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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
May 13, 1997
ESELCO, INC.
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(Exact name of registrant as specified in its charter)
MICHIGAN 0-17736 38-2785176
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(State of Incorporation) (Commission File Number) (IRS Employer
Identification Number)
725 East Portage Avenue,
Sault Ste. Marie, Michigan 49783
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(Address of principal executive offices) (Zip Code)
(906) 632-2221
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(Former name or former address, if changed since last report)
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Item 5. OTHER EVENTS.
(a) The registrant issued the following press release on May 14, 1997:
Donald C. Wilson NEWS
Corporate Secretary
ESELCO, Inc.
725 East Portage Avenue RELEASE
Sault St. Marie, MI 49783
(906) 632-5158
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Sault Ste. Marie, Michigan, and Milwaukee, Wisconsin, May 14, 1997
ESELCO, Inc. (NASDAQ-EDSE) and Wisconsin Energy Corporation (NYSE-WEC)
announced today that they had entered into a definitive agreement regarding the
acquisition of ESELCO, Inc., by WEC. The terms of the definitive agreement have
been approved by both companies' boards. Upon completion of the acquisition,
ESELCO, Inc., would continue to operate from Sault Ste. Marie, Michigan.
All outstanding shares of ESELCO, Inc., common stock would be
converted into shares of Wisconsin Energy Corporation common stock based on a
value of $44.50 for each share of ESELCO, Inc., common stock in a transaction
proposed to be structured as a tax-free reorganization. The total purchase
price would be approximately $71 million. The exact number of shares of
Wisconsin Energy Corporation common stock to be issued in the transaction
would be determined by dividing $44.50 by the average closing prices of
Wisconsin Energy Corporation common stock during the period specified in the
definitive agreement. Pursuant to the definitive agreement, Wisconsin Energy
Corporation will be paid a fee of $2 million if ESELCO, Inc., consummates, or
enters into an agreement with respect to, a business combination with a party
unrelated to Wisconsin Energy Corporation or ESELCO, Inc., terminates the
definitive agreement to pursue a business combination with a party unrelated
to Wisconsin Energy Corporation prior to the end of the period specified in
the agreement.
The transaction is contingent upon several conditions, including the
approval by the shareholders of ESELCO, Inc., receipt of all appropriate
regulatory approvals, and the effectiveness of a registration statement to be
filed with the Securities and Exchange Commission covering the Wisconsin Energy
Corporation shares to be issued in the transaction. Shareholders of
ESELCO, Inc., will be provided a proxy statement describing the terms of the
transaction prior to being asked to vote on the transaction at a special meeting
of shareholders, which is
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expected to take place later in 1997. There can be no assurance that the
conditions will be satisfied or that the transaction will be consummated.
ESELCO, Inc., is the parent corporation of Edison Sault Electric
Company, an electric utility which serves approximately 22,000 residential,
commercial and industrial customers located in Michigan's Eastern Upper
Peninsula.
Wisconsin Energy Corporation is a holding company with
subsidiaries in utility and nonutility businesses. Its principal subsidiary,
Wisconsin Electric, provides electricity, natural gas, and/or steam service
to about 2.3 million people in southeastern Wisconsin (including the
Milwaukee area), the Appleton area, the Prairie du Chien area, and portions
of northeastern Wisconsin and Michigan's Upper Peninsula.
* * * * * * * * * * * * * * * * * * * * *
The definitive agreement regarding the proposed acquisition is
incorporated herein by reference and filed as an exhibit to this Form 8-K.
(b) As previously disclosed, the Dividend Reinvestment Plan of
ESELCO, Inc. (the "DRIP") has been suspended pending the acquisition of
ESELCO, Inc. by Wisconsin Energy Corporation ("WEC"). Pursuant to the
definitive agreement, all shares of ESELCO, Inc. common stock held in the
DRIP will continue to be recorded in book-entry form and, subject to earlier
withdrawal in accordance with the terms of the DRIP, will be held in the DRIP
until the consummation of the acquisition. All shares of ESELCO, Inc. common
stock held in the ESELCO DRIP upon the consummation of the acquisition will
be converted into shares of WEC common stock on the same terms as the other
shares of ESELCO common stock as provided in the definitive agreement.
Participants in the ESELCO, Inc. DRIP may elect to have the whole and
fractional shares of WEC common stock they receive in the acquisition
credited to accounts established for them under WEC's dividend reinvestment
and stock purchase plan, if WEC provides that such an election may be made.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits
Number Description
2 Agreement and Plan of Reorganization by and among ESELCO,
Inc., Wisconsin Energy Corporation and ESL Acquisition,
Inc. dated May 13, 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ESELCO, INC.
By /s/ William R. Gregory
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William R. Gregory, President
May 14, 1997
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AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
WISCONSIN ENERGY CORPORATION
AND
ESELCO, INC.
AND
ESL ACQUISITION, INC.
DATED AS OF MAY 13, 1997
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TABLE OF CONTENTS
RECITALS 1
ARTICLE I DEFINITIONS
1.1 Accounts 1
1.2 Acquisition 1
1.3 Affiliates 1
1.4 Affiliate Letter 1
1.5 Agreement 2
1.6 Buildings 2
1.7 Certificate of Merger 2
1.8 Closing 2
1.9 Closing Date 2
1.10 Code 2
1.11 Confidentiality Agreement 2
1.12 Contracts 2
1.13 Disclosure Schedule 2
1.14 Edison Sault 3
1.15 Employee Benefit Plans 3
1.16 Equipment 3
1.17 ERISA 3
1.18 ESEG 3
1.19 ESELCO 3
1.20 ESELCO Closing Certificate 3
1.21 ESELCO Common Stock 3
1.22 ESELCO Companies 3
1.23 ESELCO Counsel Opinion 3
1.24 ESELCO DRIP 3
1.25 ESELCO Material Adverse Effect 4
1.26 ESELCO Special Meeting 4
1.27 ESELCO Stockholders 4
1.28 ESELCO SEC Reports 4
1.29 Exchange Act 4
1.30 Existing Contracts 4
1.31 Existing Indebtedness 4
1.32 Existing Insurance Policies 5
1.33 Existing Investments 5
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1.34 Existing Liens 5
1.35 Existing Litigation 5
1.36 Existing Permits 5
1.37 Existing Plans 5
1.38 Existing Real Estate 5
1.39 FERC 5
1.40 HSR Act 5
1.41 Indebtedness 5
1.42 Investment 6
1.43 Knowledge of ESELCO 6
1.44 Law 6
1.45 Letter of Intent 6
1.46 Lien 6
1.47 MDCI 6
1.48 MPSC 6
1.49 Merger 6
1.50 NTS 6
1.51 Permitted Liens 7
1.52 Person 7
1.53 Plan of Merger 7
1.54 Primergy Agreement 7
1.55 Proxy Statement 7
1.56 PUHCA 7
1.57 Registration Statement 7
1.58 SEC 7
1.59 Securities Act 7
1.60 Subsidiary 7
1.61 Wisconsin Energy 8
1.62 Wisconsin Energy Closing Certificate 8
1.63 Wisconsin Energy Counsel Opinion 8
1.64 Wisconsin Energy Common Stock 8
1.65 Wisconsin Energy SEC Reports 8
1.66 Other Terms 8
ARTICLE II THE MERGER
2.1 The Merger 9
2.2 Effective Time of Merger 9
2.3 Articles of Incorporation of Surviving Corporation 10
2.4 Bylaws of Surviving Corporation 10
2.5 Directors and Officers of Surviving Corporation 10
2.6 Conversion of ESELCO Common Stock 10
2.7 Conversion of Acquisition Common Stock 11
2.8 Exchange of ESELCO Certificates 11
2.9 Stock Transfer Books 14
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2.10 Reorganization; Pooling 14
2.11 Primergy Agreement 14
ARTICLE III OTHER AGREEMENTS
3.1 Proxy Statement and Registration Statement 15
3.2 Approval of ESELCO Stockholders 16
3.3 Access 16
3.4 Disclosure Schedule 17
3.5 Duties Concerning Representations 17
3.6 Deliveries of Information; Consultation 18
3.7 Affiliates; Accounting and Tax Treatment 19
3.8 Other Transactions 19
3.9 Letter of ESELCO's Accountants 21
3.10 Letter of Wisconsin Energy's Accountants 22
3.11 Legal Conditions to Merger 22
3.12 Stock Exchange Listing 22
3.13 Public Announcements 22
3.14 Indemnification and Insurance 22
3.15 Employment Matters 23
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF ESELCO
4.1 Organization; Business 27
4.2 Capitalization 28
4.3 Authorization; Enforceability 29
4.4 No Violation or Conflict 30
4.5 Title to Assets 30
4.6 Litigation 30
4.7 ESELCO SEC Reports and Books and Records 30
4.8 Absence of Certain Changes 31
4.9 Buildings and Equipment 31
4.10 Existing Contracts 32
4.11 Performance of Contracts 32
4.12 Contingent and Undisclosed Liabilities 33
4.13 Existing Insurance Policies 33
4.14 Employee Benefit Plans 33
4.15 No Violation of Law 34
4.16 Brokers 34
4.17 Taxes 34
4.18 Existing Real Estate 36
4.19 Governmental Approvals 36
4.20 No Pending Other Transactions 36
4.21 Investments 36
4.22 Labor Matters 36
4.23 Indebtedness 37
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4.24 Subsidiaries 37
4.25 Existing Permits 37
4.26 Disclosure 37
4.27 Information Supplied 37
4.28 Vote Required 38
4.29 Accounting Matters 38
4.30 Opinion of Financial Advisor 38
4.31 Environmental Protection 38
4.32 Accounts 40
4.33 Customers 40
ARTICLE V REPRESENTATIONS AND WARRANTIES OF
WISCONSIN ENERGY AND ACQUISITION
5.1 Organization 41
5.2 Capitalization 41
5.3 Authorization; Enforceability 41
5.4 No Violation or Conflict 42
5.5 Litigation 42
5.6 Wisconsin Energy SEC Reports 42
5.7 Brokers 43
5.8 Governmental Approvals 43
5.9 Disclosure 43
5.10 Information Supplied 43
ARTICLE VI CONDUCT OF BUSINESS BY THE ESELCO COMPANIES
PENDING THE MERGER
6.1 Carry on in Regular Course 44
6.2 Use of Assets 44
6.3 No Default 44
6.4 Existing Insurance Policies 44
6.5 Employment Matters 44
6.6 Contracts and Commitments 44
6.7 Indebtedness; Investments 44
6.8 Preservation of Relationships 44
6.9 Compliance with Laws 44
6.10 Taxes 44
6.11 Amendments 45
6.12 Dividends; Redemptions; Issuance of Stock 45
ARTICLE VII CONDITIONS PRECEDENT TO THE OBLIGATIONS OF
WISCONSIN ENERGY AND ACQUISITION
7.1 Compliance with Agreement 45
7.2 Proceedings and Instruments Satisfactory 45
7.3 No Litigation 46
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7.4 Representations and Warranties of ESELCO 46
7.5 No ESELCO Material Adverse Effect 46
7.6 Approval of ESELCO Stockholders; Certificate of Merger 46
7.7 Deliveries at Closing 46
7.8 Other Documents 46
7.9 Governmental Approvals 46
7.10 Listing 47
7.11 Tax Opinion 47
7.12 Accountant Letters 47
7.13 Pooling Opinion 47
7.14 Affiliate Letters 48
7.15 Fractional Shares 48
7.16 Dissenting ESELCO Stock 48
ARTICLE VIII CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF ESELCO
8.1 Compliance with Agreement 48
8.2 Proceedings and Instruments Satisfactory 48
8.3 No Litigation 48
8.4 Representations and Warranties of Wisconsin Energy and Acquisition 49
8.5 Approval of ESELCO Stockholders; Certificate of Merger 49
8.6 Deliveries at Closing 49
8.7 Other Documents 49
8.8 Governmental Approvals 49
8.9 Tax Opinion 50
8.10 Accountant Letters 50
8.11 No Material Adverse Change 50
8.12 Listing 50
ARTICLE IX TERMINATION; MISCELLANEOUS
9.1 Termination 50
9.2 Rights on Termination; Waiver 51
9.3 Survival of Representations, Warranties and Covenants 51
9.4 Entire Agreement; Amendment 52
9.5 Expenses 52
9.6 Governing Law 52
9.7 Assignment 52
9.8 Notices 53
9.9 Counterparts; Headings 53
9.10 Interpretation 54
9.11 Severability 54
9.12 Specific Performance 54
9.13 No Reliance 54
9.14 Exhibits and Disclosure Schedule 54
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9.15 Further Assurances 54
SIGNATURES 56
EXHIBITS:
1. Form of Affiliate Letter
2. Form of ESELCO Closing Certificate
3. Form of ESELCO Counsel Opinion
4. Form of Plan of Merger
5. Form of Wisconsin Energy Closing Certificate
6. Form of Wisconsin Energy Counsel Opinion
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION is made as of this 13th day
of May, 1997 by and among WISCONSIN ENERGY CORPORATION, ESELCO, INC. and ESL
ACQUISITION, INC.
