a plan of
reorganization within the meaning of Section 368(a) of the Code and that the
Merger be a tax-free reorganization under Section 368(a) of the Code to the
extent that shares of WICOR Common Stock are exchanged for shares of Wisconsin
Energy Common Stock as described in this Agreement.
2.8 No Dissenting Shares. The parties acknowledge that under the WBCL, the
WICOR Shareholders are not entitled to dissent from the Merger and are not
entitled to require appraisal of their WICOR Common Stock.
2.9 WICOR Options and WICOR Awards.
(a) Stock Options. At the Effective Time of Merger, each then outstanding
option to purchase shares of WICOR Common Stock (a "WICOR Option") under
WICOR's 1987 Stock Option Plan, 1992 Director Stock Option Plan (the "WICOR
Director Option Plan") or 1994 Long-Term Performance Plan (the "WICOR
Performance Plan"), each as amended (collectively, the "WICOR Option Plans"),
whether vested or not vested, shall be deemed assumed by Wisconsin Energy and
shall thereafter be deemed to constitute an option to acquire shares of
Wisconsin Energy Common Stock, on the same terms and conditions as were
applicable under such WICOR Option immediately prior to the Effective Time of
Merger except that:
(i) the number (rounded to the nearest whole number) of shares of
Wisconsin Energy Common Stock covered by such WICOR Option shall be equal
to: (A) the number of shares of WICOR Common Stock subject to such WICOR
Option immediately prior to the Effective Time of Merger; multiplied by (B)
the Exchange Ratio;
(ii) the price per share (rounded to the nearest whole cent) of
Wisconsin Energy Common Stock covered by such WICOR Option shall be equal
to: (A) the exercise price per share of WICOR Common Stock formerly
purchasable pursuant to such WICOR Option; divided by (B) the Exchange
Ratio; and
(iii) with respect only to the WICOR Options that were outstanding on
the date of this Agreement, such WICOR Options shall be fully vested
notwithstanding any vesting requirement otherwise applicable thereto.
(b) Equity-Based Awards. At the Effective Time of Merger, each then
outstanding equity-based award or account (including shares of WICOR New
Restricted Stock awarded after the date of this Agreement as
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described in Section 6.1(j)(iii) of this Agreement and stock equivalents and
stock units relating to WICOR Common Stock, but excluding WICOR Options)
(individually a "WICOR Award") shall be deemed assumed by Wisconsin Energy and
shall thereafter be deemed to constitute an award or account, on the same terms
and conditions as were applicable under such WICOR Award immediately prior to
the Effective Time of Merger, except that the number (rounded to the nearest
whole number) of shares or phantom shares of Wisconsin Energy Common Stock
subject thereto shall be equal to: (i) the number of shares or phantom shares,
as the case may be, of WICOR Common Stock subject to such WICOR Award
immediately prior to the Effective Time of Merger; multiplied by (ii) the
Exchange Ratio. With respect only to awards of restricted stock existing on the
date of this Agreement and outstanding at the Effective Time of Merger, the
restrictions applicable thereto shall immediately cease with respect to 100% of
the number of shares of WICOR Common Stock subject to such awards and such
unrestricted shares shall be converted in the Merger in accordance with Section
2.4 of this Agreement.
(c) Assumption. At the Effective Time of Merger, Wisconsin Energy shall
assume each WICOR Option and WICOR Award in accordance with the terms of the
WICOR Option Plan or other plan or arrangement under which it was granted and
all the terms and conditions of the stock option, restricted stock or other
agreement by which it is evidenced, as adjusted as provided in this Agreement.
At or prior to the Effective Time of Merger, Wisconsin Energy shall take all
corporate action necessary to reserve for issuance a sufficient number of
shares of Wisconsin Energy Common Stock for delivery pursuant to the terms set
forth in this Section 2.9 of this Agreement. As soon as practicable after the
Effective Time of Merger, Wisconsin Energy shall file a registration statement
on an appropriate form or a post-effective amendment to a previously filed
registration statement under the Securities Act to register the shares of
Wisconsin Energy Common Stock subject to the options and awards assumed
pursuant to this Section 2.9 of this Agreement where such registration is
necessary to permit the issuance of such shares free of restrictive legends
under the Securities Act, and shall use its reasonable best efforts to maintain
the effectiveness of such registration statement (and the current status of the
prospectus or prospectuses relating thereto) for so long as such options or
awards remain outstanding.
(d) Other. WICOR represents that there are no options, awards or accounts
relating to WICOR Common Stock outstanding at the date of this Agreement other
than those reflected in Sections 4.1(d) and 4.2(a) of this Agreement. Prior to
the Effective Time of Merger, WICOR shall make all necessary arrangements to
permit the assumption of the WICOR Options and WICOR Awards by Wisconsin Energy
pursuant to this Section 2.9 of this Agreement. WICOR represents that no
consents are necessary to give effect to the transactions contemplated by this
Section 2.9 of this Agreement.
ARTICLE III
Other Agreements
3.1 Proxy Statement and Registration Statement. Wisconsin Energy and WICOR
will prepare and file with the SEC the Registration Statement and the Proxy
Statement as soon as reasonably practicable after the date of this Agreement.
Wisconsin Energy and WICOR shall use reasonable best efforts to cause the
Registration Statement to be declared effective under the Securities Act as
promptly as practicable after such filing. Wisconsin Energy and WICOR shall
also take such action as may be reasonably required to cause any shares of
Wisconsin Energy Common Stock issuable pursuant to the Merger to be registered
or to obtain an exemption from registration or qualification under applicable
state "blue sky" or securities Laws; provided, however, that Wisconsin Energy
shall not be required to qualify as a foreign corporation or to file any
general consent to service of process under the Laws of any jurisdiction. Each
party to this Agreement will furnish to the other parties all information
concerning itself as each such other party or its counsel may reasonably
request and which is required or customary for inclusion in the Proxy Statement
and the Registration Statement.
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3.2 Approval of Shareholders.
(a) WICOR Shareholders.
(i) WICOR shall, as soon as reasonably practicable: (A) take all
steps necessary duly to call, give notice of, convene and hold the
WICOR Special Meeting; (B) distribute the Proxy Statement, which shall
also constitute the prospectus of Wisconsin Energy included in the
Registration Statement, to the WICOR Shareholders in accordance with
applicable Federal and state Law and its Articles of Incorporation and
Bylaws; (C) subject to the provisions of Section 3.2(a)(ii) of this
Agreement, recommend to the WICOR Shareholders the approval of this
Agreement and the transactions contemplated by this Agreement and such
other matters as may be submitted to the WICOR Shareholders in
connection with this Agreement; and (D) fully cooperate and consult
with Wisconsin Energy with respect to each of the foregoing matters.
(ii) The Board of Directors of WICOR shall be permitted to not
recommend to the WICOR Shareholders that the WICOR Shareholders approve
this Agreement and the transactions contemplated by this Agreement or
withdraw or modify in a manner adverse to Wisconsin Energy the
recommendation of the Board of Directors of WICOR if and only if: (A)
the Board of Directors of WICOR determines in its good faith judgment
that it is advisable to so withdraw or modify its recommendation to
comply with its fiduciary duties under applicable Law after
consultation with outside legal counsel; and (B) WICOR and the WICOR
Advisors have complied with their obligations and agreements set forth
in Section 3.9(c) of this Agreement.
(b) Wisconsin Energy Shareholders. Wisconsin Energy shall, as soon as
reasonably practicable: (i) take all steps necessary duly to call, give notice
of, convene and hold the Wisconsin Energy Special Meeting; (ii) distribute the
Proxy Statement to the Wisconsin Energy Shareholders in accordance with
applicable Federal and state Law and its Articles of Incorporation and Bylaws;
(iii) recommend to the Wisconsin Energy Shareholders the approval of the
issuance of Wisconsin Energy Common Stock pursuant to this Agreement and the
transactions contemplated by this Agreement and such other matters as may be
submitted to the Wisconsin Energy Shareholders in connection with this
Agreement; and (iv) fully cooperate and consult with WICOR with respect to each
of the foregoing matters.
(c) Meeting Dates. The WICOR Special Meeting and the Wisconsin Energy
Special Meeting shall be held on such dates as are mutually determined by WICOR
and Wisconsin Energy.
(d) Fairness Opinions. It shall be a condition to the mailing of the Proxy
Statement to the WICOR Shareholders and to the Wisconsin Energy Shareholders
that: (i) Wisconsin Energy shall have received an opinion from Chase Securities
Inc., dated the date of the Proxy Statement, to the effect that, as of the date
thereof, the Merger Consideration to be paid in the Merger is fair to Wisconsin
Energy from a financial point of view; and (ii) WICOR shall have received an
opinion from Merrill Lynch, Pierce, Fenner & Smith Incorporated, dated the date
of the Proxy Statement, to the effect that, as of the date thereof, the Merger
Consideration is fair to the WICOR Shareholders from a financial point of view.
3.3 HSR Act. Each party shall: (a) file or cause to be filed with the
Federal Trade Commission and the Department of Justice any notifications
required to be filed under the HSR Act; and (b) use reasonable best efforts to
make such filings promptly and to respond promptly to any request for
additional information made by either of such agencies.
3.4 Access.
(a) Access to WICOR Companies. Upon reasonable notice and subject to
applicable Laws, WICOR shall, and shall cause the other WICOR Companies to,
afford to the officers, employees, investment bankers, agents, accountants,
attorneys and representatives of Wisconsin Energy reasonable access to all of
its books, records, financial information, facilities, key personnel and other
documents and materials; provided that such access shall be during normal
business hours of the WICOR Companies.
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(b) Confidentiality Agreement. Wisconsin Energy and WICOR agree that the
provisions of the Confidentiality Agreement shall remain in full force and
effect; provided that at the Effective Time of Merger, the Confidentiality
Agreement shall be deemed to have terminated without further action by the
parties.
3.5 Disclosure Schedule.
(a) Disclosure Schedule. Contemporaneously with the execution and delivery
of this Agreement, WICOR is delivering to Wisconsin Energy the Disclosure
Schedule. The Disclosure Schedule is deemed to constitute an integral part of
this Agreement and to be incorporated into and to modify the representations,
warranties, covenants or agreements of WICOR contained in this Agreement to
the extent that such representations, warranties, covenants or agreements
expressly refer to the Disclosure Schedule.
(b) Updates. WICOR shall update the Disclosure Schedule on a monthly basis
by written notice to Wisconsin Energy to reflect any matters which have
occurred from and after the date of this Agreement which, if existing on the
date of this Agreement, would have been required to be described in the
Disclosure Schedule. If requested by Wisconsin Energy within 14 calendar days
after receipt by Wisconsin Energy of an update to the Disclosure Schedule,
WICOR shall meet and discuss with Wisconsin Energy any update to the
Disclosure Schedule which, in the reasonable judgment of Wisconsin Energy, has
or may reasonably be expected to have a WICOR Material Adverse Effect or which
may in any manner be materially adverse to Wisconsin Energy (a "Disclosure
Schedule Change").
3.6 Conditions to Merger. Each party to this Agreement shall use reasonable
best efforts to: (a) to the extent within its control, cause all of its
representations and warranties contained in this Agreement to be true and
correct in all respects on the Closing Date with the same force and effect as
if such representations and warranties had been made on the Closing Date; (b)
take all reasonable actions necessary to comply promptly with all legal
requirements which may be imposed on it with respect to the Merger (including
making all filings and requests in connection with approvals of or filings
with any governmental entity as described in Sections 7.7 and 8.7 of this
Agreement and furnishing all information required in connection therewith);
(c) promptly cooperate with and furnish information to the other parties in
connection with any such requirements imposed upon any of them in connection
with the Merger; (d) contest any legal proceedings seeking to restrain, enjoin
or frustrate the Merger, subject, in the case of WICOR, to the provisions of
Section 3.9(c) of this Agreement concerning Superior Proposals; (e) execute
any additional documents or instruments and take any additional actions
reasonably necessary to consummate the transactions contemplated by this
Agreement; and (f) take all reasonable actions necessary to obtain (and
cooperate with the other parties in obtaining) any consent, authorization,
order or approval of, or any exemption by, any governmental entity or other
public or private Person, required to be obtained by the parties to this
Agreement in connection with the Merger or the taking of any action
contemplated thereby or by this Agreement.
3.7 Deliveries of Information; Consultation. From time to time prior to the
Effective Time of Merger:
(a) Deliveries by WICOR. WICOR shall furnish promptly to Wisconsin
Energy: (i) a copy of each report, schedule and other document filed by
WICOR with the SEC pursuant to the requirements of federal securities Laws
promptly after such documents are available; (ii) the monthly consolidated
and consolidating financial statements of the WICOR Companies (as prepared
by WICOR in accordance with its normal accounting procedures) promptly
after such financial statements are available; (iii) a summary of any
action taken by the Board of Directors, or any committee thereof, of WICOR;
and (iv) subject to the reasonable approval of WICOR, all other information
of WICOR concerning the business, properties and personnel of any of the
WICOR Companies as Wisconsin Energy may request.
(b) Deliveries by Wisconsin Energy. Wisconsin Energy shall promptly
furnish to WICOR a copy of each report, schedule and other document filed
by Wisconsin Energy with the SEC pursuant to the requirements of federal
securities Laws promptly after such documents are available.
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(c) Consultation. WICOR shall, and shall cause the other WICOR Companies
to, confer and consult with representatives of the Wisconsin Energy
Companies on a regular basis to report on operational matters and the
general status of ongoing business operations of the WICOR Companies.
(d) Litigation. Each party to this Agreement shall provide prompt notice
to the other parties of any litigation, arbitration, proceeding,
governmental investigation, citation or action of any kind which is
commenced, threatened or proposed by any Person concerning the legality,
validity or propriety of the transactions contemplated by this Agreement.
If any such litigation or other proceeding is commenced against any party
to this Agreement, the parties shall cooperate in all respects in
connection therewith.
(e) Regulatory Matters. Subject to applicable Law, WICOR shall cause
those of the WICOR Companies that are public utilities to discuss with
Wisconsin Energy any changes in the rates, charges, standards of service or
accounting of such WICOR Companies from those in effect on the date of this
Agreement and consult with Wisconsin Energy prior to making any filing (or
amendment thereto), or effecting any agreement, commitment, arrangement or
consent, whether written or oral, formal or informal, with respect thereto.
(f) Franchises, etc. Except as otherwise agreed to in writing by
Wisconsin Energy, WICOR shall cause those of the WICOR Companies that are
public utilities to use all reasonable best efforts to maintain in effect
and renew all existing franchises, certificates of authority, certificates
of public convenience and necessity and other permits, as the case may be,
pursuant to which any of the WICOR Companies operates in its service
territories. WICOR shall notify Wisconsin Energy promptly in the event that
it becomes aware of any problem, complaint or proceeding which could
reasonably be expected to result in the termination or non-renewal of any
such franchise, certificate or permit.
(g) Transition Matters. Wisconsin Energy and WICOR shall, subject to
applicable Laws, consult on a regular basis regarding the combined
operations of Wisconsin Energy and WICOR after the Closing Date and discuss
the status and timing of the integration of Wisconsin Energy and WICOR
after the Closing Date. The scope of such consultation shall be determined,
and any decisions made on such matters shall be made, by Wisconsin Energy's
Chief Executive Officer on behalf of Wisconsin Energy and WICOR's Chief
Executive Officer on behalf of WICOR.
3.8 Affiliates. Not later than 10 calendar days after the date of the WICOR
Special Meeting, WICOR shall deliver to Wisconsin Energy a letter identifying,
to the best of WICOR's knowledge, all Persons who were Affiliates at the date
of the WICOR Special Meeting. WICOR shall furnish such information and
documents as Wisconsin Energy may reasonably request for the purposes of
reviewing such list. If any Wisconsin Energy Common Stock is to be issued
pursuant to the Merger, WICOR shall advise the Affiliates of the resale
restrictions imposed by applicable securities Laws and shall use reasonable
best efforts to obtain from the Affiliates an executed Affiliate Letter for
delivery to Wisconsin Energy prior to or at the Closing. As used in this
Agreement the following terms shall have the meanings specified: (a)
"Affiliates" shall mean all Persons who are affiliates of WICOR for purposes of
Rule 145 under the Securities Act; and (b) "Affiliate Letter" shall mean a
letter from each Affiliate substantially in the form of Exhibit 1 attached to
this Agreement.
3.9 Other Transactions; Expenses; Other Remedies.
(a) Definitions. As used in this Agreement, the following terms shall have
the meanings specified:
(i) "Other Proposal" shall mean any request for information, expression
of interest, inquiry, proposal or offer relating in any manner to an Other
Transaction.
(ii) "Other Transaction" shall mean any of the following on or prior to
the Special Date, other than the Merger as contemplated by this Agreement:
(A) a merger, consolidation, share exchange, exchange of securities,
reorganization, business combination or other similar transaction
involving WICOR;
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(B) a sale, lease, transfer or other disposition of all or
substantially all of the assets, in a single transaction or series of
related transactions: (1) of the WICOR Companies, taken as a whole, or
(2) of Wisconsin Gas, or (3) of WICOR Industries, Inc.;
(C) a sale of, or tender offer or exchange offer for, or acquisition
by any Person or group of beneficial owners of, 20% or more of the
outstanding shares of capital stock of WICOR, Wisconsin Gas or WICOR
Industries, Inc. in a single transaction or series of related
transactions; or
(D) a public announcement of a proposal, plan, intention or
agreement to do any of the foregoing.
(iii) "Special Date" shall mean that date which is twenty one (21)
months after the date of termination of this Agreement if such termination
is pursuant to any of the following Sections of this Agreement (and if this
Agreement is terminated pursuant to any other Section of this Agreement,
there shall be no Special Date):
(A) Section 9.1(c)(v) or 9.1(d)(v) of this Agreement;
(B) Section 9.1(c)(i) or 9.1(c)(ii) of this Agreement if, at the
time of such termination or prior thereto, there has been an Other
Proposal or Other Transaction that has not been withdrawn prior to such
termination; or
(C) Section 9.1(c)(iv) or 9.1(d)(iv) of this Agreement if, at the
time of such termination or prior to the WICOR Special Meeting, there
has been an Other Proposal or Other Transaction that has not been
withdrawn prior to such termination.
(iv) "Special Event" shall mean any of the following to occur on or
prior to the Special Date (and if there is no Special Date there will be no
Special Event): (A) a Person unrelated to Wisconsin Energy has consummated
an Other Transaction, or has publicly announced or publicly proposed an
Other Transaction and subsequently consummates such Other Transaction after
the Special Date (in which event a Special Event for such Other Transaction
shall be deemed to have occurred at the earlier of the events specified in
clauses (B) or (C) of this Section 3.9(a)(iv) of this Agreement with
reference to such Other Transaction); or (B) WICOR has entered into an
agreement with respect to an Other Transaction; or (C) WICOR shall have
terminated this Agreement for the purpose of pursuing an Other Proposal or
Other Transaction.
(v) "Superior Proposal" shall mean a written bona fide unsolicited Other
Proposal by any Person (other than Wisconsin Energy) which the Board of
Directors of WICOR determines in good faith, and in the exercise of
reasonable judgment (based, among other factors, on the advice of its
independent nationally recognized financial advisors) to be more favorable
to the WICOR Shareholders than the Merger from a financial point of view,
which proposal is capable of being consummated without undue delay taking
into account all relevant factors in connection with such Other Proposal,
including the financial ability of the other parties to consummate such
Other Proposal and the likelihood of regulatory approvals for such Other
Proposal.
(b) Termination of Discussions. WICOR shall immediately cease and cause to
be terminated all existing discussions and negotiations, if any, with any
Persons with respect to any Other Transaction, except that WICOR may notify
such other Persons that the discussions and negotiations are terminated. WICOR
will not release any Person from, or waive any provision of, any standstill
agreement to which it is a party or any confidentiality agreement between it
and another Person.
(c) Non Solicitation. Except as expressly permitted by this Section 3.9(c)
or by Section 6.1(j)(ii) or by Section 6.1(o)(ii) of this Agreement, WICOR
shall not, and shall not permit its Subsidiaries or officers, directors,
employees, agents or other representatives of any of the WICOR Companies
(including, without limitation, any investment banker, attorney or accountant
retained or engaged by any of the WICOR Companies) (the "WICOR Advisors") to
directly or indirectly solicit, initiate, facilitate, encourage, negotiate
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with respect to, discuss or agree to, any Other Proposal or any Other
Transaction. Notwithstanding the foregoing: (i) the Board of Directors of WICOR
may furnish information about the WICOR Companies to the Person making a
Superior Proposal pursuant to a confidentiality agreement in customary form and
may participate in discussions and negotiations regarding such Superior
Proposal if the Board of Directors of WICOR determines to do so in good faith,
after consultation with outside legal counsel, because such action is
consistent with its fiduciary duties under applicable Law; and (ii) WICOR will
be permitted to take and disclose to WICOR Shareholders a position contemplated
by Rules 14d-9 and 14e-2(a) under the Exchange Act with respect to an Other
Proposal by means of a tender offer. [If WICOR receives an Other Proposal that
is not a Superior Proposal and such Other Proposal becomes public information,
WICOR shall use reasonable best efforts to resist such Other Proposal,
including taking all appropriate steps to have the WICOR Board of Directors
approve defensive measures, including, but not limited to a shareholders rights
plan or amendments to existing shareholder rights plans.]* WICOR shall notify
Wisconsin Energy orally and in writing within twenty-four (24) hours following
receipt by WICOR of any Other Proposal, including the terms and conditions of
any such Other Proposal and the Person making such Other Proposal, and shall
give Wisconsin Energy at least five (5) calendar days advance notice of any
agreement proposed to be entered into by WICOR with any Person making an Other
Proposal.
(d) Termination. WICOR may, by notice to Wisconsin Energy at any time prior
to the Effective Time of Merger, terminate this Agreement if WICOR enters into,
executes or agrees to an Other Transaction following a good faith determination
by the Board of Directors of WICOR (after compliance by WICOR with the
provisions of Section 3.9(c) of this Agreement) after consulting with outside
legal counsel, that entering into, executing or agreeing to such Other
Transaction is consistent with its fiduciary duties under applicable Law.
(e) Special Fee. In order to induce Wisconsin Energy to enter into this
Agreement and to compensate Wisconsin Energy for the time and expenses incurred
in connection with this Agreement and the Merger and the losses suffered by
Wisconsin Energy from foregone opportunities, WICOR shall pay a "Special Fee"
equal to [$25,000,000]* to Wisconsin Energy in immediately available funds
within five (5) business days after the occurrence of a Special Event. If WICOR
fails to pay the Special Fee when due: (i) the unpaid portion of the Special
Fee (including accrued interest thereon) shall accrue interest at the annual
rate of 12%, compounding monthly, from the date the Special Fee was due until
the date the Special Fee and all accrued interest thereon is paid in full; and
(ii) WICOR shall pay all costs and expenses of Wisconsin Energy (including the
fees and expenses of attorneys and other advisors) in connection with any
action (including the filing of any lawsuit or other legal action) taken by
Wisconsin Energy to collect payment of the Special Fee and accrued interest
thereon. The agreements contained in this Section 3.9 (e) of this Agreement are
an integral part of this Agreement and constitute liquidated damages and not a
penalty. Notwithstanding anything contained in this Agreement, there shall not
be a Special Fee required with respect to an Other Transaction described in
Section 3.9(a)(ii)(A) of this Agreement unless:
(i) if WICOR is the actual party to such Other Transaction: (A) the
WICOR Shareholders immediately prior to such Other Transaction own 50% or
less of the outstanding common stock of the surviving or resulting Person
immediately after such Other Transaction; and (B) those individuals who
were directors of WICOR immediately prior to such Other Transaction do not
constitute a majority of the directors of the surviving or resulting Person
immediately after such Other Transaction; or
(ii) if a direct or indirect Subsidiary of WICOR is the actual party to
such Other Transaction: (A) the WICOR Shareholders immediately prior to
such Other Transaction own 50% or less of the outstanding WICOR Common
Stock immediately after such Other Transaction; (B) WICOR, either directly
or
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* The third sentence of Section 3.9(c) was deleted and the amount of the
Special Fee was changed from $30,000,000 to $25,000,000 by the Amendment to
Agreement and Plan of Merger dated as of September 9, 1999. The Amendment
provides that it will be of no further force and effect if the settlement of
the litigation entitled Halpren v. George E. Wardeberg, et al. does not
receive final court approval or if the Merger is not consummated.
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indirectly, owns 50% or less of the surviving or resulting Person; and (C)
those individuals who were directors of WICOR immediately prior to such
Other Transaction do not constitute a majority of the directors of WICOR
immediately after such Other Transaction.
(f) Certain Terminations by WICOR. If this Agreement is terminated by WICOR
pursuant to Section 9.1(d)(i) or 9.1(d)(ii) of this Agreement, then Wisconsin
Energy shall promptly (but not later than five business days after receipt of
notice from WICOR) pay to WICOR in cash an amount equal to all documented out
of pocket expenses and fees incurred by WICOR (including, without limitation,
fees and expenses payable to all legal, accounting, financial, public relations
and other professional advisors arising out of or in connection with or related
to the Merger or the transactions contemplated by this Agreement) not in excess
of $3,000,000; provided that if this Agreement is so terminated by WICOR as a
result of a willful breach by Wisconsin Energy, WICOR may pursue any remedies
available to WICOR at law or in equity and shall, in addition to its out of
pocket expenses (which shall be paid as specified above in this Section 3.9(f)
of this Agreement and shall not be limited to $3,000,000) be entitled to retain
such additional amounts as WICOR may be entitled to receive at law or in
equity.
(g) Certain Terminations by Wisconsin Energy. If this Agreement is
terminated by Wisconsin Energy pursuant to Section 9.1(c)(i) or 9.1(c)(ii) of
this Agreement, then: (i) WICOR shall promptly (but not later than five
business days after receipt of notice from Wisconsin Energy) pay to Wisconsin
Energy in cash an amount equal to all documented out of pocket expenses and
fees incurred by Wisconsin Energy (including, without limitation, fees and
expenses payable to all legal, accounting, financial, public relations and
other professional advisors arising out of or in connection with or related to
the Merger or the transactions contemplated by this Agreement) not in excess of
$3,000,000; provided that if this Agreement is so terminated by Wisconsin
Energy as a result of a willful breach by WICOR, Wisconsin Energy may pursue
any remedies available to Wisconsin Energy at law or in equity and shall, in
addition to its out of pocket expenses (which shall be paid as specified above
in this Section 3.9(g) of this Agreement and shall not be limited to
$3,000,000) be entitled to retain such additional amounts as Wisconsin Energy
may be entitled to receive at law or in equity; and (ii) Wisconsin Energy shall
be entitled to receive the Special Fee if such termination is a termination
described in Section 3.9(a)(iii)(B) of this Agreement.
3.10 Letter of WICOR's Accountants. WICOR shall use reasonable best efforts
to cause to be delivered a letter of Arthur Andersen LLP, WICOR's independent
auditors, dated within two business days before the effective date of the
Registration Statement and addressed to WICOR and Wisconsin Energy, in form and
substance reasonably satisfactory to Wisconsin Energy and customary in scope
and substance for cold comfort letters delivered by independent public
accountants in connection with registration statements similar to the
Registration Statement.
3.11 Letter of Wisconsin Energy's Accountants. Wisconsin Energy shall use
reasonable best efforts to cause to be delivered a letter of
PricewaterhouseCoopers LLP, Wisconsin Energy's independent auditors, dated
within two business days before the effective date of the Registration
Statement and addressed to Wisconsin Energy and WICOR, in form and substance
reasonably satisfactory to WICOR and customary in scope and substance for cold
comfort letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement.
3.12 Stock Exchange Listing. Wisconsin Energy shall use reasonable best
efforts to cause any shares of Wisconsin Energy Common Stock to be issued or
reserved for issuance pursuant to this Agreement to be approved for listing on
the New York Stock Exchange, subject to official notice of issuance.
3.13 Public Announcements. Subject to each party's disclosure obligations
imposed by Law, WICOR, Acquisition and Wisconsin Energy will cooperate with
each other in the development and distribution of all news releases and other
public information disclosures with respect to this Agreement or any of the
transactions contemplated by this Agreement and, except as may be required by
Law, shall not issue any public announcement or statement with respect thereto
without the prior consent of the other parties to this Agreement.
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3.14 Indemnification; Directors' and Officers' Insurance.
(a) Indemnity Obligations. From and after the Effective Time of Merger,
Wisconsin Energy shall cause (including, to the extent required, by providing
sufficient funding to enable the Surviving Corporation to satisfy all of its
obligations under this Section 3.14(a) of this Agreement), the Surviving
Corporation to indemnify, defend and hold harmless each Person who is now, or
has been at any time prior to the date of this Agreement, or who becomes prior
to the Effective Time of Merger, an officer, director or employee of any of the
WICOR Companies (each an "Indemnified Party" and collectively, the "Indemnified
Parties") against:
(i) all losses, expenses (including reasonable attorney's fees and
expenses), claims, damages or liabilities or, subject to the provisions of
Section 3.14(b) of this Agreement, amounts paid in settlement, arising out
of actions or omissions occurring at or prior to the Effective Time of
Merger (and whether asserted or claimed prior to, at or after the Effective
Time of Merger) that are, in whole or in part, based on or arising out of
the fact that such Person is or was a director, officer or employee of any
of the WICOR Companies (the "Indemnified Liabilities"); and
(ii) all Indemnified Liabilities to the extent that they are based on or
arise out of or pertain to the transactions contemplated by this Agreement.
(b) Fees and Expenses. In the event of any such loss, expense, claim, damage
or liability (whether or not arising before the Effective Time of Merger):
(i) the Surviving Corporation shall pay the reasonable fees and expenses
of counsel selected by the Indemnified Parties, which counsel shall be
reasonably satisfactory to Wisconsin Energy, promptly after statements
therefor are received and otherwise advance to such Indemnified Party upon
request reimbursement of documented expenses incurred, provided that the
Indemnified Parties as a group may retain only one law firm with respect to
each related matter except to the extent that there is, in the opinion of
counsel to an Indemnified Party, under applicable standards of professional
conduct, a conflict on any significant issue between positions of such
Indemnified Party and any other Indemnified Party or Indemnified Parties;
(ii) Wisconsin Energy and the Surviving Corporation will cooperate in
the defense of any such matter; and
(iii) any determination required to be made with respect to whether an
Indemnified Party's conduct complies with the standards set forth under
Sections 180.0850 through 180.0859 of the WBCL and the Articles of
Incorporation or Bylaws of WICOR (as the same shall be amended from time to
time) shall be made by independent counsel mutually acceptable to Wisconsin
Energy and the Indemnified Party; 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).
(c) Insurance. Wisconsin Energy shall cause the individuals serving as
officers and directors of the WICOR Companies immediately prior to the
Effective Time of Merger to be covered for a period of six years from the
Effective Time of Merger (or the period of the applicable statute of
limitations, if longer) by the directors' and officers' liability insurance
policies maintained by WICOR (provided that Wisconsin Energy may substitute
therefor policies of at least the same coverage and amounts containing terms
and conditions that are not less advantageous than such policies) with respect
to acts or omissions occurring prior to the Effective Time of Merger which were
committed by such officers and directors in their capacity as such; provided,
however, that in no event shall Wisconsin Energy be required to expend more
than 200% of the current amount expended by WICOR (the "Insurance Amount") to
maintain or procure insurance coverage pursuant hereto and provided further
that if Wisconsin Energy is unable to maintain or obtain the insurance called
for by this Section 3.14 of this Agreement, Wisconsin Energy shall use its
reasonable best efforts to obtain as much comparable insurance as available for
the Insurance Amount.
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(d) Successors. In the event Wisconsin Energy or the Surviving Corporation
or any of their respective successors or assigns: (i) consolidates with or
merges into any other Person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger; or (ii) transfers all or
substantially all of its properties and assets to any Person; then and in
either such case, proper provisions shall be made so that the successors and
assigns of Wisconsin Energy or the Surviving Corporation, as applicable, shall
assume the obligations set forth in this Section 3.14 of this Agreement.
(e) Survival of Indemnification. To the fullest extent permitted by Law,
from and after the Effective Time of Merger, all rights to indemnification as
of the date of this Agreement in favor of the officers, directors and employees
of the WICOR Companies with respect to their activities as such prior to the
Effective Time of Merger, as provided in their respective Articles of
Incorporation and Bylaws in effect on the date of this Agreement, or otherwise
in effect on the date of this Agreement, shall survive the Merger and shall
continue in full force and effect for a period of six years from the Effective
Time of Merger (or the period of the applicable statute of limitations, if
longer).
(f) Benefit. The provisions of this Section 3.14 of this Agreement are
intended to be for the benefit of, and shall be enforceable by, each
Indemnified Party and his or her heirs and representatives.
3.15 Employee and Employee Benefit Plan Matters.
(a) General Agreement. Subject to the provisions of this Section 3.15 of
this Agreement, Wisconsin Energy shall cause the WICOR Companies to honor all
employment agreements, consulting agreements, severance agreements and
collective bargaining agreements to which any of the WICOR Companies is a
party, including the Existing Plans but excluding the WICOR ESOP. Wisconsin
Energy acknowledges that for purposes of certain of the Employee Benefit Plans
described on the Disclosure Schedule, the consummation of the Merger will
constitute a "Change in Control" (as such term or any similar term is defined
in such plans, contracts and agreements) and that following the Effective Time
of Merger the employees listed on the Disclosure Schedule may be entitled to
terminate employment under their employment agreements and receive change of
control severance benefits thereunder.