RECITALS
WHEREAS, the respective Boards of Directors of Wisconsin Energy,
ESELCO and Acquisition have: (a) determined that the merger of Acquisition with
and into ESELCO 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,
ESELCO 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 ESELCO has directed that this
Agreement and the transactions described in this Agreement be submitted for
approval at the ESELCO Special Meeting.
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 ACCOUNTS. "Accounts" shall mean all accounts receivable, notes
and associated rights owned by any of the ESELCO Companies.
1.2 ACQUISITION. "Acquisition" shall mean ESL Acquisition, Inc., a
Michigan corporation and a wholly-owned subsidiary of Wisconsin Energy.
1.3 AFFILIATES. "Affiliates" shall mean all Persons who are
affiliates of ESELCO for purposes of Rule 145 under the Securities Act.
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1.4 AFFILIATE LETTER. "Affiliate Letter" shall mean a letter from
each Affiliate in substantially the form of Exhibit 1 attached to this
Agreement.
1.5 AGREEMENT. "Agreement" shall mean this Agreement and Plan of
Reorganization, 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.
1.6 BUILDINGS. "Buildings" shall mean all buildings, fixtures,
structures and improvements used by any of the ESELCO Companies and located on
the Existing Real Estate.
1.7 CERTIFICATE OF MERGER. "Certificate of Merger" shall mean a
Certificate of Merger in a form approved for filing with the MDCI which shall
have the executed Plan of Merger attached thereto.
1.8 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, 411
East Wisconsin Avenue, Milwaukee, Wisconsin 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.
1.9 CLOSING DATE. "Closing Date" shall mean:
(a) December 30, 1997; or
(b) if all of the consents and approvals specified in
Sections 7.9 and 8.8 of this Agreement have not been received on or before
December 23, 1997, that date which is five (5) business days after receipt of
the last of such consents and approvals, subject in each case to the
provisions of Section 9.1(g) of this Agreement; or
(c) such other date as the parties may mutually agree to in
writing.
1.10 CODE. "Code" shall mean the Internal Revenue Code of 1986, as
the same may be in effect from time to time.
1.11 CONFIDENTIALITY AGREEMENT. "Confidentiality Agreement" shall
mean the letter agreement between Wisconsin Energy and ESELCO dated January 16,
1997 as amended by this Agreement.
1.12 CONTRACTS. "Contracts" shall mean all of the contracts,
agreements and leases, written or oral, to which any of the ESELCO Companies is
a party or by which any of the ESELCO Companies is bound.
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1.13 DISCLOSURE SCHEDULE. "Disclosure Schedule" shall mean the
Disclosure Schedule, dated the date of this Agreement, delivered by ESELCO to
Wisconsin Energy contemporaneously with the execution and delivery of this
Agreement and as the same may be amended from time to time after the date of
this Agreement and prior to the Closing Date in accordance with the terms of
this Agreement.
1.14 EDISON SAULT. "Edison Sault" shall mean Edison Sault Electric
Company, a Michigan corporation and a wholly-owned subsidiary of ESELCO.
1.15 EMPLOYEE BENEFIT PLANS. "Employee Benefit Plans" shall mean any
pension plan, profit sharing plan, bonus plan, incentive compensation plan,
stock ownership plan, stock purchase plan, stock option plan, stock appreciation
plan, employee benefit plan, employee benefit policy, retirement plan, fringe
benefit program, insurance plan, severance plan, disability plan, health care
plan, sick leave plan, death benefit plan, or any other plan or program to
provide retirement income, fringe benefits or other benefits to former or
current employees of any of the ESELCO Companies.
1.16 EQUIPMENT. "Equipment" shall mean all machinery, toolings,
equipment, boilers, furniture, fixtures, motor vehicles, furnishings, molds,
parts, tools, dies, jigs, patterns, machine tools, office equipment, computers,
construction in progress and other items of tangible personal property owned by
any of the ESELCO Companies which are either presently used, or are used on the
Closing Date, by any of the ESELCO Companies in the conduct of its business.
1.17 ERISA. "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as the same may be in effect from time to time.
1.18 ESEG. "ESEG" shall mean ESEG, Inc., a Michigan corporation and a
wholly-owned subsidiary of ESELCO.
1.19 ESELCO. "ESELCO" shall mean ESELCO, Inc., a Michigan
corporation.
1.20 ESELCO CLOSING CERTIFICATE. "ESELCO Closing Certificate" shall
mean the Closing Certificate of ESELCO in substantially the form of Exhibit 2
attached to this Agreement.
1.21 ESELCO COMMON STOCK. "ESELCO Common Stock" shall mean all of the
issued and outstanding shares of common stock, $0.01 par value, of ESELCO.
1.22 ESELCO COMPANIES. "ESELCO Companies" shall mean ESELCO, Edison
Sault, ESEG and NTS.
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1.23 ESELCO COUNSEL OPINION. "ESELCO Counsel Opinion" shall mean an
opinion of Kutak Rock in substantially the form of Exhibit 3 attached to this
Agreement.
1.24 ESELCO DRIP. "ESELCO DRIP" shall mean ESELCO's Dividend
Reinvestment and Common Stock Purchase Plan.
1.25 ESELCO MATERIAL ADVERSE EFFECT. "ESELCO Material Adverse Effect"
shall mean 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 ESELCO Companies taken as a whole.
1.26 ESELCO SPECIAL MEETING. "ESELCO Special Meeting" shall mean a
special meeting of the ESELCO Stockholders for the purpose of approving the
Merger, this Agreement and the transactions contemplated by this Agreement and
for such other purposes as may be necessary or desirable.
1.27 ESELCO STOCKHOLDERS. "ESELCO Stockholders" shall mean all
Persons owning shares of ESELCO Common Stock on the relevant date.
1.28 ESELCO SEC REPORTS. "ESELCO SEC Reports" shall mean:
(a) Reports on Form 10-Q for the quarters ended March 31, 1994,
June 30, 1994, September 30, 1994, March 31, 1995, June 30, 1995, September 30,
1995, March 31, 1996, June 30, 1996, September 30, 1996 and March 31, 1997;
(b) Reports on Form 10-K for the years ended December 31, 1993,
1994, 1995 and 1996;
(c) Proxy Statements dated April 1, 1994, April 3, 1995,
April 1, 1996 and March 28, 1997;
(d) Reports on Form 8-K dated January 23, 1997 and March 31,
1997;
(e) Form U-3A-2 for the years ended December 31, 1995 and 1996;
and
(f) all other reports, registration statements, definitive proxy
statements, prospectuses, and amendments thereto filed by any of the ESELCO
Companies with the SEC after the date of this Agreement and prior to the
Effective Time of Merger.
1.29 EXCHANGE ACT. "Exchange Act" shall mean the Securities Exchange
Act of 1934, as the same may be in effect from time to time.
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1.30 EXISTING CONTRACTS. "Existing Contracts" shall mean those
Contracts which are listed and briefly described on the Disclosure Schedule.
1.31 EXISTING INDEBTEDNESS. "Existing Indebtedness" shall mean all
Indebtedness of each of the ESELCO Companies, all of which is listed and briefly
described on the Disclosure Schedule.
1.32 EXISTING INSURANCE POLICIES. "Existing Insurance Policies" shall
mean all of the insurance policies currently in effect and owned by any of the
ESELCO Companies, all of which are listed and briefly described on the
Disclosure Schedule.
1.33 EXISTING INVESTMENTS. "Existing Investments" shall mean all
Investments of each of the ESELCO Companies, all of which are listed and briefly
described on the Disclosure Schedule.
1.34 EXISTING LIENS. "Existing Liens" shall mean all Liens affecting
any of the assets and properties of any of the ESELCO Companies on the date of
this Agreement, all of which are listed and briefly described on the Disclosure
Schedule.
1.35 EXISTING LITIGATION. "Existing Litigation" shall mean all
pending or, to the Knowledge of ESELCO, threatened suits, audit inquiries,
charges, workers compensation claims, product warranty claims, litigation,
arbitrations, proceedings, governmental investigations, citations and actions of
any kind against any of the ESELCO Companies, all of which are listed and
briefly described on the Disclosure Schedule.
1.36 EXISTING PERMITS. "Existing Permits" shall mean all licenses,
permits, approvals, franchises, qualifications, certificates of convenience and
necessity, permissions, agreements, rate and other orders and governmental
authorizations required for the conduct of the business of any of the ESELCO
Companies, all of which are listed and briefly described on the Disclosure
Schedule.
1.37 EXISTING PLANS. "Existing Plans" shall mean all Employee Benefit
Plans of each of the ESELCO Companies, all of which are listed and briefly
described on the Disclosure Schedule.
1.38 EXISTING REAL ESTATE. "Existing Real Estate" shall mean those
parcels of real property described in the Disclosure Schedule which: (a)
includes those parcels owned in fee simple title by any of the ESELCO Companies;
and (b) excludes easements and any other real estate interests owned by any of
the ESELCO Companies relating to the distribution and transmission of
electricity in the ordinary course of business.
1.39 FERC. "FERC" shall mean the Federal Energy Regulatory
Commission.
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1.40 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.
1.41 INDEBTEDNESS. "Indebtedness" shall mean any liability or
obligation of any of the ESELCO Companies, whether primary or secondary or
absolute or contingent: (a) for borrowed money; or (b) evidenced by notes,
bonds, debentures or similar instruments; or (c) secured by Liens on any assets
of any of the ESELCO Companies.
1.42 INVESTMENT. "Investment" by any of the ESELCO Companies shall
mean: (a) any transfer or delivery of cash, stock or other property or thing of
value in exchange for indebtedness, stock or any other security of another
Person; (b) any loan or advance to, or capital contribution in, any other
Person; (c) any guaranty, creation or assumption of any liability or obligation
of any other Person; and (d) any investments in any fixed property or fixed
assets other than fixed properties and fixed assets acquired and used in the
ordinary course of the business.
1.43 KNOWLEDGE OF ESELCO. "Knowledge of ESELCO" shall mean actual
knowledge of any one or more of the following named Persons and knowledge that
any one or more of the following named Persons should have acquired in the
ordinary course of performance of that Person's duties as a director, officer or
employee of any of the ESELCO Companies: Thomas S. Nurnberger, William R.
Gregory, Allan L. Grauer, James S. Clinton, David K. Easlick, Donald Sawruk,
David R. Hubbard, James L. Beedy, Steven L. Boeckman, Donald C. Wilson, Ernest
H. Maas, David H. Jirikovic and Paul A. Schemanski.
1.44 LAW. "Law" shall mean any federal, state, local or other law,
rule, regulation or governmental requirement of any kind, and the rules,
regulations and orders promulgated thereunder by any regulatory agencies or
other Persons.
1.45 LETTER OF INTENT. "Letter of Intent" shall mean the Letter of
Intent by and between Wisconsin Energy and ESELCO dated March 24, 1997.
1.46 LIEN. "Lien" shall mean, with respect to any asset: (a) any
mortgage, pledge, lien, covenant, lease or security interest; and (b) the
interest of a vendor or lessor under any conditional sale agreement, financing
lease or other title retention agreement relating to such asset.
1.47 MDCI. "MDCI" shall mean The Michigan Department of Consumer and
Industry Services-Corporation, Securities and Land Development Bureau.
1.48 MPSC. "MPSC" shall mean The Michigan Public Service Commission.
1.49 MERGER. "Merger" shall mean the merger of Acquisition with and
into ESELCO pursuant to this Agreement.
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1.50 NTS. "NTS" shall mean Northern Tree Service, Inc., a Michigan
corporation and a wholly-owned subsidiary of ESELCO.
1.51 PERMITTED LIENS. "Permitted Liens" shall mean those of the
Existing Liens which are expressly noted as Permitted Liens on the Disclosure
Schedule.
1.52 PERSON. "Person" shall mean a natural person, corporation,
trust, partnership, governmental entity, agency or branch or department thereof,
or any other legal entity.
1.53 PLAN OF MERGER. "Plan of Merger" shall mean the Plan of Merger
between ESELCO and Acquisition in substantially the form of Exhibit 4 attached
to this Agreement.
1.54 PRIMERGY AGREEMENT. "Primergy Agreement" shall mean the Amended
and Restated Agreement and Plan of Merger by and among Wisconsin Energy,
Northern States Power Company, Northern Power Wisconsin Corp. and WEC Sub Corp.
dated as of April 28, 1995, as amended and restated as of July 26, 1995, and as
the same may be amended from time to time.
1.55 PROXY STATEMENT. "Proxy Statement" shall mean the proxy
statement of ESELCO to be filed with the SEC and to be distributed to the ESELCO
Stockholders in connection with the ESELCO Special Meeting and the approval of
the Merger by the ESELCO Stockholders, which shall also constitute the
prospectus of Wisconsin Energy filed as a part of the Registration Statement.
1.56 PUHCA. "PUHCA" shall mean the Public Utility Holding Company Act
of 1935, as the same may be in effect from time to time.
1.57 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 the
shares of Wisconsin Energy Common Stock to be issued in the Merger pursuant to
Article II of this Agreement.
1.58 SEC. "SEC" shall mean the Securities and Exchange Commission.
1.59 SECURITIES ACT. "Securities Act" shall mean the Securities Act
of 1933, as the same may be in effect from time to time.
1.60 SUBSIDIARY. "Subsidiary" shall mean any corporation, at least a
majority of the outstanding capital stock of which (of any class or classes,
however designated, having ordinary voting power for the election of at least a
majority of the board of directors of such corporation) shall at the time be
owned by the relevant Person directly or through one or more corporations which
are themselves Subsidiaries.
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1.61 WISCONSIN ENERGY. "Wisconsin Energy" shall mean Wisconsin Energy
Corporation, a Wisconsin corporation.
1.62 WISCONSIN ENERGY CLOSING CERTIFICATE. "Wisconsin Energy Closing
Certificate" shall mean the Closing Certificate of Wisconsin Energy in
substantially the form of Exhibit 5 attached to this Agreement.
1.63 WISCONSIN ENERGY COUNSEL OPINION. "Wisconsin Energy Counsel
Opinion" shall mean the opinion of Quarles & Brady in substantially the form of
Exhibit 6 attached to this Agreement.
1.64 WISCONSIN ENERGY COMMON STOCK. "Wisconsin Energy Common Stock"
shall mean shares of the common stock, $.01 par value, of Wisconsin Energy.
1.65 WISCONSIN ENERGY SEC REPORTS. "Wisconsin Energy SEC Reports"
shall mean:
(a) Reports on Form 10-Q for the quarters ended March 31, 1994,
June 30, 1994, September 30, 1994, March 31, 1995, June 30, 1995, September 30,
1995, March 31, 1996, June 30, 1996, September 30, 1996 and March 31, 1997;
(b) Reports on Form 10-K for the years ended December 31, 1993,
1994, 1995 and 1996;
(c) Proxy Statements dated March 22, 1994, April 10, 1995,
August 7, 1995, April 13, 1996 and March 14, 1997;
(d) Reports on Form 8-K dated February 1, 1994, May 3, 1995 and
September 25, 1995; and
(e) all documents filed by Wisconsin Energy with the SEC after
the date of this Agreement and prior to the Effective Time of Merger pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act.
1.66 OTHER TERMS. The Following terms shall have the meanings
specified in the following noted Sections of this Agreement:
TERM SECTION
1986 Fee Deferral Plan 3.15
1989 Fee Deferral Plan 3.15
Average Wisconsin Energy Price 2.6
CERCLA 4.31
Changeover Date 3.15
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Disclosure Schedule Change 3.4
Dissenting ESELCO Stock 2.6
Edison Sault Management Plan 3.15
Effective Time of Merger 2.2
Environmental Claim 4.31
Environmental Hazardous Material 4.31
Environmental Laws 4.31
Environmental Permits 4.31
Environmental Release 4.31
ESELCO Certificates 2.8
ESELCO Director Plan 3.15
ESELCO Retiree Health Plan 3.15
Exchange Agent 2.8
Exchange Fund 2.8
Extended Period 3.15
Indemnified Parties 3.14
Initial Termination Date 9.1
Exchange Ratio 2.6
Other Offer 3.8
Other Transaction 3.8
Retirement Account Plan 3.15
Section 2.11 Notice 2.11
Section 2.11 Termination Fee 2.11
SERP 3.15
Special Date 3.8
Special Event 3.8
Surviving Corporation 2.1
Wisconsin Energy Directors' Plan 3.15
ARTICLE II
THE MERGER
2.1 THE MERGER. This Agreement provides for the merger of
Acquisition with and into ESELCO, whereby each outstanding share of ESELCO
Common Stock will be converted into shares of Wisconsin Energy Common Stock as
described in this Agreement. As of the Effective Time of Merger, Acquisition
will be merged with and into ESELCO, which shall be the surviving corporation in
the Merger (the "Surviving Corporation") and shall continue to be governed by
the Laws of the State of Michigan, and the separate existence of Acquisition
shall thereupon cease. The Merger shall be pursuant to the provisions of, and
shall be with the effects provided in, the Michigan Business Corporation Act.
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2.2 EFFECTIVE TIME OF MERGER. The consummation of the Merger shall
be effected as promptly as practicable after the satisfaction or waiver of the
conditions set forth in Article VII and Article VIII of this Agreement and
Acquisition and ESELCO will cause the Certificate of Merger and the Plan of
Merger to be executed, delivered and filed with the MDCI. The Merger shall
become effective at: (a) if the Closing occurs on or prior to December 30,
1997, 12:01 A.M. on January 1, 1998; or (b) if the Closing occurs after
December 30, 1997, the date and time of the filing of the Certificate of Merger
and the Plan of Merger with the MDCI. 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 ARTICLES OF INCORPORATION OF SURVIVING CORPORATION. The Restated
Articles of Incorporation of ESELCO 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.
2.4 BYLAWS OF SURVIVING CORPORATION. The Bylaws of ESELCO as in
effect immediately prior to the Effective Time of Merger shall be the Bylaws of
the Surviving Corporation until amended in accordance with Law.
2.5 DIRECTORS AND OFFICERS OF SURVIVING CORPORATION. The duly
qualified and acting directors and officers of Acquisition 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.
2.6 CONVERSION OF ESELCO COMMON STOCK.
(a) DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings specified:
(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 Transactions on each of the ten (10)
consecutive trading days ending with the trading day immediately preceding the
Closing Date.
(ii) "Exchange Ratio" shall mean that number (carried
to the fourth decimal place) obtained by dividing: (A) $44.50; by (B) the
Average Wisconsin Energy Price.
(b) CONVERSION. At the Effective Time of Merger, and without
any action on the part of the holders thereof:
(i) Each share of ESELCO Common Stock issued and
outstanding at the Effective Time of Merger (other than Dissenting ESELCO Stock)
shall be
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converted into that number of shares of Wisconsin Energy Common Stock
as is equal to the Exchange Ratio on the terms and conditions set forth in this
Agreement; subject to the provisions of Section 2.8(e) of this Agreement
concerning cash being paid for fractional shares.
(ii) Any shares of capital stock of ESELCO that are owned by
any of the ESELCO Companies at the Effective Time of Merger shall be cancelled
and retired and cease to exist and no Wisconsin Energy Common Stock or other
consideration shall be issued or delivered in exchange therefor.
(c) DISSENTING ESELCO STOCK. Notwithstanding anything in this
Agreement to the contrary, shares of ESELCO Common Stock which are outstanding
immediately prior to the Effective Time of Merger and which are held by ESELCO
Stockholders who shall have exercised their dissenter's rights in accordance
with the provisions of Sections 450.1761 through 450.1774 of the Michigan
Business Corporation Act (the "Dissenting ESELCO Stock") shall not be converted
into the right to receive the consideration specified in this Section 2.6 of
this Agreement but shall be cancelled and converted into the right to receive
such consideration as may be determined to be due to the holders of the
Dissenting ESELCO Stock pursuant to the Michigan Business Corporation Act. If
any holder of Dissenting ESELCO Stock shall, after the Effective Time of Merger,
withdraw or otherwise lose the dissenters rights provided in the Michigan
Business Corporation Act, the Dissenting ESELCO Stock of such holder shall be
deemed to be converted, as of the Effective Time of Merger, into shares of
Wisconsin Energy Common Stock on the terms and conditions set forth in this
Agreement.
2.7 CONVERSION OF ACQUISITION COMMON STOCK. At the Effective Time of
Merger, and without any action on the part of the holders thereof, each share of
common stock of Acquisition issued and outstanding at the Effective Time of
Merger shall be converted into one (1) share of ESELCO Common Stock.
2.8 EXCHANGE OF ESELCO CERTIFICATES.
(a) EXCHANGE AGENT. As of the Effective Time of Merger,
Wisconsin Energy shall act as the exchange agent for, or shall deposit, or shall
cause to be deposited, with a bank or trust company designated by Wisconsin
Energy (in either case, the "Exchange Agent"), for the benefit of the holders of
shares of ESELCO Common Stock, for exchange in accordance with this Article II
of this Agreement through the Exchange Agent, certificates representing the
shares of Wisconsin Energy Common Stock (such certificates for shares of
Wisconsin Energy Common Stock, together with any dividends or distributions with
respect thereto and together with any cash for fractional share interests made
pursuant to Section 2.8(e) of this Agreement, being hereinafter referred to as
the "Exchange Fund") issuable pursuant to Section 2.6 of this Agreement in
exchange for outstanding shares of ESELCO Common Stock.