(b) Employee Benefit Plans. Wisconsin Energy understands and agrees that
(except for the WICOR ESOP) all Existing Plans or plans substantially
comparable in the aggregate shall be maintained for individuals who are
employees and former employees of the WICOR Companies on the Closing Date for a
period of at least one year after the Closing Date. For purposes of determining
comparability, even though the WICOR ESOP is excluded from consideration, the
employees of the WICOR Companies covered by the WICOR ESOP on the Closing Date
will be deemed to have been covered by a 401(k) plan that provides for an
employer matching contribution of 50% of the first 6% of employee compensation.
(c) Eligibility. For purposes of all employee benefit plans maintained or
contributed to by any of the Wisconsin Energy Companies after the Effective
Time of Merger in which employees of any of the WICOR Companies at the
Effective Time of Merger participate, Wisconsin Energy shall cause each such
plan to treat the prior service with the WICOR Companies as service rendered to
the Wisconsin Energy Companies for purposes of eligibility and vesting under
such plan, but, unless otherwise determined by Wisconsin Energy, not for
purposes of benefit accrual under such plan.
(d) Employment Agreement. Wisconsin Energy shall, as of or prior to the
Effective Time, enter into an employment agreement with Mr. George E. Wardeberg
in the form of Exhibit 2 attached to this Agreement.
(e) ESOP. At the Effective Time of Merger, the Wisconsin Gas Company
Employee Stock Ownership Plan (the "WICOR ESOP") shall be terminated and the
WICOR Common Stock held by the WICOR ESOP shall be exchanged for cash or shares
of Wisconsin Energy Common Stock, or both, as described in Section 2.4 of this
Agreement and distributed to participants in the WICOR ESOP. Such termination
shall occur in a manner determined by WICOR that is reasonably acceptable to
Wisconsin Energy, and in accordance with a favorable determination letter from
the Internal Revenue Service requested on a proposed basis by WICOR prior to
the Effective Time of Merger.
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(f) Wisconsin Energy Severance Policies. Prior to the Closing Date,
Wisconsin Energy shall adopt severance policies substantially in the forms
attached to this Agreement as Exhibits 3 and 4 (the "Wisconsin Energy Severance
Policies"). WICOR shall notify Wisconsin Energy at least three (3) calendar
days prior to the Closing Date of the identity of those employees of the WICOR
Companies that are to be "Participants" under each of the Wisconsin Energy
Severance Policies (not to exceed 4 individuals as Participants who are to
receive "Tier 1 Benefits", 4 individuals as Participants who are to receive
"Tier 2 Benefits", 10 individuals as Participants who are to receive "Tier 3
Benefits" and 30 individuals as Participants who are to receive "Tier 4
Benefits"). Wisconsin Energy shall then take all appropriate actions prior to
the Closing Date to designate such Persons as "Participants" under the
Wisconsin Energy Severance Policies as indicated in such notice.
(g) Benefit. The provisions of Sections 3.15(a). 3.15(b), 3.15(c), 3.15(e)
and 3.15(f) are for the benefit of the various Persons described therein and
may be enforced for the benefit of such Persons only by Mr. Wardeberg or by the
Wisconsin Energy Designee.
3.16 Directors.
(a) Mr. Wardeberg. Wisconsin Energy shall take all action necessary to elect
Mr. George E. Wardeberg as Vice Chairman of the Board of Directors of Wisconsin
Energy as of the Effective Time of Merger to hold office until his successor is
duly appointed or elected in accordance with the Bylaws of Wisconsin Energy and
applicable Law. Thereafter, Wisconsin Energy shall nominate and solicit proxies
in good faith to elect Mr. Wardeberg as a director of Wisconsin Energy at each
annual meeting at which Mr. Wardeberg's term expires held after the Effective
Time of Merger so that Mr. Wardeberg will be a director of Wisconsin Energy
until the annual meeting in the year in which Mr. Wardeberg attains age 70.
(b) Other Director. Wisconsin Energy shall take all action necessary to
elect the Wisconsin Energy Designee as a member of the Board of Directors of
Wisconsin Energy as of the Effective Time of Merger in the class of directors
of Wisconsin Energy whose term will expire at the first annual meeting of
Wisconsin Energy Shareholders after the Effective Time of Merger, and to hold
office until his successor is duly appointed or elected in accordance with the
Bylaws of Wisconsin Energy and applicable Law. Wisconsin Energy shall nominate
and solicit proxies in good faith to elect the Wisconsin Energy Designee for a
full term as a director of Wisconsin Energy at the first annual meeting of
Wisconsin Energy Shareholders after the Effective Time of Merger. As used in
this Agreement, "Wisconsin Energy Designee" shall mean a Person (other than Mr.
Wardeberg) selected by Wisconsin Energy, and reasonably acceptable to WICOR,
who is a director of WICOR at the Effective Time of Merger.
(c) Benefit. The provisions of Sections 3.16(a) of this Agreement are
intended to be for the benefit of, and shall be enforceable by, Mr. Wardeberg
and the provisions of Section 3.16(b) of this Agreement are intended to be for
the benefit of, and shall be enforceable by, the Wisconsin Energy Designee.
3.17 WICOR DRIP. Through the Effective Time of Merger WICOR will continue to
cause WICOR's direct stock purchase and dividend reinvestment plan (the "WICOR
DRIP") to use market purchases of shares of WICOR Common Stock instead of
original issue as the source of shares of WICOR Common Stock for the WICOR
DRIP. The WICOR DRIP will be terminated at the Effective Time of Merger. All
shares of WICOR Common Stock held in the WICOR DRIP have been or will be
properly allocated to the accounts of Persons who were participants in the
WICOR DRIP. All shares of WICOR Common Stock held in the WICOR DRIP at the
Effective Time of Merger shall be converted into cash and shares of Wisconsin
Energy Common Stock as provided in Section 2.4 of this Agreement. If Wisconsin
Energy provides an election pursuant to Section 2.6(j) of this Agreement, and
subject to the allocation and election procedures in Section 2.4 of this
Agreement, participants in the WICOR DRIP who elect to have shares of Wisconsin
Energy Common Stock credited to accounts established for them under Wisconsin
Energy's dividend reinvestment and stock purchase plan shall have their shares
of WICOR Common Stock held in the WICOR DRIP converted into the number of whole
shares and any fractional share of Wisconsin Energy Common Stock resulting from
the application of the Exchange Ratio, instead of having any such fractional
share paid in cash as provided in Section 2.6(e) of this Agreement.
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3.18 Acknowledgments. Wisconsin Energy and WICOR acknowledge that they
recognize the value of the business franchises, structures, organizations,
employees and operations of Wisconsin Gas and the gas distribution business of
Wisconsin Electric. Wisconsin Energy and WICOR each recognize that it may prove
advantageous for the customers and employees of Wisconsin Energy and WICOR, and
the Wisconsin Energy Shareholders, at some point after the Effective Time of
Merger, for Wisconsin Energy to combine in some manner the gas distribution
business of Wisconsin Electric with the business and operations of Wisconsin
Gas, subject to all applicable Laws and collective bargaining agreements. In
that event, Wisconsin Energy shall, in good faith, make reasonable efforts to
maintain the name of Wisconsin Gas as the principal operating name of such
combined businesses and shall appropriately consider other relevant business
and regulatory factors in making such decisions.
3.19 Other Workforce Matters. Subject to applicable collective bargaining
agreements, any reductions in workforce in respect of employees of the
Wisconsin Energy Companies or the WICOR Companies, or both, shall be made on a
fair and equitable basis, in light of the circumstances and the objectives to
be achieved, giving consideration to previous work history, job experience, and
qualifications without regard to whether employment was with the WICOR
Companies or the Wisconsin Energy Companies, and any employees whose employment
is terminated or jobs eliminated shall be entitled to participate on a fair and
equitable basis in the job opportunity and employment placement programs
offered by the Wisconsin Energy Companies. Any workforce reductions carried out
following the Effective Time of Merger by the Wisconsin Energy Companies shall
be done in accordance with all applicable collective bargaining agreements and
all Laws.
3.20 Payment of Dividends. From the date of this Agreement through the
Effective Time of Merger, WICOR and Wisconsin Energy shall cooperate with each
other regarding the declaration of dividends with the intention of WICOR and
Wisconsin Energy being that holders of WICOR Common Stock will not receive two
dividends, or fail to receive one dividend, for any single calendar quarter
with respect to their WICOR Common Stock and the shares, if any, of Wisconsin
Energy Common Stock any holder of WICOR Common Stock receives in exchange
therefor in connection with the Merger.
ARTICLE IV
Representations and Warranties of WICOR
WICOR hereby represents and warrants to Wisconsin Energy and Acquisition
that, except as set forth in the relevant section of the Disclosure Schedule
(which exception shall apply to all Sections of this Article IV of this
Agreement other than Section 4.16):
4.1 Organization; Business.
(a) Organization. Each of the WICOR Companies is a corporation duly
organized, validly existing and in good standing (or equivalent status) under
the Laws of its respective jurisdiction of incorporation. Each of the WICOR
Companies is qualified to do business as a foreign corporation and is in good
standing (or equivalent status) in all other jurisdictions where the ownership
or leasing of property or the conduct of its business requires qualification as
a foreign corporation by it, except where the failure to so qualify would not
have a WICOR Material Adverse Effect.
(b) Corporate Power and Authority. Each of the WICOR Companies has: (i) full
corporate power and authority necessary to carry on its business as it is now
conducted and to own, lease and operate its assets and properties; and (ii) all
franchises, permits, licenses, approvals, authorizations, certificates and
registrations necessary to carry on its business as it is now conducted and to
own, lease and operate its assets and properties, except where the absence of
any such franchises, permits, licenses, approvals, authorizations, certificates
or registrations would not have a WICOR Material Adverse Effect.
(c) Regulation. WICOR is an exempt holding company under Section 3(a)(1) of
PUHCA. Wisconsin Gas is regulated as a public utility in the State of Wisconsin
and is not subject to regulation in any other state. The other WICOR Companies
are not regulated as public utilities or subject to such regulation by any
state.
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(d) Disclosure Schedule. The Disclosure Schedule sets forth a brief
description of each of the Subsidiaries of WICOR, including the name of each
such Subsidiary, the state or other jurisdiction of incorporation of each such
Subsidiary, the address of the principal place of business of such Subsidiary,
a brief description of the principal line or lines of business conducted by
each such Subsidiary, the names and percentage ownership of the owners of all
outstanding shares of capital stock or other ownership or equity interests of
such Subsidiary and, if directly owned by WICOR, a description of the
capitalization of such Subsidiary. Except as set forth on the Disclosure
Schedule, there are no options, warrants, conversion rights or other rights to
subscribe for or purchase, or other contracts with respect to, or equity-based
awards or accounts (including restricted stock, stock equivalents and stock
units) with respect to, any capital stock of any of the WICOR Companies.
(e) Articles of Incorporation and Bylaws. Copies of the Articles of
Incorporation and Bylaws of each of the WICOR Companies, as amended, certified
by the Secretary of WICOR as of the date of this Agreement, are being
delivered, or will be delivered promptly after the date of this Agreement, by
WICOR to Wisconsin Energy contemporaneously with the execution and delivery of
this Agreement and such copies are complete and correct copies of such
documents in effect as of the date of this Agreement.
4.2 Capitalization.
(a) Capitalization of WICOR. As of the date of this Agreement, the entire
authorized capital stock of WICOR consists of: (i) 120,000,000 shares of Common
Stock, $1.00 par value, of which 37,502,034 shares are issued and outstanding,
(including 75,300 shares of outstanding restricted stock awarded under the
WICOR Performance Plan), no shares are held in treasury by WICOR, 2,972,210
shares are subject to outstanding WICOR Options granted under the WICOR Option
Plans (of which options to purchase an aggregate of 1,753,832 shares are
exercisable) and 45,632,143 shares are reserved for issuance pursuant to the
WICOR Rights Agreement; and (ii) 1,500,000 shares of Cumulative Preferred
Stock, $1.00 par value, none of which are issued and outstanding. As of the
date of this Agreement, there are outstanding equity-based awards or accounts
(other than outstanding restricted stock) with respect to an aggregate of
86,641 shares or phantom shares of WICOR Common Stock.
(b) Outstanding Capital Stock. All of the outstanding capital stock of each
of the WICOR Companies is duly authorized, validly issued, fully paid and
nonassessable, except as provided in Section 180.0622(2)(b) of the WBCL, as
judicially interpreted.
4.3 Authorization; Enforceability. The execution, delivery and performance
of this Agreement by WICOR and all of the documents and instruments required by
this Agreement to be executed and delivered by WICOR are within the corporate
power of WICOR and: (a) have been duly authorized by the Board of Directors of
WICOR; and (b) upon the approval of the WICOR Shareholders, shall be duly
authorized by all necessary corporate action by WICOR. This Agreement is, and
the other documents and instruments required by this Agreement to be executed
and delivered by WICOR will be, when executed and delivered by WICOR, the valid
and binding obligations of WICOR, enforceable against WICOR in accordance with
their respective terms, except as the enforcement thereof may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws
generally affecting the rights of creditors and subject to general equity
principles.
4.4 No Violation or Conflict. Subject to the receipt of the approvals and
consents described in Section 8.7 of this Agreement or as set forth in the
Disclosure Schedule, the execution, delivery and performance of this Agreement
by WICOR do not and will not conflict with or violate: (a) any Law or the
Articles of Incorporation or Bylaws of any of the WICOR Companies; or (b) any
Existing Contract, except where such conflict or violation would not have a
WICOR Material Adverse Effect.
4.5 Litigation. Except for the litigation identified in the WICOR SEC
Reports filed prior to the date of this Agreement or on the Disclosure Schedule
as "Existing Litigation" as of the date of this Agreement: (a) there is no
material litigation, arbitration, proceeding, governmental investigation,
citation or action of any kind pending or, to the Knowledge of WICOR, proposed
or threatened, against or relating to any of the WICOR
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Companies; and (b) there are no actions, suits or proceedings pending or, to
the Knowledge of WICOR, proposed or threatened, against any of the WICOR
Companies by any Person which question the legality, validity or propriety of
the transactions contemplated by this Agreement.
4.6 WICOR SEC Reports and Financial Statements.
(a) Definition. As used in this Agreement, "WICOR SEC Reports" shall mean
all reports, registration statements, definitive proxy statements, prospectuses
and amendments thereto filed by WICOR with the SEC since January 1, 1996 or
filed by WICOR with the SEC after the date of this Agreement and prior to the
Effective Time of Merger.
(b) WICOR SEC Reports. The WICOR SEC Reports: (i) complied or will comply,
as the case may be, in all material respects with the then applicable
requirements of the Exchange Act and the Securities Act, as the case may be,
and the rules and regulations of the SEC issued thereunder; and (ii) did not or
will not, as the case may be, contain as of their respective filing dates any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(c) Financial Statements. The audited consolidated financial statements and
unaudited consolidated interim financial statements of WICOR included in the
WICOR SEC Reports have been or will be, as the case may be, prepared in
accordance with generally accepted accounting principles applied on a
consistent basis (except as may be indicated therein or in the notes thereto
and except with respect to the absence of notes in the case of any unaudited
interim financial statements) and fairly present in all material respects the
consolidated financial position of the WICOR Companies as of the dates thereof
and the results of their operations and changes in financial position for the
periods then ended, subject, in the case of the unaudited consolidated interim
financial statements, to normal year-end and audit adjustments and any other
adjustments described therein.
(d) Undisclosed Liabilities. The WICOR Companies, taken as a whole, do not
have any material liabilities of any nature except as disclosed in the WICOR
SEC Reports or which do not, individually or in the aggregate, have a WICOR
Material Adverse Effect.
4.7 Absence of Certain Changes. Except as set forth in the Disclosure
Schedule or in the WICOR SEC Reports, since March 31, 1999 and through the date
of this Agreement there has not been any: (a) WICOR Material Adverse Effect; or
(b) declaration or payment or setting aside the payment of any dividend or any
distribution in respect of the capital stock of WICOR (except for regular
quarterly cash dividends on outstanding shares of WICOR Common Stock which have
been publicly announced by WICOR) or any direct or indirect redemption,
purchase or other acquisition of any such stock by any of the WICOR Companies.
4.8 Contracts.
(a) Existing Contracts. The contracts identified on the Disclosure Schedule
as the "Existing Contracts" or which are described in the WICOR SEC Reports are
the only contracts as of the date of this Agreement to which any of the WICOR
Companies is a party or by which any of the WICOR Companies is bound and which
constitute: (i) any union labor contracts; (ii) any management or employment
contract which: (A) is in writing; or (B) creates other than an at-will
employment relationship; or (iii) any agreements or notes evidencing any
Indebtedness; as used in this Agreement, the term "Indebtedness" shall mean any
liability or obligation of any of the WICOR Companies, whether primary or
secondary or absolute or contingent: (A) for borrowed money; or (B) evidenced
by notes, bonds, debentures or similar instruments.
(b) Insurance Policies. The WICOR Companies currently maintain such valid
insurance as is reasonably prudent for the WICOR Companies and their
businesses. Except as set forth on the Disclosure Schedule, no material
property damage, personal injury or liability claims have been made, or are
pending, against any of the WICOR Companies that are not covered by insurance.
Within the past two (2) years, no insurance company has canceled any material
insurance (of any type) maintained by any of the WICOR Companies.
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4.9 Employee Benefit Plans.
(a) Definition. As used in this Agreement, the term "Employee Benefit Plans"
shall mean any pension plan, restricted stock plan, profit sharing plan, bonus
plan, incentive compensation plan, stock ownership plan, stock purchase plan,
stock option plan, stock appreciation plan, employee welfare plan, retirement
plan, deferred compensation plan, fringe benefit program, insurance plan,
severance plan, disability plan, health care plan, sick leave plan, death
benefit plan, defined contribution plan, or any other plan or program to
provide retirement income, fringe benefits or other benefits to former or
current employees or directors of any of the WICOR Companies.
(b) Existing Plans. Except for the Employee Benefit Plans of the WICOR
Companies identified as the "Existing Plans" on the Disclosure Schedule, none
of the WICOR Companies maintain, nor is bound by, any Employee Benefit Plan.
Except as set forth on the Disclosure Schedule, all of the Existing Plans are,
to the extent applicable, in compliance in all material respects with ERISA,
the Code and all other applicable Laws. Except as set forth on the Disclosure
Schedule, all of the Existing Plans which are intended to meet the requirements
of Section 401(a) or 403(a) of the Code have been determined to be "qualified"
within the meaning of the Code, and there are no facts which would adversely
affect the qualified status of any of such Existing Plans. Except as set forth
on the Disclosure Schedule, each Existing Plan has been administered in all
material respects in accordance with its terms and is in compliance in all
material respects with all applicable Laws. Any Employee Benefit Plan that is
not an Existing Plan that has been terminated was done so in compliance in all
material respects with all applicable Laws, and there is no basis for further
liability or obligation of any WICOR Company pursuant to any past Employee
Benefit Plan.
(c) Certain Matters. Except as set forth on the Disclosure Schedule, with
respect to each Existing Plan which is subject to either Title IV of ERISA or
Section 412 of the Code, there is no amount of unfunded benefit liabilities as
defined in Section 4001(a)(18) of ERISA, there has occurred no failure to meet
the minimum funding standards of Section 412 of the Code, there is no
"accumulated funding deficiency" (whether or not waived) within the meaning of
Section 412 of the Code, no such Existing Plan has terminated or has filed a
Notice of Intent to terminate, the Pension Benefit Guaranty Corporation has not
instituted proceedings to terminate any such Existing Plan and there is no
outstanding liability under Section 4062 of ERISA.
(d) Prohibited Transactions; Reportable Events. Except as set forth on the
Disclosure Schedule, no nonexempt prohibited transaction within the meaning of
Section 4975 of the Code or Section 406 of ERISA or reportable event as
described in Section 4043 of ERISA for which the reporting required is not
waived has occurred with respect to any of the Employee Benefit Plans.
(e) Multiemployer Plans. Except as set forth on the Disclosure Schedule,
none of the WICOR Companies is contributing to, nor has any of the WICOR
Companies contributed to since September 2, 1974, any "multiemployer plan" as
defined in Section 4001(a)(3) of ERISA.
(f) Claims. There are no pending, or to the Knowledge of WICOR, threatened
claims with respect to any of the Employee Benefit Plans, other than claims for
benefits arising in the ordinary course of business.
(g) COBRA. With respect to each Existing Plan, each WICOR Company has
complied in all material respects with the applicable health care continuation
and notice provisions of the Consolidated Omnibus Budget Reconciliation Act of
1985 and the proposed regulations thereunder, and the applicable requirements
of the Family and Medical Leave Act of 1993 and the regulations thereunder.
(h) The Merger. Except as set forth in the Disclosure Schedule, the Merger
and the consummation of the transactions contemplated by this Agreement will
not entitle any current or former employee of any WICOR Company to severance
benefits or any other payment or accelerate the time of paying or vesting, or
increase the amount of compensation due any such employee.
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(i) Copies. Correct and complete copies of all Existing Plans, together with
recent summary plan descriptions, have been delivered, or will be delivered
promptly after execution of this Agreement, by WICOR to Wisconsin Energy.
4.10 No Violation of Law. Neither any of the WICOR Companies nor any of the
assets of any of the WICOR Companies violate or conflict in any material
respect with any Law.
4.11 Brokers. Except for fees to Merrill Lynch, Pierce, Fenner & Smith
Incorporated, none of the WICOR Companies has incurred any brokers', finders'
or any similar fee in connection with the transactions contemplated by this
Agreement.
4.12 Taxes. Except as set forth in the Disclosure Schedule:
(a) Tax Returns. Each of the WICOR Companies has timely and properly
filed all federal, state, local and foreign tax returns (including but not
limited to income, business, franchise, sales, payroll, employee
withholding and social security and unemployment) which were required to be
filed. Each of the WICOR Companies has paid or made adequate provision, in
reserves reflected in its financial statements included in the WICOR SEC
Reports in accordance with generally accepted accounting principles, for
the payment of all taxes (including interest and penalties) and withholding
amounts owed by it or assessable against it. No tax deficiencies have been
proposed or assessed against any of the WICOR Companies and, to the
Knowledge of WICOR, there is no basis in fact for the assessment of any
material tax or material penalty tax against any of the WICOR Companies
after giving effect to all reserves for tax matters reflected in the
financial statements included in the WICOR SEC Reports. To the Knowledge of
WICOR, no material issue has been raised in any prior tax audit which, by
application of the same or similar principles, could reasonably be expected
upon a future tax audit to result in a proposed material deficiency for any
period.
(b) Extensions. None of the WICOR Companies has consented to any
extension of the statute of limitation with respect to any open federal tax
returns.
(c) Tax Liens. There are no tax Liens upon any property or assets of any
of the WICOR Companies except for Liens for current taxes not yet due and
payable.
(d) Tax Examinations. No examination or audit of any tax return or
report for any period not barred by the applicable statute of limitations
has occurred, no such examination is in progress and, to the Knowledge of
WICOR, no such examination or audit is planned.
(e) Employment Taxes. Each of the WICOR Companies has properly withheld
and timely paid all withholding and employment taxes which it was required
to withhold and pay relating to salaries, compensation and other amounts
heretofore paid to its employees or other Persons. All Forms W-2 and 1099
required to be filed with respect thereto have been timely and properly
filed.
(f) Tax Sharing Agreements. None of the WICOR Companies is a party to
any agreement relating to allocating or sharing any taxes.
(g) Excess Parachute Payments. None of the WICOR Companies is a party to
any contract that could result, on account of the Merger, separately or in
the aggregate, in the payment of any "excess parachute payments" within the
meaning of Section 280G of the Code.
(h) Liabilities of Other Persons. None of the WICOR Companies has any
liability for taxes of any kind of any Person other than the WICOR
Companies under any contract or under Treasury Regulations Section 1.1502-6
(or any similar provision of Law) as a transferee or successor or
otherwise.
4.13 Governmental Approvals. No permission, approval, determination, consent
or waiver by, or any declaration, filing or registration with, any United
States or foreign governmental or United States or foreign
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regulatory authority is required in connection with the execution, delivery and
performance of this Agreement by WICOR and the consummation of the Merger,
except for: (a) the approvals described in Section 8.7 of this Agreement; and
(b) the filing of the Articles of Merger as described in this Agreement.
4.14 No Pending Other Transactions. Except for this Agreement, none of the
WICOR Companies is a party to or bound by any agreement, undertaking or
commitment with respect to an Other Transaction.
4.15 Labor Matters.
(a) Employee Claims. As of the date of this Agreement and except as set
forth in the Disclosure Schedule, there are no pending and unresolved claims by
any Person against any of the WICOR Companies arising out of any statute,
ordinance or regulation relating to discrimination against employees or
employee practices or occupational or safety and health standards. There is no
pending or, to the Knowledge of WICOR, threatened, labor dispute, strike or
work stoppage.
(b) NLRB Matters. As of the date of this Agreement and except as set forth
in the Disclosure Schedule, there is not now pending or, to the Knowledge of
WICOR, threatened, any charge or complaint against any of the WICOR Companies
by or before the National Labor Relations Board or any representative thereof,
or any comparable state agency or authority. To the Knowledge of WICOR, no
union organizing activities are in process or contemplated and no petitions
have been filed for union organization or representation of employees of any of
the WICOR Companies not presently organized.
4.16 Disclosure. No statement of fact by WICOR contained in this Agreement
or in the Disclosure Schedule contains or will contain any untrue statement of
a material fact or omits or will omit to state a material fact necessary in
order to make the statements herein or therein contained, in the light of the
circumstances under which they were made, not misleading as of the date to
which it speaks.
4.17 Information Supplied. None of the information supplied or to be
supplied by WICOR for inclusion or incorporation by reference in: (a) the
Registration Statement will, at the time the Registration Statement is filed
with the SEC and at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading; and (b) the Proxy Statement will, at the date mailed to the
WICOR Shareholders and at the time of the WICOR Special 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 are made, not misleading. The Proxy
Statement will comply as to form in all material respects with the provisions
of the Exchange Act and the rules and regulations thereunder.
4.18 Vote Required. The affirmative vote of the holders of a majority of the
outstanding shares of WICOR Common Stock entitled to vote thereon is the only
vote of the holders of any class or series of capital stock or other securities
of WICOR necessary to approve the Merger, this Agreement and the transactions
contemplated by this Agreement.
4.19 Opinion of Financial Advisor. WICOR has received the opinion of Merrill
Lynch, Pierce, Fenner & Smith Incorporated, dated the date of this Agreement,
to the effect that the Merger Consideration is fair to the WICOR Shareholders
from a financial point of view, and a copy of such opinion has been delivered
to Wisconsin Energy.
4.20 Environmental Protection.
(a) Definitions. As used in this Agreement:
(i) "Environmental Claim" shall mean any and all administrative,
regulatory or judicial actions, suits, demands, demand letters, directives,
claims, Liens, investigations, proceedings or notices of
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noncompliance or violation (written or oral) by any Person alleging
potential liability (including, without limitation, potential liability for
enforcement, investigatory costs, cleanup costs, governmental response
costs, removal costs, remedial costs, natural resources damages, property
damages, personal injuries, or penalties) arising out of, based on or
resulting from: (A) the presence, or release into the environment, of any
Environmental Hazardous Materials at any location, whether or not owned by
any of the WICOR Companies; or (B) circumstances forming the basis of any
violation or alleged violation, of any Environmental Law; or (C) any and
all claims by any Person seeking damages, contribution, indemnification,
cost, recovery, compensation or injunctive relief resulting from the
presence or Environmental Release of any Environmental Hazardous Materials.
(ii) "Environmental Hazardous Materials" shall mean: (A) any petroleum
or petroleum products, radioactive materials, asbestos in any form that is
or could become friable, urea formaldehyde foam insulation, and
transformers, compressors or other equipment that contain dielectric fluid
containing levels of polychlorinated biphenyls (PCBs) and radon gas; and
(B) any chemicals, materials or substances which are now defined as or
included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances," "toxic pollutants," or words of similar
import, under any Environmental Law; and (C) any products or byproducts
related to the manufacture of gas or related to gas manufacturing; and (D)
any other chemical, material, substance or waste, exposure to which is now
prohibited, limited or regulated by any governmental authority under any
Environmental Law.
(iii) "Environmental Laws" shall mean all federal, state, local or
foreign statutes, Laws, rules, ordinances, codes, policies, rules of common
law and regulations relating to pollution or protection of human health or
the environment (including, without limitation, ambient air, surface water,
ground water, land surface or subsurface strata), including, without
limitation, Laws and regulations relating to Environmental Releases or
threatened Environmental Releases of Environmental Hazardous Materials, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport or handling of Environmental
Hazardous Materials.
(iv) "Environmental Release" shall mean any release, spill, emission,
leaking, injection, deposit, disposal, discharge, dispersal, leaching or
migration into the atmosphere, soil, surface water, groundwater or property
which would be likely to result in an Environmental Claim.
(b) Environmental Laws. Except as set forth in the Disclosure Schedule or in
the WICOR SEC Reports, each of the WICOR Companies: (i) is in compliance in all
respects with all applicable Environmental Laws, except where the failure to so
comply would not in the aggregate be reasonably expected to have a WICOR
Material Adverse Effect; and (ii) has not received any written communication
from a governmental authority that alleges that it is not in compliance with
applicable Environmental Laws.
(c) Environmental Permits. To the Knowledge of WICOR, except as set forth in
the Disclosure Schedule or in the WICOR SEC Reports, each of the WICOR
Companies has obtained all environmental, health and safety permits and
governmental authorizations (collectively, the "Environmental Permits")
necessary for its operations, and all such permits are in good standing and it
is in compliance with all terms and conditions of the Environmental Permits
except where the failure to so comply would not in the aggregate be reasonably
expected to have a WICOR Material Adverse Effect.
(d) Environmental Claims. Except as set forth in the Disclosure Schedule or
in the WICOR SEC Reports, there is no Environmental Claim pending or, to the
Knowledge of WICOR, threatened, against any of the WICOR Companies or, to the
Knowledge of WICOR, against any Person whose liability for any Environmental
Claim any of the WICOR Companies has or may have retained or assumed either
contractually or by operation of Law, or against any real or personal property
or operations which any of the WICOR Companies owns, leases or manages.
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(e) Environmental Hazardous Materials. To the Knowledge of WICOR, except as
set forth in the Disclosure Schedule or in the WICOR SEC Reports, there have
been no Environmental Releases of any Environmental Hazardous Material by any
of the WICOR Companies or by any Person on real property owned, used, leased or
operated by any of the WICOR Companies.
(f) Owned Properties. To the Knowledge of WICOR, except as set forth in the
Disclosure Schedule or in the WICOR SEC Reports, no real property at any time
owned, operated, used or controlled by any of the WICOR Companies is currently
listed on the National Priorities List promulgated under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), or on any comparable state list, and none of the WICOR Companies
has received any written notice from any Person of potential or actual
liability or a request for information from any Person under or relating to
CERCLA or any comparable state or local Law.
(g) Off-Site Properties. To the Knowledge of WICOR, except as set forth on
the Disclosure Schedule, no off-site location at which any of the WICOR
Companies has disposed or arranged for the disposal of any waste is listed on
the National Priorities List or on any comparable state list and none of the
WICOR Companies has received any written notice from any Person with respect to
any off-site location, of potential or actual liability or a written request
for information from any Person under or relating to CERCLA or any comparable
state or local Law.
4.21 Year 2000 Compliance. All of the material computer hardware and
software systems of the WICOR Companies (including, without limitation, those
related to their facilities, equipment, manufacturing processes, quality
control activities, accounting and bookkeeping records and record keeping
activities) are presently or will be prior to December 31, 1999, Year 2000
Compliant. As used in this Agreement, the phrase "Year 2000 Compliant" shall
mean with respect to material hardware and software systems, that such hardware
and software is designed to be used prior to, during, and after the calendar
Year 2000 A.D., and such hardware and software used during each such time
period will accurately receive, provide and process date/time data from, into
and between the twentieth and twenty-first centuries, and will not malfunction,
cease to function, or provide invalid or incorrect results as a result of
date/time data, to the extent that other hardware and software, used in
combination with the hardware and software of the affected Person, properly
exchanges date/time data with the hardware and software of the affected Person.
4.22 Takeover Provisions. Assuming that the representation and warranty of
Wisconsin Energy in Section 5.13 of this Agreement is correct, and in light of
the nature of this Agreement and the transactions contemplated by this
Agreement and the approval thereof by the Board of Directors of WICOR, none of
the supermajority vote/fair price provisions of Sections 180.1130 to 180.1134
of the WBCL, the business combination provisions of Sections 180.1140 to
180.1144 of the WBCL, the control share acquisition provisions of Section
180.1150 of the WBCL or any similar provisions of the WBCL or the Restated
Articles of Incorporation or Bylaws of WICOR, as amended, are applicable to the
transactions contemplated by this Agreement.