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(b) EXCHANGE PROCEDURES.
(i) As soon as reasonably practicable after the Effective
Time of Merger, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time of
Merger represented outstanding shares of ESELCO Common Stock (the "ESELCO
Certificates"): (A) a letter of transmittal which shall specify that delivery
shall be effected, and risk of loss and title to the ESELCO Certificates shall
pass, only upon delivery of the ESELCO Certificates to the Exchange Agent and
which shall be in such form and have such other provisions as Wisconsin Energy
may reasonably specify; and (B) instructions to effect the surrender of the
ESELCO Certificates in exchange for certificates representing shares of
Wisconsin Energy Common Stock.
(ii) Upon surrender of an ESELCO Certificate for
cancellation to the Exchange Agent together with such letter of transmittal,
duly executed, and with such other documents as the Exchange Agent may
reasonably require, the holder of such ESELCO Certificate shall be entitled to
receive in exchange therefor a certificate representing that number of whole
shares of Wisconsin Energy Common Stock to which such holder is entitled in
respect of such ESELCO Certificate pursuant to the provisions of this Article II
of this Agreement plus any cash in lieu of any fractional share interest in
accordance with Section 2.8(e) of this Agreement, and the ESELCO Certificate so
surrendered shall forthwith be cancelled; 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 2.8(e) of this
Agreement.
(iii) In the event of a transfer of ownership of shares of
ESELCO Common Stock which is not registered in the transfer records of ESELCO, a
certificate representing the proper number of shares of Wisconsin Energy Common
Stock may be issued to the transferee if the ESELCO Certificate which
represented such shares of ESELCO 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) Until surrendered as contemplated by this Section 2.8 of
this Agreement, each ESELCO Certificate shall be deemed at all times after the
Effective Time of Merger to represent only the right to receive upon surrender a
certificate representing shares of Wisconsin Energy Common Stock and cash in
lieu of any fractional share interest as contemplated by Section 2.8(e) of this
Agreement.
(c) DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. 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 be paid to the holder of any unsurrendered
ESELCO Certificate with respect to
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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 2.8(e) of this Agreement, until the holder of such ESELCO
Certificate shall surrender such ESELCO Certificate. Subject to the effect of
any applicable Law, following surrender of any such ESELCO Certificate, there
shall be paid to the holder of the certificate representing whole shares of
Wisconsin Energy Common Stock issued in exchange therefor, 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 2.8(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 ESELCO COMMON STOCK. All shares of
Wisconsin Energy Common Stock issued upon conversion of the ESELCO Common Stock
in accordance with the terms of this Agreement (and any cash paid pursuant to
Section 2.8(e) of this Agreement) shall be deemed to have been issued (and paid)
in full satisfaction of all rights pertaining to the ESELCO 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 ESELCO 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. As soon as practicable
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 make available such amounts to such holders subject to
and in accordance with the terms of Section 2.8(c) of this Agreement.
(f) TERMINATION OF EXCHANGE FUND. Any portion of the Exchange
Fund which remains undistributed to the ESELCO Stockholders as of a date which
is six months after the Effective Time of Merger shall be delivered to Wisconsin
Energy, upon demand, and any ESELCO Stockholders 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 shares of Wisconsin Energy
Common Stock, any cash in lieu of fractional share interests and any dividends
or distributions with respect to Wisconsin Energy Common Stock.
(g) NO LIABILITY. Neither the Exchange Agent nor any party to
this Agreement shall be liable to any ESELCO Stockholder for any shares of
ESELCO Common Stock or Wisconsin Energy Common Stock (or dividends or
distributions with
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respect thereto) or cash delivered to a public official pursuant to any
abandoned property, escheat or similar Law.
(h) WITHHOLDING RIGHTS. Wisconsin Energy shall be entitled to
deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any ESELCO Stockholder 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 ESELCO
Stockholder in respect of which such deduction and withholding was made by
Wisconsin Energy.
(i) BOOK ENTRY. Notwithstanding any other provision of this
Agreement, the letter of transmittal referred to in Section 2.8(b) of this
Agreement may, at the option of Wisconsin Energy, provide for the ability of a
holder of one or more ESELCO Certificates to elect that Wisconsin Energy Common
Stock to be received in exchange for the ESELCO Common Stock formerly
represented by such surrendered ESELCO Certificates be issued in uncertificated
form or to elect that such Wisconsin Energy Common Stock be credited to an
account established under the dividend reinvestment and stock purchase plan of
Wisconsin Energy.
2.9 STOCK TRANSFER BOOKS. At the Effective Time of Merger, the stock
transfer books of ESELCO shall be closed and there shall be no further
registration of transfers of shares of ESELCO Common Stock thereafter on the
records of ESELCO. From and after the Effective Time of Merger, the holders of
ESELCO Certificates outstanding immediately prior to the Effective Time of
Merger shall cease to have any rights with respect to such shares of ESELCO
Common Stock except as otherwise provided in this Agreement or by Law.
2.10 REORGANIZATION; POOLING. 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
and that the Merger qualify for pooling of interests accounting treatment.
2.11 PRIMERGY AGREEMENT.
(a) PRIMERGY AGREEMENT. Wisconsin Energy is a party to the
Primergy Agreement and has delivered to ESELCO a copy of the Primergy Agreement
as in effect on the date of this Agreement, without the Disclosure Schedules and
Exhibits thereto. Upon the closing of the transactions described in the
Primergy Agreement, Wisconsin Energy shall enter into a business combination
with Northern States Power Company, Wisconsin Energy's name will be changed to
Primergy Corporation and Primergy Corporation will continue to be bound by the
terms of this Agreement. Except as set forth in Section 2.11(b)
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of this Agreement, the closing of the transactions described in the Primergy
Agreement is not a condition to the Closing of the Merger as described in
this Agreement.
(b) TERMINATION. Wisconsin Energy may, by notice to ESELCO at
any time prior to the Effective Time of Merger (the "Section 2.11 Notice"),
terminate this Agreement if Wisconsin Energy reasonably concludes in good faith
that this Agreement, the Merger, the Closing of the Merger or the ownership of
the ESELCO Companies by Wisconsin Energy after the Closing of the Merger may
provide a substantial impediment to obtaining, on a timely basis, the regulatory
approvals necessary to close the transactions described in the Primergy
Agreement.
(c) TERMINATION FEE. In order to induce ESELCO to enter into
this Agreement and to compensate ESELCO for the time and expenses incurred in
connection with this Agreement and the Merger and the losses suffered by ESELCO
from foregone opportunities, Wisconsin Energy shall pay the Section 2.11
Termination Fee to ESELCO within five (5) business days after the termination of
this Agreement by Wisconsin Energy pursuant to Section 2.11(b) of this
Agreement. As used in this Agreement, the "Section 2.11 Termination Fee" shall
be: (i) if the Section 2.11 Notice is given by Wisconsin Energy after the date
of this Agreement and prior to September 1, 1997, the amount of $3,000,000;
(ii) if the Section 2.11 Notice is given by Wisconsin Energy on or after
September 1, 1997 and prior to November 1, 1997, the amount of $4,000,000;
(iii) if the Section 2.11 Notice is given by Wisconsin Energy on or after
November 1, 1997 and prior to January 1, 1998, the amount of $5,000,000; and
(iv) if the Section 2.11 Notice is given by Wisconsin Energy on or after
January 1, 1998, the amount of $7,500,000.
(d) TERMINATION OF SECTION 3.8. If Wisconsin Energy terminates
this Agreement pursuant to Section 2.11(b) of this Agreement, all obligations of
ESELCO under Section 3.8 of this Agreement shall immediately and completely
terminate as of the date of such termination.
ARTICLE III
OTHER AGREEMENTS
3.1 PROXY STATEMENT AND REGISTRATION STATEMENT. Wisconsin Energy and
ESELCO 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 ESELCO shall use reasonable efforts to cause
the Registration Statement to be declared effective under the Securities Act as
promptly as practicable after such filing. Wisconsin Energy and ESELCO shall
also take such action as may be reasonably required to cause the shares of
Wisconsin Energy Common Stock issuable pursuant to the Merger to be registered
or to obtain an exemption from registration under applicable state "blue sky" or
securities Laws; provided, however, that Wisconsin Energy shall not be required
to qualify
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as a foreign corporation or to file any general consent to service of process
under the Laws of any jurisdiction or to comply with any other requirements
deemed by Wisconsin Energy to be unduly burdensome. 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.
3.2 APPROVAL OF ESELCO STOCKHOLDERS. ESELCO shall as soon as
reasonably practicable: (a) take all steps necessary duly to call, give notice
of, convene and hold the ESELCO Special Meeting; (b) distribute the Proxy
Statement, which shall also constitute the prospectus of Wisconsin Energy
included in the Registration Statement, to the ESELCO Stockholders in accordance
with applicable Federal and state Law and with its Restated Articles of
Incorporation and Bylaws; (c) subject to the provisions of Section 3.8(d) of
this Agreement, recommend to the ESELCO Stockholders the approval of this
Agreement and the transactions contemplated by this Agreement and such other
matters as may be submitted to the ESELCO Stockholders in connection with this
Agreement; and (d) cooperate and consult with Wisconsin Energy with respect to
each of the foregoing matters.
3.3 ACCESS.
(a) ACCESS. Upon reasonable notice, ESELCO shall, and shall
cause Edison Sault, ESEG and NTS to, afford to the 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 upon reasonable
notice and during normal business hours of the ESELCO Companies.
(b) CONFIDENTIALITY AGREEMENT. ESELCO and Wisconsin Energy
agree that the provisions of the Confidentiality Agreement shall remain in full
force and effect; provided that: (i) the phrase "three years from the date
hereof" in the second full paragraph on page 2 of the Confidentiality Agreement
is amended to read as follows: "beginning on January 16, 1997 and ending on
that date which is the later of January 16, 1999 or that date which is one year
after the termination of the Agreement and Plan of Reorganization between ESELCO
and Wisconsin Energy"; and (ii) at the Effective Time of Merger, the
Confidentiality Agreement shall be deemed to have terminated without further
action by the parties.
3.4 DISCLOSURE SCHEDULE.
(a) DISCLOSURE SCHEDULE. Contemporaneously with the execution
and delivery of this Agreement, ESELCO is delivering to Wisconsin Energy the
Disclosure Schedule, which is accompanied by a certificate signed by the
President and Chief Executive Officer and the Secretary of ESELCO stating the
Disclosure Schedule is being delivered pursuant to this Agreement and is the
Disclosure Schedule referred to in this Agreement.
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The Disclosure Schedule is deemed to constitute an integral part of this
Agreement and to modify the representations, warranties, covenants or
agreements of ESELCO contained in this Agreement.
(b) UPDATES. Prior to the Closing Date, ESELCO 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 of an update to the Disclosure
Schedule, ESELCO shall meet and discuss with Wisconsin Energy any change in the
Disclosure Schedule made by ESELCO which, in the reasonable judgment of
Wisconsin Energy, has or may have an ESELCO Material Adverse Effect or which may
be materially adverse in any manner to Wisconsin Energy (a "Disclosure Schedule
Change"). If the parties cannot resolve any differences regarding a Disclosure
Schedule Change within a reasonable period of time (not to exceed 30 calendar
days after receipt of an update to the Disclosure Schedule) Wisconsin Energy may
terminate this Agreement. If Wisconsin Energy does not terminate this Agreement
pursuant to this Section 3.4(b) of this Agreement, the relevant Disclosure
Schedule Changes shall be deemed to be accepted by Wisconsin Energy and
Wisconsin Energy shall no longer have any right to terminate this Agreement
based on such Disclosure Schedule Changes except to the extent otherwise
provided in Section 7.5 of this Agreement with respect to such Disclosure
Schedule Change.
3.5 DUTIES CONCERNING REPRESENTATIONS. Each party to this Agreement
shall: (a) to the extent within its control, use reasonable efforts to cause
all of its representations and warranties contained in this Agreement to be true
and correct in all respects at the Effective Time of Merger with the same force
and effect as if such representations and warranties had been made at and as of
the Effective Time of Merger; and (b) use reasonable efforts to obtain any third
party consents or approvals required by this Agreement and to cause all of the
conditions precedent set forth in Articles VII and VIII of this Agreement to be
satisfied.
3.6 DELIVERIES OF INFORMATION; CONSULTATION. From time to time prior
to the Effective Time of Merger:
(a) DELIVERIES BY ESELCO. ESELCO shall furnish promptly to
Wisconsin Energy: (i) a copy of each report, schedule and other document filed
by it or received by it pursuant to the requirements of federal or state
securities Laws or any other applicable Laws promptly after such documents are
available; (ii) the monthly consolidated and consolidating financial statements
of the ESELCO Companies (as prepared by ESELCO 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 any of the ESELCO Companies; and (iv) all other information
concerning the business, properties and personnel of any of the ESELCO Companies
as Wisconsin Energy may reasonably request.
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(b) DELIVERIES BY WISCONSIN ENERGY. Wisconsin Energy shall
promptly furnish to ESELCO 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.
(c) CONSULTATION. ESELCO shall, and shall cause Edison Sault,
ESEG and NTS to, confer and consult with representatives of Wisconsin Energy and
its Subsidiaries on a regular and frequent basis to report on operational
matters, environmental remediations and other environmental matters and the
general status of ongoing business operations of the ESELCO Companies.
(d) REGULATORY MATTERS. ESELCO shall, and shall cause Edison
Sault, ESEG and NTS to, discuss with Wisconsin Energy any changes in the rates,
charges, standards of service or accounting of any of the ESELCO 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.
(e) FRANCHISES, ETC. ESELCO shall, and shall cause Edison
Sault, ESEG and NTS to, use all reasonable efforts to maintain in effect and
renew all existing franchises, certificates of convenience and necessity and
other permits, as the case may be, pursuant to which any of the ESELCO Companies
operates in its service territories. ESELCO shall notify Wisconsin Energy
promptly in the event that it becomes aware of: (i) any problem, complaint or
proceeding which could result in the termination or non-renewal of any such
franchise, certificate of convenience and necessity or permit; or (ii) any
significant complaint to the MPSC or any of the ESELCO Companies by a customer
of any of the ESELCO Companies or by any other Person concerning the rates,
billings, service or any other matter relating to the business of any of the
ESELCO Companies.
(f) 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 may be
commenced, threatened or proposed by any Person concerning the legality,
validity or propriety of the transactions contemplated by this Agreement. If
any such litigation is commenced against any party to this Agreement, the
parties shall cooperate in all respects in connection with such litigation and
Wisconsin Energy shall have the right to assume the defense thereof at its cost
and expense and, if Wisconsin Energy does assume such defense, it shall confer
regularly with ESELCO and shall not settle any such litigation without the prior
consent of ESELCO, which consent shall not be unreasonably withheld.
(g) DELIVERY OF ESELCO STOCKHOLDER LIST. ESELCO shall: (a)
deliver to Wisconsin Energy a list of all outstanding options to acquire any
shares of ESELCO Common Stock, the names of the Persons holding such options and
the terms and conditions of each such option; (b) deliver to Wisconsin Energy a
list of all outstanding
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restricted shares of ESELCO Common Stock, the names of the Persons holding
such shares and the terms and conditions of each such arrangement; and
(c) after the approval of this Agreement by the ESELCO Stockholders at the
ESELCO Special Meeting, arrange to have its transfer agent deliver to Wisconsin
Energy or its designee a true and complete list setting forth the names and
addresses of the ESELCO Stockholders, their holdings of stock as of the
latest practicable date, and such other shareholder information as Wisconsin
Energy may request.
3.7 AFFILIATES; ACCOUNTING AND TAX TREATMENT. ESELCO shall advise
the Affiliates of the resale restrictions imposed by applicable securities Laws
and required to cause the Merger to qualify for pooling-of-interests accounting
treatment, and shall obtain from each Affiliate an executed Affiliate Letter.
ESELCO shall obtain an executed Affiliate Letter from any Person who becomes an
Affiliate of ESELCO after the date of this Agreement and on or prior to the
Effective Time of Merger. ESELCO and Wisconsin Energy will each use its
respective reasonable best efforts to cause the Merger to qualify for
pooling-of-interests accounting treatment and as a reorganization under
Section 368(a)of the Code.
3.8 OTHER TRANSACTIONS.
(a) DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings specified:
(i) "Other Offer" shall mean any 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 any
of the ESELCO Companies; (B) a sale, transfer or other disposition of all or a
significant portion of the assets of any of the ESELCO Companies in a single
transaction or series of related transactions; (C) a sale of, or tender offer or
exchange offer for, or acquisition by any Person or group of beneficial owners
of, a substantial interest in the outstanding capital stock of any of the ESELCO
Companies 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 the later
of: (A) January 16, 1999; or (B) six (6) months after the date of termination
of this Agreement.
(iv) "Special Event" shall mean any of the following to
occur on or prior to the Special Date: (A) a Person unrelated to Wisconsin
Energy has consummated, or has publicly announced or proposed (and subsequently
consummates after the Special Date), an Other Transaction; or (B) a Person
unrelated to Wisconsin Energy has
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consummated an Other Transaction or any of the ESELCO Companies has entered
into an agreement with respect to an Other Transaction; or (C) ESELCO shall
have terminated this Agreement for the purpose of pursuing an Other Offer or
Other Transaction.
(b) TERMINATION OF DISCUSSIONS. ESELCO shall immediately cease
and cause to be terminated all existing discussions and negotiations, if any,
with any parties conducted prior to the date of this Agreement with respect to
any Other Transaction, except that ESELCO may notify such other parties that the
discussions and negotiations are terminated.
(c) NON SOLICITATION. ESELCO shall not, and shall not permit
its Subsidiaries or officers, directors, employees, agents or other
representatives of any of the ESELCO Companies (including, without limitation,
any investment banker, attorney or accountant retained or engaged by any of the
ESELCO Companies) to, solicit, initiate, facilitate, encourage, negotiate with
respect to, discuss or agree to, any Other Offer or any Other Transaction,
except to the extent required by the fiduciary duties of ESELCO's officers and
Board of Directors under applicable Law if so advised by a written opinion of
outside counsel. ESELCO shall notify Wisconsin Energy orally and in writing
within twenty-four (24) hours following receipt by the Chairman of the Board or
President of ESELCO of any Other Offer, including the terms and conditions of
any such Other Offer and the Person making such Other Offer, except to the
extent that ESELCO may be prohibited from so doing by a Contract entered into
prior to March 24, 1997. ESELCO shall give Wisconsin Energy five (5) calendar
days prior notice and an opportunity to negotiate with ESELCO before entering
into, executing or agreeing to any Other Offer or Other Transaction. Nothing in
this Section 3.8 of this Agreement shall prohibit ESELCO from taking and
disclosing to the ESELCO Stockholders a position contemplated by Rule 14e-2(a)
under the Exchange Act with respect to an Other Transaction by means of a tender
offer.
(d) TERMINATION. ESELCO may, by notice to Wisconsin Energy at
any time prior to the Effective Time of Merger, terminate this Agreement if
ESELCO enters into, executes or agrees to an Other Offer or Other Transaction
following a determination by the Board of Directors of ESELCO on the written
advice of counsel that such action is required by its fiduciary duties under
applicable Law and compliance by ESELCO with the provisions of Section 3.8(c) of
this Agreement.
(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, ESELCO shall pay
$2,000,000 to Wisconsin Energy in immediately available funds within five (5)
business days after the occurrence of a Special Event.
(f) TERMINATION OF SECTION 3.8(e). There shall be no Special
Fee payable as a result of a Special Event which occurs after this Agreement is
terminated:
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(i) by Wisconsin Energy and ESELCO pursuant to Section
9.1(a) of this Agreement; or
(ii) by Wisconsin Energy pursuant to Section 9.1(b) of this
Agreement based on a failure of either or both of the conditions specified in
Section 7.4 or 7.5 of this Agreement except if such failure of condition results
from any wilful or intentional acts of any of the ESELCO Companies; or
(iii) by Wisconsin Energy pursuant to Sections 9.1(f) and
2.11(b) of this Agreement; or
(iv) by Wisconsin Energy pursuant to Section 9.1(g) of this
Agreement.
3.9 LETTER OF ESELCO'S ACCOUNTANTS. ESELCO shall use its reasonable
best efforts to cause to be delivered to Wisconsin Energy a letter of Arthur
Andersen LLP, ESELCO's independent auditors, dated a date within two business
days before the date on which the Registration Statement shall become effective
and addressed to 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.
3.10 LETTER OF WISCONSIN ENERGY'S ACCOUNTANTS. Wisconsin Energy shall
use its reasonable best efforts to cause to be delivered to ESELCO a letter of
Price Waterhouse LLP, Wisconsin Energy's independent auditors, dated a date
within two business days before the date on which the Registration Statement
shall become effective and addressed to ESELCO, in form and substance reasonably
satisfactory to ESELCO 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 LEGAL CONDITIONS TO MERGER. Each party to this Agreement will:
(a) 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 7.9 and 8.8 of this Agreement
and furnishing all information required in connection therewith); (b) 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;
and (c) take all reasonable actions necessary to obtain (and will 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 or made by the parties to this Agreement in
connection with the Merger or the taking of any action contemplated thereby or
by this Agreement.
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3.12 STOCK EXCHANGE LISTING. Wisconsin Energy shall use its
reasonable best efforts to cause the shares of Wisconsin Energy Common Stock to
be issued in the Merger 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, ESELCO, 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 hereby and, except as may be required by
Law, shall not issue any public announcement or statement with respect thereto
prior to consultation with the other parties.
3.14 INDEMNIFICATION AND INSURANCE.
(a) INDEMNIFICATION. From and after the Effective Time of
Merger, Wisconsin Energy shall cause ESELCO (and successors to ESELCO) to
indemnify and hold harmless each present and former employee, agent, director or
officer of any of the ESELCO Companies and the heirs, successors and assigns of
such Persons (the "Indemnified Parties") against any amounts incurred by such
Indemnified Parties, including without limitation, losses, claims, damages,
liabilities, costs, expenses (including reasonable attorneys fees incurred in
defense or otherwise), judgments and amounts paid in settlement, in connection
with any claim, action, suit, proceeding or investigation arising out of or
relating to the transactions described in this Agreement and any which arise out
of or relate to an Indemnified Party having served as a committee member,
director, officer, employee or agent of any of the ESELCO Companies, or as a
trustee or fiduciary of any Employee Benefit Plans or otherwise on behalf of any
of the ESELCO Companies, whether asserted or commenced prior to or after the
Effective Time of Merger. Such indemnification shall be in accordance with, and
substantially equivalent to, the indemnification provided from time to time by
Subsidiaries of Wisconsin Energy to employees, agents, directors and officer of
Subsidiaries of Wisconsin Energy.