4.23 Rights Agreement. The Board of Directors of WICOR has resolved to, and
WICOR promptly after the execution of this Agreement will, take any actions
necessary to render the WICOR Rights issued pursuant to the terms of the WICOR
Rights Agreement inapplicable to the Merger, this Agreement and the other
transactions contemplated by this Agreement, and will take such actions with
respect to any extension or renewal of the WICOR Rights Agreement or any
successor shareholder rights plan.
4.24 Ownership of Wisconsin Energy Common Stock. WICOR does not
"beneficially own" (as such term is defined for purposes of Section 13(d) of
the Exchange Act) any shares of Wisconsin Energy Common Stock.
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ARTICLE V
Representations and Warranties
of Wisconsin Energy and Acquisition
Wisconsin Energy and Acquisition hereby represent and warrant to WICOR that:
5.1 Organization.
(a) Organization. Each of the Wisconsin Energy Companies and Acquisition is
a corporation, limited liability company or statutory business trust duly
organized, validly existing and in good standing (or equivalent status) under
the Laws of its respective jurisdiction of organization and is qualified to do
business and is in good standing (or equivalent status) in all other
jurisdictions where the ownership or leasing of property or the conduct of its
business requires such qualification, except where the failure to so qualify
would not have a Wisconsin Energy Material Adverse Effect.
(b) Corporate Power and Authority. Each of the Wisconsin Energy Companies
and Acquisition has: (i) full corporate power and authority necessary to carry
on its business as it is now conducted and to own, lease and operate its assets
and properties; and (ii) all material franchises, permits, licenses, approvals,
authorizations and registrations necessary to carry on its business as it is
now conducted and to own, lease and operate its assets and properties, except
where the absence of any such franchises, permits, licenses, approvals,
authorizations or registrations would not have a Wisconsin Energy Material
Adverse Effect.
(c) Regulation. Wisconsin Energy is an exempt holding company under Section
3(a)(1) of PUHCA. Wisconsin Electric is regulated as a public utility in the
States of Wisconsin and Michigan and is not subject to regulation in any other
state. Edison Sault Electric Company, a Subsidiary of Wisconsin Energy, is
regulated as a public utility in the State of Michigan and is not subject to
regulation in any other state. The other Wisconsin Energy Companies are not
regulated as public utilities or subject to such regulation by any state.
5.2 Capitalization.
(a) Capitalization of Wisconsin Energy. As of the date of this Agreement,
the entire authorized capital stock of Wisconsin Energy consists of: (i)
325,000,000 shares of Common Stock, $.01 par value, of which 116,970,367 shares
were issued and outstanding on June 22, 1999; and (ii) 15,000,000 shares of
Preferred Stock, $.01 par value, none of which are issued and outstanding.
(b) Outstanding Capital Stock. All of the outstanding shares of Wisconsin
Energy Common Stock are, and any shares of Wisconsin Energy Common Stock to be
issued pursuant to this Agreement will be when issued: (i) duly authorized,
validly issued and fully paid; and (ii) nonassessable, except as provided in
Section 180.0622(2)(b) of the WBCL, as judicially interpreted.
5.3 Authorization; Enforceability. The execution, delivery and performance
of this Agreement by Wisconsin Energy and Acquisition and all of the documents
and instruments required by this Agreement to be executed and delivered by
Wisconsin Energy and Acquisition are within the corporate power of Wisconsin
Energy and Acquisition and: (a) have been duly authorized by the Boards of
Directors of Wisconsin Energy and Acquisition; and (b) if required, upon the
approval of the Wisconsin Energy Shareholders of the issuance of the Wisconsin
Energy Common Stock pursuant to this Agreement, shall be duly authorized by all
necessary corporate action by Wisconsin Energy and Acquisition. This Agreement
is, and the other documents and instruments required by this Agreement to be
executed and delivered by Wisconsin Energy and Acquisition will be, when
executed and delivered by Wisconsin Energy and Acquisition, the valid and
binding obligations of Wisconsin Energy and Acquisition, enforceable against
Wisconsin Energy and Acquisition in accordance with their respective terms,
except as the enforcement thereof may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar Laws generally affecting the
rights of creditors and subject to general equity principles.
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5.4 No Violation or Conflict. Subject to the receipt of the approvals and
consents described in Section 7.7 of this Agreement, the execution, delivery
and performance of this Agreement by Wisconsin Energy and Acquisition do not
and will not conflict with or violate: (a) any Law or the Restated Articles of
Incorporation or Bylaws of Wisconsin Energy or the Articles of Incorporation or
Bylaws of Acquisition; or (b) any material contract or agreement to which any
of the Wisconsin Energy Companies or Acquisition is a party or by which any of
them is bound, except where such conflict or violation would not have a
Wisconsin Energy Material Adverse Effect.
5.5 Litigation. Except as disclosed in the Wisconsin Energy SEC Reports
filed prior to the date of this Agreement, as of the date of this Agreement,
there is no litigation, arbitration, proceeding, governmental investigation,
citation or action of any kind pending or, to the Knowledge of Wisconsin
Energy, proposed or threatened against or relating to any of the Wisconsin
Energy Companies which, if adversely determined against any of the Wisconsin
Energy Companies, individually or in the aggregate, would or would be
reasonably likely to result in a Wisconsin Energy Material Adverse Effect.
There are no actions, suits or proceedings pending or, to the Knowledge of
Wisconsin Energy, proposed or threatened, against any of the Wisconsin Energy
Companies by any Person which question the legality, validity or propriety of
the transactions contemplated by this Agreement.
5.6 Wisconsin Energy SEC Reports and Financial Statements.
(a) Definition. As used in this Agreement, "Wisconsin Energy SEC Reports"
shall mean all reports, registration statements, definitive proxy statements,
prospectuses and amendments thereto filed by Wisconsin Energy with the SEC
since January 1, 1996 or filed by Wisconsin Energy with the SEC after the date
of this Agreement and prior to the Effective Time of Merger.
(b) Wisconsin Energy SEC Reports. The Wisconsin Energy SEC Reports: (i)
complied or will comply, as the case may be, in all material respects with the
then applicable requirements of the Exchange Act and the Securities Act, as the
case may be, and the rules and regulations of the SEC issued thereunder; and
(ii) did not or will not, as the case may be, contain as of their respective
filing dates any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(c) Financial Statements. The audited consolidated financial statements and
unaudited consolidated interim financial statements of Wisconsin Energy
included in the Wisconsin Energy SEC Reports have been or will be, as the case
may be, prepared in accordance with generally accepted accounting principles
applied on a consistent basis (except as may be indicated therein or in the
notes thereto and except with respect to the absence of notes in the case of
any unaudited interim financial statements) and fairly present in all material
respects the consolidated financial position of the Wisconsin Energy Companies
as of the dates thereof and the consolidated results of their operations and
changes in financial position for the periods then ended, subject, in the case
of the unaudited consolidated interim financial statements, to normal year-end
and audit adjustments and any other adjustments described therein.
(d) Undisclosed Liabilities. The Wisconsin Energy Companies, taken as a
whole, do not have any material liabilities of any nature except as disclosed
in the Wisconsin Energy SEC Reports or which do not, individually or in the
aggregate, have a Wisconsin Energy Material Adverse Effect.
(e) Absence of Certain Changes. Since March 31, 1999 and through the date of
this Agreement, there has not been any Wisconsin Energy Material Adverse
Effect.
5.7 Brokers. Except for fees to Chase Securities Inc., neither Wisconsin
Energy nor Acquisition has incurred any brokers', finders' or any similar fee
in connection with the transactions contemplated by this Agreement.
5.8 Governmental Approvals. No permission, approval, determination, consent
or waiver by, or any declaration, filing or registration with, any United
States or foreign governmental or regulatory authority is
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required in connection with the execution, delivery and performance of this
Agreement by Wisconsin Energy and Acquisition and the consummation of the
Merger, except for: (a) the approvals described in Section 7.7 of this
Agreement; and (b) the filing of the Articles of Merger as described in this
Agreement.
5.9 Disclosure. No statement of fact by Wisconsin Energy or Acquisition
contained in this Agreement contains or will contain any untrue statement of a
material fact or omits or will omit to state a material fact necessary in order
to make the statements herein, in the light of the circumstances under which
they were made, not misleading as of the date to which it speaks.
5.10 Information Supplied. None of the information supplied or to be
supplied by Wisconsin Energy for inclusion or incorporation by reference in:
(a) the Registration Statement will, at the time the Registration Statement is
filed with the SEC and at the time it becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading; and (b) the Proxy Statement will, at the date mailed to
the Wisconsin Energy Shareholders and at the time of the Wisconsin Energy
Special 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 are
made, not misleading. The Proxy Statement will comply as to form in all
material respects with the provisions of the Exchange Act and the rules and
regulations thereunder, and the Registration Statement, including the Proxy
Statement insofar as it constitutes the prospectus of Wisconsin Energy, will
comply as to form in all material respects with the provisions of the
Securities Act and the rules and regulations thereunder.
5.11 Vote Required. The approval of the issuance of shares of Wisconsin
Energy Common Stock pursuant to this Agreement by a majority of the votes cast
by the holders of the shares of Wisconsin Energy Common Stock represented at
the Wisconsin Energy Special Meeting and entitled to vote thereon, provided
that the total vote cast represents over 50% of all outstanding shares entitled
to vote thereon, is the only vote of the holders of any class or series of
capital stock or other securities of Wisconsin Energy necessary to approve this
Agreement and the transactions contemplated by this Agreement.
5.12 Opinion of Financial Advisor. Wisconsin Energy has received the opinion
of Chase Securities Inc., dated the date of this Agreement, to the effect that
the Merger Consideration to be paid in the Merger is fair to Wisconsin Energy
from a financial point of view, and a copy of such opinion has been delivered
to WICOR.
5.13 Ownership of WICOR Common Stock. Wisconsin Energy does not
"beneficially own" (as such term is defined for purposes of Section 13(d) of
the Exchange Act) any shares of WICOR Common Stock.
5.14 Year 2000 Compliance. All of the material computer hardware and
software systems of the Wisconsin Energy Companies (including, without
limitation, those related to their facilities, equipment, manufacturing
processes, quality control activities, accounting and bookkeeping records and
record keeping activities) are presently or will be prior to December 31, 1999,
Year 2000 Compliant.
ARTICLE VI
Covenants Pending the Merger
Except as otherwise provided in this Agreement, from and after the date of
this Agreement and until the Effective Time of Merger:
6.1 Covenants of WICOR. Except as provided in the Disclosure Schedule or
with the written consent of Wisconsin Energy, WICOR shall, and shall cause each
of the other WICOR Companies to:
(a) Carry on in Regular Course. Diligently carry on its business only in
the regular course and in substantially the same manner as heretofore and
shall not make or institute any unusual or novel methods of purchase, sale,
lease, management, accounting or operation.
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(b) Use of Assets. Use, operate, maintain and repair all of its assets
and properties in a normal business manner.
(c) No Default. Not do any act or omit to do any act, or permit any act
or omission to act, which will cause a breach of any of the Existing
Contracts.
(d) Employment Matters. Not: (i) except as consistent with its normal
past business practices or as permitted under WICOR's bonus and incentive
compensation plans existing on the date of this Agreement, grant any
increase in the rate of pay of any of its employees, directors or officers;
(ii) institute or, except as required by Law, amend any Employee Benefit
Plan; or (iii) enter into or modify any written employment arrangement with
any Person.
(e) Indebtedness. Not create, incur or assume any Indebtedness, except
for: (i) Indebtedness incurred in the ordinary course of business by the
WICOR Companies consistent with past practice (such as the issuance of
commercial paper or the use of existing credit facilities); (ii)
Indebtedness incurred to refinance or replace Indebtedness existing on the
date of this Agreement; (iii) Indebtedness of up to $50,000,000 in original
principal amount to cover the cost of certain acquisitions by the WICOR
Companies closed prior to the date of this Agreement; and (iv) Indebtedness
of up to $125,000,000 in original principal amount incurred in connection
with acquisitions by the WICOR Companies as described in Section 6.1(o)(ii)
of this Agreement.
(f) Preservation of Relationships. Use reasonable best efforts to
preserve its business organization intact, to retain the services of its
present officers and key employees and to preserve the goodwill of
suppliers, customers, creditors and others having business relationships
with it.
(g) Compliance with Laws. Comply in all material respects with all
applicable Laws.
(h) Taxes. Timely and properly file all federal, state, local and
foreign tax returns which are required to be filed, and shall pay or make
provision for the payment of all taxes owed by it.
(i) Amendments. Not amend its Articles of Incorporation or Bylaws.
(j) Issuance of Stock. Not issue any additional shares of stock of any
class (including any shares of preferred stock) except for:
(i) issuances of shares of WICOR Common Stock upon the exercise of
options outstanding on the date of this Agreement, or granted after the
date of this Agreement as described in Section 6.1(k) of this
Agreement, under the WICOR Option Plans;
(ii) issuances of shares of WICOR Common Stock in acquisitions
described in Section 6.1(o)(ii) of this Agreement, provided that: (A)
the aggregate fair market value of the WICOR Common Stock issued in all
such acquisitions does not exceed $10,000,000, calculated in each case
at the date of issuance of such WICOR Common Stock; and (B) the per
share value of the WICOR Common Stock issued in any such acquisition
shall be valued at not less than $31.50 per share of WICOR Common
Stock; and
(iii) issuances of restricted shares of WICOR Common Stock from and
after January 1, 2000 through awards granted under the WICOR
Performance Plan (the "WICOR New Restricted Stock") provided that each
such award shall:
(A) be consistent with the past practices of WICOR, including the
point in time during each fiscal year of WICOR when such awards are
made;
(B) not exceed, in the aggregate, 38,000 restricted shares of
WICOR Common Stock during each fiscal year of WICOR;
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(C) except as described in Section 6.1(j)(iii)(D) of this
Agreement, include a provision in each related agreement to the
effect that the Merger and the transactions described in this
Agreement shall not result in any acceleration of vesting of such
restricted shares of WICOR Common Stock;
(D) subject to the provisions of Section 2.9(b) of this
Agreement, provide that the restrictions applicable to such
restricted shares of WICOR Common Stock shall be lifted:
(i) prior to the Effective Time of Merger, in accordance with
applicable performance standards established by WICOR in
accordance with the WICOR Performance Plan; and
(ii) from and after the Effective Time of Merger, at the
earliest of: (1) one third ( 1/3) of the restricted shares of
Wisconsin Energy Common Stock covered by each such award, as
assumed by Wisconsin Energy pursuant to Section 2.9 of this
Agreement, shall vest on each of the first, second and third
annual anniversary of the grant date of the award (but in no
event earlier than the Effective Time of Merger); or (2) a
termination of the employment with the WICOR Companies of the
recipient of such restricted shares by the WICOR Companies
without "Cause" as defined in the Wisconsin Energy Severance
Policies or by such recipient under circumstances where such
recipient is entitled to "Separation Benefits" under Section
4.2(a) of the Severance Policies (other than Section 4.2(a)(i)
of the Severance Policies); or (3) a "change in control" of
Wisconsin Energy after the Effective Time of Merger; and
(E) provide that such restricted shares of WICOR Common Stock
then outstanding shall, at the Effective Time of Merger, be
converted into restricted shares of Wisconsin Energy Common Stock as
described in Section 2.9 of this Agreement.
(k) Options. Not grant any warrants, options or rights to subscribe for
or acquire any additional shares of stock of any class, except that WICOR
may, from and after January 1, 2000, issue options under the WICOR Stock
Option Plans provided that the grant of each such option shall:
(i) be consistent with the past practices of WICOR, including the
point in time during each fiscal year of WICOR when such grants are
made;
(ii) not exceed, in the aggregate, 630,000 shares of WICOR Common
Stock during each fiscal year of WICOR;
(iii) except as described in Section 6.1(k)(v) of this Agreement
include a provision in each related agreement to the effect that the
Merger and the transactions described in this Agreement shall not
result in any acceleration of vesting under such option;
(iv) provide for a per share exercise price equal to the per share
fair market value of the WICOR Common Stock on the date of grant of
each such option; and
(v) except with respect to options granted under the WICOR Director
Option Plan, provide that each such option shall vest at the earliest
of: (A) one third ( 1/3) of the shares of WICOR Common Stock (or, after
the Effective Time of Merger, Wisconsin Energy Common Stock) covered by
each such option shall vest on each of the first, second and third
annual anniversary of the date of the grant of such option; or (B) a
termination of the employment with the WICOR Companies of the recipient
of such option by the WICOR Companies without "Cause" as defined in the
Wisconsin Energy Severance Policies or by such recipient under
circumstances where such recipient is entitled to "Separation Benefits"
under Section 4.2(a) of the Severance Policies (other than Section
4.2(a)(i) of the Severance Policies); or (C) a "change in control" of
Wisconsin Energy after the Effective Time of Merger;
(vi) provide that each such option granted under the WICOR Director
Option Plan shall be immediately vested; and
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(vii) provide that each such option then outstanding shall, at the
Effective Time of Merger, be converted into an option to purchase
shares of Wisconsin Energy Common Stock as described in Section 2.9 of
this Agreement.
(l) Dividends. Not declare or pay any dividend or make any capital or
surplus distributions of any nature, except for: (i) cash dividends by
Subsidiaries of WICOR to WICOR; and (ii) regular quarterly cash dividends
by WICOR on the outstanding WICOR Common Stock with usual record and
payment dates not exceeding, during any fiscal year of WICOR, 102.3% of the
cash dividends paid by WICOR on the WICOR Common Stock during the
immediately preceding fiscal year of WICOR.
(m) Redemptions. Not directly or indirectly redeem, purchase or
otherwise acquire any of its capital stock, except for market purchases of
WICOR Common Stock: (i) by the WICOR DRIP; (ii) for distribution pursuant
to the terms of the WICOR, Inc. Deferred Compensation Plan for Directors
and the Wisconsin Gas Company Deferred Compensation Plan for Directors;
(iii) for issuance upon the exercise of options granted under the WICOR
Director Option Plan; and (iv) to satisfy the needs or requirements for
shares of WICOR Common Stock of the 401(k) plans maintained by the WICOR
Companies.
(n) Recapitalization. Not recapitalize or reclassify any of its capital
stock or liquidate in whole or in part.
(o) No Dispositions or Acquisitions. Not:
(i) sell, lease, license, encumber or otherwise dispose of, or agree
to sell, lease, license, encumber or otherwise dispose of, any of its
assets: (A) except in the ordinary course of business consistent with
past practice; and (B) except for transactions which: (1) individually
involve a purchase price of less than $10,000,000; and (2) collectively
involve an aggregate purchase price of less than $25,000,000; or
(ii) acquire, or publicly propose to acquire or agree to acquire, by
merger or consolidation with, or by purchase or otherwise, an equity
interest in, or all or any portion of the assets of, any Person: (A)
except as disclosed on the Disclosure Schedule; and (B) except for
transactions which: (1) do not include any utility assets or a public
utility; (2) individually involve a purchase price of less than
$30,000,000; and (3) collectively involve an aggregate purchase price
of less than $100,000,000.
(p) Capital Expenditures. Not make capital expenditures in any fiscal
year of WICOR in excess of the amounts by WICOR for capital expenditures as
set forth in the Disclosure Schedule.
(q) Power Marketing Authorization. (i) Not enter into any transactions
involving electric power marketing under the authorization from the Federal
Energy Regulatory Commission for certain of the WICOR Companies. (ii)
Promptly apply for, and thereafter use reasonable best efforts to obtain,
the cancellation of the authorization from the Federal Energy Regulatory
Commission for the WICOR Companies to engage in electric power marketing.
(r) Agreement. Not agree in writing or otherwise to take any of the
actions described in Section 6.1(c), 6.1(d), 6.1(e), 6.1(i), 6.1(j),
6.1(k), 6.1(l), 6.1(m), 6.1(n), 6.1(o), 6.1(p) or 6.1(q)(i) of this
Agreement.
6.2 Covenants of Wisconsin Energy. Except with the written consent of WICOR,
Wisconsin Energy shall, and shall cause each of the other Wisconsin Energy
Companies to:
(a) Preservation of Business. Use reasonable best efforts to preserve
intact its business organization, to keep available the services of its
current officers and key employees and preserve its material business
relationships with customers and suppliers and to preserve goodwill, except
as described in the Wisconsin Energy SEC Reports filed prior to the date of
this Agreement, except for the possible transfers of transmission assets or
nuclear assets, or both, of Wisconsin Electric for capital stock or equity
interests of another Person and except as described in Section 9.7(b) of
this Agreement.
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(b) Articles of Incorporation. Not amend its Restated Articles of
Incorporation in a manner that changes the fundamental attributes of the
Wisconsin Energy Common Stock or amend in any material respect the Articles
of Incorporation of Acquisition.
(c) Dividends. Not make, declare or pay any extraordinary cash
dividends, except for extraordinary cash dividends by a Subsidiary of
Wisconsin Energy to Wisconsin Energy.
(d) Other. Not take any action that is material and adverse to WICOR and
the WICOR Shareholders as prospective shareholders of Wisconsin Energy in a
manner that affects the WICOR Shareholders disproportionately as compared
to the current Wisconsin Energy Shareholders.
(e) Agreement. Not agree in writing or otherwise to take any of the
actions described in Section 6.2(b), 6.2(c) or 6.2(d) of this Agreement.
ARTICLE VII
Conditions Precedent to the Obligations
of Wisconsin Energy and Acquisition
Each and every obligation of Wisconsin Energy and Acquisition to be
performed on the Closing Date shall be subject to the satisfaction prior to or
at the Closing of the following express conditions precedent:
7.1 Compliance with Agreement. WICOR shall have performed and complied in
all material respects with all of its obligations under this Agreement which
are to be performed or complied with by it prior to or on the Closing Date.
7.2 No Litigation. No suit, action or other proceeding shall be pending
before any court in which the consummation of the transactions contemplated by
this Agreement is restrained or enjoined.
7.3 Representations and Warranties of WICOR. The representations and
warranties made by WICOR in this Agreement shall be true and correct in all
respects (when read without any exception or qualification as to materiality or
a WICOR Material Adverse Effect) when made and as of the Closing Date with the
same force and effect as though said representations and warranties had been
made on the Closing Date, except where the effect of any breaches of the
representations and warranties of WICOR made in this Agreement, individually or
in the aggregate, would not or would not be reasonably likely to result in a
WICOR Material Adverse Effect.
7.4 No WICOR Material Adverse Effect. During the period from the date of
this Agreement to the Closing Date there shall not have occurred, and be
continuing on the Closing Date, any WICOR Material Adverse Effect, whether
relating to a matter, event or state of facts which is a Disclosure Schedule
Change or otherwise.
7.5 Approval of WICOR Shareholders and Wisconsin Energy Shareholders;
Articles of Merger. This Agreement, the Merger and the transactions
contemplated by this Agreement shall have received the requisite approval and
authorization of the WICOR Shareholders and the issuance of shares of Wisconsin
Energy Common Stock pursuant to this Agreement shall have received the
requisite approval and authorization of the Wisconsin Energy Shareholders. The
Articles of Merger shall have been executed and delivered by WICOR.
7.6 Closing Certificate. WICOR shall have delivered to Wisconsin Energy a
certificate signed on behalf of WICOR by the Chief Executive Officer and Chief
Financial Officer of WICOR, dated the Closing Date, to the effect that the
conditions set forth in Sections 7.1 and 7.3 of this Agreement have been
satisfied.
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7.7 Governmental Approvals.
(a) Regulatory Approvals. There shall have been secured such permissions,
approvals, determinations, consents and waivers from all appropriate state and
federal regulatory authorities, including PSCW and SEC, as may be required by
Law or by such Persons: (i) in order for Wisconsin Energy to consummate the
Merger and the transactions described in this Agreement; and (ii) so that
Wisconsin Energy continues to be an exempt holding company under PUHCA except
for Section 9(a)(2) of PUHCA.
(b) Registration Statement. The Registration Statement shall have been
declared effective under the Securities Act and shall not be the subject of any
stop order or proceedings to effect a stop order. Any Wisconsin Energy Common
Stock issuable pursuant to the Merger shall have been registered or shall be
exempt from registration or qualification under applicable state "blue sky" or
securities Laws.
(c) HSR Act. All necessary requirements of the HSR Act shall have been
complied with and any "waiting periods" applicable to the Merger and to the
transactions described in this Agreement which are imposed by the HSR Act shall
have expired prior to the Closing Date or shall have been terminated by the
appropriate agency.
(d) Effect of Approvals. No permission, approval, determination, consent or
waiver received pursuant to Sections 7.7(a), 7.7(b) or 7.7(c) of this Agreement
shall contain any condition applicable to the WICOR Companies, the Wisconsin
Energy Companies or Acquisition, or any one or more of them, which is, in the
reasonable judgment of Wisconsin Energy, materially adverse in any manner to
the WICOR Companies, the Wisconsin Energy Companies or Acquisition.
7.8 Listing. Wisconsin Energy shall have received notice from the New York
Stock Exchange that any shares of Wisconsin Energy Common Stock to be issued or
reserved for issuance pursuant to this Agreement are approved for listing on
the New York Stock Exchange subject to official notice of issuance.
7.9 Accountant Letter. Wisconsin Energy shall have received a copy of a
letter from Arthur Andersen LLP, which shall be in form and substance
reasonably satisfactory to Wisconsin Energy and shall contain information
concerning the financial condition of WICOR, dated the Closing Date, similar to
the letter described in Section 3.10 of this Agreement.
7.10 Affiliate Letters. If any Wisconsin Energy Common Stock is to be issued
pursuant to the Merger, Wisconsin Energy shall have received an Affiliate
Letter from each Person who is an Affiliate of WICOR.
ARTICLE VIII
Conditions Precedent to the
Obligations of WICOR
Each and every obligation of WICOR to be performed on the Closing Date shall
be subject to the satisfaction prior to or at the Closing of the following
express conditions precedent:
8.1 Compliance with Agreement. Wisconsin Energy and Acquisition shall have
performed and complied in all material respects with all of their obligations
under this Agreement which are to be performed or complied with by them prior
to or on the Closing Date.
8.2 No Litigation. No suit, action or other proceeding shall be pending
before any court in which the consummation of the transactions contemplated by
this Agreement is restrained or enjoined.
8.3 Representations and Warranties of Wisconsin Energy and Acquisition. The
representations and warranties made by Wisconsin Energy and Acquisition in this
Agreement shall be true and correct in all
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respects (when read without any exception or qualification as to materiality or
a Wisconsin Energy Material Adverse Effect) when made and as of the Closing
Date with the same force and effect as though such representations and
warranties had been made on the Closing Date, except where the effect of any
breaches of the representations and warranties of Wisconsin Energy and
Acquisition made in this Agreement, individually or in the aggregate, would not
or would not be reasonably likely to result in a Wisconsin Energy Material
Adverse Effect.
8.4 No Wisconsin Energy Material Adverse Effect. If any Wisconsin Energy
Common Stock is to be issued pursuant to the Merger, during the period from the
date of this Agreement to the Closing Date there shall not have occurred, and
be continuing on the Closing Date, any Wisconsin Energy Material Adverse
Effect.
8.5 Approval of WICOR Shareholders and Wisconsin Energy Shareholders;
Articles of Merger. This Agreement, the Merger and the transactions
contemplated by this Agreement shall have received the requisite approval and
authorization of the WICOR Shareholders and the issuance of shares of Wisconsin
Energy Common Stock pursuant to this Agreement shall have received the
requisite approval and authorization of the Wisconsin Energy Shareholders. The
Articles of Merger shall have been executed and delivered by Acquisition.
8.6 Closing Certificate. Wisconsin Energy shall have delivered to WICOR a
certificate signed on behalf of Wisconsin Energy by the Chief Executive Officer
and Chief Financial Officer of Wisconsin Energy, dated the Closing Date, to the
effect that the conditions set forth in Sections 8.1 and 8.3 of this Agreement
have been satisfied.
8.7 Governmental Approvals.
(a) Regulatory Approvals. There shall have been secured such permissions,
approvals, determinations, consents and waivers from all appropriate state and
federal regulatory authorities, including PSCW and SEC, as may be required by
Law or by such Persons in order for WICOR to consummate the Merger and the
transactions described in this Agreement.
(b) Registration Statement. The Registration Statement shall have been
declared effective under the Securities Act and shall not be the subject of any
stop order or proceedings to effect a stop order. Any Wisconsin Energy Common
Stock issuable pursuant to the Merger shall have been registered or shall be
exempt from registration or qualification under applicable state "blue sky" or
securities Laws.
(c) HSR Act. All necessary requirements of the HSR Act shall have been
complied with and any "waiting periods" applicable to the Merger and to the
transactions described in this Agreement which are imposed by the HSR Act shall
have expired prior to the Closing Date or shall have been terminated by the
appropriate agency.
8.8 Listing. Wisconsin Energy shall have received notice from the New York
Stock Exchange that any shares of Wisconsin Energy Common Stock to be issued or
reserved for issuance pursuant to this Agreement are approved for listing on
the New York Stock Exchange subject to official notice of issuance.
8.9 Tax Opinion. If any Wisconsin Energy Common Stock is to be issued
pursuant to the Merger, WICOR shall have received an opinion of Foley &
Lardner, counsel to WICOR, dated on or about the date that is two (2) business
days prior to the date that the Proxy Statement is first mailed to WICOR
Shareholders, 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, and that Wisconsin Energy, Acquisition and WICOR will each be a party to
that reorganization within the meaning of Section 368(b) of the Code and such
opinion shall not have been withdrawn or modified in any material respect as of
the Closing Date.
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ARTICLE IX
Termination; Miscellaneous
9.1 Termination. This Agreement may be terminated and the transactions
contemplated by this Agreement may be abandoned at any time prior to the
Closing (whether before or after approval of this Agreement by the WICOR
Shareholders or the Wisconsin Energy Shareholders or both), as follows:
(a) by mutual written agreement of Wisconsin Energy and WICOR, duly
authorized by the Boards of Directors of Wisconsin Energy and WICOR;
(b) by either Wisconsin Energy or WICOR by written notice to the other
party if:
(i) any court of competent jurisdiction shall have issued an order,
judgment or decree permanently restraining, enjoining or otherwise
prohibiting the Merger and such order, judgment or decree shall have
become final and nonappealable; or
(ii) if the Effective Time of Merger has not occurred on or before
July 1, 2000 (the "Initial Termination Date"), provided, however, that:
(A) if on the Initial Termination Date the conditions to Closing set
forth in Sections 7.7 and 8.7 of this Agreement shall not have been
fulfilled, then the Initial Termination Date shall be automatically
extended to January 1, 2001; and (B) the right to terminate this
Agreement under this Section 9.1(b)(ii) of this Agreement 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 of Merger to occur on or before that date;
(c) by Wisconsin Energy by written notice to WICOR if:
(i) there exists one or more breaches of the representations and
warranties of WICOR made in this Agreement which breaches, individually
or in the aggregate, would or would be reasonably likely to result in a
WICOR Material Adverse Effect and such breaches shall not have been
remedied within 45 calendar days after receipt by WICOR of written
notice from Wisconsin Energy specifying the nature of such breaches and
requesting that they be remedied;
(ii) WICOR shall have failed to perform and comply in all respects
with all of its other agreements and covenants contained in this
Agreement and such failures to perform or comply, individually or in
the aggregate, would or would be reasonably likely to result in a WICOR
Material Adverse Effect and such failures to perform or comply shall
not have been remedied within 45 calendar days after receipt by WICOR
of written notice from Wisconsin Energy specifying the nature of such
failures to perform or comply and requesting that they be remedied;
(iii) Wisconsin Energy shall have convened the Wisconsin Energy
Special Meeting to vote upon the issuance of shares of Wisconsin Energy
Common Stock pursuant to this Agreement and such proposal does not
receive the requisite vote of the Wisconsin Energy Shareholders for
such proposal;
(iv) WICOR shall have convened the WICOR Special Meeting to vote
upon the Merger and the transactions described in this Agreement and
such proposal does not receive the requisite vote of the WICOR
Shareholders for such proposal; or
(v) the Board of Directors of WICOR, or any committee thereof,
shall: (A) withdraw or modify in any manner adverse to Wisconsin Energy
its approval or recommendation of this Agreement or the Merger, (B)
fail to reaffirm such approval or recommendation upon Wisconsin
Energy's request, or (C) approve or recommend any Other Transaction;
and
(d) by WICOR by written notice to Wisconsin Energy if:
(i) there exists one or more breaches of the representations and
warranties of Wisconsin Energy made in this Agreement which breaches,
individually or in the aggregate, would or would be
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reasonably likely to result in a Wisconsin Energy Material Adverse
Effect and such breaches shall not have been remedied within 45
calendar days after receipt by Wisconsin Energy of written notice from
WICOR specifying the nature of such breaches and requesting that they
be remedied;
(ii) Wisconsin Energy shall have failed to perform and comply in all
respects with all of its other agreements and covenants contained in
this Agreement and such failures to perform or comply, individually or
in the aggregate, would or would be reasonably likely to result in a
Wisconsin Energy Material Adverse Effect and such failures to perform
or comply shall not have been remedied within 45 calendar days after
receipt by Wisconsin Energy of written notice from WICOR specifying the
nature of such failures to perform or comply and requesting that they
be remedied;
(iii) Wisconsin Energy shall have convened the Wisconsin Energy
Special Meeting to vote upon the issuance of shares of Wisconsin Energy
Common Stock pursuant to this Agreement and such proposal does not
receive the requisite vote of the Wisconsin Energy Shareholders for
such proposal;
(iv) WICOR shall have convened the WICOR Special Meeting to vote
upon the Merger and the transactions described in this Agreement and
such proposal does not receive the requisite vote of the WICOR
Shareholders for such proposal;
(v) pursuant to Section 3.9(d) of this Agreement; or
(vi) the Board of Directors of Wisconsin Energy, or any committee
thereof, shall: (A) withdraw or modify in any manner adverse to WICOR
its approval or recommendation of this Agreement or the Merger, or (B)
fail to reaffirm such approval or recommendation upon WICOR's request.