(b) INSURANCE. For at least three (3) years from and after the
Effective Time of Merger, Wisconsin Energy shall maintain, or shall cause to be
maintained, in effect directors and officers insurance covering those Persons
covered by ESELCO's directors and officers insurance as of the date of this
Agreement. This directors and officers insurance shall be not less in terms of
coverage and amount as the insurance that ESELCO has in effect covering officers
and directors on the date of this Agreement.
3.15 EMPLOYMENT MATTERS.
(a) EDISON SAULT MANAGEMENT PENSION PLAN. Within a reasonable
period of time after the Effective Time of Merger, Wisconsin Energy shall cause
the Pension Plan for Management Employees of Edison Sault (the "Edison Sault
Management Plan") to be merged into the Wisconsin Electric Power Company
Retirement Account Plan (the
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"Retirement Account Plan") and the Retirement Account Plan to be amended to
provide that employees of Edison Sault who were covered under the Edison
Sault Management Plan and who became covered under the Retirement Account
Plan by reason of such merger and who subsequently terminate on or prior to
December 31, 2010 with a 100% fully vested interest shall be entitled to an
accrued pension benefit not less than what they would have received had the
provisions of the Edison Sault Management Plan as in existence as of the
Effective Time of Merger continued to apply to them (except that Wisconsin
Energy reserves the right to provide all or part of such accrued pensions
benefits by means of a non-qualified pension plan to the extent necessary to
maintain, in the reasonable judgment of Wisconsin Energy, the tax qualified
status of the Retirement Account Plan).
(b) EDISON SAULT EMPLOYEE INCENTIVE INVESTMENT AND STOCK
OWNERSHIP PLAN. Within a reasonable period of time after the Effective Time of
Merger, Wisconsin Energy shall cause the Employee Incentive Investment and Stock
Ownership Plan of Edison Sault to be merged into the Wisconsin Electric Power
Company Employees Savings Plan and shall extend such Savings Plan to the
employees of the ESELCO Companies.
(c) SPECIAL EARLY RETIREMENT WINDOW PROGRAM. Prior to or after
the Effective Time of Merger, but prior to the merger of any defined benefit
pension plan of Edison Sault which is used in connection with a special
voluntary early window program, Edison Sault may proceed with a special
voluntary early retirement window program in accordance with the program
described in the Disclosure Schedule.
(d) SEVERANCE AGREEMENTS. After the Effective Time of Merger,
Wisconsin Energy shall cause Edison Sault to honor all obligations which may be
incurred by Edison Sault under the nine Executive Severance Agreements
identified on the Disclosure Schedule, subject to the terms thereof, which would
cause such obligations to expire regarding any individual who elected a special
early retirement benefit under the program described in Section 3.15(c) of this
Agreement.
(e) COMPANY CARS. After the Effective Time of Merger, Wisconsin
Energy will cause the ESELCO Companies to continue a company car policy with
respect to those employees who are determined from time-to-time to have an
operational need therefor and regarding the other individuals who are currently
provided with company cars as of the Effective Time of Merger, to allow them to
either continue to use the same until the end of the useful life thereof, with
an option at the end of such useful life to buy the same at the lower of book or
market value, or to elect to discontinue use of the same and receive such
increase in compensation as is determined to be appropriate in the sole
discretion of the employer.
(f) RETIREE HEALTH CARE PLAN. After the Effective Time of
Merger, Wisconsin Energy will cause the retiree health care program then in
effect at the ESELCO Companies (the "ESELCO Retiree Health Plan") to be
continued, subject to and in
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accordance with its terms (including any reserved right to amend or terminate
the same), with respect to individuals who were already retired at such time
and with respect to those who retire or otherwise terminate from the service
of the ESELCO Companies in such manner as to entitle them to benefit from
such program, until at least one year from the Effective Time of Merger (the
"Changeover Date"), with such individuals (both those already retired and
those who subsequently retire) to pay forty-five percent (45%) of the cost
thereof, except for the classes of individuals identified in the Disclosure
Schedule who will only be obligated to pay forty percent (40%). From the
Changeover Date until December 31, 2004 (the "Extended Period"), Wisconsin
Energy will cause the ESELCO Companies to continue the same program of
benefits and, at least for purposes of measuring retiree contributions, at
the same total premium costs, with both such benefits and costs to be subject
to change from time to time as would occur pursuant to the underlying health
insurance contracts in effect immediately prior to the Changeover Date
(whether or not those insurance contracts are actually continued in force),
and retiree contributions shall be fifty percent (50%) of such costs. During
the Extended Period, Wisconsin Energy may in its discretion cause the ESELCO
Companies to provide such benefits either by a continuation of the health
insurance contracts in effect immediately prior to the Changeover Date under
the ESELCO Retiree Health Plan, use of a self-insured arrangement, or
otherwise.
(g) OTHER BENEFITS. Within a reasonable period of time after
the Effective Time of Merger and subject to the collective bargaining
obligations of Edison Sault, Wisconsin Energy shall cause other benefit plans
and programs substantially similar to those in effect at Wisconsin Electric
Power Company for employees generally (including severance benefits) to be
extended to employees of the ESELCO Companies and shall extend past service
credit for purposes of eligibility to participate, vesting and benefit accruals
under such benefit plans and programs for service with the ESELCO Companies
before the Effective Time of Merger, provided that such crediting of service
shall not operate to duplicate any benefit or the funding of any benefit, and
provided further that any vacation entitlements in existence at the Effective
Time of Merger under any policy of the ESELCO Companies with respect to officers
shall not be decreased after the Effective Time of Merger.
(h) RELOCATION EXPENSES FOR TRANSFERRED MANAGEMENT EMPLOYEES.
Wisconsin Energy will cause the ESELCO Companies to establish a special
relocation expense reimbursement plan for such of the management employees of
Edison Sault as are requested to relocate as a result of the transactions
described in this Agreement substantially similar to such program as may then be
in effect at Wisconsin Electric Power Company.
(i) SERP. Edison Sault shall take all necessary actions to
terminate the Supplemental Executive Retirement Plan of Edison Sault Electric
Company (the "SERP"), as of the Effective Time of Merger and shall continue to
remain obligated to pay benefits in the amount earned under the SERP as of the
termination date to those participants who would be eligible to receive benefits
if their employment had been then terminated. Edison Sault shall obtain the
consent of each other current participant who may have earned
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benefits under the SERP but who would not be eligible to receive such
benefits if his employment had terminated on the date of termination of the
SERP to receipt of an immediate single lump sum distribution of reasonably
equivalent actuarial value in lieu of and in complete satisfaction of any
other obligation to such individual under the SERP (with such lump sum to be
increased to take into account the tax impact thereof, assuming the maximum
combined federal, Michigan and employee Medicare tax rates in effect as of
the Effective Time of Merger, net of the federal income tax benefit of the
state tax, the intent of such increase being to leave each such individual
with an amount which, after payment of such taxes under the assumption above,
would be equal to such single lump sum distribution.
(j) DIRECTOR'S RETIREMENT PLAN. ESELCO shall take all necessary
actions to terminate the ESELCO, Inc. Director's Retirement Plan (the "ESELCO
Director Plan") as of the Effective Time of Merger. After the Effective Time of
Merger, Wisconsin Energy shall cause ESELCO to continue to honor all obligations
under the ESELCO Director Plan as in effect at such termination.
(k) DIRECTOR'S FEE DEFERRAL PLANS. (i) With respect to the
Edison Sault Electric Company Director's Fee Deferral Plan effective as of
October 1, 1989 (the "1989 Fee Deferral Plan"), ESELCO shall cause Edison Sault
to take all necessary actions to discontinue recognizing further fee deferrals
and to amend such Plan as of the Effective Time of Merger as follows:
(A) to provide that all future earnings on the deferred fee account
balances will be identical to the interest rates or other methods
allowed to participants under the Wisconsin Energy Directors' Deferred
Compensation Plan (the "Wisconsin Energy Directors' Plan") from time
to time;
(B) to eliminate Section B(17) of Article I and Section B(3) of
Article III; and
(C) to make the methods of payment identical to the methods allowed to
participants and beneficiaries under the Wisconsin Energy Directors'
Plan.
ESELCO shall also cause Edison Sault to take all necessary actions,
simultaneously with the foregoing amendments, to terminate the 1989 Fee Deferral
Plan as of the Effective Time of Merger. After the Effective Time of Merger,
Wisconsin Energy shall cause Edison Sault to continue to honor all obligations
under the 1989 Fee Deferral Plan, as so amended and as in effect at such
termination.
(ii) With respect to the Edison Sault Electric Company ESELCO
Director's Fee Deferral Plan as of January 1, 1986 (the "1986 Fee Deferral
Plan"), ESELCO shall cause Edison Sault to take all necessary actions to
discontinue recognizing further fee deferrals and to amend such Plan as of the
Effective Time of Merger to eliminate Section B(17) of Article I and
Section B(3) of Article III. ESELCO shall also cause Edison Sault to take all
necessary actions, simultaneously with the foregoing amendments, to terminate
the
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1986 Fee Deferral Plan, as of the Effective Time of Merger. After the
Effective Time of Merger, Wisconsin Energy shall cause Edison Sault to
continue to honor all obligations under the 1986 Fee Deferral Plan, as so
amended and as in effect at such termination.
(l) LABOR AGREEMENTS. Prior to and after the Effective Time of
Merger, Edison Sault shall, and after the Effective Time of Merger, Wisconsin
Energy shall cause Edison Sault to, continue to honor all collective bargaining
agreements to which it is a party, subject to the terms thereof, it being
acknowledged that the current collective bargaining agreements in effect as of
the date of execution of this Agreement expire on October 21, 1998.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF ESELCO
ESELCO hereby represents and warrants to Wisconsin Energy and
Acquisition that, except as set forth in the Disclosure Schedule:
4.1 ORGANIZATION; BUSINESS.
(a) ORGANIZATION. Each of the ESELCO Companies is a corporation
duly and validly organized and existing and in good standing under the Laws of
the State of Michigan. Each of the ESELCO Companies is qualified to do business
as a foreign corporation and is in good standing 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 does not and will not have an ESELCO Material Adverse Effect.
(b) CORPORATE POWER AND AUTHORITY. Each of the ESELCO Companies
has full corporate power and authority and all franchises, permits, licenses,
approvals, authorizations, registrations, certificates of convenience and
necessity, grants and orders necessary to carry on its business as it is now
conducted and to own, lease and operate its assets and properties.
(c) REGULATION. ESELCO is an exempt holding company under
Section 3(a)(1) of PUHCA. Edison Sault is regulated as a public utility in the
State of Michigan and is not subject to regulation in any other state. ESELCO,
ESEG and NTS are not regulated as public utilities or subject to such regulation
by any state.
(d) BUSINESS OF ESELCO. The only business conducted by ESELCO
is the ownership of the capital stock of, and providing services to and
guarantees for, Edison Sault, ESEG and NTS.
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(e) BUSINESS OF EDISON SAULT. The only business conducted by
Edison Sault is the generation, distribution, transmission and sale of
electricity, and service incidental thereto, to approximately 22,000
residential, commercial and industrial customers in the Eastern portion of the
Upper Peninsula of the State of Michigan. Edison Sault conducts its business
within its service areas pursuant to rate schedules and applicable rules and
regulations of Edison Sault duly authorized and approved and filed with the
MPSC.
(f) ASSETS OF EDISON SAULT. Edison Sault owns or has the right
to use all property, real or personal, tangible or intangible, which it uses in
the operation of its business and to permit it to render electric utility
services within the service areas in which it carries on its business as it is
now being conducted.
(g) BUSINESS OF ESEG. ESEG is currently inactive but, upon
appropriate FERC approval, the only business conducted by ESEG will be the
ownership of submarine cables under the Straits of Mackinac which are leased to
Edison Sault.
(h) BUSINESS OF NTS. The only businesses conducted by NTS are
the provision of tree removal and tree trimming services and the ownership of a
radio tower near Engadine, Michigan.
(i) ARTICLES OF INCORPORATION AND BYLAWS. Copies of the
Articles of Incorporation and Bylaws of each of the ESELCO Companies, as
amended, certified by the Secretary of ESELCO as of the date of this Agreement,
are being delivered by ESELCO 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 ESELCO. The entire authorized capital
stock of ESELCO consists of: (i) 3,000,000 shares of Common Stock (which will
be increased to 9,840,000 shares under an amendment to ESELCO's Restated
Articles of Incorporation to be voted upon at ESELCO's 1997 Annual Meeting of
Stockholders), $0.01 par value, of which 1,593,765 shares will be issued and
outstanding following payment of ESELCO's 3% stock dividend which was declared
on March 13, 1997 and is payable on May 15, 1997, and none of such shares are
held by any of the ESELCO Companies; and (ii) 160,000 shares of Preferred Stock,
$0.01 par value, none of which are issued and outstanding.
(b) CAPITALIZATION OF EDISON SAULT. The entire authorized
capital stock of Edison Sault consists of: (i) 3,000,000 shares of Common Stock,
$1.00 par value, of which 673,929 shares are issued and outstanding, all of
which are owned by ESELCO; and (ii) 160,000 shares of Preferred Stock, $25.00
par value, none of which are issued and outstanding.
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(c) CAPITALIZATION OF ESEG. The entire authorized capital
stock of ESEG consists of 100 shares of Common Stock, $0.01 par value, of which
100 shares are issued and outstanding, all of which are owned by ESELCO.
(d) CAPITALIZATION OF NTS. The entire authorized capital stock
of NTS consists of 100 shares of Common Stock, $0.01 par value, of which 100
shares are issued and outstanding, all of which are owned by ESELCO.
(e) OUTSTANDING CAPITAL STOCK. All of the outstanding capital
stock of each of the ESELCO Companies is duly authorized, validly issued, fully
paid and nonassessable and free of preemptive rights. There are no options,
warrants, conversion rights or other rights to subscribe for or purchase, or
other contracts with respect to, any capital stock of any of the ESELCO
Companies.
(f) ESELCO DRIP. The ESELCO DRIP has been suspended in
accordance with its terms by ESELCO effective as of May 15, 1997 and will be
terminated at the Effective Time of Merger. All shares of ESELCO Common Stock
held in the ESELCO DRIP have been or will be properly allocated to the accounts
of Persons who were participants in the ESELCO DRIP, are recorded in book-entry
form and, subject to earlier withdrawal in accordance with the terms of the
ESELCO DRIP, will be held in the ESELCO DRIP until the Effective Time of Merger.
All shares of ESELCO Common Stock held in the ESELCO DRIP at the Effective Time
of Merger shall be converted into shares of Wisconsin Energy Common Stock as
provided in Section 2.6 of this Agreement. If Wisconsin Energy provides such an
election pursuant to Section 2.8(i) of this Agreement, participants in the
ESELCO DRIP who elect to have such Wisconsin Energy Common Stock credited to
accounts established for them under Wisconsin Energy's dividend reinvestment and
stock purchase Plan shall have their ESELCO DRIP shares 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 2.8(e) of this Agreement.
4.3 AUTHORIZATION; ENFORCEABILITY. The execution, delivery and
performance of this Agreement and all of the documents and instruments required
by this Agreement to be executed and delivered by ESELCO are within the
corporate power of ESELCO and: (a) have been duly authorized by the unanimous
vote of the Board of Directors of ESELCO; and (b) upon the approval of the
ESELCO Stockholders, shall be duly authorized by all necessary corporate action.
This Agreement is, and the other documents and instruments required by this
Agreement to be executed and delivered by ESELCO will be, when executed and
delivered by ESELCO, the valid and binding obligations of ESELCO, enforceable
against ESELCO 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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4.4 NO VIOLATION OR CONFLICT. Subject to the receipt of the
approvals and consents described in Section 8.8 of this Agreement, the
execution, delivery and performance of this Agreement by ESELCO do not and will
not conflict with or violate any Law, the Articles of Incorporation or Bylaws of
any of the ESELCO Companies or any Existing Contract.
4.5 TITLE TO ASSETS. Each of the ESELCO Companies owns good and
valid title to the assets and properties which it owns or purports to own, free
and clear of any and all Liens, except: (a) the Existing Liens on the date of
this Agreement; and (b) the Permitted Liens on the Closing Date.
4.6 LITIGATION. Except for the Existing Litigation: (a) there is no
litigation, arbitration, proceeding, governmental investigation, citation or
action of any kind pending or, to the Knowledge of ESELCO, proposed or
threatened, against or relating to any of the ESELCO Companies, nor, to the
Knowledge of ESELCO, is there any basis for any such action; and (b) there are
no actions, suits or proceedings pending or, to the Knowledge of ESELCO,
proposed or threatened, against any of the ESELCO Companies by any Person which
question the legality, validity or propriety of the transactions contemplated by
this Agreement.
4.7 ESELCO SEC REPORTS AND BOOKS AND RECORDS.
(a) ESELCO SEC REPORTS. The ESELCO SEC Reports: (i) include
all reports, definitive proxy statements and amendments thereto filed or
required to be filed by ESELCO with the SEC since January 1, 1994; and (ii) did
not or will not, as the case may be, contain as of their respective 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.
(b) FINANCIAL STATEMENTS. The audited consolidated financial
statements and unaudited consolidated interim financial statements of ESELCO
included in the ESELCO 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 unaudited interim statements as permitted
by Form 10-Q of the SEC) and fairly present the consolidated financial
position of the ESELCO 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.
(c) BOOKS AND RECORDS. The minute books of each of the ESELCO
Companies contain correct and complete records of all actions taken by the
stockholders and the Board of Directors (including committees of the Board) of
each of the ESELCO Companies, and all signatures contained therein are the true
signatures of the
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Persons whose signatures they purport to be. The share transfer books of
each of the ESELCO Companies are correct, complete and current in all
respects. The accounting books and records of each of the ESELCO Companies:
(i) are in all material respects correct and complete; (ii) are current in a
manner consistent with past practice; and (iii) have recorded therein all
the properties and assets and liabilities of the ESELCO Companies. The
accounting books and records of Edison Sault have been kept and maintained in
accordance with the Uniform System of Accounts as prescribed by the MPSC. The
Disclosure Schedule sets forth the name of each bank in which each of the
ESELCO Companies has an account or safe deposit box or with which any of the
ESELCO Companies has an arrangement for safekeeping.
4.8 ABSENCE OF CERTAIN CHANGES. Since December 31, 1996 there has
not been any:
(a) material adverse change in the financial condition,
properties, business or results of operations of the ESELCO Companies taken as
a whole;
(b) damage, destruction or loss (whether or not covered by
insurance) which has materially and adversely affected the financial condition,
properties, business or results of operations of the ESELCO Companies taken as a
whole;
(c) transactions by any of the ESELCO Companies outside the
ordinary course of business, except for the transactions contemplated by this
Agreement; or
(d) declaration or payment or setting aside the payment of any
dividend or any distribution in respect of the capital stock of any of the
ESELCO Companies or any direct or indirect redemption, purchase or other
acquisition of any such stock by any of the ESELCO Companies.
4.9 BUILDINGS AND EQUIPMENT. The Buildings and the Equipment:
(a) are, taken as a whole, in good operating condition and repair, reasonable
wear and tear excepted; (b) are adequately insured at normal competitive premium
rates with the self insured retentions specified on the Disclosure Schedule;
(c) such assets and their use conform in all respects to applicable Laws; and
(d) no notice of any violation of any building, zoning or other Law relating to
such assets or their use has been received by any of the ESELCO Companies.
4.10 EXISTING CONTRACTS. The Existing Contracts are the only
Contracts which constitute:
(a) a lease of, or agreement to purchase or sell, any capital
assets;
(b) any union labor contracts;
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(c) any management, consulting, employment, personal service,
agency or other contract or contracts providing for employment or rendition of
services and which: (i) are in writing; or (ii) create other than an at will
employment relationship; or (iii) provide for any commission, bonus, profit
sharing, incentive, retirement, consulting or additional compensation;
(d) any agreements or notes evidencing any Indebtedness;
(e) an agreement for the storage, transportation, treatment or
disposal of any hazardous waste or hazardous byproduct;
(f) a power of attorney (whether revocable or irrevocable) given
to any Person by any of the ESELCO Companies that is in force;
(g) an agreement by any of the ESELCO Companies not to compete
in any business or in any geographical area;
(h) an agreement restricting the right of any of the ESELCO
Companies to use or disclose any information in its possession;
(i) a partnership, joint venture or similar arrangement;
(j) a license;
(k) an agreement or arrangement with any Affiliate; or
(l) any other agreement which: (i) involves an amount in excess
of $10,000.00; or (ii) is not in the ordinary course of business.
4.11 PERFORMANCE OF CONTRACTS. Each of the ESELCO Companies has fully
performed each term, covenant and condition of each Contract which is to be
performed by it at or before the date hereof. Each of the Contracts is in full
force and effect and constitutes the legal and binding obligation of the
relevant ESELCO Company and, to the Knowledge of ESELCO, constitutes the legal
and binding obligation of the other parties thereto.
4.12 CONTINGENT AND UNDISCLOSED LIABILITIES. Except pursuant to the
deposit and collection of checks in the ordinary course of business, none of the
ESELCO Companies has guaranteed or become a surety or is otherwise contingently
liable for the obligation of any other Person. None of the ESELCO Companies has
any liabilities of any nature except for those which: (a) are disclosed in the
ESELCO SEC Reports or in the Disclosure Schedule or in this Agreement; or (b)
arise in the ordinary course of business since December 31, 1996 and are not
required to be disclosed pursuant to this Agreement or the Disclosure Schedule.
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4.13 EXISTING INSURANCE POLICIES. All real and personal property
owned or leased by the ESELCO Companies has been and is being insured against,
and the ESELCO Companies maintain liability insurance against, such insurable
risks and in such amounts as set forth in the Existing Insurance Policies. The
Existing Insurance Policies constitute all insurance coverage owned by the
ESELCO Companies and are in full force and effect and, to the Knowledge of
Eselco, none of the ESELCO Companies has received notice of and is not otherwise
aware of any cancellation or threat of cancellation of such insurance. No
property damage, personal injury or liability claims have been made, or are
pending, against any of the ESELCO Companies that are not covered by insurance.
Within the past two (2) years, no insurance company has canceled any insurance
(of any type) maintained by any of the ESELCO Companies. To the Knowledge of
ESELCO, the cost of any insurance currently maintained by the ESELCO Companies
will not increase upon renewal other than increases which ESELCO reasonably
believes are consistent with the general upward trend in the cost of obtaining
insurance.
4.14 EMPLOYEE BENEFIT PLANS.
(a) EXISTING PLANS. Except for the Existing Plans, none of the
ESELCO Companies maintain, nor is bound by, any Employee Benefit Plan. All of
the Existing Plans are in compliance in all material respects with ERISA, the
Code and all other applicable Laws. 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.