9.2 Rights on Termination; Waiver. If this Agreement is terminated pursuant
to Section 9.1 of this Agreement, all further obligations of the parties under
or pursuant to this Agreement shall terminate without further liability of any
party (including its directors, officers, employees, agents, legal, accounting
or financial advisors or other representatives) to the others, provided that:
(a) the obligations of Wisconsin Energy and Acquisition contained in Sections
3.4(b), 3.9(f), 9.2 and 9.5 of this Agreement shall survive any such
termination; (b) the obligations of WICOR contained in Sections 3.4(b), 3.9(e),
3.9(g), 9.2 and 9.5 of this Agreement shall survive any such termination; and
(c) each party to this Agreement shall retain any and all remedies which it may
have for breach of contract provided by Law based on another party's willful
failure to comply with the terms of this Agreement. If any of the conditions
set forth in Article VII of this Agreement have not been satisfied, Wisconsin
Energy may nevertheless elect to proceed with the consummation of the
transactions contemplated by this Agreement and if any of the conditions set
forth in Article VIII of this Agreement have not been satisfied, WICOR may
nevertheless elect to proceed with the consummation of the transactions
contemplated by this Agreement. Any such election to proceed shall be evidenced
by a certificate signed on behalf of the waiving party by an officer of that
party.
9.3 Survival of Representations, Warranties and Covenants. All
representations, warranties and covenants of the parties contained in this
Agreement (other than the covenants contained in Sections 2.6, 2.9, 3.14, 3.15,
3.16, 9.3, 9.13 and 9.15 of this Agreement) or made pursuant to this Agreement
shall terminate and be of no further force and effect at the Effective Time of
Merger and none of the parties shall have any liability or obligation with
respect thereto.
9.4 Entire Agreement; Amendment. This Agreement and the documents referred
to in this Agreement and required to be delivered pursuant to this Agreement
constitute the entire agreement among the parties pertaining to the subject
matter of this Agreement, and supersede all prior and contemporaneous
agreements, understandings, negotiations and discussions of the parties,
whether oral or written, other than the Confidentiality Agreement, and there
are no warranties, representations or other agreements between the parties in
connection with the subject matter of this Agreement, except as specifically
set forth in this Agreement and
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in the Confidentiality Agreement. This Agreement may be amended by the parties
at any time before or after approval of this Agreement by the WICOR
Shareholders, except that after such approval, no amendment shall be made
without the further approval of the WICOR Shareholders if any such amendment:
(a) changes the Merger Consideration; or (b) alters or changes any of the terms
or conditions of this Agreement if any of such changes, individually or in the
aggregate, materially adversely affects the rights of the WICOR Shareholders.
This Agreement may be amended by the parties at any time before or after
approval of this Agreement by the Wisconsin Energy Shareholders, except that
after such approval, no amendment shall be made without the further approval of
the Wisconsin Energy Shareholders if any such amendment: (y) changes the Merger
Consideration; or (z) alters or changes any of the terms or conditions of this
Agreement if any of such changes, individually or in the aggregate, materially
adversely affects the rights of the Wisconsin Energy Shareholders. No
amendment, supplement, modification, waiver or termination of this Agreement
shall be binding unless executed in writing by Wisconsin Energy, WICOR and
Acquisition. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provision of this Agreement,
whether or not similar, nor shall such waiver constitute a continuing waiver
unless otherwise expressly provided.
9.5 Expenses. All costs and expenses incurred in connection with this
Agreement and the transactions contemplated by this Agreement shall be paid by
the party incurring such expenses, except: (a) Wisconsin Energy shall pay the
filing fee relating to the filing required by the HSR Act; and (b) those
expenses incurred in connection with printing the Proxy Statement and
Registration Statement, as well as the filing fee relating thereto, shall be
shared equally by WICOR, on the one hand, and Wisconsin Energy, on the other
hand; and (c) as described in Sections 3.9(f) and 3.9(g) of this Agreement.
9.6 Governing Law. This Agreement shall be construed and interpreted
according to the Laws of the State of Wisconsin.
9.7 Assignment. Prior to the Effective Time of Merger, this Agreement shall
not be assigned:
(a) by WICOR except with the prior written consent of Wisconsin Energy;
and
(b) by Wisconsin Energy or Acquisition, except: (i) with the prior
written consent of WICOR; or (ii) to a Subsidiary of Wisconsin Energy; or
(iii) in connection with a sale or transfer of all or substantially all of
the assets of Wisconsin Energy or a reorganization, merger, tender offer,
consolidation or similar transaction affecting all or substantially all of
the outstanding equity interests of Wisconsin Energy, provided the
successor Person to Wisconsin Energy or Acquisition expressly assumes in a
writing that WICOR is entitled to enforce as a third party beneficiary or
otherwise the due and punctual performance of every term, condition, and
covenant of Wisconsin Energy or Acquisition, as the case may be, in this
Agreement.
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9.8 Notices. All communications or notices required or permitted by this
Agreement shall be in writing and shall be deemed to have been given at the
earlier of the date when actually delivered to an officer of a party by
personal delivery or telephonic facsimile transmission or when deposited in the
United States mail, certified or registered mail, postage prepaid, return
receipt requested, and addressed as follows, unless and until any of such
parties notifies the others in accordance with this Section of a change of
address:
If to Wisconsin Energy or Acquisition:
Wisconsin Energy Corporation
Attention: Calvin H. Baker
Treasurer and Chief Financial Officer
P. O. Box 2949
231 West Michigan Street
Milwaukee WI 53201
Fax No.: 414-221-5068
with a copy to:
Quarles & Brady LLP
Attention: Patrick M. Ryan
411 E. Wisconsin Avenue
Milwaukee, WI 53202-4497
Fax No: 414-271-3552
If to WICOR:
WICOR, Inc
Attention: Joseph P. Wenzler
Senior Vice President and Chief
Financial Officer
P.O. Box 334
626 East Wisconsin Avenue
Milwaukee, WI 53201
Fax No.: 414-291-7033
with a copy to:
Foley & Lardner
Attention: Joseph B. Tyson, Jr.
777 East Wisconsin Avenue
Milwaukee WI 53202-5367
Fax No: 414-297-4900
9.9 Counterparts; Headings. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitute but one and the same Agreement. The Table of Contents
and Article and Section headings in this Agreement are inserted for convenience
of reference only and shall not constitute a part hereof.
9.10 Interpretation. Unless the context requires otherwise, all words used
in this Agreement in the singular number shall extend to and include the
plural, all words in the plural number shall extend to and include the
singular, and all words in any gender shall extend to and include all genders.
The language used in this Agreement shall be deemed to be language chosen by
the parties to this Agreement to express their mutual intent. In the event an
ambiguity or question of intent or interpretation arises concerning the
language of this Agreement, this Agreement shall be construed as if drafted
jointly by the parties to this Agreement and no presumption or burden of proof
will arise favoring or disfavoring any party to this Agreement by virtue of the
authorship of any of the provisions of this Agreement.
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9.11 Severability. If any provision, clause, or part of this Agreement, or
the application thereof under certain circumstances, is held invalid, the
remainder of this Agreement, or the application of such provision, clause or
part under other circumstances, shall not be affected thereby unless such
invalidity materially impairs the ability of the parties to consummate the
transactions contemplated by this Agreement.
9.12 Specific Performance. The parties agree that the assets and business of
the WICOR Companies as a going concern constitute unique property. There is no
adequate remedy at Law for the damage which any party might sustain for failure
of the other parties to consummate the Merger and the transactions contemplated
by this Agreement, and accordingly, each party shall be entitled, at its
option, to the remedy of specific performance to enforce the Merger pursuant to
this Agreement.
9.13 No Reliance. Except for the parties to this Agreement, any assignees
permitted by Section 9.7 of this Agreement and as described in Sections 3.14,
3.15 and 3.16 of this Agreement: (a) no Person is entitled to rely on any of
the representations, warranties and agreements of the parties contained in this
Agreement; and (b) the parties assume no liability to any Person because of any
reliance on the representations, warranties and agreements of the parties
contained in this Agreement.
9.14 Exhibits and Disclosure Schedule. If a document or matter is disclosed
in any Exhibit to this Agreement or in the Disclosure Schedule, it shall be
deemed to be disclosed for all purposes of this Agreement without the necessity
of specific repetition or cross-reference. All capitalized terms used in any
Exhibit to this Agreement or in the Disclosure Schedule shall have the
definitions specified in this Agreement.
9.15 Further Assurances. If, at any time after the Effective Time of Merger,
any further action is necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving Corporation with full right, title and
possession to all assets, properties, rights, privileges, powers and franchises
of either Acquisition or WICOR, the officers of the Surviving Corporation are
fully authorized to take any such action in the name of Acquisition or WICOR.
9.16 Waiver of Jury Trial. WICOR, Wisconsin Energy and Acquisition hereby
irrevocably waive any and all right to trial by jury in any legal proceeding
arising out of or relating to this Agreement or the transactions contemplated
by this Agreement.
In Witness Whereof, the parties have caused this Agreement and Plan of
Merger to be duly executed as of the day and year first above written.
Wisconsin Energy Corporation
By/s/ Richard A. Abdoo
-----------------------------------
Richard A. Abdoo,
Chairman of the Board, President
and Chief Executive Officer
WICOR, Inc.
By/s/ George E. Wardeberg
-----------------------------------
George E. Wardeberg,
Chairman and Chief Executive
Officer
CEW Acquisition, Inc.
By/s/ Richard A. Abdoo
-----------------------------------
Richard A. Abdoo,
Chairman of the Board, President
and Chief Executive Officer
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<PAGE>
EXHIBIT 1
AFFILIATE LETTER
________________________, ______
________________________________
Name of Affiliate
Wisconsin Energy Corporation
231 W. Michigan Street
P. O. Box 2949
Milwaukee WI 53201
Ladies and Gentlemen:
I have been advised that as of the date of the meeting of shareholders of
WICOR, Inc. ("WICOR") to vote on the transaction described below, and as of the
date hereof, I may be deemed an "affiliate" (as that term is defined for
purposes of Rule 145(c) and (d) under the Securities Act of 1933, as amended
(the "Act")) of WICOR. Pursuant to the terms of the Agreement and Plan of
Merger dated as of June 27, 1999 (the "Merger Agreement") among Wisconsin
Energy Corporation ("Wisconsin Energy"), WICOR and CEW Acquisition, Inc.
("Acquisition"), Acquisition and WICOR will merge in a transaction (the
"Merger") in which I will or may receive shares of $.01 par value common stock
of Wisconsin Energy (the "Shares") in exchange for shares of common stock of
WICOR which I own at the "Effective Time of Merger" (as that term is defined in
the Merger Agreement).
In connection with the Merger, I represent and warrant to, and agree with,
Wisconsin Energy that:
1. I have carefully read this Affiliate Letter and the Merger Agreement
and, to the extent I felt necessary, discussed the requirements of such
documents and other applicable limitations upon my ability to sell,
transfer or otherwise dispose of the Shares with my counsel or counsel for
WICOR.
2. I have been advised that the issuance of the Shares to me pursuant to
the Merger will be registered with the Securities and Exchange Commission
(the "Commission") under the Act on a Registration Statement on Form S-4.
However, I have also been advised that, because (A) at the time the Merger
is submitted for a vote of the shareholders of WICOR, I may be deemed to be
an affiliate of WICOR and (B) the distribution by me of the Shares has not
been registered under the Act, I may not sell, transfer or otherwise
dispose of the Shares issued to me in the Merger unless (i) such sale,
transfer or other disposition has been registered under the Act, (ii) such
sale, transfer or other disposition is made in conformity with the volume
and other limitations of Rule 145 promulgated by the Commission under the
Act, or (iii) in the opinion of counsel reasonably acceptable to Wisconsin
Energy, or pursuant to a "no-action" letter obtained by me from the staff
of the Commission, such sale, transfer or other disposition is otherwise
exempt from registration under the Act.
3. I agree that I will not make any sale, transfer or other disposition
of the Shares in violation of the Act or the rules and regulations of the
Commission thereunder. In the event of a sale of Shares pursuant to Rule
145, I will supply Wisconsin Energy with evidence of compliance with such
Rule, in the form of customary seller's and broker's Rule 145
representation letters or as Wisconsin Energy may otherwise reasonably
request.
4. I understand that Wisconsin Energy is under no obligation to register
the sale, transfer or other disposition of the Shares by me or on my behalf
under the Act or, except as provided in paragraph A below, to take any
other action necessary in order to make compliance with an exemption from
such registration available.
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<PAGE>
Wisconsin Energy Corporation
______________________, ____
Page 2
5. I also understand Wisconsin Energy may decline to register any
transfer of the Shares inconsistent with this Affiliate Letter, that stop
transfer instructions will be given to Wisconsin Energy's transfer agent
with respect to the Shares, and that there will be placed on the
certificates for the Shares, or any substitutions therefor, a legend
stating in substance:
"The securities represented by this certificate were issued in a
transaction to which Rule 145 promulgated under the Securities Act of
1933 applies. The securities represented by this certificate may be
sold, transferred or otherwise disposed of only in accordance with the
terms of a letter agreement between the registered holder hereof and
Wisconsin Energy Corporation, a copy of which agreement is on file at
the principal offices of Wisconsin Energy Corporation."
6. I also understand that unless a sale or transfer of the Shares by me
has been registered under the Act or is a sale made in conformity with the
provisions of Rule 145 under the Act, Wisconsin Energy reserves the right
to put the following legend on the certificates issued to my transferee:
"The securities represented by this certificate have not been
registered under the Securities Act of 1933 and were acquired from a
person who received such securities in a transaction to which Rule 145
promulgated under the Securities Act of 1933 applies. The securities
have not been acquired by the holder with a view to, or for resale in
connection with, any distribution thereof within the meaning of the
Securities Act of 1933 and may not be sold, transferred or otherwise
disposed of except pursuant to an effective registration statement or
in accordance with an exemption from the registration requirements of
the Securities Act of 1933."
7. I further understand and agree that my representations, warranties,
covenants and agreements set forth herein are for the benefit of Wisconsin
Energy, WICOR, and the Surviving Corporation (as defined in the Merger
Agreement) and will be relied upon by such entities and their respective
counsel and accountants.
8. I understand and agree that this letter agreement shall apply to all
Shares issued pursuant to the Merger in exchange for shares of common stock
of WICOR that are deemed to be beneficially owned by me pursuant to
applicable federal securities laws immediately prior to the Effective Time
of Merger.
Execution of this letter should not be considered an admission on my part
that I am an "affiliate" of WICOR as described in the first paragraph of this
letter or as a waiver of any rights I may have to object to any claim that I am
such an affiliate on or after the date of this letter.
By Wisconsin Energy's acceptance of this letter, Wisconsin Energy hereby
agrees with me as follows:
A. For so long as and to the extent necessary to permit me to sell the
Shares pursuant to Rule 145 and, to the extent applicable, Rule 144 under
the Act, Wisconsin Energy shall (a) use its reasonable efforts to (i) file,
on a timely basis, all reports required to be filed with the Commission by
it pursuant to Section 13 of the Securities Exchange Act of 1934, as
amended, and (ii) furnish to me upon request a written statement as to
whether Wisconsin Energy has complied with such reporting requirements
during the 12 months preceding any proposed sale of the Shares by me under
Rule 145, and (b) otherwise use its reasonable efforts to permit such sales
pursuant to Rule 145 and Rule 144.
B. It is understood and agreed that certificates with the legends set
forth in paragraphs 5 and 6 above will be substituted by delivery of
certificates without such legend if (i) one year shall have elapsed from
the date I acquired the Shares received in the Merger and the provisions of
Rule 145(d)(2) are then available to me, (ii) two years shall have elapsed
from the date I acquired the Shares received in the
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<PAGE>
Wisconsin Energy Corporation
_____________________, _____
Page 3
Merger and the provisions of Rule 145(d)(3) are then applicable to me, or
(iii) Wisconsin Energy has received either an opinion of counsel, which
opinion and counsel shall be reasonably satisfactory to Wisconsin Energy,
or a "no-action" letter obtained by me from the staff of the Commission, to
the effect that the restrictions imposed by Rule 144 and Rule 145 under the
Act no longer apply to me.
Very truly yours,
-------------------------------------
Name:
Accepted as of the day of
, .
Wisconsin Energy Corporation
By: _________________________________
Name:
Title:
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<PAGE>
EXHIBIT 2
EMPLOYMENT AGREEMENT
This Employment Agreement by and between WISCONSIN ENERGY CORPORATION, a
Wisconsin corporation (the "Company"), and GEORGE E. WARDEBERG (the
"Executive"), dated as of the day of , 200 .
WITNESSETH
Whereas, pursuant to an Agreement and Plan of Merger, dated as of June 27,
1999 (the "Merger Agreement"), among the Company, WICOR, Inc. and CEW
Acquisition, Inc., WICOR, Inc. has become a wholly-owned subsidiary of the
Company; and
Whereas, the Company further wishes to provide for the employment by it of
the Executive, and the Executive wishes to serve the Company, in the capacities
and on the terms and conditions set forth in this Agreement:
Now, Therefore, it is hereby agreed as follows:
1. Employment Period. The Company shall employ the Executive, and the
Executive shall serve the Company, on the terms and conditions set forth in
this Agreement, for the period (the "Employment Period") beginning at the
Effective Time of Merger as defined in the Merger Agreement (the "Effective
Time") and ending the last day of the 24th calendar month commencing on or
immediately after the Effective Time.
2. Position and Duties.
(a) The Executive shall serve as the Vice Chairman of the Board of
Directors of the Company (the "Board") during the Employment Period,
being consulted by the Chairman of the Board and providing advice to
the Chairman with respect to the integration of the WICOR businesses
with the Company and the Company's organizational structure, staffing
and future business strategy, and with such duties and responsibilities
as are customarily assigned to such position, and such other duties and
responsibilities not inconsistent therewith as may from time to time be
assigned to him by the Board or by the Chairman. The Executive shall be
a member of the Board on the first day of the Employment Period and the
Board shall propose the Executive for re-election to the Board
throughout the Employment Period.
(b) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the
Executive shall devote reasonable attention and time during normal
business hours to the business and affairs of the Company and, to the
extent necessary to discharge the responsibilities assigned to the
Executive under this Agreement, use the Executive's reasonable best
efforts to carry out such responsibilities faithfully and efficiently.
It shall not be considered a violation of the foregoing for the
Executive to serve on corporate, industry, civic or charitable boards
or committees, so long as such activities do not significantly
interfere with the performance of the Executive's responsibilities as
an employee of the Company in accordance with this Agreement.
3. Compensation.
(a) Base Salary. The Executive's compensation during the Employment
Period shall be determined by the Board upon the recommendation of the
Compensation Committee of the Board (the "Compensation Committee"),
subject to the next sentence and Section 3(b). During the Employment
Period, the Executive shall receive an annual base salary ("Annual Base
Salary") of not less than the greater of (i) his annual base salary
from WICOR, Inc. as in effect immediately before
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<PAGE>
the Effective Time or (ii) 90% of the base salary paid to the Chairman
of the Board of the Company during such period. The Annual Base Salary
shall be payable in accordance with the Company's regular payroll
practice for its senior executives, as in effect from time to time.
During the Employment Period, the Annual Base Salary shall be reviewed
by the Compensation Committee for possible increase at least annually.
Any increase in the Annual Base Salary shall not limit or reduce any
other obligation of the Company under this Agreement. The Annual Base
Salary shall not be reduced after any such increase, and the term
"Annual Base Salary" shall thereafter refer to the Annual Base Salary
as so increased.
(b) Incentive Compensation. During the Employment Period, the
Executive shall participate in short-term incentive compensation plans
and long-term incentive compensation plans (the latter to consist of
plans offering stock options, restricted stock and other long-term
incentive compensation, as adopted and approved by the Board or the
Compensation Committee from time to time) providing him with an
opportunity to earn short-term and long-term incentive compensation
(the "Incentive Compensation") on a basis commensurate with other
senior officers of the Company, subject to the next sentence hereof,
provided that he shall receive an initial grant of non-qualified stock
options covering 100,000 shares of Company stock as of the start of the
Employment Period with an exercise price equal to the then fair market
value, vesting over a 3-year period at the rate of one third ( 1/3) of
such shares each year, based on his continuation of service either as
an officer or as a director of the Company, to be exercisable over a 5-
year period, to the extent vested, after the later of his cessation of
service as an officer or director of the Company. The Executive shall
receive an annual award under such short-term incentive plans at least
equal to 90% of the annual award made to the Chairman of the Board
during the Employment Period (prorated for any period of participation
in such plans which is for less than one full year, whether at the
inception or on termination of the Employment Period) under such plans;
provided, however, that in no event shall the award be less than an
amount which when added to the Annual Base Salary is less on an
annualized basis than the salary and bonus actually received by the
Executive from WICOR, Inc. for the calendar year ending coincident with
or immediately prior to the Effective Time.
(c) Other Benefits. During the Employment Period and thereafter: (1)
the Executive shall be entitled to participate in all applicable
savings and retirement plans (including non-qualified supplemental
executive retirement plans and specifically including Benefits A and B
under the Company's Supplemental Executive Retirement Plan), practices,
policies and programs of the Company to the same extent as other senior
executives of the Company, (2) the Executive and/or the Executive's
eligible dependents, as the case may be, shall be eligible for
participation in, and shall receive all benefits under, all applicable
welfare benefit plans, practices, policies and programs provided by the
Company, other than severance plans, practices, policies and programs
but including, without limitation, medical, prescription, dental,
disability, employee life insurance, group life insurance, accidental
death and travel accident insurance plans and programs, and retiree
welfare benefits on a basis commensurate with other long-term senior
officers of the Company and (3) the Executive shall be entitled to past
service credit under the Company's Supplemental Executive Retirement
Plan (the "SERP"), Benefit A, calculated as if his participation in the
Company's tax-qualified defined benefit pension plan had commenced on
the first day of the month following his attainment of age 25 and as if
the benefit formula under such pension plan for all periods before
December 31, 1995 was the same as that in effect on December 31, 1995,
and for all periods after December 31, 1995, pursuant to the actual
benefit formula used in such pension plan (including the grandfathered
minimum benefit provisions thereof), offset by the actuarial equivalent
of any benefits payable to the Executive at age 65 or any later age at
which such benefits commence from any qualified or non-qualified
defined benefit pension plans of WICOR, Inc. Actuarial equivalency for
this purpose shall be determined using the interest rate and mortality
table then in use for determining optional forms of annuity under the
Company's tax-qualified defined benefit pension plan, or, if Benefit A
is to be payable in a lump sum, actuarial equivalency shall be
determined by using the interest rate and mortality table referenced in
Article VIII of the SERP.
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(d) Fringe Benefits. During the Employment Period, the Executive
shall be entitled to receive fringe benefits on a basis commensurate
with other senior officers of the Company.
4. Termination of Employment.
(a) Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death during the Employment Period.
The Company shall be entitled to terminate the Executive's employment
because of the Executive's Disability during the Employment Period.
"Disability" means that (i) the Executive has been unable, for the
period specified in the Company's disability plan for senior
executives, but not less than a period of 90 consecutive business days,
to perform the Executive's duties under this Agreement, as a result of
physical or mental illness or injury, and (ii) a physician selected by
the Company or its insurers, and acceptable to the Executive or the
Executive's legal representative, has determined that the Executive is
disabled within the meaning of the applicable disability plan for
senior executives. A termination of the Executive's employment by the
Company for Disability shall be communicated to the Executive by
written notice, and shall be effective on the 30th day after receipt of
such notice by the Executive (the "Disability Effective Date"), unless
the Executive returns to full-time performance of the Executive's
duties before the Disability Effective Date.
(b) Termination by the Company.
(i) The Company may terminate the Executive's employment during
the Employment Period for Cause or without Cause. "Cause" means the
willful and continued failure of the Executive to substantially
perform his duties under this Agreement (other than as a result of
physical or mental injury) after the Board delivers to the Executive
a written demand for substantial performance that specifically
identifies the manner in which the Board believes that the Executive
has not substantially performed the Executive's duties, or illegal
or gross misconduct by the Executive in connection with his
employment by the Company, in either case that is willful and
results in material and demonstrable damage to the business or the
reputation of the Company. No act or failure to act on the part of
the Executive shall be considered "willful" unless it is done, or
omitted to be done, by the Executive in bad faith or without
reasonable belief that the Executive's action or omission was in the
best interests of the Company. Any act or failure to act that is
based upon authority given pursuant to a resolution duly adopted by
the Board, or the advice of counsel for the Company, shall be
conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Company.
(ii) A termination of the Executive's employment for Cause shall
not be effective unless it is accomplished in accordance with the
following procedures. The Company shall give the Executive written
notice ("Notice of Termination for Cause") of its intention to
terminate the Executive's employment for Cause, setting forth in
reasonable detail the specific conduct of the Executive that it
considers to constitute Cause and the specific provision(s) of this
Agreement on which it relies, and stating the date, time and place
of the Special Board Meeting for Cause. The "Special Board Meeting
for Cause" means a meeting of the Board called and held specifically
for the purpose of considering the Executive's termination for
Cause, that takes place not less than 10 nor more than 20 business
days after the Executive receives the Notice of Termination for
Cause. The Executive shall be given an opportunity, together with
counsel, to be heard at the Special Board Meeting for Cause. The
Executive's termination for Cause shall be effective when and if a
resolution is duly adopted at the Special Board Meeting for Cause by
affirmative vote of a majority of the entire membership of the
Board, excluding employee directors, stating that, in the good faith
opinion of the Board, the Executive is guilty of the conduct
described in the Notice of Termination for Cause and that such
conduct constitutes Cause under this Agreement.
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(c) Good Reason.
(i) The Executive may terminate employment for Good Reason or
without Good Reason. "Good Reason" means:
A. the assignment to the Executive of any duties or
responsibilities inconsistent in any respect with Section 2(a)
of this Agreement, or any other action by the Company that
results in a diminution in the Executive's position, authority,
duties or responsibilities, other than an isolated,
insubstantial and inadvertent action that is not taken in bad
faith and is remedied by the Company promptly after receipt of
notice thereof from the Executive;
B. any failure by the Company to comply with any provision of
Section 3 of this Agreement, other than an isolated,
insubstantial and inadvertent failure that is not taken in bad
faith and is remedied by the Company promptly after receipt of
notice thereof from the Executive;
C. any requirement by the Company that the Executive's
services be rendered primarily at a location or locations other
than the Milwaukee, Wisconsin general metropolitan area;
D. any failure by the Company to comply with paragraph (c) of
Section 10 of this Agreement; or
E. any other substantial breach of this Agreement by the
Company that is not remedied by the Company promptly after
receipt of notice thereof from the Executive.
(ii) A termination of employment by the Executive for Good Reason
shall be effectuated by giving the Company written notice ("Notice
of Termination for Good Reason") of the termination, setting forth
in reasonable detail the specific conduct of the Company that
constitutes Good Reason and the specific provision(s) of this
Agreement on which the Executive relies. A termination of employment
by the Executive for Good Reason shall be effective on the 5th
business day following the date when the Notice of Termination for
Good Reason is given, unless the notice sets forth a later date
(which date shall in no event be later than 30 days after the notice
is given).
(iii) A termination of the Executive's employment by the
Executive without Good Reason shall be effected by giving the
Company written notice of the termination.
(d) The failure to set forth any fact or circumstance in a Notice of
Termination for Cause or a Notice of Termination for Good Reason shall
not constitute a waiver of the right to assert, and shall not preclude
the party giving notice from asserting, such fact or circumstance in an
attempt to enforce any right under or provision of this Agreement.
(e) Date of Termination. The "Date of Termination" means the date of
the Executive's death, the Disability Effective Date, the date on which
the termination of the Executive's employment by the Company for Cause
or without Cause or by the Executive for Good Reason is effective, or
the date on which the Executive gives the Company notice of a
termination of employment without Good Reason, as the case may be.
5. Obligations of the Company Upon Termination.
(a) Other Than For Cause, Death or Disability, or For Good Reason.
If, during the Employment Period, the Company terminates the
Executive's employment for any reason other than Cause, death or
Disability, or the Executive terminates employment for Good Reason, the
Company shall continue to provide the Executive with the compensation
and benefits set forth in paragraphs (a), (b) and (c) of Section 3 and
the continuing protection of Section 5(d) as if he had remained
employed by the Company through the end of the Employment Period and
then retired. The Incentive Compensation for such period shall be equal
to the maximum Incentive Compensation that the
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Executive would have been eligible to earn for such period. In lieu of
stock options, restricted stock and other stock-based awards, the
Executive shall be paid cash equal to the fair market value (without
regard to any restrictions) of the stock options, restricted stock and
other stock-based awards that would otherwise have been granted. To the
extent that any benefits described in Section 3(c) cannot be provided
pursuant to the plan or program provided by the Company for its
executives, the Company shall provide such benefits outside such plan
or program at no additional cost (including without limitation tax
cost) to the Executive and his family. Finally, during any period when
the Executive is eligible to receive medical, prescription or dental
benefits under another employer-provided plan, the benefits provided by
the Company under this Section 5(a) may be made secondary to those
provided under such other plan. In addition to the foregoing, any
restricted stock outstanding on the Date of Termination and all options
outstanding on the Date of Termination shall be fully vested and
exercisable and shall remain in effect and exercisable until the end of
the Employment Period (absent the prior death of the Executive) as if
the Executive remained employed until then and shall thereafter remain
exercisable in accordance with the applicable terms respecting retired
employees. The payments and benefits provided pursuant to this Section
5(a) are intended as liquidated damages for a termination of the
Executive's employment by the Company other than for Cause or
Disability or for the actions of the Company leading to a termination
of the Executive's employment by the Executive for Good Reason, and
shall be the sole and exclusive remedy therefor.
(b) Death and Disability. If the Executive's employment is
terminated by reason of the Executive's death or Disability during the
Employment Period, the Company shall pay to the Executive or, in the
case of the Executive's death, to the Executive's designated
beneficiaries (or, if there is no such beneficiary, to the Executive's
estate or legal representative), in a lump sum in cash within 30 days
after the Date of Termination, the sum of the following amounts (the
"Accrued Obligations"): (1) any portion of the Executive's Annual Base
Salary through the Date of Termination that has not yet been paid; (2)
an amount equal to the product of (A) the maximum annual bonus that the
Executive would have been eligible to earn for the period during which
such termination occurs, and (B) a fraction, the numerator of which is
the number of days in such period through the Date of Termination, and
the denominator of which is the total number of days in the relevant
period; and (3) any accrued but unpaid Incentive Compensation and
vacation pay. The Company shall have no further obligations under this
Agreement, except as specified in Section 5(d) which shall continue to
apply and in Section 6 below.
(c) By the Company For Cause; By the Executive Other Than For Good
Reason. If the Executive's employment is terminated by the Company for
Cause during the Employment Period, the Company shall pay to the
Executive the Annual Base Salary through the Date of Termination and
all compensation and benefits payable to the Executive under the terms
of the Company's compensation and benefit plans, programs or
arrangements as in effect immediately prior to the Date of Termination.
If the Executive voluntarily terminates employment during the
Employment Period other than for Good Reason, the Executive shall have
no liability to the Company for breach of this Agreement and the
Company shall pay the Accrued Obligations to the Executive in a lump
sum in cash within 30 days of the Date of Termination and the Company
shall have no further obligations under this Agreement, except as
specified in Section 6 below; provided that if such voluntary
termination by the Executive occurs after completion of six months of
service, but not otherwise, Section 5(d) shall also continue to apply.
(d) Certain Increase in Payments.
(i) Notwithstanding any other provision of this Agreement, if any
portion of any payment under this Agreement, or under any other
agreement with or plan of the Company or its affiliates (in the
aggregate "Total Payments"), would constitute an"excess parachute
payment," Executive shall be paid an additional amount (the "Gross-
Up Payment") such that the net amount retained by Executive after
deduction of any excise tax imposed under Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code"), any interest
charges or penalties
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in respect of the imposition of such excise tax (but not any
federal, state or local income tax, or employment tax) on the Total
Payments, any federal, state and local income tax, employment tax,
and excise tax upon the payment provided for by this paragraph (i)
of Section 5(d), shall be equal to the Total Payments. For purposes
of determining the amount of the Gross-Up Payment, Executive shall
be deemed to pay federal income tax and employment taxes at the
highest marginal rate of federal income and employment taxation in
the calendar year in which the Gross-Up Payment is to be made and
state and local income taxes at the highest marginal rate of
taxation in the state and locality of Executive's domicile for
income tax purposes on the date the Gross-Up Payment is made, net of
the maximum reduction in federal income taxes that may be obtained
from the deduction of such state and local taxes.
(ii) For purposes of this Agreement, the terms "excess parachute
payment" and "parachute payments" shall have the meanings assigned
to them in Section 280G of the Code and such "parachute payments"
shall be valued as provided therein. Present value for purposes of
this Agreement shall be calculated in accordance with Section
1274(b)(2) of the Code (or any successor provision). Within 20
business days following notice from either party to the other of the
belief that there is a payment or benefit due the Executive which
will result in an excess parachute payment as defined in Section
280G of the Code, the Executive and the Company, at the Company's
expense, shall obtain the opinion (which need not be unqualified) of
nationally recognized tax counsel ("National Tax Counsel") selected
by the Company's independent auditors and reasonably acceptable to
the Executive (which may be regular outside counsel to the Company),
which opinion sets forth (i) the amount of the Base Period Income,
(ii) the amount and present value of Total Payments and (iii) the
amount and present value of any excess parachute payments. As used
in this Agreement, the term "Base Period Income" means an amount
equal to the Executive's "annualized includible compensation for the
base period" as defined in Section 280G(d)(1) of the Code. For
purposes of such opinion, the value of any noncash benefits or any
deferred payment or benefit shall be determined by the Company's
independent auditors in accordance with the principles of Section
280G(d)(3) and (4) of the Code (or any successor provisions), which
determination shall be evidenced in a certificate of such auditors
addressed to the Company and the Executive. The opinion of National
Tax Counsel shall be addressed to the Company and the Executive and
shall be binding upon the Company and the Executive. If such
National Tax Counsel so requests in connection with the opinion
required by this paragraph (ii) of Section 5(d), the Executive and
the Company shall obtain the advice of a firm of recognized
executive compensation consultants as to the reasonableness of any
item of compensation to be received by the Executive solely with
respect to its status under Section 280G of the Code and the
regulations thereunder. Within 5 days after the National Tax
Counsel's opinion is received by the Company and the Executive, the
Company shall pay (or cause to be paid) or distribute (or cause to
distribute) to or for the benefit of Executive such amounts as are
then due to Executive under this Agreement.
(iii) In the event that upon any audit by the Internal Revenue
Service, or by a state or local taxing authority, of the Total
Payments or Gross-Up Payment, a change is finally determined to be
required in the amount of taxes paid by Executive, appropriate
adjustments shall be made under this Agreement such that the net
amount which is payable to the Executive after taking into account
the provisions of Section 4999 of the Code shall reflect the intent
of the parties as expressed in paragraph (i) above, in the manner
determined by the National Tax Counsel.
(iv) The Company agrees to bear all costs associated with, and to
indemnify and hold harmless, the National Tax Counsel of and from
any and all claims, damages, and expenses resulting from or relating
to its determinations pursuant to paragraphs (ii) and (iii) above,
except for claims, damages or expenses resulting from the gross
negligence or willful misconduct of such firm.
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6. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its
affiliated companies for which the Executive may qualify, nor, subject to
Section 11(f), shall anything in this Agreement limit or otherwise affect
such rights as the Executive may have under any contract or agreement with
the Company or any of its affiliated companies. However, the Key Executive
Employment and Severance Agreement between WICOR, Inc. and the Executive
dated as of July 1, 1997 is expressly terminated as a result of the
execution of this Agreement and the Executive hereby waives all rights
thereunder. Vested benefits and other amounts that the Executive is
otherwise entitled to receive under the Incentive Compensation, the SERP
[including the SERP benefits described in Section 3(c)(1) and (3)], or any
other plan, policy, practice or program of, or any contract or agreement
with, the Company or any of its affiliated companies on or after the Date
of Termination shall be payable in accordance with the terms of each such
plan, policy, practice, program, contract or agreement, as the case may be,
except as explicitly modified by this Agreement.
7. Full Settlement. The Company's obligation to make the payments
provided for in, and otherwise to perform its obligations under, this
Agreement shall not be affected by any set-off, counterclaim, recoupment,
defense or other claim, right or action that the Company may have against
the Executive or others. In no event shall the Executive be obligated to
seek other employment or take any other action by way of mitigation of the
amounts payable to the Executive under any of the provisions of this
Agreement and, except as specifically provided in Section 5(a), such
amounts shall not be reduced, regardless of whether the Executive obtains
other employment.
8. Confidential Information. The Executive shall hold in a fiduciary
capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its
affiliated companies and their respective businesses that the Executive
obtains during the Executive's employment by the Company or any of its
affiliated companies and that is not public knowledge (other than as a
result of the Executive's violation of this Section 8) ("Confidential
Information"). The Executive shall not communicate, divulge or disseminate
Confidential Information at any time during or after the Executive's
employment with the Company, except with the prior written consent of the
Company or as otherwise required by law or legal process. In no event shall
any asserted violation of the provisions of this Section 8 constitute a
basis for deferring or withholding any amounts otherwise payable to the
Executive under this Agreement.
9. Attorneys' Fees. The Company agrees to pay, as incurred, to the
fullest extent permitted by law, all legal fees and expenses that the
Executive may reasonably incur as a result of any contest (regardless of
the outcome) by the Company, the Executive or others of the validity or
enforceability of or liability under, or otherwise involving, any provision
of this Agreement, together with interest on any delayed payment at the
applicable federal rate provided for in Section 7872(f)(2)(A) of the Code.
10. Successors.
(a) This Agreement is personal to the Executive and, without the
prior written consent of the Company, shall not be assignable by the
Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.
(c) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company
expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would have been required
to perform it if no such succession had taken place. As used in this
Agreement, "Company" shall mean both the Company as defined above and
any such successor that assumes and agrees to perform this Agreement,
by operation of law or otherwise.
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11. Miscellaneous.
(a) This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Wisconsin, without reference to
principles of conflict of laws. The captions of this Agreement are not
part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified except by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.
(b) All notices and other communications under this Agreement shall
be in writing and shall be given by hand delivery to the other party or
by registered or certified mail, return receipt requested, postage
prepaid, addressed as follows:
If to the Executive:
--------------------------------------------------
--------------------------------------------------
--------------------------------------------------
If to the Company: Wisconsin Energy Corporation
Attn: Calvin H. Baker, Treasurer
and Chief Financial Officer
P.O. Box 2949
231 West Michigan Street
Milwaukee, WI 53201
Fax No.: (414) 221-5068
With a Copy to: Quarles & Brady LLP
Attn: Patrick M. Ryan
411 East Wisconsin Avenue
Milwaukee, WI 53202
Fax No.: (414) 271-3552
or to such other address as either party furnishes to the other in
writing in accordance with this paragraph (b) of Section 11. Notices
and communications shall be effective when actually received by the
addressee.
(c) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other
provision of this Agreement. If any provision of this Agreement shall
be held invalid or unenforceable in part, the remaining portion of such
provision, together with all other provisions of this Agreement, shall
remain valid and enforceable and continue in full force and effect to
the fullest extent consistent with law.
(d) Notwithstanding any other provision of this Agreement, the
Company may withhold from amounts payable under this Agreement all
federal, state, local and foreign taxes that are required to be
withheld by applicable laws or regulations.
(e) The Executive's or the Company's failure to insist upon strict
compliance with any provisions of, or to assert, any right under, this
Agreement (including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to paragraph (c) of
Section 4 of this Agreement) shall not be deemed to be a waiver of such
provision or right or of any other provision of or right under this
Agreement.
(f) The Executive and the Company acknowledge that this Agreement
supersedes any other agreement between them concerning the subject
matter hereof.
(g) The rights and benefits of the Executive under this Agreement
may not be anticipated, assigned, alienated or subject to attachment,
garnishment, levy, execution or other legal or equitable process except
as required by law. Any attempt by the Executive to anticipate,
alienate, assign, sell, transfer, pledge, encumber or charge the same
shall be void. Payments hereunder shall not be considered assets of the
Executive in the event of insolvency or bankruptcy.
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(h) This Agreement may be executed in several counterparts, each of
which shall be deemed an original, and said counterparts shall
constitute but one and the same instrument.
In Witness Whereof, the Executive has hereunto set the Executive's hand and,
pursuant to the authorization of its Board, the Company has caused this
Agreement to be executed in its name on its behalf, all as of the day and year
first above written.
Executive
-------------------------------------
George E. Wardeberg
Wisconsin Energy Corporation
By: _________________________________
Richard A. Abdoo
Chairman of the Board,
President and Chief Executive
Officer
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EXHIBIT 3
WISCONSIN ENERGY CORPORATION
SPECIAL EXECUTIVE SEVERANCE POLICY
Introduction
Wisconsin Energy Corporation, a Wisconsin corporation ("Wisconsin Energy")
has entered into an Agreement and Plan of Merger dated as of June 27, 1999
(the "Merger Agreement") among Wisconsin Energy, WICOR, Inc. and CEW
Acquisition, Inc. whereby WICOR, Inc. will become a wholly-owned subsidiary of
Wisconsin Energy (the "WICOR Transaction") and although no change of control
of Wisconsin Energy will occur in connection with such acquisition, the
inevitable adjustments that will occur following the acquisition may result in
loss or distraction of employees of Wisconsin Energy and its subsidiaries to
the detriment of Wisconsin Energy and its shareholders.
Accordingly, the Board of Directors of Wisconsin Energy (the "Board") has
determined that appropriate steps should be taken to assure Wisconsin Energy
of the continued employment and attention and dedication to duty of its
employees and to seek to ensure the availability of their continued service,
notwithstanding the closing of the WICOR Transaction.
Therefore, in order to fulfill the above purposes, the following plan has
been developed and is hereby adopted.
ARTICLE I
Establishment of Plan
As of the Effective Time of Merger (as defined in the Merger Agreement),
Wisconsin Energy hereby establishes a separation compensation plan known as
the Wisconsin Energy Special Executive Severance Policy, as set forth in this
document.
ARTICLE II
Definitions
As used herein the following words and phrases shall have the following
respective meanings unless the context clearly indicates otherwise.
(a) Annual Compensation. The sum of a Participant's Annual Salary and
Annual Incentive Award.
(b) Annual Incentive Award. The highest annual cash incentive award
earned by a Participant during any of the 3 years prior to a termination of
employment entitling the Participant to a Separation Benefit.
(c) Annual Salary. The Participant's regular annual base salary
immediately prior to his or her termination of employment, including
compensation converted to other benefits under a flexible pay arrangement
maintained by the Corporation or deferred pursuant to a written plan or
agreement with the Corporation, but excluding overtime pay, allowances,
premium pay, compensation paid or payable under any Corporation long-term
or short-term incentive plan or any similar payment.
(d) Board. The Board of Directors of Wisconsin Energy.
(e) Code. The Internal Revenue Code of 1986, as amended from time to
time.
(f) Committee. The Compensation Committee of the Board.
(g) Corporation. Wisconsin Energy and any successor thereto.
(h) Date of Termination. The date on which a Participant ceases to be an
Employee.
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(i) Employee. Any full-time, regular-benefit, non-bargaining employee of
an Employer. The term shall exclude all individuals employed as independent
contractors, temporary employees, other benefit employees, non-benefit
employees, leased employees, even if it is subsequently determined that
such classification is incorrect.
(j) Employer. The Corporation, WICOR, Inc. as of the Effective Time of
Merger as defined in the Merger Agreement, or a Subsidiary which has
adopted the Plan pursuant to Article V hereof.
(k) Participant. An individual who is designated as such pursuant to
Section 3.1.
(l) Plan. The Wisconsin Energy Special Executive Severance Policy.
(m) Separation Benefits. The benefits described in Section 4.3 that are
provided to qualifying Participants under the Plan. Such benefits are also
referred to as Tier 1 benefits.
(n) Separation Period. The period beginning on a Participant's Date of
Termination and ending on the third anniversary thereof.
(o) Subsidiary. Any corporation in which the Corporation, directly or
indirectly, holds a majority of the voting power of such corporation's
outstanding shares of capital stock.
(p) Target Annual Incentive. The Annual Incentive Award that the
Participant would have earned for the year in which his or her Date of
Termination occurs, if the target goals had been achieved.
(q) WICOR Closing Date. The Effective Time of Merger as defined in the
Merger Agreement.
ARTICLE III
Eligibility
3.1 Participation. Each of the individuals named on Schedule 1 hereto shall
be a Participant in the Plan. Schedule 1 may be amended by the Board from time
to time to add individuals as Participants.
3.2 Duration of Participation. A Participant shall only cease to be a
Participant in the Plan as a result of an amendment or termination of the Plan
complying with Article VII of the Plan, or when he ceases to be an Employee of
any Employer, unless, at the time he ceases to be an Employee, such Participant
is entitled to payment of Separation Benefits as provided in the Plan or there
has been an event or occurrence described in Section 4.2(a) which would enable
the Participant to terminate his employment and receive Separation Benefits. A
Participant entitled to payment of a Separation Benefit or any other amounts
under the Plan shall remain a Participant in the Plan until the full amount of
the Separation Benefit and any other amounts payable under the Plan have been
paid to the Participant.
ARTICLE IV
Separation Benefits
4.1 Right to Separation Benefit. A Participant shall be entitled to receive
Separation Benefits in accordance with Section 4.3 if the Participant ceases to
be an Employee for any reason specified in Section 4.2(a).
4.2 Termination of Employment.
(a) Terminations Which Give Rise to Separation Benefits Under This Plan.
Except as set forth in Section 4.2(b), a Participant shall be entitled to
Separation Benefits if at any time on or after the WICOR Closing Date and
before the end of a 2-year period following the WICOR Closing Date:
(i) the Participant ceases to be an Employee by action of the Employer
or any of its affiliates (excluding any transfer to another Employer);
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(ii) the Participant's Annual Salary is reduced below the higher of (A)
the amount in effect immediately before the WICOR Closing Date and (B) the
highest amount in effect at any time thereafter, and the Participant ceases
to be an Employee by his or her own action within 90 days after the
occurrence of such reduction;
(iii) the Participant's duties and responsibilities or the program of
incentive compensation or retirement and welfare benefits offered to the
Participant are diminished in comparison to the duties and responsibilities
or the program of incentive compensation or retirement and welfare benefits
enjoyed by the Participant immediately before the WICOR Closing Date, and
the Participant ceases to be an Employee by his or her own action within 90
days after the occurrence after such reduction;
(iv) the Participant is required to be based at a location more than 35
miles from the location where the Participant was based and performed
services immediately before the WICOR Closing Date, and the Participant
ceases to be an Employee by his or her own action within 90 days after such
relocation;
(v) an Employer or any affiliate of an Employer sells or otherwise
distributes or disposes of the subsidiary, branch or other business unit in
which the Participant was employed before such sale, distribution or
disposition and the requirements of Section 4.2(b)(iii) are not met, and
the Participant ceases to be an Employee by action of the Employer upon or
within 90 days after such sale, distribution or disposition; or
(vi) the Participant ceases to be an Employee by his or her own action
within 6 months after completion of one year of service following the WICOR
Closing Date.
(b) Terminations Which Do Not Give Rise to Separation Benefits Under This
Plan. If a Participant's employment is terminated for Cause, disability, death,
or a qualified sale of business (as those terms are defined below), or
voluntarily by the Participant (whether on account of retirement or otherwise)
in the absence of an event described in Section 4.2(a)(ii), 4.2(a)(iii),
4.2(a)(iv) or 4.2(a)(vi), the Participant shall not be entitled to Separation
Benefits under the Plan.
(i) A termination for disability shall have occurred where a Participant
is terminated because illness or injury has prevented him or her from
performing his or her duties (as they existed immediately prior to the
illness or injury) on a full time basis for 180 consecutive business days.
(ii) A termination for Cause shall have occurred where a Participant is
terminated because of:
A. the willful and continued failure of the Participant to perform
substantially the Participant's duties with the Corporation or one of
its affiliates (other than any such failure resulting from incapacity
due to physical or mental illness), after a written demand for
substantial performance is delivered to the Participant by the Board or
an elected officer of the Corporation which specifically identifies the
manner in which the Board or the elected officer believes that the
Participant has not substantially performed the Participant's duties,
or
B. the willful engaging by the Participant in illegal conduct or
gross misconduct which is materially and demonstrably injurious to the
Corporation.
For purposes of this provision, no act or failure to act, on the part of
the Participant, shall be considered "willful" unless it is done, or
omitted to be done, by the Participant in bad faith or without reasonable
belief that the Participant's action or omission was in the best interests
of the Corporation. Any act, or failure to act, based upon authority given
pursuant to a resolution duly adopted by the Board or upon the advice of
counsel for the Corporation, shall be conclusively presumed to be done, or
omitted to be done, by the Participant in good faith and in the best
interests of the Corporation.
(iii) A termination due to a qualified sale of business shall have
occurred where an Employer or an affiliate of an Employer has sold,
distributed or otherwise disposed of the subsidiary, branch or other
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business unit in which the Participant was employed before such sale,
distribution or disposition and the Participant has been offered employment
with the purchaser of such subsidiary, branch or other business unit or the
corporation or other entity which is the owner thereof on substantially the
same terms and conditions under which he worked for the Employer
(including, without limitation, base salary, duties and responsibilities,
program of benefits and location where based). Such terms and conditions
shall also include, without limitation, a legally binding agreement or plan
covering such Participant, providing that upon a termination of employment
with the subsidiary, branch or business unit (or the corporation or other
entity which is the owner thereof) or any successor thereto of the kind
described in Article VI of this Plan, at any time before the end of a 2-
year period following the WICOR Closing Date, the Participant's employer or
any successor will pay to each such former Participant an amount equal to
the Separation Benefit and other benefits that such former Participant
would have received under the Plan had he been a Participant at the time of
such termination. For purposes of this subsection, the new employer plan or
agreement must treat service with any Employer (irrespective of whether the
Employer was an affiliate of the Corporation or the Employee was a
Participant at the time of such service) and the new employer as continuous
service for purposes of calculating Separation Benefits.
4.3 Separation Benefits.
(a) If a Participant's employment is terminated in circumstances entitling
him to a separation benefit as provided in Section 4.2(a), the Participant's
Employer shall pay such Participant, within 20 days of the Date of
Termination, a cash lump sum as set forth in Section 4.3(b) and the continued
benefits set forth as Section 4.3(c). For purposes of determining the benefits
set forth in Sections 4.3(b) and 4.3(c), if the termination of the
Participant's employment is based upon a reduction of the Participant's Annual
Salary or benefits as described in Section 4.2(a)(ii) or 4.2(a)(iii), such
reduction shall be ignored.
(b) The cash lump sum referred to in Section 4.3(a) shall equal the
aggregate of the following amounts:
(i) the sum of (A) the Participant's Annual Salary through the Date of
Termination to the extent not theretofore paid, (B) the product of (1) the
Target Incentive and (2) a fraction, the numerator of which is the number
of days in such year through the date of Termination, and the denominator
of which is 365, and (C) any accrued vacation pay, in each case to the
extent not theretofore paid and in full satisfaction of the rights of the
Participant thereto;
(ii) an amount equal to the product of (A) three, and (B) the sum of (1)
the Participant's Annual Salary and (2) the higher of the Target Annual
Incentive Award or the Annual Incentive Award; and
(iii) an amount equal to the difference between (A) the actuarial
equivalent of the benefit under the Corporation's qualified defined benefit
retirement plan (the "Retirement Plan") and any excess or supplemental
retirement plans in which the Participant participates (together, the
"SERP") which the Participant would receive if his or her employment
continued during the Separation Period, assuming that the Participant's
compensation during the Separation Period would have been equal to his or
her compensation as in effect immediately before the termination or, if
higher, immediately before the WICOR Closing Date, and (B) the actuarial
equivalent of the Participant's actual benefit (paid or payable), if any,
under the Retirement Plan and the SERP as of the Date of Termination. The
actuarial assumptions used for purposes of determining actuarial
equivalence shall be no less favorable to the Participant than the most
favorable of those in effect under the Retirement Plan and the SERP on the
Date of Termination and the WICOR Closing Date, as the case may be.
(c) The continued benefits referred to above shall be the provision to the
Participant and his or her family during the Separation Period of medical,
dental and life insurance benefits as if the Participant's employment had not
been terminated; provided, however, that if the Participant becomes reemployed
with another employer and is eligible to receive medical or other welfare
benefits under another employer-provided plan, the medical and other welfare
benefits described herein shall be secondary to those provided under such
other plan during
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such applicable period of eligibility. For purposes of determining eligibility
(but not the time of commencement of benefits) of the Participant for retiree
medical, dental and life insurance benefits under the Corporation's plans,
practices, programs and policies, the Participant shall be considered to have
remained employed during the Separation Period and to have retired on the last
day of such period.
To the extent any benefits described in this Section 4.3(c) cannot be
provided pursuant to the appropriate plan or program maintained for Employees,
the Employer shall provide such benefits outside such plan or program at no
additional cost (including without limitation tax cost) to the Participant.
4.4 Other Benefits Payable. The cash lump sum and continuing benefits
described in Section 4.3 above shall be payable in addition to, and not in lieu
of, all other accrued or vested or earned but deferred compensation, rights,
options or other benefits which may be owed to a Participant upon or following
termination, including but not limited to accrued vacation or sick pay, amounts
or benefits payable under any bonus or other compensation plans, stock option
plan, stock ownership plan, stock purchase plan, restricted stock plan, life
insurance plan, health plan, disability plan or similar or successor plan, but
excluding any severance pay under any severance plan, practice or program or
pay in lieu of notice required to be paid to such Participant under applicable
law.
4.5 Certain Reduction of Payments by the Corporation.
Notwithstanding any other provision of this Plan, if any portion of the
Separation Benefits or any other payment under any other agreement with or plan
of the Corporation or the Employer (in the aggregate "Total Payments"), would
constitute an "excess parachute payment," then the Total Payments to be made to
the Participant shall be reduced such that the value of the aggregate Total
Payments that the Participant is entitled to receive shall be One Dollar ($1)
less than the maximum amount which the Participant may receive without becoming
subject to the tax imposed by Section 4999 of the Internal Revenue Code (the
"Code") (or any successor provision) or which the Corporation may pay without
loss of deduction under Section 280G(a) of the Code (or any successor
provision). For purposes of this Plan, the terms "excess parachute payment" and
"parachute payments" shall have the meaning assigned to them in Section 280G of
the Code (or any successor provision), and such "parachute payments" shall be
valued as provided therein. Present value for purposes of this Agreement shall
be calculated in accordance with Section 1274(b)(2) of the Code (or any
successor provision). Within 60 days following delivery of a notice by the
Corporation to the Participant of its belief that there is a payment or benefit
due the Participant which will result in an excess parachute payment as defined
in Section 280G of the Code (or any successor provision), the Participant and
the Corporation, at the Corporation's expense, shall obtain the opinion (which
need not be unqualified) of the Corporation's independent auditors which sets
forth (A) the amount of the Base Period Income, (B) the amount and present
value of Total Payments and (C) the amount and present value of any excess
parachute payments without regard to the limitations of this Section 4.5. As
used in this Section 4.5, "Base Period Income" means the Participant's
"annualized includible compensation for the base period" as defined in Section
280G(d)(1) of the Code (or any successor provision). For purposes of such
opinion, the value of any noncash benefits or any deferred payment or benefit
shall be determined by the Corporation's independent auditors in accordance
with the principles of Sections 280G(d)(3) and (4) of the Code (or any
successor provisions), which determination shall be evidenced in a certificate
of such auditors addressed to the Corporation and the Participant. Such opinion
shall be dated as of the Participant's date of termination of employment and
addressed to the Corporation and the Participant and shall be binding, absent
manifest error, upon the Corporation and the Participant. If such opinion
determines that there would be an excess parachute payment, the Separation
Benefits hereunder or any other payment determined by such auditors to be
includible in Total Payments shall be reduced or eliminated as specified by the
Participant in writing delivered to the Corporation within 30 days of the
Participant's receipt of such opinion or, if the Participant fails to so notify
the Corporation, then as the Corporation shall reasonably determine, so that
under the bases of calculations set forth in such opinion there will be no
excess parachute payment. If such auditors so request in connection with the
opinion required by this Section, the Participant and the Corporation shall
obtain, at the Corporation's expense, and the auditors may
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rely on in providing the opinion, the advice of a firm of recognized executive
compensation consultants as to the reasonableness of any item of compensation
to be received by the Participant. Notwithstanding the foregoing, the
calculations provided for herein shall be based upon the conclusive presumption
that the following are reasonable: the compensation payments made under Section
4.3(b)(i) as well as any other compensation, earned prior to the date of the
Participant's termination of employment pursuant to the Corporation's
compensation programs if such payments would have been made in the future in
any event, even though the timing of such payment is triggered by the Change of
Control. If the provisions of Sections 280G and 4999 of the Code (or any
successor provisions) are repealed without succession, then this Section 4.5
shall be of no further force or effect.
The Participant shall notify the Corporation in writing of any claim by the
Internal Revenue Service that, if successful, would subject the Participant to
the tax imposed by Section 4999 of the Code. Such notification shall be given
as soon as practicable, but no later than 10 business days after the
Participant is informed in writing of such claim and shall apprise the
Corporation of the nature of the claim and the date on which such claim is
requested to be paid. The Participant shall not pay such claim prior to the
expiration of the 30-day period following the date on which he gives notice to
the Corporation (or such shorter period ending on the date that any payment of
taxes with respect to the claim is due). If the Corporation notifies the
Participant in writing prior to the expiration of such period that it desires
to contest such claim, the Participant agrees to give the Corporation any
information reasonably requested by the Corporation in writing relating to such
claim, to take such action in connection with contesting such claim as the
Corporation shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim
by an attorney reasonably selected by the Corporation, to cooperate with the
Corporation in good faith in order to effectively contest such claim, to permit
the Corporation to control any proceedings relating to such claim and to permit
the Corporation to pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority with respect to
such claim. The Corporation shall bear and pay directly all costs and expenses,
including additional interest and penalties, incurred in connection with such
contest. Further, provided only that Corporation receives timely written
notification from the Participant with respect to such claim, the Corporation
will indemnify and hold the Participant harmless, on an after-tax basis, for
any excise tax under Section 4999 of the Code (including interest and penalties
thereon), such that the net amount retained by the Participant after the
deduction of any such excise tax and any interest or penalties thereon (but not
any federal, state or local income tax) would be the same as if such excise tax
had never applied.
4.6 Payment Obligations Absolute; Offset for WICOR Agreements and for
Wisconsin Energy Senior Executive Severance Policy. Subject to Section 4.5 and
except for the WICOR Agreements offset and offset for the Wisconsin Energy
Senior Executive Severance Policy described below, the obligations of the
Corporation and the Employers to pay the separation benefits described in
Section 4.3 shall be absolute and unconditional and shall not be affected by
any circumstances, including, without limitation, any set-off, counterclaim,
recoupment, defense or other right which the Corporation or any of its
Subsidiaries may have against any Participant. In no event shall a Participant
be obligated to seek other employment or take any other action by way of
mitigation of the amounts payable to a Participant under any of the provisions
of this Plan, nor shall the amount of any payment hereunder be reduced by any
compensation earned by a Participant as a result of employment by another
employer, except as specifically provided in Section 4.3(c). The parties
acknowledge that pursuant to the Merger Agreement the Corporation (or a
Subsidiary) has expressly assumed all of the obligations of WICOR under certain
Key Executive Employment and Severance Agreements between WICOR and certain
Participants dated in 1997 (the "WICOR Agreements"). The WICOR Agreements
provide for the payment of certain cash compensation (the "WICOR Cash Amounts")
and provision of certain benefits (the "WICOR Benefits") to the Participants
covered by a WICOR Agreement under certain circumstances. Should the
Corporation (or a Subsidiary) become obligated to make any WICOR Cash Amounts
or WICOR Benefits, such items shall be offset against any cash payments or
benefits otherwise due to such Participant under the terms of this Plan in the
manner provided herein. The WICOR Cash Amounts shall be offset dollar-for-
dollar against any cash payments otherwise due under this Plan. The
Corporation's obligation to such Participant with respect to the SERP
referenced in Section 4.3(b)(iii) of this Plan shall be subject to an actuarial
equivalent
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offset for the value of the additional pension benefit provided for in Section
8(b)(i) of the WICOR Agreement. Unless such Participant elects within 10 days
after the Date of Termination to commence pension benefits immediately, the
offset will be calculated for any such Participant who is younger than age 63
on the Date of Termination as if such additional pension benefits were earned
over the 2-year period following such Participant's Date of Termination and
became payable at the end of such period and calculated for any such
Participant who is age 63 or older on the Date of Termination as if such
additional pension benefits were earned up until such Participant's 65th
birthday and became payable then. Actuarial equivalency for this purpose shall
be determined using the interest rate and mortality table referenced in Article
VIII of the SERP. The Corporation's obligation to such Participants under
Section 4.3(c) hereof with respect to life insurance and medical and dental
benefits shall be eliminated entirely if the Corporation (or a Subsidiary)
becomes obligated under Section 8(b)(ii) of the WICOR Agreement to provide
welfare benefits of the same type to such Participant and his or her family,
for the period of time that such welfare benefits are provided under the WICOR
Agreement. However, if at the end of such period of time, the Separation Period
for welfare benefits of the same type under Section 4.3(c) would not have
expired, then the Corporation shall extend the life insurance, medical and
dental benefits under the terms of Section 4.3(c) hereof for the remaining
balance of the Separation Period. If the Corporation (or a Subsidiary) becomes
obligated to and provides outplacement services to any such Participant under
Section 8(b)(iii) of the WICOR Agreement, the cost to the Corporation (and any
Subsidiary) of such services shall be a dollar-for-dollar offset against any
cash payments otherwise due to such Participant under this Plan. If any
Participant in this Plan is also a participant under the Wisconsin Energy
Senior Executive Severance Policy adopted by Wisconsin Energy in 1995 (the
"SESP") and become entitled to any cash or benefits under the terms of the
SESP, the same shall be offset against any cash or benefits otherwise due to
such Participant under the terms of this Plan.
ARTICLE V
Participating Employers
This Plan may be adopted by any Subsidiary of the Corporation. Upon such
adoption, the Subsidiary shall become an Employer hereunder and the provisions
of the Plan shall be fully applicable to the Employees of that Subsidiary who
are Participants pursuant to Section 3.1.
ARTICLE VI
Successor to Corporation
This Plan shall bind any successor of the Corporation, its assets or its
businesses (whether direct or indirect, by purchase, merger, consolidation or
otherwise) in the same manner and to the same extent that the Corporation would
be obligated under this Plan if no succession had taken place.
In the case of any transaction in which a successor would not by the
foregoing provision or by operation of law be bound by this Plan, the
Corporation shall require such successor expressly and unconditionally to
assume and agree to perform the Corporation's obligations under this Plan, in
the same manner and to the same extent that the Corporation would be required
to perform if no such succession had taken place. The term "Corporation," as
used in this Plan, shall mean the Corporation as hereinbefore defined and any
successor or assignee to the business or assets which by reason hereof becomes
bound by this Plan.
ARTICLE VII
Duration, Amendment and Termination
7.1 Duration. This Plan shall be deemed established, without the need for
any further act by the Board, on the Effective Time of Merger and it shall
continue for a period of 2 years after the WICOR Closing Date, on which date it
will expire, unless extended for an additional period or periods by resolution
adopted by the Board.
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However, once the WICOR Closing Date has occurred, then notwithstanding any
other provision of the Plan, the Plan shall continue in full force and effect
and shall not terminate or expire until after all Participants who become
entitled to any payments hereunder shall have received such payments in full
and all adjustments required to be made pursuant to Sections 4.5 and 4.6 have
been made.
If the Effective Time of Merger has not occurred on or prior to January 1,
2001, then this Plan will become void and of no force and effect.
7.2 Amendment. Except as provided in Section 7.1, the Plan shall not be
subject to amendment, change, substitution, deletion, revocation or termination
in any respect which adversely affects the rights of Participants.
7.3 Form of Amendment. The form of any amendment of the Plan shall be a
written instrument signed by a duly authorized officer or officers of the
Corporation, certifying that the amendment has been approved by the Board.
ARTICLE VIII
Miscellaneous
8.1 Indemnification. If a Participant institutes any legal action in seeking
to obtain or enforce or is required to defend in any legal action the validity
or enforceability of, any right or benefit provided by this Plan, the
Corporation or the Employer will pay for all actual reasonable legal fees and
expenses incurred (as incurred) by such Participant, regardless of the outcome
of such action.
8.2 Employment Status. This Plan does not constitute a contract of
employment or impose on the Participant or the Participant's Employer any
obligation to retain the Participant as an Employee, to change the status of
the Participant's employment, or to change the Corporation's policies or those
of its Subsidiaries regarding termination of employment.
8.3 Claim Procedure. If an Employee or former Employee makes a written
request alleging a right to receive benefits under this Plan or alleging a
right to receive an adjustment in benefits being paid under the Plan, the
Corporation shall treat it as a claim for benefit. All claims for benefit under
the Plan shall be sent to the Human Resources Department of the Corporation and
must be received within 90 days after termination of employment. If the
Corporation determines that any individual who has claimed a right to receive
benefits, or different benefits, under the Plan is not entitled to receive all
or any part of the benefits claimed, it will inform the claimant in writing of
its determination and the reasons therefor in terms calculated to be understood
by the claimant. The notice will be sent within 90 days of the claim unless the
Corporation determines additional time, not exceeding 90 days, is needed. The
notice shall make specific reference to the pertinent Plan provisions on which
the denial is based, and describe any additional material or information that
is necessary. Such notice shall, in addition, inform the claimant what
procedure the claimant should follow to take advantage of the review procedures
set forth below in the event the claimant desires to contest the denial of the
claim. The claimant may within 90 days thereafter submit in writing to the
Corporation a notice that the claimant contests the denial of his or her claim
by the Corporation and desires a further review. The Corporation shall within
60 days thereafter review the claim and authorize the claimant to appear
personally and review pertinent documents and submit issues and comments
relating to the claim to the persons responsible for making the determination
on behalf of the Corporation. The Corporation will render its final decision
with specific reasons therefor in writing and will transmit it to the claimant
within 60 days of the written request for review, unless the Corporation
determines additional time, not exceeding 60 days, is needed, and so notifies
the Participant. If the Corporation fails to respond to a claim filed in
accordance with the foregoing within 60 days or any such extended period, the
Corporation shall be deemed to have denied the claim.
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8.4 Validity and Severability. The invalidity or unenforceability of any
provision of the Plan shall not affect the validity or enforceability of any
other provision of the Plan, which shall remain in full force and effect, and
any prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
8.5 Governing Law. The validity, interpretation, construction and
performance of the Plan shall in all respects be governed by the laws of
Wisconsin, without reference to principles of conflict of law, except to the
extent preempted by federal law.
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SCHEDULE 1
Participants Eligible for Tier 1 Separation
Benefits if the Conditions Specified in
Section 4.2(a) are Satisfied:
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EXHIBIT 4
WISCONSIN ENERGY CORPORATION
EXECUTIVE SEVERANCE POLICY
Introduction
Wisconsin Energy Corporation, a Wisconsin corporation ("Wisconsin Energy")
has entered into an Agreement and Plan of Merger dated as of June 27, 1999
(the "Merger Agreement") among Wisconsin Energy, WICOR, Inc. and CEW
Acquisition, Inc. whereby WICOR, Inc. ("WICOR") will become a wholly-owned
subsidiary of Wisconsin Energy (the "WICOR Transaction") and although no
change of control of Wisconsin Energy will occur in connection with such
acquisition, the inevitable adjustments that will occur following the
acquisition may result in loss or distraction of employees of Wisconsin Energy
and its subsidiaries to the detriment of Wisconsin Energy and its
shareholders.
Accordingly, the Board of Directors of Wisconsin Energy (the "Board") has
determined that appropriate steps should be taken to assure Wisconsin Energy
of the continued employment and attention and dedication to duty of its
employees and to seek to ensure the availability of their continued service,
notwithstanding the closing of the WICOR Transaction.
Therefore, in order to fulfill the above purposes, the following plan has
been developed and is hereby adopted.
ARTICLE I
Establishment of Plan
As of the Effective Time of Merger (as defined in the Merger Agreement),
Wisconsin Energy hereby establishes a separation compensation plan known as
the Wisconsin Energy Executive Severance Policy, as set forth in this
document.
ARTICLE II
Definitions
As used herein the following words and phrases shall have the following
respective meanings unless the context clearly indicates otherwise.
(a) Annual Compensation. The sum of a Participant's Annual Salary and
Annual Incentive Award.
(b) Annual Incentive Award. The highest annual cash incentive award
earned by a Participant during any of the 3 years prior to a termination of
employment entitling the Participant to a Separation Benefit.
(c) Annual Salary. The Participant's regular annual base salary
immediately prior to his or her termination of employment, including
compensation converted to other benefits under a flexible pay arrangement
maintained by the Corporation or deferred pursuant to a written plan or
agreement with the Corporation, but excluding overtime pay, allowances,
premium pay, compensation paid or payable under any Corporation long-term
or short-term incentive plan or any similar payment.
(d) Board. The Board of Directors of Wisconsin Energy.
(e) Code. The Internal Revenue Code of 1986, as amended from time to
time.
(f) Committee. The Compensation Committee of the Board.
(g) Corporation. Wisconsin Energy and any successor thereto.
(h) Date of Termination. The date on which a Participant ceases to be an
Employee.
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(i) Employee. Any full-time, regular-benefit, non-bargaining employee of
an Employer. The term shall exclude all individuals employed as independent
contractors, temporary employees, other benefit employees, non-benefit
employees, leased employees, even if it is subsequently determined that
such classification is incorrect.
(j) Employer. The Corporation, WICOR, Inc. as of the Effective Time of
Merger as defined in the Merger Agreement, or a Subsidiary which has
adopted the Plan pursuant to Article V hereof.
(k) Participant. An individual who is designated as such pursuant to
Section 3.1.
(l) Plan. The Wisconsin Energy Executive Severance Policy.
(m) Separation Benefits. The benefits described in Section 4.3 that are
provided to qualifying Participants under the Plan.
(n) Separation Period. The period beginning on a Participant's Date of
Termination and ending on the third anniversary thereof for a Participant
designated on Schedule 1 as eligible for a Tier 2 Separation Benefit,
ending on the second anniversary thereof for a Participant designated as
eligible for a Tier 3 Separation Benefit, and ending on the first
anniversary thereof for a Participant designated as eligible for a Tier 4
Separation Benefit.
(o) Subsidiary. Any corporation in which the Corporation, directly or
indirectly, holds a majority of the voting power of such corporation's
outstanding shares of capital stock.
(p) Target Annual Incentive. The Annual Incentive Award that the
Participant would have earned for the year in which his or her Date of
Termination occurs, if the target goals had been achieved.
(q) WICOR Closing Date. The Effective Time of Merger as defined in the
Merger Agreement.
ARTICLE III
Eligibility
3.1 Participation. Each of the individuals named on Schedule 1 hereto shall
be a Participant in the Plan. Schedule 1 may be amended by the Board from time
to time to add individuals as Participants. All Participants will also be
designated on Schedule 1 as eligible for either a Tier 2, Tier 3 or Tier 4
Separation Benefit under the provisions of section 4.3(b)(ii) hereof.
3.2 Duration of Participation. A Participant shall only cease to be a
Participant in the Plan as a result of an amendment or termination of the Plan
complying with Article VII of the Plan, or when he ceases to be an Employee of
any Employer, unless, at the time he ceases to be an Employee, such Participant
is entitled to payment of Separation Benefits as provided in the Plan or there
has been an event or occurrence described in Section 4.2(a) which would enable
the Participant to terminate his employment and receive Separation Benefits. A
Participant entitled to payment of a Separation Benefit or any other amounts
under the Plan shall remain a Participant in the Plan until the full amount of
the Separation Benefit and any other amounts payable under the Plan have been
paid to the Participant.
ARTICLE IV
Separation Benefits
4.1 Right to Separation Benefit. A Participant shall be entitled to receive
Separation Benefits in accordance with Section 4.3 if the Participant ceases to
be an Employee for any reason specified in Section 4.2(a).
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4.2 Termination of Employment.
(a) Terminations Which Give Rise to Separation Benefits Under This Plan.
Except as set forth in Section 4.2(b), a Participant shall be entitled to
Separation Benefits if at any time on or after the WICOR Closing Date and
before the end of a 2-year period following the WICOR Closing Date:
(i) the Participant ceases to be an Employee by action of the Employer
or any of its affiliates (excluding any transfer to another Employer);
(ii) the Participant's Annual Salary is reduced below the higher of (A)
the amount in effect immediately before the WICOR Closing Date and (B) the
highest amount in effect at any time thereafter, and the Participant ceases
to be an Employee by his or her own action within 90 days after the
occurrence of such reduction;
(iii) the Participant's duties and responsibilities or the program of
incentive compensation or retirement and welfare benefits offered to the
Participant are diminished in comparison to the duties and responsibilities
or the program of incentive compensation or retirement and welfare benefits
enjoyed by the Participant immediately before the WICOR Closing Date, and
the Participant ceases to be an Employee by his or her own action within 90
days after the occurrence after such reduction;
(iv) the Participant is required to be based at a location more than 35
miles from the location where the Participant was based and performed
services immediately before the WICOR Closing Date, and the Participant
ceases to be an Employee by his or her own action within 90 days after such
relocation; or
(v) an Employer or any affiliate of an Employer sells or otherwise
distributes or disposes of the subsidiary, branch or other business unit in
which the Participant was employed before such sale, distribution or
disposition and the requirements of Section 4.2(b)(iii) are not met, and
the Participant ceases to be an Employee by action of the Employer upon or
within 90 days after such sale, distribution or disposition.
(b) Terminations Which Do Not Give Rise to Separation Benefits Under This
Plan. If a Participant's employment is terminated for Cause, disability, death,
or a qualified sale of business (as those terms are defined below), or
voluntarily by the Participant (whether on account of retirement or otherwise)
in the absence of an event described in Section 4.2 (a)(ii), 4.2(a)(iii) or
4.2(a)(iv), the Participant shall not be entitled to Separation Benefits under
the Plan.
(i) A termination for disability shall have occurred where a Participant
is terminated because illness or injury has prevented him or her from
performing his or her duties (as they existed immediately prior to the
illness or injury) on a full time basis for 180 consecutive business days.
(ii) A termination for Cause shall have occurred where a Participant is
terminated because of:
A. the willful and continued failure of the Participant to perform
substantially the Participant's duties with the Corporation or one of
its affiliates (other than any such failure resulting from incapacity
due to physical or mental illness), after a written demand for
substantial performance is delivered to the Participant by the Board or
an elected officer of the Corporation which specifically identifies the
manner in which the Board or the elected officer believes that the
Participant has not substantially performed the Participant's duties,
or
B. the willful engaging by the Participant in illegal conduct or
gross misconduct which is materially and demonstrably injurious to the
Corporation.
For purposes of this provision, no act or failure to act, on the part of
the Participant, shall be considered "willful" unless it is done, or
omitted to be done, by the Participant in bad faith or without reasonable
belief that the Participant's action or omission was in the best interests
of the Corporation. Any act, or failure to act, based upon authority given
pursuant to a resolution duly adopted by the Board or upon the advice of
counsel for the Corporation, shall be conclusively presumed to be done, or
omitted to be done, by the Participant in good faith and in the best
interests of the Corporation.
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(iii) A termination due to a qualified sale of business shall have
occurred where an Employer or an affiliate of an Employer has sold,
distributed or otherwise disposed of the subsidiary, branch or other
business unit in which the Participant was employed before such sale,
distribution or disposition and the Participant has been offered employment
with the purchaser of such subsidiary, branch or other business unit or the
corporation or other entity which is the owner thereof on substantially the
same terms and conditions under which he worked for the Employer
(including, without limitation, base salary, duties and responsibilities,
program of benefits and location where based). Such terms and conditions
shall also include, without limitation, a legally binding agreement or plan
covering such Participant, providing that upon a termination of employment
with the subsidiary, branch or business unit (or the corporation or other
entity which is the owner thereof) or any successor thereto of the kind
described in Article VI of this Plan, at any time before the end of a 2-
year period following the WICOR Closing Date, the Participant's employer or
any successor will pay to each such former Participant an amount equal to
the Separation Benefit and other benefits that such former Participant
would have received under the Plan had he been a Participant at the time of
such termination. For purposes of this subsection, the new employer plan or
agreement must treat service with any Employer (irrespective of whether the
Employer was an affiliate of the Corporation or the Employee was a
Participant at the time of such service) and the new employer as continuous
service for purposes of calculating Separation Benefits.
4.3 Separation Benefits.
(a) If a Participant's employment is terminated in circumstances entitling
him to a separation benefit as provided in Section 4.2(a), the Participant's
Employer shall pay such Participant, within 20 days of the Date of
Termination, a cash lump sum as set forth in Section 4.3(b) and the continued
benefits set forth as Section 4.3(c). For purposes of determining the benefits
set forth in Sections 4.3(b) and 4.3(c), if the termination of the
Participant's employment is based upon a reduction of the Participant's Annual
Salary or benefits as described in Section 4.2(a)(ii) or 4.2(a)(iii), such
reduction shall be ignored.
(b) The cash lump sum referred to in Section 4.3(a) shall equal the
aggregate of the following amounts:
(i) the sum of (A) the Participant's Annual Salary through the Date of
Termination to the extent not theretofore paid, (B) the product of (1) the
Target Incentive and (2) a fraction, the numerator of which is the number
of days in such year through the date of Termination, and the denominator
of which is 365, and (C) any accrued vacation pay, in each case to the
extent not theretofore paid and in full satisfaction of the rights of the
Participant thereto;
(ii) an amount equal to the product of (A) the number specified below
for the Tier level applicable to the Participant as set forth on Schedule
1, and (B) the sum of (1) the Participant's Annual Salary and (2) the
higher of the Target Annual Incentive Award or the Annual Incentive Award:
<TABLE>
<CAPTION>
Tier Level Multiplier for (1) Above
---------- ------------------------
<S> <C>
Tier 2......................................... 3
Tier 3......................................... 2
Tier 4......................................... 1
</TABLE>
(iii) an amount equal to the difference between (A) the actuarial
equivalent of the benefit under the Corporation's qualified defined benefit
retirement plan (the "Retirement Plan") and any excess or supplemental
retirement plans in which the Participant participates (together, the
"SERP") which the Participant would receive if his or her employment
continued during the Separation Period, assuming that the Participant's
compensation during the Separation Period would have been equal to his or
her compensation as in effect immediately before the termination or, if
higher, immediately before the WICOR Closing Date, and (B) the actuarial
equivalent of the Participant's actual benefit (paid or payable), if any,
under the Retirement Plan and the SERP as of the Date of Termination. The
actuarial assumptions used for purposes of determining actuarial
equivalence shall be no less favorable to the Participant than the most
favorable of those in effect under the Retirement Plan and the SERP on the
Date of Termination and the WICOR Closing Date, as the case may be.
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(c) The continued benefits referred to above shall be the provision to the
Participant and his or her family during the Separation Period of medical,
dental and life insurance benefits as if the Participant's employment had not
been terminated; provided, however, that if the Participant becomes reemployed
with another employer and is eligible to receive medical or other welfare
benefits under another employer-provided plan, the medical and other welfare
benefits described herein shall be secondary to those provided under such other
plan during such applicable period of eligibility. For purposes of determining
eligibility (but not the time of commencement of benefits) of the Participant
for retiree medical, dental and life insurance benefits under the Corporation's
plans, practices, programs and policies, the Participant shall be considered to
have remained employed during the Separation Period and to have retired on the
last day of such period.
To the extent any benefits described in this Section 4.3(c) cannot be
provided pursuant to the appropriate plan or program maintained for Employees,
the Employer shall provide such benefits outside such plan or program at no
additional cost (including without limitation tax cost) to the Participant.
4.4 Other Benefits Payable. The cash lump sum and continuing benefits
described in Section 4.3 above shall be payable in addition to, and not in lieu
of, all other accrued or vested or earned but deferred compensation, rights,
options or other benefits which may be owed to a Participant upon or following
termination, including but not limited to accrued vacation or sick pay, amounts
or benefits payable under any bonus or other compensation plans, stock option
plan, stock ownership plan, stock purchase plan, restricted stock plan, life
insurance plan, health plan, disability plan or similar or successor plan, but
excluding any severance pay under any severance plan, practice or program or
pay in lieu of notice required to be paid to such Participant under applicable
law.
4.5 Certain Reduction of Payments by the Corporation.
Notwithstanding any other provision of this Plan, if any portion of the
Separation Benefits or any other payment under any other agreement with or plan
of the Corporation or the Employer (in the aggregate "Total Payments"), would
constitute an "excess parachute payment," then the Total Payments to be made to
the Participant shall be reduced such that the value of the aggregate Total
Payments that the Participant is entitled to receive shall be One Dollar ($1)
less than the maximum amount which the Participant may receive without becoming
subject to the tax imposed by Section 4999 of the Internal Revenue Code (the
"Code") (or any successor provision) or which the Corporation may pay without
loss of deduction under Section 280G(a) of the Code (or any successor
provision). For purposes of this Plan, the terms "excess parachute payment" and
"parachute payments" shall have the meaning assigned to them in Section 280G of
the Code (or any successor provision), and such "parachute payments" shall be
valued as provided therein. Present value for purposes of this Agreement shall
be calculated in accordance with Section 1274(b)(2) of the Code (or any
successor provision). Within 60 days following delivery of a notice by the
Corporation to the Participant of its belief that there is a payment or benefit
due the Participant which will result in an excess parachute payment as defined
in Section 280G of the Code (or any successor provision), the Participant and
the Corporation, at the Corporation's expense, shall obtain the opinion (which
need not be unqualified) of the Corporation's independent auditors which sets
forth (A) the amount of the Base Period Income, (B) the amount and present
value of Total Payments and (C) the amount and present value of any excess
parachute payments without regard to the limitations of this Section 4.5. As
used in this Section 4.5, "Base Period Income" means the Participant's
"annualized includible compensation for the base period" as defined in Section
280G(d)(1) of the Code (or any successor provision). For purposes of such
opinion, the value of any noncash benefits or any deferred payment or benefit
shall be determined by the Corporation's independent auditors in accordance
with the principles of Sections 280G(d)(3) and (4) of the Code (or any
successor provisions), which determination shall be evidenced in a certificate
of such auditors addressed to the Corporation and the Participant. Such opinion
shall be dated as of the Participant's date of termination of employment and
addressed to the Corporation and the Participant and shall be binding, absent
manifest error, upon the Corporation and the Participant. If such opinion
determines that there would be an excess parachute payment, the Separation
Benefits hereunder or any other payment determined by such auditors to be
includible in Total Payments shall
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be reduced or eliminated as specified by the Participant in writing delivered
to the Corporation within 30 days of the Participant's receipt of such opinion
or, if the Participant fails to so notify the Corporation, then as the
Corporation shall reasonably determine, so that under the bases of calculations
set forth in such opinion there will be no excess parachute payment. If such
auditors so request in connection with the opinion required by this Section,
the Participant and the Corporation shall obtain, at the Corporation's expense,
and the auditors may rely on in providing the opinion, the advice of a firm of
recognized executive compensation consultants as to the reasonableness of any
item of compensation to be received by the Participant. Notwithstanding the
foregoing, the calculations provided for herein shall be based upon the
conclusive presumption that the following are reasonable: the compensation
payments made under Section 4.3(b)(i) as well as any other compensation, earned
prior to the date of the Participant's termination of employment pursuant to
the Corporation's compensation programs if such payments would have been made
in the future in any event, even though the timing of such payment is triggered
by the Change of Control. If the provisions of Sections 280G and 4999 of the
Code (or any successor provisions) are repealed without succession, then this
Section 4.5 shall be of no further force or effect.
The Participant shall notify the Corporation in writing of any claim by the
Internal Revenue Service that, if successful, would subject the Participant to
the tax imposed by Section 4999 of the Code. Such notification shall be given
as soon as practicable, but no later than 10 business days after the
Participant is informed in writing of such claim and shall apprise the
Corporation of the nature of the claim and the date on which such claim is
requested to be paid. The Participant shall not pay such claim prior to the
expiration of the 30-day period following the date on which he gives notice to
the Corporation (or such shorter period ending on the date that any payment of
taxes with respect to the claim is due). If the Corporation notifies the
Participant in writing prior to the expiration of such period that it desires
to contest such claim, the Participant agrees to give the Corporation any
information reasonably requested by the Corporation in writing relating to such
claim, to take such action in connection with contesting such claim as the
Corporation shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim
by an attorney reasonably selected by the Corporation, to cooperate with the
Corporation in good faith in order to effectively contest such claim, to permit
the Corporation to control any proceedings relating to such claim and to permit
the Corporation to pursue or forego any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority with respect to
such claim. The Corporation shall bear and pay directly all costs and expenses,
including additional interest and penalties) incurred in connection with such
contest. Further, provided only that Corporation receives timely written
notification from the Participant with respect to such claim, the Corporation
will indemnify and hold the Participant harmless, on an after-tax basis, for
any excise tax under Section 4999 of the Code (including interest and penalties
thereon), such that the net amount retained by the Participant after the
deduction of any such excise tax and any interest or penalties thereon (but not
any federal, state or local income tax) would be the same as if such excise tax
had never applied.
4.6 Payment Obligations Absolute; Offset for Wisconsin Energy Senior
Executive Severance Policy. Subject to Section 4.5 and except for the Wisconsin
Energy Senior Executive Severance Policy offset described below, the
obligations of the Corporation and the Employers to pay the separation benefits
described in Section 4.3 shall be absolute and unconditional and shall not be
affected by any circumstances, including, without limitation, any set-off,
counterclaim, recoupment, defense or other right which the Corporation or any
of its Subsidiaries may have against any Participant. In no event shall a
Participant be obligated to seek other employment or take any other action by
way of mitigation of the amounts payable to a Participant under any of the
provisions of this Plan, nor shall the amount of any payment hereunder be
reduced by any compensation earned by a Participant as a result of employment
by another employer, except as specifically provided in Section 4.3(c). If any
of the Participants in this Plan are also participants under the Wisconsin
Energy Senior Executive Severance Policy adopted by Wisconsin Energy in 1995
(the "SESP") and become entitled to any cash or benefits under the terms of the
SESP, the same shall be offset against any cash or benefits otherwise due to
such Participants under the terms of this Agreement.
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ARTICLE V
Participating Employers
This Plan may be adopted by any Subsidiary of the Corporation. Upon such
adoption, the Subsidiary shall become an Employer hereunder and the provisions
of the Plan shall be fully applicable to the Employees of that Subsidiary who
are Participants pursuant to Section 3.1.
ARTICLE VI
Successor to Corporation
This Plan shall bind any successor of the Corporation, its assets or its
businesses (whether direct or indirect, by purchase, merger, consolidation or
otherwise) in the same manner and to the same extent that the Corporation would
be obligated under this Plan if no succession had taken place.
In the case of any transaction in which a successor would not by the
foregoing provision or by operation of law be bound by this Plan, the
Corporation shall require such successor expressly and unconditionally to
assume and agree to perform the Corporation's obligations under this Plan, in
the same manner and to the same extent that the Corporation would be required
to perform if no such succession had taken place. The term "Corporation," as
used in this Plan, shall mean the Corporation as hereinbefore defined and any
successor or assignee to the business or assets which by reason hereof becomes
bound by this Plan.
ARTICLE VII
Duration, Amendment and Termination
7.1 Duration. This Plan shall be deemed established, without the need for
any further act by the Board, on the Effective Time of Merger and it shall
continue for a period of 2 years after the WICOR Closing Date, on which date it
will expire, unless extended for an additional period or periods by resolution
adopted by the Board.
However, once the WICOR Closing Date has occurred, then notwithstanding any
other provision of the Plan, the Plan shall continue in full force and effect
and shall not terminate or expire until after all Participants who become
entitled to any payments hereunder shall have received such payments in full
and all adjustments required to be made pursuant to Sections 4.5 and 4.6 have
been made.
If the Effective Time of Merger has not occurred on or prior to January 1,
2001, then this Plan will become void and of no force and effect.
7.2 Amendment. Except as provided in Section 7.1, the Plan shall not be
subject to amendment, change, substitution, deletion, revocation or termination
in any respect which adversely affects the rights of Participants.
7.3 Form of Amendment. The form of any amendment of the Plan shall be a
written instrument signed by a duly authorized officer or officers of the
Corporation, certifying that the amendment has been approved by the Board.
ARTICLE VIII
Miscellaneous
8.1 Indemnification. If a Participant institutes any legal action in seeking
to obtain or enforce or is required to defend in any legal action the validity
or enforceability of, any right or benefit provided by this Plan, the
Corporation or the Employer will pay for all actual reasonable legal fees and
expenses incurred (as incurred) by such Participant, regardless of the outcome
of such action.
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8.2 Employment Status. This Plan does not constitute a contract of
employment or impose on the Participant or the Participant's Employer any
obligation to retain the Participant as an Employee, to change the status of
the Participant's employment, or to change the Corporation's policies or those
of its Subsidiaries regarding termination of employment.
8.3 Claim Procedure. If an Employee or former Employee makes a written
request alleging a right to receive benefits under this Plan or alleging a
right to receive an adjustment in benefits being paid under the Plan, the
Corporation shall treat it as a claim for benefit. All claims for benefit under
the Plan shall be sent to the Human Resources Department of the Corporation and
must be received within 90 days after termination of employment. If the
Corporation determines that any individual who has claimed a right to receive
benefits, or different benefits, under the Plan is not entitled to receive all
or any part of the benefits claimed, it will inform the claimant in writing of
its determination and the reasons therefor in terms calculated to be understood
by the claimant. The notice will be sent within 90 days of the claim unless the
Corporation determines additional time, not exceeding 90 days, is needed. The
notice shall make specific reference to the pertinent Plan provisions on which
the denial is based, and describe any additional material or information that
is necessary. Such notice shall, in addition, inform the claimant what
procedure the claimant should follow to take advantage of the review procedures
set forth below in the event the claimant desires to contest the denial of the
claim. The claimant may within 90 days thereafter submit in writing to the
Corporation a notice that the claimant contests the denial of his or her claim
by the Corporation and desires a further review. The Corporation shall within
60 days thereafter review the claim and authorize the claimant to appear
personally and review pertinent documents and submit issues and comments
relating to the claim to the persons responsible for making the determination
on behalf of the Corporation. The Corporation will render its final decision
with specific reasons therefor in writing and will transmit it to the claimant
within 60 days of the written request for review, unless the Corporation
determines additional time, not exceeding 60 days, is needed, and so notifies
the Participant. If the Corporation fails to respond to a claim filed in
accordance with the foregoing within 60 days or any such extended period, the
Corporation shall be deemed to have denied the claim.
8.4 Validity and Severability. The invalidity or unenforceability of any
provision of the Plan shall not affect the validity or enforceability of any
other provision of the Plan, which shall remain in full force and effect, and
any prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
8.5 Governing Law. The validity, interpretation, construction and
performance of the Plan shall in all respects be governed by the laws of
Wisconsin, without reference to principles of conflict of law, except to the
extent preempted by federal law.
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SCHEDULE 1
Participants Eligible for Separation
Benefits if the Conditions Specified in
Section 4.2(a) are Satisfied and Tier Level
Applicable for Each Such Participant:
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APPENDIX B
[logo of chase] wis14pc
September 10, 1999
Board of Directors
Wisconsin Energy Corporation
231 West Michigan Street
Milwaukee, WI 53201
Members of the Board:
You have informed us that Wisconsin Energy Corporation (the "Parent"), CEW
Acquisition, Inc., ("Merger Sub") and WICOR, Inc. (the "Subject Company") have
entered into an Agreement and Plan of Merger, dated as of June 27, 1999, as
amended as of September 9, 1999 (the "Merger Agreement"), which provides, among
other things, for (a) the merger of Merger Sub with and into the Subject
Company if the Stock Percentage is zero (0) or (b) for the merger of the
Subject Company with and into Merger Sub if the Stock Percentage is any
percentage other than zero (0) (in either case, the "Merger"). The "Stock
Percentage" means that percentage between and including 40% and 60% selected by
the Parent pursuant to the Merger Agreement; provided that if the Average
Parent Price (as defined below) is less than $22.00, then the Parent may select
zero (0) as the Stock Percentage. As set forth more fully in the Merger
Agreement, as a result of the Merger, each share of common stock, par value
$1.00 per share, of the Subject Company (the "Subject Company Common Stock")
will be converted into the right to receive on a per share basis if the Stock
Percentage is zero (0), cash in the amount of the Exchange Value (as defined
below). Alternatively, if the Stock Percentage is other than zero (0), each
share of Subject Company Common Stock will be converted, at the election of the
holder thereof, into (i) cash in the amount of the Exchange Value, (ii) the
number of shares of common stock of the Parent, par value $.01 per share (the
"Parent Common Stock") equal to the Exchange Ratio (as defined below); or (iii)
a combination thereof. The Merger Agreement also provides that, if the Stock
Percentage is other than zero (0), the maximum percentage of shares of Subject
Company Common Stock to be converted into the right to receive Parent Common
Stock will equal the Stock Percentage. The "Exchange Value" means (i) $31.50 if
the closing of the Merger occurs on or prior to July 1, 2000; or (ii) if the
closing of the Merger occurs after July 1, 2000, $31.50 plus the amount
(carried to the fourth decimal place) obtained by multiplying $31.50 by
.0001644 for each calendar day after July 1, 2000 through and including the
closing date of the Merger. The "Exchange Ratio" equals the number obtained by
dividing the Exchange Value by the average of the closing sale price per share
of Parent Common Stock as reported on the New York Stock Exchange Composite
Tape on each of the ten (10) consecutive trading days ending with the fifth
trading day immediately preceding the closing date of the Merger (the "Average
Parent Price"). You have also informed us that the Merger is expected to be
tax-free to each of the Parent and its shareholders and the Subject Company
and, to the extent they receive Parent Common Stock, the Subject Company's
shareholders.
You have requested that we render our opinion as to the fairness, from a
financial point of view, to the Parent of the consideration to be paid in the
Merger.
In arriving at the opinion set forth below, we have, among other things:
(a) reviewed the Merger Agreement;
(b) reviewed certain publicly available business and financial
information that we deemed relevant relating to the Parent and the Subject
Company and the respective industries in which they operate;
(c) reviewed certain internal non-public financial and operating data
provided to us by the management of the Parent and the Subject Company
relating to such businesses, including certain forecast and projection
information as to future financial results of such businesses;
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(d) discussed with members of the Parent's and the Subject Company's
senior management the Parent's and the Subject Company's operations,
historical financial statements and future prospects, before and after
giving effect to the Merger, as well as their views of the business,
operational and strategic benefits and other implications of the Merger,
including, solely with respect to the members of the Parent's management,
their views of the amount and timing of the cost savings and the related
expenses and synergies expected to result from the Merger (the "Expected
Synergies"), and such other matters as we deemed necessary or appropriate;
(e) compared the financial and operating performance of the Parent and
the Subject Company with publicly available information concerning certain
other companies we deemed comparable and reviewed the relevant historical
stock prices and trading volumes of the Parent Common Stock, the Subject
Company Common Stock and certain publicly traded securities of such other
companies;
(f) reviewed the financial terms of certain recent business
combinations and acquisition transactions we deemed reasonably comparable
to the Merger and otherwise relevant to our inquiry; and
(g) made such other analyses and examinations as we have deemed
necessary or appropriate.
We have assumed and relied upon, without assuming any responsibility for
verification, the accuracy and completeness of all of the financial and other
information provided to, discussed with, or reviewed by or for us, or publicly
available, for purposes of this opinion. We have neither made nor obtained any
independent evaluations or appraisals of the assets or liabilities of the
Parent or the Subject Company, nor have we conducted a physical inspection of
the properties and facilities of the Parent or the Subject Company. We have
assumed that the financial forecast and projection information and the Expected
Synergies provided to or discussed with us by or on behalf of the Parent and
the Subject Company have been reasonably determined on bases reflecting the
best currently available estimates and judgments of the managements of the
Parent and the Subject Company. We have further assumed that, in all material
respects, such forecasts, projections and Expected Synergies will be realized
in the amounts and times indicated thereby and express no view thereon or the
assumptions on which they were based.
For purposes of rendering our opinion, we have assumed, in all respects
material to our analysis, that the representations and warranties of each party
contained in the Merger Agreement are true and correct, that each party will
perform all of the covenants and agreements required to be performed by it
under the Merger Agreement and that all conditions to the consummation of the
Merger will be satisfied without waiver thereof. We have also assumed that all
material governmental, regulatory or other consents and approvals will be
obtained and that in the course of obtaining any necessary governmental,
regulatory or other consents and approvals, or any amendments, modifications or
waivers to any documents to which either of the Parent or the Subject Company
are party, as contemplated by the Merger Agreement, no restrictions will be
imposed or amendments, modifications or waivers made that would have any
material adverse effect on the contemplated benefits to the Parent of the
Merger.
Our opinion herein is necessarily based on market, economic and other
conditions as they exist and can be evaluated on the date of this letter. Our
opinion is limited to the fairness, from a financial point of view, to the
Parent of the consideration to be paid in the Merger and we express no opinion
as to the merits of the underlying decision by the Parent to engage in the
Merger.
Chase Securities Inc., as part of its financial advisory business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions and valuations for estate, corporate
and other purposes. We will receive a fee for our services in rendering this
opinion. In addition, the Parent has agreed to indemnify us for certain
liabilities arising out of our engagement. As we have previously advised you,
The Chase Manhattan Corporation and its affiliates, including Chase Securities
Inc., in the ordinary course of business, have, from time to time, provided,
and in the future may continue to provide, commercial and/or investment banking
services to the Parent and the Subject Company. In the ordinary course of
business, we or our affiliates may trade in the debt and equity securities of
the Parent or the Subject Company for our own accounts and for the accounts of
our customers and, accordingly, may at any time hold a long or short position
in such securities.
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Based upon and subject to the foregoing, we are of the opinion, as of the
date hereof, that the consideration to be paid in the Merger is fair, from a
financial point of view, to the Parent.
This opinion is for the use and benefit of the Board of Directors of the
Parent in its evaluation of the Merger and shall not be used for any other
purpose. Other than with respect to the joint proxy statement/prospectus
relating to the Merger under the terms as contemplated by Section 3(c) of the
Letter Agreement, dated as of March 14, 1999, between the Parent and Chase
Securities Inc., neither this opinion nor any other opinion or advice (written
or oral) of Chase Securities Inc., shall be reproduced, disseminated, quoted or
summarized, in any manner or for any purpose, without the prior consent of
Chase Securities Inc., provided that copies of this opinion may be distributed
to the members of the Board of Directors of the Parent.
Very truly yours,
/s/ Chase Securities Inc.
Chase Securities Inc.
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APPENDIX C
September 10, 1999
Board of Directors
WICOR, Inc.
626 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Members of the Board of Directors:
WICOR, Inc. (the "Company"), Wisconsin Energy Corporation (the "Acquiror")
and CEW Acquisition, Inc., a wholly-owned subsidiary of the "Acquiror (the
"Acquisition Sub"), have entered into an Agreement and Plan of Merger dated as
of June 27, 1999, as amended as of September 9, 1999 (the "Agreement") pursuant
to which the Company will become a wholly-owned subsidiary of the Acquiror in a
merger (the "Merger") in which each outstanding share of the Company's common
stock, par value $1.00 per share (the "Company Shares"), will be converted into
the right to receive a combination of cash and shares of the Acquiror's common
stock, par value $0.01 per share (the "Acquiror Shares"), based upon the
Average Acquiror Price (as defined below) and having an aggregate value equal
to $31.50 per share (subject to increase as set forth in the Agreement), as the
holder thereof shall have selected or be deemed to have selected, subject to
the terms, limitations and procedures set forth in the Agreement. The Agreement
limits the aggregate amount of cash available to be paid in the Merger to a
percentage of the total consideration in the Merger, between 40% and 60%, which
is to be established by the Acquiror. In the event that the Average Acquiror
Price is less than $22.00, however, the Acquiror may elect to have the Company
Shares converted into the right to receive $31.50 per share in cash (subject to
increase as set forth in the Agreement).
For purposes of our opinion, the term "Average Acquiror Price" means the
average of the closing sale price per share of the Acquiror Shares as reported
on the New York Stock Exchange Composite Tape on each of the ten consecutive
trading days ending with the fifth trading day immediately preceding the
closing date of the Merger, and the term "Consideration" means the aggregate
amount of Acquiror Shares, if any, and cash to be paid by the Acquiror pursuant
to the Merger.
You have asked us whether, in our opinion, the Consideration to be received
by the holders of the Company Shares pursuant to the Merger is fair from a
financial point of view to such holders.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial
information relating to the Company and the Acquiror that we deemed to be
relevant;
(2) Reviewed certain information, including financial forecasts,
relating to the business, earnings, cash flow, assets, liabilities and
prospects of the Company and the Acquiror furnished to us by the Company
and the Acquiror;
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(3) Conducted discussions with members of senior management and
representatives of the Company and the Acquiror concerning the matters
described in clauses 1 and 2 above, as well as their respective businesses
and prospects before and after giving effect to the Merger;
(4) Reviewed the market prices and valuation multiples for the Company
Shares and the Acquiror Shares and compared them with those of certain
publicly traded companies that we deemed to be relevant;
(5) Reviewed the results of operations of the Company and the Acquiror
and compared them with those of certain publicly traded companies that we
deemed to be relevant;
(6) Compared the financial terms of the Merger with the financial terms
of certain other transactions that we deemed to be relevant;
(7) Participated in certain discussions and negotiations among
representatives of the Company and the Acquiror and their financial and
legal advisors;
(8) Reviewed the potential pro forma impact of the Merger;
(9) Reviewed the Agreement; and
(10) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our assessment
of general economic, market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of any of the assets or
liabilities of the Company or the Acquiror or been furnished with any such
evaluation or appraisal. In addition, we have not assumed any obligation to
conduct any physical inspection of the properties or facilities of the Company
or the Acquiror. With respect to the financial forecast information furnished
to or discussed with us by the Company or the Acquiror, we have assumed that
they have been reasonably prepared and reflect the best currently available
estimates and judgment of the Company's or the Acquiror's management as to the
expected future financial performance of the Company or the Acquiror, as the
case may be. We have further assumed that if any Acquiror Shares are issued
pursuant to the Merger, the Merger will qualify as a tax-free reorganization
for U.S. federal income tax purposes.
Our opinion is necessarily based upon market, economic and other conditions
as they exist and can be evaluated on, and on the information made available to
us as of, the date hereof. We have assumed that in the course of obtaining the
necessary regulatory or other consents or approvals (contractual or otherwise)
for the Merger, no restrictions, including any divestiture requirements or
amendments or modifications, will be imposed that will have a material adverse
effect on the contemplated benefits of the Merger.
In connection with the preparation of this opinion, we have not been
authorized by the Company or the Board of Directors to solicit, nor have we
solicited, third-party indications of interest for the acquisition of all or
any part of the Company.
We are acting as financial advisor to the Company in connection with the
Merger and will receive a fee from the Company for our services, a significant
portion of which is contingent upon the consummation of the Merger. In
addition, the Company has agreed to indemnify us for certain liabilities
arising out of our engagement. We have, in the past, provided financial
advisory and financing services to the Company and the Acquiror and may
continue to do so and have received, and may receive, fees for the rendering of
such services. In addition, in the ordinary course of our business, we may
actively trade the Company Shares and other securities of the Company, as well
as securities of the Acquiror 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.
This opinion is for the use and benefit of the Board of Directors of the
Company. Our opinion does not address the merits of the underlying decision by
the Company to engage in the Merger and does not constitute a recommendation to
any shareholder as to how such shareholder should vote on the proposed Merger
or any matter related thereto.
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On the basis of and subject to the foregoing, we are of the opinion that, as
of the date hereof, the Consideration to be received by the holders of the
Company Shares pursuant to the Merger is fair from a financial point of view to
the holders of such shares.
Very truly yours,
Merrill Lynch, Pierce, Fenner &
Smith Incorporated
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SKU: 3420-SPMPS-99
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 20. Indemnification of Directors and Officers.
Wisconsin Energy is incorporated under the Wisconsin Business Corporation
Law (the "WBCL").
Under Section 180.0851(1) of the WBCL, Wisconsin Energy is required to
indemnify a director or officer, to the extent such person is successful on the
merits or otherwise in the defense of a proceeding, for all reasonable expenses
incurred in the proceeding if such person was a party because he or she was a
director or officer of Wisconsin Energy. In all other cases, Wisconsin Energy
is required by Section 180.0851(2) to indemnify a director or officer against
liability incurred in a proceeding to which such person was a party because he
or she was a director or officer of Wisconsin Energy, unless it is determined
that he or she breached or failed to perform a duty owed to Wisconsin Energy
and the breach or failure to perform constitutes: (i) a willful failure to deal
fairly with Wisconsin Energy or its shareholders in connection with a matter in
which the director or officer has a material conflict of interest; (ii) a
violation of criminal law, unless the director or officer had reasonable cause
to believe his or her conduct was lawful or no reasonable cause to believe his
or her conduct was unlawful; (iii) a transaction from which the director or
officer derived an improper personal profit; or (iv) willful misconduct.
Section 180.0858(1) provides that, subject to certain limitations, the
mandatory indemnification provisions do not preclude any additional right to
indemnification or allowance of expenses that a director or officer may have
under Wisconsin Energy's Restated Articles of Incorporation, Bylaws, any
written agreement or a resolution of the Board of Directors or shareholders.
Section 180.0859 of the WBCL provides that it is the public policy of the
State of Wisconsin to require or permit indemnification, allowance of expenses
and insurance to the extent required or permitted under Sections 180.0850 to
180.0858 of the WBCL, for any liability incurred in connection with a
proceeding involving a federal or state statute, rule or regulation regulating
the offer, sale or purchase of securities.
Section 180.0828 of the WBCL provides that, with certain exceptions, a
director is not liable to a corporation, its shareholders, or any person
asserting rights on behalf of the corporation or its shareholders, for damages,
settlements, fees, fines, penalties or other monetary liabilities arising from
a breach of, or failure to perform, any duty resulting solely from his or her
status as a director, unless the person asserting liability proves that the
breach or failure to perform constitutes any of the four exceptions to
mandatory indemnification under Section 180.0851(2) referred to above.
Under Section 180.0833 of the WBCL, directors of Wisconsin Energy against
whom claims are asserted with respect to the declaration of improper dividends
or distributions to shareholders or certain other improper acts which they
approved are entitled to contribution from other directors who approved such
actions and from shareholders who knowingly accepted an improper dividend or
distribution, as provided therein.
Articles V and VI of Wisconsin Energy's Bylaws provide that Wisconsin Energy
will indemnify to the fullest extent permitted by law any person who is or was
a party or threatened to be made a party to any legal proceeding by reason of
the fact that such person is or was a director or officer of Wisconsin Energy,
or is or was serving at the request of Wisconsin Energy as a director or
officer of another enterprise, against expenses (including attorney fees),
judgments, fines and amounts paid in settlement actually and reasonably
incurred by the person in connection with such legal proceeding. Wisconsin
Energy's Restated Articles of Incorporation and Bylaws do not limit the
indemnification to which directors and officers are entitled under the WBCL.
Officers and directors of Wisconsin Energy are covered by insurance policies
purchased by Wisconsin Energy under which they are insured (subject to
exceptions and limitations specified in the policies) against expenses and
liabilities arising out of actions, suits or proceedings to which they are
parties by reason of being or having been such directors or officers.
II-1
<PAGE>
Item 21. Exhibits and Financial Statement Schedules.
The following exhibits are filed with or incorporated by reference in this
registration statement.
<TABLE>
<CAPTION>
Exhibit
Number
-------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of June 27, 1999, as amended
as of September 9, 1999, by and among Wisconsin Energy Corporation,
WICOR, Inc. and CEW Acquisition, Inc. (included as Appendix A to the
joint proxy statement/prospectus contained in this registration
statement). Wisconsin Energy agrees to furnish supplementally a copy
of any omitted schedule to the Commission upon request.
2.2 Amendment to Agreement and Plan of Merger dated as of September 9,
1999.
2.3 Confidentiality Agreement, dated January 14, 1999, between Wisconsin
Energy and WICOR.
3.1 Restated Articles of Incorporation of Wisconsin Energy, as amended
and restated effective June 12, 1995. (Exhibit 3.1 to Wisconsin
Energy's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995, File No. 1-9057).
3.2 Bylaws of Wisconsin Energy, as amended to December 17, 1997.
(Exhibit 3.2 to Wisconsin Energy's Annual Report on Form 10-K for
the year ended December 31, 1997, File No. 1-9057.)
4.1 Reference is made to the Restated Articles of Incorporation of
Wisconsin Energy. (Exhibit 3.1 above.)
4.2 Reference is made to the Bylaws of Wisconsin Energy. (Exhibit 3.2
above.)
4.3 As permitted by footnote 3 to the Exhibit Table in Item 601(a) of
Regulation S-K with respect to a registration statement on Form S-4
prepared at a level prescribed by Form S-3, no instruments that
define the rights of holders of long-term debt of Wisconsin Energy
and its consolidated subsidiaries are filed herewith. Reference is
made to the exhibit index in Wisconsin Energy's latest Annual Report
on Form 10-K, and any subsequent Quarterly Reports on Form 10-Q or
Current Reports on Form 8-K filed under the Exchange Act, with
respect to the filing of such instruments, the omission of
instruments with respect to long-term debt not exceeding 10% of the
total assets of Wisconsin Energy and its subsidiaries on a
consolidated basis as permitted by Item 601(b)(4)(iii)(A) of
Regulation S-K, and Wisconsin Energy's agreement pursuant to such
regulation to furnish a copy of any such omitted instrument to the
Commission upon request.
5.1 Opinion of Quarles & Brady LLP as to the legality of the securities
being registered.
8.1 Opinion of Foley & Lardner as to certain U.S. federal income tax
matters.
10.1 Form of Employment Agreement of George E. Wardeberg (included as
Exhibit 2 to the merger agreement in Appendix A to the joint proxy
statement/prospectus).
10.2 Form of Wisconsin Energy Special Executive Severance Policy
(included as Exhibit 3 to the merger agreement in Appendix A to the
joint proxy statement/prospectus).
10.3 Form of Wisconsin Energy Executive Severance Policy (included as
Exhibit 4 to the merger agreement in Appendix A to the joint proxy
statement/prospectus).
23.1 Consent of PricewaterhouseCoopers LLP, Wisconsin Energy's
independent accountants.
23.2 Consent of Arthur Andersen LLP, WICOR's independent public
accountants.
23.3 Consent of Quarles & Brady LLP, contained in their opinion filed as
Exhibit 5.1.
23.4 Consent of Foley & Lardner, contained in their opinion filed as
Exhibit 8.1.
23.5 Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated,
financial advisor to WICOR.
23.6 Consent of Chase Securities Inc., financial advisor to Wisconsin
Energy.
24.1 Power of Attorney, contained in the signature page of this
registration statement.
99.1 Form of Proxy to be used in connection with the special meeting of
shareholders of WICOR.
99.2 Form of Proxy to be used in connection with the special meeting of
shareholders of Wisconsin Energy.
99.3 Consent of George E. Wardeberg.
99.4 Form of summary information booklet accompanying the joint proxy
statement/prospectus mailed to the shareholders of Wisconsin Energy
and WICOR.
</TABLE>
II-2
<PAGE>
Item 22. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8, and the information required
to be included in a post-effective amendment by those paragraphs is contained
in periodic reports filed with or furnished to the Commission by the registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934
that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(5) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.
(6) That every prospectus: (i) that is filed pursuant to paragraph (5)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to
the registration statement and will not be used until such amendment is
effective, and that, for purposes of determining
II-3
<PAGE>
any liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(7) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions referred
to in Item 20 of this registration statement, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in
the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
(8) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(9) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Milwaukee, State of
Wisconsin, on September 9, 1999.
WISCONSIN ENERGY CORPORATION
By /s/ Richard A. Abdoo
_____________________________________
Richard A. Abdoo, Chairman of the
Board,
President and Chief Executive
Officer
POWER OF ATTORNEY
Each person whose signature appears below hereby authorizes Richard A. Abdoo
or Calvin H. Baker, or either of them, as attorneys-in-fact with full power of
substitution, to execute in the name and on behalf of such person,
individually, and in each capacity stated below or otherwise, and to file, any
and all pre-effective or post-effective amendments to this registration
statement.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.*
Signature and Title
/s/ Richard A. Abdoo
_____________________________________
Richard A. Abdoo, Chairman of the
Board,
President and Chief Executive
Officer
(Principal Executive Officer and
Director)
/s/ Paul Donovan
_____________________________________
Paul Donovan, Senior Vice President
and Chief Financial Officer
(Principal Financial Officer)
/s/ Anne K. Klisurich
_____________________________________
Anne K. Klisurich, Controller
(Principal Accounting Officer)
/s/ John F. Ahearne /s/ Richard R. Grigg
_____________________________________ _____________________________________
John F. Ahearne, Director Richard R. Grigg, Director
/s/ John F. Bergstrom /s/ John N. MacDonough
_____________________________________ _____________________________________
John F. Bergstrom, Director John N. MacDonough, Director
/s/ Barbara L. Bowles /s/ Julia B. North
_____________________________________ _____________________________________
Barbara L. Bowles, Director Julia B. North, Director
/s/ Robert A. Cornog /s/ Frederick P. Stratton, Jr.
_____________________________________ _____________________________________
Robert A. Cornog, Director Frederick P. Stratton, Jr.,
Director
- --------
* Each of the above signatures is affixed as of September 9, 1999.
II-5
<PAGE>
WISCONSIN ENERGY CORPORATION
(COMMISSION FILE NO. 1-9057)
EXHIBIT INDEX
Registration Statement on Form S-4
The following exhibits are filed with or incorporated by reference in this
registration statement.
<TABLE>
<CAPTION>
Exhibit
Number
-------
<C> <S>
2.1 Agreement and Plan of Merger, dated as of June 27, 1999, as amended as
of September 9, 1999, by and among Wisconsin Energy Corporation,
WICOR, Inc. and CEW Acquisition, Inc. (included as Appendix A to the
joint proxy statement/prospectus contained in this registration
statement). Wisconsin Energy agrees to furnish supplementally a copy
of any omitted schedule to the Commission upon request.
2.2 Amendment to Agreement and Plan of Merger dated as of September 9,
1999.
2.3 Confidentiality Agreement, dated January 14, 1999, between Wisconsin
Energy and WICOR.
3.1 Restated Articles of Incorporation of Wisconsin Energy, as amended and
restated effective June 12, 1995. (Exhibit 3.1 to Wisconsin Energy's
Quarterly Report on Form 10-Q for the quarter ended
June 30, 1995, File No. 1-9057).
3.2 Bylaws of Wisconsin Energy, as amended to December 17, 1997. (Exhibit
3.2 to Wisconsin Energy's Annual Report on Form 10-K for the year
ended December 31, 1997, File No. 1-9057.)
4.1 Reference is made to the Restated Articles of Incorporation of
Wisconsin Energy. (Exhibit 3.1 above.)
4.2 Reference is made to the Bylaws of Wisconsin Energy. (Exhibit 3.2
above.)
4.3 As permitted by footnote 3 to the Exhibit Table in Item 601(a) of
Regulation S-K with respect to a registration statement on Form S-4
prepared at a level prescribed by Form S-3, no instruments that define
the rights of holders of long-term debt of Wisconsin Energy and its
consolidated subsidiaries are filed herewith. Reference is made to the
exhibit index in Wisconsin Energy's latest Annual Report on Form 10-K,
and any subsequent Quarterly Reports on Form 10-Q or Current Reports
on Form 8-K filed under the Exchange Act, with respect to the filing
of such instruments, the omission of instruments with respect to long-
term debt not exceeding 10% of the total assets of Wisconsin Energy
and its subsidiaries on a consolidated basis as permitted by Item
601(b)(4)(iii)(A) of Regulation S-K, and Wisconsin Energy's agreement
pursuant to such regulation to furnish a copy of any such omitted
instrument to the Commission upon request.
5.1 Opinion of Quarles & Brady LLP as to the legality of the securities
being registered.
8.1 Opinion of Foley & Lardner as to certain U.S. federal income tax
matters.
10.1 Form of Employment Agreement of George E. Wardeberg (included as
Exhibit 2 to the merger agreement in Appendix A to the joint proxy
statement/prospectus).
10.2 Form of Wisconsin Energy Special Executive Severance Policy (included
as Exhibit 3 to the merger agreement in Appendix A to the joint proxy
statement/prospectus).
10.3 Form of Wisconsin Energy Executive Severance Policy (included as
Exhibit 4 to the merger agreement in Appendix A to the joint proxy
statement/prospectus).
23.1 Consent of PricewaterhouseCoopers LLP, Wisconsin Energy's independent
accountants.
23.2 Consent of Arthur Andersen LLP, WICOR's independent public
accountants.
23.3 Consent of Quarles & Brady LLP, contained in their opinion filed as
Exhibit 5.1.
23.4 Consent of Foley & Lardner, contained in their opinion filed as
Exhibit 8.1.
23.5 Consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated,
financial advisor to WICOR.
23.6 Consent of Chase Securities Inc., financial advisor to Wisconsin
Energy.
</TABLE>
EI-1
<PAGE>
<TABLE>
<CAPTION>
Exhibit
Number
-------
<C> <S>
24.1 Power of Attorney, contained in the signature page of this
registration statement.
99.1 Form of Proxy to be used in connection with the special meeting of
shareholders of WICOR.
99.2 Form of Proxy to be used in connection with the special meeting of
shareholders of Wisconsin Energy.
99.3 Consent of George E. Wardeberg.
99.4 Form of summary information booklet accompanying the joint proxy
statement/prospectus mailed to the shareholders of Wisconsin Energy
and WICOR.
</TABLE>
EI-2
<PAGE>
EXHIBIT 2.2
AMENDMENT TO
AGREEMENT AND PLAN OF MERGER
THIS AMENDMENT TO AGREEMENT AND PLAN OF MERGER is made as of this 9th
day of September, 1999 by and among WISCONSIN ENERGY CORPORATION ("Wisconsin
Energy"), WICOR, INC. ("WICOR") and CEW ACQUISITION, INC. ("Acquisition").
RECITALS
WHEREAS, Wisconsin Energy, WICOR and Acquisition are parties to an
Agreement and Plan of Merger dated as of June 27, 1999 (the "Merger Agreement");
and
WHEREAS, WICOR and Wisconsin Energy are parties to a lawsuit filed in
the Circuit Court of Milwaukee County, Wisconsin as Case No. 99-CV-005395
entitled Halpren v. George E. Wardeberg et al. (the "Action"); and
WHEREAS, the parties to the Action have reached a settlement
concerning the matters in the Action pursuant to a Memorandum of Understanding
dated August 27, 1999 (the "Memorandum"); and
WHEREAS, the parties wish to amend the Merger Agreement as set forth
in this Amendment to Agreement and Plan of Merger.
NOW THEREFORE, in consideration of the Recitals and of the mutual
covenants and agreements set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, it
is hereby agreed that:
1. Amendments. The Merger Agreement is hereby amended as follows:
(a) The third sentence of Section 3.9(c) of the Merger Agreement
is deleted.
(b) The number "$30,000,000" as the Special Fee in Section 3.9(e)
of the Merger Agreement is changed to "$25,000,000".
2. Effectiveness. This Amendment to Agreement and Plan of Merger
shall be of no further force and effect if the Memorandum is "null and void"
pursuant to the provisions of paragraph 7 of the Memorandum.
<PAGE>
3. Continuance of Merger Agreement. Except as specifically amended
by this Amendment to Agreement and Plan of Merger, the Merger Agreement shall
continue in full force and effect.
IN WITNESS WHEREOF, the parties have caused this Amendment to
Agreement and Plan of Merger to be duly executed as of the day and year first
above written.
WISCONSIN ENERGY CORPORATION
By /s/ RICHARD A. ABDOO
---------------------
Richard A. Abdoo,
Chairman of the Board, President
and Chief Executive Officer
WICOR, INC.
By /s/ GEORGE E. WARDEBERG
------------------------
George E. Wardeberg,
Chairman and Chief Executive Officer
CEW ACQUISITION, INC.
By /s/ RICHARD A. ABDOO
---------------------
Richard A. Abdoo,
Chairman of the Board, President
and Chief Executive Officer
2
<PAGE>
EXHIBIT 2.3
CONFIDENTIALITY AGREEMENT
THIS CONFIDENTIALITY AGREEMENT ("Agreement") entered into as of
January 14, 1999, between Wisconsin Energy Corporation, a Wisconsin corporation
("WEC"), and WICOR, Inc., a Wisconsin corporation ("WICOR").
RECITALS
A. WEC and WICOR are each prepared to furnish the other with certain
information to assist in making an evaluation of a possible business transaction
between WEC and WICOR (the "Proposed Transaction").
B. As a condition to each party furnishing such information to the
other party, WEC and WICOR have each agreed, as set forth below, to treat
confidentiality certain information about the other party and its properties and
operations and otherwise to take or abstain from taking certain other actions.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, covenants and agreements hereinafter set forth, and intending
to be legally bound hereby, the parties hereto agree as follows:
1. All information about a party (the party furnishing or on whose
behalf information is furnished is referred to herein as the "Source") furnished
by such party or its Representatives (as defined below) to the other party (the
party receiving information is hereinafter referred to as the "Recipient"),
whether furnished before or after the date hereof, whether oral or written,
regardless of the manner in which it is furnished (and including information
about the Source that the Recipient learns in the course of any investigation of
the Source pursuant to access the Source has given), is referred to in this
Agreement as "Evaluation Information." Without limitation, Evaluation
Information includes any and all data, reports, analyses, compilations, studies,
projections, forecasts, records and all other financial, technical, commercial
or other information concerning the business and affairs of the Source furnished
by the Source or its Representatives and all analyses, compilations, studies or
other material prepared by the Recipient or its Representatives containing or
based on, in whole or in part, any information furnished by the Source or its
Representatives. Evaluation Information does not include, however, information
that (a) is or becomes generally available to the public other than as a result
of a disclosure by the Recipient or its Representatives, (b) was available to
the Recipient on a nonconfidential basis prior to its disclosure by the Source
or its Representatives or (c) becomes available to the Recipient on a
nonconfidential basis from a person, other than the Source or its
Representatives, who is not known by the Recipient to be otherwise bound by a
confidentiality agreement with the Source or any Representative of the Source or
to be otherwise under an obligation to the Source or any Representative of the
Source not to transmit the information to the Recipient. As used in this
Agreement, the term "Representative" means, as to any person, such person's
affiliates and its and their directors, officers, employees, agents, advisors
(including, without limitation, financial advisors, counsel and accountants),
controlling persons and lenders. As used in this Agreement, the term "person"
shall be broadly interpreted to include, without limitation, any corporation,
company, partnership, other entity or individual.
2. Except as required by law, unless otherwise agreed to in writing
by the Source, the Recipient agrees (a) to keep all Evaluation Information
confidential and not to disclose or reveal any Evaluation Information to any
person other than its Representatives who are actively and directly
participating in its evaluation of the Proposed Transaction or who otherwise
need to know the Evaluation Information for the purpose of evaluating the
Proposed Transaction and to cause those persons to observe the terms of this
Agreement, (b) to use Evaluation Information only for purposes in connection
with the Recipient's evaluation of the Proposed Transaction or the consummation
of the Proposed Transaction and not to use Evaluation Information for any other
purpose and (c) not to disclose to any person any information (other than any
disclosure or other use of the Evaluation Information to which the Source
consents in
<PAGE>
advance in writing) about the Proposed Transaction, or the terms or conditions
or any other facts relating thereto, including, without limitation, the fact
that discussions are taking place with respect thereto or the status thereof, or
the fact that Evaluation Information has been made available to the Recipient or
its Representatives, except that the Recipient may disclose such information to
those of its Representatives who are actively and directly participating in its
evaluation of the Proposed Transaction or who otherwise need to know for the
purpose of evaluating the Proposed Transaction, with it being understood that
(i) the Recipient will inform such Representatives of this Agreement, and such
Representatives shall agree to observe, and the Recipient shall cause such
Representatives to observe, the terms of this Agreement, (ii) the Recipient
shall maintain a list of those to whom such Evaluation Information has been
disclosed, which list shall be presented to the Source on request and (iii) in
any event the Recipient shall be jointly and severally responsible for any
breach of the terms of this Agreement by its Representatives.
3. In the event that the Recipient or its Representatives are
requested pursuant to, or required (by oral question or request for information
or documents in legal proceedings, interrogatories, subpoena, civil
investigation demand or similar process) to disclose any Evaluation Information
or any other information concerning the Source or the Proposed Transaction, the
Recipient will provide the Source with prompt notice of such request or
requirement to enable the Source to seek an appropriate protective order or
other remedy, to consult with the Recipient with respect to the Source's taking
steps to resist or narrow the scope of such request or legal process, or to
waive compliance, in whole or in part, with the terms of this Agreement. If, in
the absence of a protective order or the receipt of a waiver hereunder, the
Recipient or any of its Representatives is nonetheless, in the reasonable
written opinion of the Recipient's counsel, compelled to disclose Evaluation
Information, then the Recipient or such Representative may disclose such
Evaluation Information; provided that the Recipient shall use reasonable efforts
to obtain, at the request of the Source, an order or other reasonable assurance
that confidential treatment will be accorded to such portion of the Evaluation
Information required to be disclosed as the Source designates.
4. If the Recipient is advised by legal counsel that information
disclosed in the Evaluation Information must otherwise be disclosed in
accordance with applicable law or legal process, including disclosures necessary
for the Recipient to comply with the Securities Exchange Act of 1934, as amended
(the "Exchange Act") and the rules and regulations promulgated thereunder, then
such disclosures shall contain only those disclosures that the Recipient is
legally compelled to disclose and shall be made at the latest time practicable
consistent, in the opinion of the Recipient's counsel, with its obligations
under the Exchange Act or other applicable law; provided that any disclosure
required to be made by law or legal process shall first be disclosed to the
Source in the form proposed to be otherwise disclosed at least three business
days prior to making such disclosure (unless, Recipient reasonably believes,
based upon advice of counsel, that disclosure must be made without delay, in
which case Recipient shall advise the Source of such disclosure as promptly as
possible. The Recipient shall cooperate with the Source so that the necessary
disclosures may be made in a manner reasonably acceptable to the Source.
5. Each party also agrees that, while the parties are negotiating
the Proposed Transaction and for a period of two years after such negotiations
have terminated, neither it nor any of its Representatives (acting on its
behalf) will, without the prior written consent of the other party:
(a) Acquire, offer to acquire, or agree to acquire, directly or
indirectly, by purchase or otherwise, ownership (including, without
limitation, "beneficial ownership" as defined in Rule 13d-3 under the
Exchange Act) of any voting securities or direct or indirect rights to
acquire any voting securities of the other party or any subsidiary or
affiliate thereof, or of any successor to or person in control of the other
party, or any assets of the other party or any subsidiary, division or
affiliate thereof or of any such successor or controlling person.
(b) Make or in any way participate, directly or indirectly, in
any "solicitation" of "proxies" to vote (as such terms are used in the
rules of the Securities and Exchange Commission), or seek to advise or
influence any person or entity with respect to the voting of, any voting
securities of the other party.
(c) Make any public announcement with respect to, or submit a
proposal for, or offer of (without or without conditions) any extraordinary
transaction involving the other party or any of its securities or assets.
2
<PAGE>
(d) Form, join or in any way participate in a "group" as defined
in Section 13(d)(3) of the Exchange Act in connection with any of the
foregoing.
(e) Otherwise act, alone or in concert with others, to seek to
control or influence the management, board of directors or policies of the
other party.
(f) Disclose any intention, plan or arrangement inconsistent with
the foregoing.
(g) Advise, assist or encourage any other persons in connection
with any of the foregoing.
(h) Request the other party, its board of directors or any of its
Representatives, directly or indirectly, to amend or waive any provision of
this paragraph.
(i) Take any action that might require the other party to make a
public announcement regarding the possibility of an extraordinary
transaction involving the other party or any of its securities or assets.
(j) File any application with any regulatory authority seeking
approval or authority in connection with any action described above.
Each party represents to the other that, as of the date hereof, neither it, its
subsidiaries, nor its Chief Executive Officer owns any shares of common stock of
the other party other than in a fiduciary capacity. Each party has confirmed
with its Chief Executive Officer that the Chief Executive Officer is not aware
that its officers or directors in the aggregate own more than 100,000 shares of
the other.
6. If either party determines that it does not wish to proceed with
the Proposed Transaction, then it will advise the other party of that decision.
In that case, or in the event that either party, in its sole discretion, at any
time so requests or the Proposed Transaction is not consummated, each party
will, upon the other's request, promptly return to the Source all Evaluation
Information (and all copies thereof) in the Recipient's possession or in the
possession of its Representatives, and the Recipient will destroy all copies of
any analyses, compilations, studies or other material prepared by it or for its
use containing or reflecting any Evaluation Information, in each case without
retaining a copy thereof. The Recipient will also provide the Source with a
certificate in writing of an authorized officer who has supervised its
compliance with this paragraph that confirms such compliance. The return to the
Source and/or destruction of such documents shall in no event relieve the
Recipient or its Representatives of any obligations of confidentiality contained
herein respecting such Evaluation Information.
7. Each party acknowledges as Recipient that none of the Source, any
of its Representatives or the respective officers, directors, employees, agents
or controlling persons of such Representatives makes any express or implied
representation or warranty as to the accuracy or completeness of any Evaluation
Information, and each party agrees that none of such persons shall have any
liability to the Recipient or any of its Representatives relating to or arising
from the Recipient's or their use of any Evaluation Information or for any
errors therein or omissions therefrom. Each party also agrees that the Recipient
is not entitled to rely on the accuracy or completeness of any Evaluation
Information and that it shall be entitled to rely solely on such representations
and warranties regarding Evaluation Information as may be made to the Recipient
in any definitive acquisition agreement relating to the Proposed Transaction,
subject to the terms and conditions of such agreement. For purposes of this
Agreement, the term "definitive acquisition agreement" does not include an
executed letter of intent or any other preliminary written agreement, nor does
it include any written or oral acceptance of an offer or bid on the Recipient's
part.
8. Until the earliest of (a) consummation of the Proposed
Transaction, (b) consummation by a third party of a transaction with the other
party that is similar to the Proposed Transaction or (c) three years from the
date of this Agreement, each party agrees on its behalf and on behalf of its
Representatives not to initiate or maintain contact with an officer, director,
employee or agent of the other party or its subsidiaries, other than (CEO) (or
his designee(s)) in the case of WEC and (CEO) (or his designee(s)) in the case
of WICOR, regarding is business, operations, prospects or
3
<PAGE>
finances except for those contacts made in the ordinary course of business and
except with the express permission of the other. It is understood that such
contact (or his designee(s)) will arrange for the appropriate contacts for due
diligence purposes. It is further understood that all (a) communications
regarding the Proposed Transaction, (b) requests for additional information and
(c) requests for access to facilities or management meetings will be submitted
and directed to such contact (or his designee(s)).
9. Each party agrees that, without the prior written consent of the
other party, it will not, while the parties are negotiating the Proposed
Transaction and for a period of two years after such negotiations have
terminated, solicit for employment or hire (whether as an employee, officer,
director, agent, consultant or independent contractor) any of the other's
officers or directors, or officers or directors of the other's subsidiaries, or
any persons immediately and directly reporting to such officers or directors.
The term "solicit for employment" includes any communication (written or oral)
from or initiated by a party or its Representatives, or any search or other
recruitment entity or person employed by the party, to any employee of the other
party.
10. Each party agrees that no contract or agreement providing for the
Proposed Transaction or any similar transaction shall be deemed to exist between
it and the other party unless and until a definitive acquisition agreement has
been executed and delivered, and each party hereby waives, in advance, any
claims (including, without limitation, breach of contract) in connection with a
transaction unless and until the parties have executed such definitive
acquisition agreement. Each party further agrees that, unless and until a
definitive acquisition agreement has been executed and delivered, neither the
other party nor its Representatives have any legal obligation of any kind
whatsoever with respect to any such transaction by virtue of this Agreement or
any other written or oral expression with respect to such transaction except in
the case of this Agreement for the matters specifically agreed to herein (and
except for obligations under any other written agreements between parties
expressly intended to be binding).
11. Without limitation, each party understands that the other party,
in its sole and absolute discretion, will have the right at any time to
terminate the other's evaluation of the Proposed Transaction and to reject any
or all proposals relating to the Proposed Transaction for any reason without
explanation and without liability. Further, neither party is under any duty or
obligation to provide the other party or its Representatives with access to any
information. The investigation and evaluation by each party and its
Representatives is entirely at its own expense and risk.
12. Without prejudice to the rights and remedies otherwise available
to the other party, each party agrees that money damages would not be a
sufficient remedy for any breach of this Agreement by it or its Representatives
and that the other party shall be entitled to specific performance and to
injunctive or other equitable relief as remedies if it or any of its
Representatives breach or threaten to breach any of the provisions of this
Agreement, and each party further agrees to waive any requirement for the
securing or posting of any bond in connection with such remedy.
13. Each party agrees to indemnify and hold the other party and its
Representatives harmless from and against any and all loss, damage, cost or
expense (including reasonable attorneys' fees and disbursements) resulting from
or arising out of its breach or threatened breach of any covenant or agreement
made by it herein.
14. It is further understood and agreed that no failure or delay by
any party in exercising any right, power or privilege hereunder shall operate as
a waiver thereof, nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any right, power or
privilege hereunder.
15. In addition, each party acknowledges that it is aware (and that
its Representatives who are apprised of this matter have been or will be advised
by it) that the United States securities laws restrict the purchase and sale of
securities by persons who possess certain nonpublic information relating to the
issuer of such securities and prohibit the communication of such nonpublic
information to any other person under circumstances in which it is reasonably
foreseeable that such person is likely to purchase or sell such securities.
16. This Agreement shall be governed by and construed in accordance
with the internal laws of the State of Wisconsin applicable to contracts
executed in and to be performed in that state.
4
<PAGE>
17. Any assignment or attempted assignment of this Agreement by any
party without the prior written consent of the other party shall be void.
18. This Agreement contains the entire agreement between the parties
concerning confidentiality of the Evaluation Information, and no modification of
this Agreement or waiver of the terms and conditions hereof shall be binding
upon either party unless evidenced in writing executed by each of the parties.
19. Each of the parties agrees that it and any entities in which it
owns 50% or more of the equity shall be bound by the terms hereof and that it
will implement appropriate procedures to assure such compliance.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date and year first above written.
WISCONSIN ENERGY CORPORATION
("WEC")
By /s/ Richard A. Abdoo
--------------------------------------
Its Chairman and Chief Executive Officer
--------------------------------------
WICOR,INC.("WICOR")
By /s/ George E. Wardeberg
--------------------------------------
Its Chairman and Chief Executive Officer
--------------------------------------
5
<PAGE>
EXHIBIT 5.1
Quarles & Brady LLP
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202-4497
September 9, 1999
Wisconsin Energy Corporation
231 West Michigan Street
P.O. Box 2949
Milwaukee, WI 53201
Ladies and Gentlemen:
We are providing this opinion in connection with the Registration
Statement of Wisconsin Energy Corporation ("Wisconsin Energy") on Form S-4 (the
"Registration Statement") filed under the Securities Act of 1933, as amended
(the "Act"), with respect to the proposed issuance of up to 35,096,600 shares of
Wisconsin Energy common stock, $.01 par value (the "Shares"), pursuant to the
Agreement and Plan of Merger, dated as of June 27, 1999, as amended as of
September 9, 1999 (the "Merger Agreement"), by and among Wisconsin Energy,
WICOR, Inc. ("WICOR") and CEW Acquisition, Inc. ("Acquisition"), a wholly owned
subsidiary of Wisconsin Energy, providing for the statutory merger of
Acquisition and WICOR (the "Merger").
We have examined: (i) Wisconsin Energy's Restated Articles of
Incorporation and Bylaws, as amended to date; (ii) the Merger Agreement, which
is attached as an appendix to the Joint Proxy Statement/Prospectus contained in
the Registration Statement; (iii) the Registration Statement; (iv) corporate
proceedings of Wisconsin Energy and Acquisition relating to the Merger Agreement
and the transactions contemplated thereby; and (v) such other documents as we
have deemed necessary in order to render this opinion. Based on the foregoing,
it is our opinion that:
1. Wisconsin Energy is a corporation duly incorporated and validly
existing under the laws of the State of Wisconsin.
2. When up to 35,096,600 Shares have been issued in accordance with
the provisions of the Merger Agreement, such Shares will be
validly issued, fully paid and nonassessable, subject to the
personal liability imposed on shareholders by Section
180.0622(2)(b) of the Wisconsin Business Corporation Law, as
judicially interpreted, for debts owing to employees for services
performed, but not exceeding six months service in any one case.
We have not passed upon the actions of the Board of Directors of WICOR
to authorize the consummation of the Merger, and have assumed that all necessary
action has been taken.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the caption "Legal
Opinions" in the Joint Proxy Statement/Prospectus constituting a part thereof.
In giving our consent, we do not admit that we are "experts" within the meaning
of Section 11 of the Act, or that we are within the category of persons whose
consent is required by Section 7 of the Act or the rules and regulations of the
Securities and Exchange Commission thereunder.
<PAGE>
Wisconsin Energy Corporation
September 9,1999
Page 2
Larry J. Martin, a partner in our firm, serves as General Counsel of
Wisconsin Energy.
Very truly yours,
/s/ Quarles & Brady LLP
QUARLES & BRADY LLP
<PAGE>
EXHIBIT 8.1
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
FOLEY & LARDNER
ATTORNEYS AT LAW
CHICAGO FIRSTAR CENTER SACRAMENTO
DENVER 777 EAST WISCONSIN AVENUE SAN DIEGO
JACKSONVILLE MILWAUKEE, WISCONSIN 53202-5367 SAN FRANCISCO
LOS ANGELES TELEPHONE (414) 271-2400 TALLAHASSEE
MADISON FACSIMILE (414) 297-4900 TAMPA
MILWAUKEE WASHINGTON, D.C.
ORLANDO WRITER'S DIRECT LINE WEST PALM BEACH
414/297-5729
EMAIL ADDRESS CLIENT/MATTER NUMBER
[email protected]
September 9, 1999
WICOR, Inc.
626 East Wisconsin Avenue
Milwaukee, WI 53202
Ladies and Gentlemen:
We have acted as counsel to WICOR, Inc. ("WICOR"), a Wisconsin
corporation, in connection with (i) the Merger, as defined and described in the
Agreement and Plan of Merger, dated as of June 27, 1999, as amended as of
September 9, 1999 ("the Merger Agreement"), among Wisconsin Energy Corporation
("Wisconsin Energy"), a Wisconsin corporation, CEW Acquisition, Inc. ("Merger
Sub"), a Wisconsin corporation and a newly-formed, wholly-owned subsidiary of
Wisconsin Energy, and WICOR, and (ii) the preparation and filing of the Joint
Proxy Statement/Prospectus of Wisconsin Energy and WICOR relating to the Merger
(the "Proxy Statement/Prospectus"). Unless otherwise indicated, each capitalized
term used herein has the meaning ascribed to it in the Merger Agreement.
In connection with this opinion, we have examined the Merger
Agreement, the Proxy Statement/Prospectus and representations contained in
letters to us, dated as of the date hereof, by WICOR and Wisconsin Energy. For
purposes of this opinion, we have assumed (i) the accuracy of the
representations made by WICOR and Wisconsin Energy contained in their respective
letters to us, (ii) that the Merger will be consummated in the manner described
in the Merger Agreement and the Proxy Statement/Prospectus and (iii) that
Wisconsin Energy will select a Stock Percentage of at least forty percent (40%).
Subject to the assumptions set forth above, we are of the opinion that
(i) 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
of 1986, as amended (the "Code"), and that each of WICOR, Wisconsin Energy and
Merger Sub will be a party to the reorganization, within the meaning of Section
368(b) of the Code, and (ii) the statements made under the captions "SUMMARY-
Material Federal Income Tax Consequence of the Merger" and "CERTAIN FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER" in the
Proxy Statement/Prospectus, to the extent they constitute matters of law or
legal conclusions, are correct in all material respects.
Although the Internal Revenue Service ordinarily does not give rulings
on merger transactions, its ruling policy would require that at least 50% of the
consideration to be paid in the Merger be in the form of Wisconsin Energy stock
for the tax consequences as described above to be realized. However, such ruling
policy is not necessarily the Internal Revenue Service's interpretation of the
existing law, as there are court decisions which have upheld tax free
reorganization treatment where less than 40% of the consideration was in the
form of stock.
We express no opinion as to the United States federal, state, local,
foreign or other tax consequences of the Merger, other than as set forth above.
Further, there can be no assurances that the opinion expressed herein will be
accepted by the Internal Revenue Service or, if challenged, by a court.
In rendering our opinion, we have considered the applicable provisions
of the Code, Treasury Department regulations promulgated thereunder, pertinent
judicial authorities, interpretive rulings of the Internal Revenue Service and
such other authorities as we have considered relevant. It should be noted that
statutes, regulations, judicial decisions and administrative interpretations are
subject to change at any time (possibly with retroactive effect). A change in
the authorities or the accuracy or completeness of any of the information,
documents, corporate records, covenants, statements, representations or
assumptions on which our opinion is based could affect our conclusions. This
opinion is expressed as of the date hereof, and we are under no obligation to
supplement or revise our opinion to reflect any changes (including changes that
have retroactive effect) (i) in applicable law or (ii) in any information,
document, corporate record, covenant, statement, representation or assumption
stated herein which becomes untrue or incorrect.
This letter is furnished to you solely for use in connection with the
Merger, as described in the Merger Agreement, and is not to be used, circulated,
quoted, or otherwise referred to for any other purpose without our express
written permission. The opinion may not be relied upon by anyone other than
WICOR and its shareholders. We hereby consent to the filing of this opinion as
an exhibit to the Proxy Statement/Prospectus and the reference to the above-
mentioned opinion under the caption "CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF
THE MERGER." In giving such consent, we do not admit that we are "experts"
within the meaning of Section 11 of the Securities Act of 1933, as amended, or
within the category of persons whose consent is required under Section 7 the
Act.
Very truly yours,
/s/ Foley & Lardner
FOLEY & LARDNER
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Joint Proxy
Statement/Prospectus constituting part of this Registration Statement on Form
S-4 of Wisconsin Energy Corporation of our report dated January 27, 1999
relating to the financial statements and financial statement schedule appearing
in Wisconsin Energy Corporation's Annual Report on Form 10-K for the year ended
December 31, 1998. We also consent to the reference to us under the heading
"Experts" in such Joint Proxy Statement/Prospectus.
/s/ PricewaterhouseCoopers LLP
PRICEWATERHOUSECOOPERS LLP
Milwaukee, Wisconsin
September 9, 1999
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in the Joint Proxy Statement/Prospectus constituting
part of this Registration Statement on Form S-4 of Wisconsin Energy Corporation
of our reports dated January 25, 1999 on the consolidated financial statements
of WICOR, Inc. and subsidiaries included in and incorporated by reference in the
Annual Report on Form 10-K of WICOR, Inc. for the year ended December 31, 1998,
and to all references to our Firm included in this Form S-4 Registration
Statement.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
September 9, 1999
<PAGE>
EXHIBIT 23.5
CONSENT OF
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
We hereby consent to the use of our opinion letter dated September 10,
1999 to the Board of Directors of WICOR, Inc. included as Appendix C to the
Joint Proxy Statement/Prospectus which forms a part of the Registration
Statement on Form S-4 relating to the proposed merger of WICOR, Inc. with a
wholly-owned subsidiary of Wisconsin Energy Corporation, and to the references
to such opinion and our opinion dated June 27, 1999 in such Joint Proxy
Statement/Prospectus under the captions "SUMMARY" and "THE MERGER AND THE MERGER
AGREEMENT." In giving such consent, we do not admit that we come within the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended, or the rules and regulations of the Securities and
Exchange Commission promulgated thereunder, nor do we thereby admit that we are
experts with respect to any part of such Registration Statement within the
meaning of the term "experts" as used in the Securities Act of 1933, as amended,
or the rules and regulations of the Securities and Exchange Commission
promulgated thereunder.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ John C. Griffith
--------------------------
Name: John C. Griffith
Title: Vice President
New York, New York
September 9, 1999
<PAGE>
EXHIBIT 23.6
CONSENT OF CHASE SECURITIES INC.
We hereby consent to the use of our opinion letter to the Board of
Directors of Wisconsin Energy Corporation, which is included as an exhibit to
this Registration Statement, and all references to our firm and such opinion
letter included in the Joint Proxy Statement/Prospectus forming a part of this
Registration Statement. In giving such consent, we do not admit that we come
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933 and the rules and regulations promulgated thereunder (the
"Securities Act"), and we do not thereby admit that we are experts with respect
to any part of this Registration Statement under the meaning of the term
"expert" as used in the Securities Act.
CHASE SECURITIES INC.
By: /s/ Colin Bryan
------------------------------
Name: Colin Bryan
Title: Vice President
New York, New York
September 9, 1999
<PAGE>
Exhibit 99.1
WICOR
COMMON SHAREHOLDER PROXY
The undersigned hereby appoints George E. Wardeberg and Joseph P. Wenzler,
and each of them, as proxy with the power of substitution (to act by a majority
present or if only one acts then by that one) to vote for the undersigned as
indicated on the reverse side and in their discretion on such other matters as
may properly be considered at the Special Meeting of Shareholders of WICOR, Inc.
to be held Wednesday, October 27, 1999, at 1:30 P.M., at the Midwest Express
Center, 400 West Wisconsin Avenue, Milwaukee, Wisconsin, and at any adjournments
or postponements thereof.
The shares represented by this proxy will be voted as directed by the
shareholder. If no direction is given when the duly executed proxy is returned,
such shares will be voted "FOR" Proposal 1, and in the discretion of the proxies
on any other items of business as may properly arise at the meeting.
Please mark, date and sign on the reverse side exactly as name appears and
return in the enclosed postage-paid envelope. If shares are held jointly, each
shareholder named should sign. If signing as attorney, administrator, executor,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporate name by duly authorized officer.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE SPECIAL MEETING
OF SHAREHOLDERS OF WICOR, INC., OCTOBER 27, 1999.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
Below is a map of downtown Milwaukee showing the location of the Midwest
Express Center as well as several of the parking facilities nearby. We suggest
that you enter the Midwest Express Center at the southeast corner of the
facility (the corner of West Wisconsin Avenue and North 4th Street) to avoid
congestion from the ongoing construction.
[Map]
<PAGE>
PROXY Please mark
your votes as X
indicated in
this example
WICOR
- --------------------------------------------------------------------------------
The Board of Directors recommends a vote FOR Proposal 1
- --------------------------------------------------------------------------------
1. Approval of the Agreement and Plan of Merger, dated as of June 27, 1999, as
amended as of September 9, 1999, providing for the merger of CEW
Acquisition, merger of CEW Acquisition, Inc., a wholly-owned subsidiary of
Wisconsin Energy Corporation, with WICOR, Inc., pursuant to which the
outstanding shares of WICOR common stock will be converted into the right to
receive cash, shares of Wisconsin Energy common stock, or a combination of
cash and shares of Wisconsin Energy common stock. Energy common stock.
FOR AGAINST ABSTAIN
[_] [_] [_]
2. In their discretion on such other matters as may properly come before the
meeting or any adjournment or postponement thereof.
Please check this box if you plan to [_]
attend the annual meeting.
This Proxy is Solicited by the Board of Directors
Signature Signature Date
-------------------- -------------------- --------------
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.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
WICOR
Admission Ticket for Special Meeting of Shareholders
----------------------------------------------------
Please admit the following shareholder to the Special Meeting:
Name of Shareholder: ----------------------------------------
Address of shareholder: ----------------------------------------
----------------------------------------
Account Number ----------------------------------------
(copy from proxy card)
Instructions:
- ------------
1. Please vote by completing, signing and mailing the attached proxy card.
Detach the proxy card from this Admission Ticket and mail it in the
enclosed postage-paid return envelope.
2. If you plan to attend the Special Meeting, please complete this Admission
Ticket and bring it with you to the meeting. DO NOT MAIL THIS ADMISSION
TICKET WITH YOUR PROXY CARD.
3. Parking is available at several locations near the Midwest Express Center
at a reasonable cost. See the reverse side of this Admission Ticket for a
map showing the location of the Midwest Express Center as well as some of
the nearby parking facilities.
Meeting Date: October 27, 1999
Meeting Time: 1:30 p.m., local time
Meeting Location: Midwest Express Center
400 West Wisconsin Avenue
Milwaukee, Wisconsin
<PAGE>
EXHIBIT 99.2
[LOGO OF WISCONSIN ENERGY CORPORATION]
231 W. Michigan, P.O. Box 2949, Milwaukee, WI 53201
Special Meeting of Shareholders
A special meeting of shareholders will be held on October 27, 1999, at the
Midwest Express Center, 400 West Wisconsin Avenue, Milwaukee, Wisconsin,
beginning at 4:00 p.m local time. This is expected to be a short business
meeting to approve the Agreement and Plan of Merger between WEC and WICOR as
described in the enclosed proxy statement.
Instructions for Voting Your Proxy
1. To vote your proxy as recommended by your Board of Directors, simply sign,
date, detach and return the proxy in the enclosed postage-paid envelope.
2. If you plan on attending the special meeting, please mark the "attend
meeting" box below. Please use the reverse side of this form as your
admittance ticket and bring it to the meeting with you.
3. You may have received more than one proxy from us. If so, please sign, date
and return all proxies so that all of your shares may be counted. However,
mark the "attend meeting" box on only one proxy to avoid duplication.
4. Please return your proxy card promptly so that it is received by me before
the meeting date.
PLEASE DETACH PROXY CARD HERE THANK YOU FOR YOUR VOTE
- --------------------------------------------------------------------------------
[X] Please mark -----
boxes as in
this example.
The Board of Directors recommends a vote FOR Proposal 1.
- -----------------------------------------------------------------------------
For Against Abstain
1. Approve the merger [_] [_] [_] I plan to attend the
agreement. special meeting. [_]
- --------------------------------------------------------------------------------
Where no voting instructions are given,
the shares represented by this Proxy
will be voted FOR Proposal 1.
Please sign exactly as your name appears
on this proxy. Joint owners should each
sign personally. When signing as
executor, trustee, custodian,
corporation officer, or in other
representative capacity, please
include your title.
- --------------------------------------------------------------------------------
Signature of Owner Signature of Joint Owner, if any Date
- --------------------------------------------------------------------------------
<PAGE>
Admittance Ticket
Please admit the following shareholder to the Special Meeting:
Name of Shareholder: ________________________________________________________
Address of Shareholder: ________________________________________________________
________________________________________________________
Account Number: _______________________
1. Please vote by completing and signing the proxy card on the reverse side of
this form. Detach the proxy card and return it in the envelope provided.
2. If you plan to attend the special meeting, please complete the Admittance
Ticket above and bring it to the meeting with you. Do not mail the
Admittance Ticket with your proxy card.
3. Parking is available near the meeting facility at a reasonable cost.
Date of Meeting: October 27, 1999
Time of Meeting: 4:00 p.m. local time
Location of Meeting: Midwest Express Center
400 W. Wisconsin Avenue
Milwaukee, WI 53203
- -------------------------------------------------------------------------------
WISCONSIN ENERGY CORPORATION
PROXY/VOTING INSTRUCTIONS FOR SPECIAL MEETING OF SHAREHOLDERS
[LOGO OF
WISCONSIN
ENERGY
CORPORATION]
This PROXY is solicited by the Board of Directors for use of the Special Meeting
of Shareholders on October 27, 1999. Your shares of stock will be voted as you
specify on the reverse side of this proxy form. If no choice is specified, your
proxy will be voted "FOR" Proposal 1.
By signing this PROXY, you revoke all prior proxies and appoint Richard A. Abdoo
and Thomas H. Fehring, or either of them, as proxies, with the power to appoint
substitutes, to vote your shares on the matter shown below and in their
discretion on any other matters which may properly come before the meeting or
any adjournment or postponement of the meeting:
1. Approve the Agreement and Plan of Merger, dated as of June 27, 1999, as
amended, by and among Wisconsin Energy Corporation, WICOR, Inc. and CEW
Acquisition, Inc., and the transactions contemplated thereby, including the
issuance of shares of Wisconsin Energy common stock pursuant to the terms
of the merger agreement;
as described in the notice and joint proxy statement/prospectus relating to the
special meeting, receipt of which is hereby acknowledged.
If you hold shares in Wisconsin Energy Corporation's Stock Plus Investment Plan
or Wisconsin Electric Power Company's Employee Retirement Savings Plan, this
proxy constitutes voting instructions for any such shares held by you.
SEE REVERSE SIDE. If you wish to vote in accordance with the Board of Directors'
recommendations, just sign and date on the reverse side; you need not mark any
voting boxes.
<PAGE>
EXHIBIT 99.3
CONSENT OF DIRECTOR NOMINEE
I hereby consent to the reference to me in the Joint Proxy
Statement/Prospectus constituting a part of the Registration Statement on Form
S-4 with which this consent is filed as a person who will become a director of
Wisconsin Energy Corporation, a Wisconsin corporation ("Wisconsin Energy"),
following the consummation of the merger of WICOR, Inc. and CEW Acquisition,
Inc., a subsidiary of Wisconsin Energy.
Dated: September 9, 1999
/s/ George E. Wardeberg
---------------------------------------
George E. Wardeberg
<PAGE>
EXHIBIT 99.4
[Abdoo and Wardeberg
individual portraits]
Dear Shareholder:
We believe the Wisconsin Energy Corporation and WICOR, Inc. merger will create a
powerful energy company that is poised to become a strong regional player in an
increasingly competitive energy market, and provide more opportunities for
increased returns to shareholders.
We've laid the groundwork for this merger, but now it's up to you. We ask that
you read the accompanying joint proxy statement/prospectus, and send in a vote
"FOR" the Wisconsin Energy/WICOR combination which was approved and recommended
by both companies' boards of directors.
We believe that the merger makes good sense. It offers strategic, competitive
and customer advantages, plus long-term growth and diversification opportunities
that enhance both companies' abilities to compete in a changing energy market.
The combined company will be one of the lowest-cost energy providers in the
Midwest and will be well-positioned to take advantage of new opportunities as
the gas and electric markets converge. Additionally, this combination is
expected to provide benefits through diversification of our non-utility
operations.
Shareholders, customers, employees and the State of Wisconsin all should benefit
from this merger:
. Shareholders will own a financially strong, more diversified holding
company with enhanced earnings and growth potential. Assuming timely
realization and fair regulatory treatment of anticipated cost savings,
shareholders should realize the benefits resulting from economies of
scale and operating efficiencies achieved by joining the best practices
of both companies. Although no definitive synergies study has been done,
we expect combination-related savings to be approximately $35 million
annually beginning in the first full year after the merger.
. Utility customers should enjoy lower gas rates over the long term than
would have been expected from the companies on a stand alone basis, as
well as continued high-quality, safe and reliable service delivered by a
seasoned, capable workforce.
. Employees will benefit by becoming part of a company that is better
equipped to play a leading role in the rapidly changing energy industry.
No layoffs will occur as a result of this merger. Any work force
reduction resulting from this transaction is expected to be achieved
through normal attrition. All union contracts will be honored.
. The State of Wisconsin will retain the headquarters of the merged
companies. In addition, Wisconsin communities will continue to enjoy the
economic and social benefits that Wisconsin Energy and WICOR have
historically provided, as well as the incremental growth contributions
that the merged companies are expected to make in the future.
You, as a shareholder, have an important role in driving this transaction to
completion, and we look forward to receiving your supporting vote "FOR" the
merger.
Sincerely,
Richard A. Abdoo George E. Wardeberg
Chairman, President and CEO Chairman and CEO
Wisconsin Energy Corporation WICOR, Inc.
<PAGE>
Why should I vote FOR the merger?
The energy industry is undergoing significant changes and is expected to
continue to evolve and consolidate over the next few years, leaving room for
only the best-run and most competitive energy companies. This merger is a first
step toward creating a major energy player in the Midwest positioned to take
advantage of new opportunities as the gas and electric markets converge. The
combined company will have the size, scope and skills needed to compete in the
emerging regional energy market and will have a solid platform for continued
growth.
The Boards of Directors of both Wisconsin Energy and WICOR unanimously recommend
that you vote "FOR" the merger.
What will the combined company look like?
Map of Wisconsin and Michigan's Upper Peninsula highlighting the following
company service areas: Wisconsin Electric's gas service area; Wisconsin
Electric's electric service area; Edison Sault Electric's electric service area;
and Wisconsin Gas' gas service areas.
[INSERT BAR CHARTS SHOWING FOLLOWING INFO]
. Operating Revenues* as of 12/31/98:
Wisconsin Energy: $2,039,434
WICOR: $944,183
. Net Income* as of 12/31/98
Wisconsin Energy: $188,132
WICOR: $45,495
. Total Assets* as of 6/30/99
Wisconsin Energy: $5,816,577
WICOR: $982,855
* (in thousands)
[INSERT BAR CHART SHOWING FOLLOWING INFO]
Combined Number of Electric
and Natural Gas Customers:
. Customers* as of 06/30/99:
Electric Customers
Wisconsin Energy: 1,013
Natural Gas Customers
Wisconsin Energy: 394
WICOR: 529
* (in thousands)
[SUBSIDIARY LISTING]
- -----------------------------------------------------------
Wisconsin Energy WICOR
- -----------------------------------------------------------
Wisconsin Electric engages Wisconsin Gas is a regulated
in the generation, natural gas utility serving
transmission, distribution 524 Wisconsin communities
and sale of electric throughout the state.
energy in an area of about WICOR Energy is an
12,000 square miles in unregulated marketing
Wisconsin, including
metropolitan
- -----------------------------------------------------------
<PAGE>
- -----------------------------------------------------------
Milwaukee, and the Upper subsidiary selling a variety
Peninsula of Michigan. of energy supply-related
Wisconsin Electric's gas services, including gas
operations purchase, purchasing, storage, energy
distribute and sell natural and risk management.
gas to retail customers and
transport customer-owned FieldTech, an unregulated
gas in four service areas subsidiary, offers meter
of about 3,800 square reading technology and
miles in Wisconsin. services to gas, water and
Wisconsin Electric also electric utilities in 13
provides steam service states.
for heating and
manufacturing processes in
Milwaukee.
Edison Sault Electric
generates, transmits,
distributes and sells
electric energy in a
territory of approximately [Insert graphic treatment]
2,000 square miles with a
population of Please Vote
approximately 55,000 "For"
people in the eastern The Merger
Upper Peninsula of
Michigan.
WISVEST is a non-regulated
energy services subsidiary
that builds, owns,
operates and maintains
energy production
facilities and invests in
other energy-related
projects.
- -----------------------------------------------------------
Minergy is engaged in the Sta-Rite Industries
business of developing and manufactures pumps and water
marketing proprietary processing equipment for
technologies designed to residential, industrial and
convert high-volume agricultural markets. Major
industrial and municipal markets are water systems
wastes into value-added and pool/spa.
products.
SHURflo Pump Manufacturing
WISPARK is a real estate Co. makes small,
development subsidiary high-performance pumps and
with projects in fluid-handling equipment.
southeastern Wisconsin, Major markets are
metro-Milwaukee, beverage/food service,
Minnesota, Illinois and recreational vehicles,
California. marine, industrial, and
water purification.
- -----------------------------------------------------------
<PAGE>
- -----------------------------------------------------------
Wisconsin Energy Capital
Corp., WEC International Hypro Corporation
Inc., Witech Corp. and manufactures pumps and
Badger Service Co. are fluid-handling equipment for
subsidiaries devoted a variety of markets. Major
primarily to capitalizing markets are agricultural
on diversified investment spraying, high-pressure
opportunities for cleaning, marine,
shareholders. industrial, and fire
fighting.
- -----------------------------------------------------------
What do shareholders receive?
If the merger occurs by July 1, 2000, WICOR shareholders will receive merger
consideration valued at $31.50 per share of WICOR common stock. They will be
able to choose to receive this in cash, in Wisconsin Energy common stock, or in
a combination of cash and Wisconsin Energy common stock, subject to proration.
The merger consideration will increase at a daily rate equivalent to 6% per
annum if the merger is delayed beyond July 1, 2000. At least 40% of the total
price of the transaction will be paid in Wisconsin Energy stock, and Wisconsin
Energy has the option to increase that percentage to 60%. The exchange ratio for
the Wisconsin Energy stock will be set based on the average closing price of
Wisconsin Energy stock during a valuation period shortly before the merger is
completed. If the average price of Wisconsin Energy shares is less than $22.00
per share, Wisconsin Energy may elect to pay all cash. Wisconsin Energy
shareholders will continue to own their existing shares after the merger, but
they will represent ownership in the combined enterprise.
What are the federal income tax consequences of the merger to shareholders?
There are no tax consequences of the merger to Wisconsin Energy shareholders.
For WICOR shareholders, the tax consequences depend upon whether you receive
Wisconsin Energy stock or cash in exchange for your WICOR shares:
. Generally, to the extent that WICOR shareholders receive Wisconsin
Energy stock in exchange for their WICOR shares, the merger will be free
of federal income taxes.
. WICOR shareholders will recognize a gain or loss for federal income tax
purposes on any cash received in connection with the merger, including
cash paid in lieu of fractional shares of Wisconsin Energy stock.
Who needs to approve this merger?
Approvals required to conclude the merger include:
. Shareholders of Wisconsin Energy and WICOR
. Public Service Commission of Wisconsin
. Securities and Exchange Commission
. Antitrust Clearances
When do you expect the merger to be completed?
We are working to complete the merger as soon as possible, and hope to do so by
spring 2000.
<PAGE>
How do I vote?
Sign, date and return the enclosed proxy card in the postage-paid envelope
provided. Please vote your proxy as soon as possible so that your shares may be
represented at your shareholders' meeting - we're eager to have your support.
If you decide later that you'd like to change your vote, you can do so at your
shareholder meeting or at any time prior to the meeting by sending a written
notice of revocation to your company's corporate secretary at the appropriate
address identified in the proxy statement, or by submitting a new proxy card.
How can I get more information?
The enclosed joint proxy statement/prospectus explains the merger proposal in
more detail, including the tax consequences to shareholders and the regulatory
approvals required to complete the merger.
Certain information about the merger is outlined in this brochure. For answers
to some other questions, please refer to the Q&A on pages 1 and 2 of the joint
proxy statement/prospectus. You should review the proxy statement/prospectus in
its entirety for a more complete description of the merger.
If you have questions, need further information, or wish to obtain another copy
of the joint proxy statement/prospectus, you can call our respective proxy
solicitors or shareholder services:
Wisconsin Energy WICOR
---------------- -----
Morrow & Co., Inc. ChaseMellon Shareholder Services
445 Park Ave., 5th Floor 450 W. 33 St.
New York, NY 10022 New York, NY 10001-2697
1-800-566-9061 1-800-684-8823
OR OR
Shareholder Services Shareholder Services
1-800-881-5882 1-800-236-3453
1-414-221-2788 1-414-291-7026
REMEMBER
The Boards of Directors of Wisconsin Energy and WICOR
unanimously recommend that you vote "FOR" the merger.
The information in this booklet does not purport to be complete and is qualified
by reference to the more detailed information appearing in the accompanying
joint proxy statement/prospectus, including the appendices thereto and the
documents incorporated therein by reference. Shareholders are urged to read
these materials. This information booklet may not be used in connection with the
solicitation of Wisconsin Energy and WICOR shareholders' votes on the merger
unless accompanied or preceded by the joint proxy statement/prospectus.
[Insert] [Insert]
Wisconsin Energy Logo WICOR Logo
[Insert]
Printers Code
99036-MD-DY-250M