(b) CERTAIN MATTERS. 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" 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.
(c) PROHIBITED TRANSACTIONS; REPORTABLE EVENTS. No 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 has occurred
with respect to any of the Existing Plans.
(d) OTHER LIABILITIES. None of the ESELCO Companies has any
direct, indirect, actual or contingent liability with respect to any of the
Existing Plans other than to make payments to the Existing Plans or benefit
payments from the Existing Plans in accordance with the terms thereof.
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(e) MULTIEMPLOYER PLANS. None of the ESELCO Companies is
contributing to, nor has any of the ESELCO 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
ESELCO, threatened claims with respect to any of the Existing Plans, other than
claims for benefits arising in the ordinary course of business.
4.15 NO VIOLATION OF LAW. Neither any of the ESELCO Companies nor any
of the assets of any of the ESELCO Companies violate or conflict with any Law,
or any decree, judgment or order, or any zoning, building line restriction,
planning, use or other similar restriction.
4.16 BROKERS. Except for fees to Pacific Economics Group, none of the
ESELCO Companies has incurred any brokers', finders' or any similar fee in
connection with the transactions contemplated by this Agreement.
4.17 TAXES.
(a) TAX RETURNS. Each of the ESELCO Companies has timely and
properly filed all federal, state, local and foreign tax returns (including but
not limited to income, single business, utility, franchise, sales, payroll,
employee withholding and social security and unemployment) which were required
to be filed. Each of the ESELCO Companies has paid or made adequate provision,
in reserves reflected in its financial statements included in the ESELCO 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 ESELCO Companies and there is no basis in fact for
the assessment of any tax or penalty tax against any of the ESELCO Companies.
No 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 deficiency for any period.
(b) AUDITS. The income tax returns of the ESELCO Companies have
been closed by audit by the Internal Revenue Service or by operation of the
applicable statute of limitations for all fiscal years through and including
December 31, 1992; the single business tax returns of the ESELCO Companies have
been closed by audit by the State of Michigan or by operation of the applicable
statute of limitations for all fiscal years through and including December 31,
1994; and the sales and use tax returns of the ESELCO Companies have been closed
by audit by the State of Michigan for all periods through and including April
30, 1996. None of the ESELCO Companies has consented to any extension of the
statute of limitation with respect to any open tax returns.
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(c) TAX LIENS. There are no tax Liens upon any property or
assets of any of the ESELCO Companies except for Liens for current taxes not yet
due and payable.
(d) DELIVERY OF TAX RETURNS. As soon as practicable after the
date of this Agreement, ESELCO will deliver to Wisconsin Energy correct and
complete copies of all tax returns and reports of each of the ESELCO Companies
filed for all periods not barred by the applicable statute of limitations. 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 ESELCO, no such examination or audit is
planned.
(e) EMPLOYMENT TAXES. Each of the ESELCO 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 ESELCO Companies is a
party to any agreement relating to allocating or sharing any taxes.
(g) EXCESS PARACHUTE PAYMENTS. None of the ESELCO 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 ESELCO Companies
has any liability for taxes of any kind of any Person other than the ESELCO
Companies under any Contract, under Treasury Regulations Section 1.1502-6 (or
any similar provision of Law) as a transferee or successor or otherwise.
4.18 EXISTING REAL ESTATE. The Existing Real Estate: (a) constitutes
all significant real property and improvements leased or owned by any of the
ESELCO Companies; (b) is not subject to any leases or tenancies of any kind;
(c) is not in the possession of any adverse possessors; (d) has direct access
to and from a public road or street; (e) is used in a manner which is consistent
with applicable Law; (f) is, and has been since the date of possession thereof
by the relevant ESELCO Company, in the peaceful possession of the relevant
ESELCO Company; and (g) is served by all water, sewer, electrical, telephone,
drainage and other utilities required for the normal operations of the
Buildings and the Existing Real Estate.
4.19 GOVERNMENTAL APPROVALS. No permission, approval, determination,
consent or waiver by, or any declaration, filing or registration with, any
governmental or regulatory authority is required in connection with the
execution, delivery and performance
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of this Agreement by ESELCO and the consummation of the Merger, except for:
(a) the approvals described in Section 8.8 of this Agreement; and (b) the
filing of the Certificate of Merger as described in this Agreement.
4.20 NO PENDING OTHER TRANSACTIONS. Except for this Agreement, none
of the ESELCO Companies is a party to or bound by any agreement, undertaking or
commitment with respect to an Other Transaction.
4.21 INVESTMENTS. Except for the Existing Investments, none of the
ESELCO Companies owns, or has any right or obligation to acquire, any
Investment.
4.22 LABOR MATTERS.
(a) EMPLOYEE MATTERS. There is no present or former employee
of any of the ESELCO Companies who has any claim against the ESELCO Companies,
(whether under Law, under any employee agreement or otherwise) on account of or
for: (i) overtime pay, other than overtime pay for the current payroll period;
(ii) wages or salaries, other than wages or salaries for the current payroll
period; or (iii) vacations, sick leave, time off or pay in lieu of vacation,
sick leave or time off, other than vacation, sick leave or time off (or pay in
lieu thereof) earned in the twelve-month period immediately preceding the date
of this Agreement or incurred in the ordinary course of business and appearing
as a liability on the most recent financial statements included in the ESELCO
SEC Reports.
(b) EMPLOYEE CLAIMS. There are no pending and unresolved claims
by any Person against any of the ESELCO Companies arising out of any statute,
ordinance or regulation relating to discrimination to employees or employee
practices or occupational or safety and health standards. There is no pending
or, to the Knowledge of ESELCO, threatened, nor has any of the ESELCO Companies
ever experienced any, labor dispute, strike or work stoppage which affects or
may affect the business of the ESELCO Companies or which may or would interfere
with the continued operation of any of the ESELCO Companies.
(c) NLRB MATTERS. There is not now pending or, to the Knowledge
of ESELCO, threatened, any charge or complaint against any of the ESELCO
Companies by or before the National Labor Relations Board or any representative
thereof, or any comparable state agency or authority. 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 ESELCO Companies
not presently organized, and none of the ESELCO Companies has committed any
unfair labor practices which have not heretofore been corrected and fully
remedied.
4.23 INDEBTEDNESS. Except for the Existing Indebtedness, none of the
ESELCO Companies has any Indebtedness.
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4.24 SUBSIDIARIES. The only Subsidiaries of ESELCO are Edison Sault,
ESEG and NTS. Each of Edison Sault, ESEG and NTS has no Subsidiaries.
4.25 EXISTING PERMITS. The Existing Permits constitute all licenses,
permits, approvals, franchises, qualifications, certificates of convenience and
necessity, permissions, agreements, rate orders and governmental authorizations
which the ESELCO Companies currently have and need for the conduct of the
business of the ESELCO Companies as currently conducted.
4.26 DISCLOSURE. No statement of fact by ESELCO contained in this
Agreement, the Disclosure Schedule or the Proxy Statement, or provided for
inclusion in the Registration Statement, 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.
4.27 INFORMATION SUPPLIED. None of the information supplied or to be
supplied by ESELCO 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
ESELCO Stockholders and at the time of the ESELCO 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.
4.28 VOTE REQUIRED. The affirmative vote of the holders of a simple
majority of the outstanding shares of ESELCO Common Stock is the only vote of
the holders of any class or series of capital stock or other securities of
ESELCO necessary to approve the Merger, this Agreement and the transactions
contemplated by this Agreement.
4.29 ACCOUNTING MATTERS. Neither the ESELCO Companies nor any of the
Affiliates has taken or agreed to take or will take any action that would
prevent Wisconsin Energy from accounting for the business combination to be
effected by the Merger as a pooling-of-interests.
4.30 OPINION OF FINANCIAL ADVISOR. ESELCO has received the opinion of
Pacific Economics Group, dated the date of this Agreement, to the effect that
the consideration to be received in the Merger by the ESELCO Stockholders is
fair to the ESELCO Stockholders from a financial point of view, and a copy of
such opinion has been delivered to Wisconsin Energy.
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4.31 ENVIRONMENTAL PROTECTION.
(a) DEFINITIONS. As used in this Section 4.31 of 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
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 ESELCO 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 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 other chemical, material, substance or waste, exposure to which is now
prohibited, limited or regulated by any governmental authority.
(iii) "Environmental Laws" shall mean all federal, state,
local or foreign statute, Law, rule, ordinance, code, policy, rule 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.
(b) ENVIRONMENTAL LAWS. Each of the ESELCO Companies: (i) is
in compliance with all applicable Environmental Laws; and (ii) has not received
any
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communication (written or oral), from a governmental authority, that alleges
that it is not in compliance with applicable Environmental Laws.
(c) ENVIRONMENTAL PERMITS. Each of the ESELCO 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.
(d) ENVIRONMENTAL CLAIMS. There is no Environmental Claim
pending or, to the Knowledge of ESELCO, threatened, against any of the ESELCO
Companies or against any Person whose liability for any Environmental Claim any
of the ESELCO 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 ESELCO Companies owns, leases or manages.
(e) ENVIRONMENTAL HAZARDOUS MATERIALS. There have been no
Environmental Releases of any Environmental Hazardous Material by any of the
ESELCO Companies or by any Person on real property owned, used, leased or
operated by any of the ESELCO Companies.
(f) OWNED PROPERTIES. No real property at any time owned,
operated, used or controlled by any of the ESELCO Companies is currently listed
on the National Priorities List or the Comprehensive Environmental Response,
Compensation and Liability Information System, both 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 ESELCO
Companies has received any written notice from any Person under or relating to
CERCLA or any comparable state or local Law.
(g) OFF-SITE PROPERTIES. To the Knowledge of ESELCO, no
off-site location at which any of the ESELCO 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 ESELCO 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.
(h) COSTS. The Disclosure Schedule includes an estimate by
ESELCO of future costs to the ESELCO Companies of compliance with, and
environmental cleanup and response under, Environmental Laws.
4.32 ACCOUNTS. All Accounts have arisen from bona fide transactions
by the ESELCO Companies in the ordinary course of business and, to the extent
not previously collected, are fully collectible, subject to reserves as set
forth in the financial statements
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included in the ESELCO SEC Reports, and no significant portion of the
Accounts is or will be on the Closing Date subject to any counterclaim or set
off.
4.33 CUSTOMERS. Since January 1, 1996 there has been no termination,
cancellation or material curtailment of the business relationship of any of the
ESELCO Companies with any customer or group of affiliated customers whose
purchases individually or in the aggregate constituted more than five percent
(5%) of the consolidated revenues of the ESELCO Companies for the fiscal year
ended December 31, 1995, nor, to the Knowledge of ESELCO, any notice of intent
to so materially curtail.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
WISCONSIN ENERGY AND ACQUISITION
Wisconsin Energy and Acquisition hereby represent and warrant to
ESELCO that:
5.1 ORGANIZATION.
(a) ORGANIZATION. Each of Wisconsin Energy and Acquisition is a
corporation duly and validly organized and existing under the Laws of the State
of its incorporation and is qualified to do business as a foreign corporation
and is in good standing in all jurisdictions where the ownership or leasing of
property or the conduct of its business requires qualification as a foreign
corporation.
(b) CORPORATE POWER AND AUTHORITY. Each of Wisconsin Energy and
Acquisition has full corporate power and authority and all franchises, permits,
licenses, approvals, authorizations, registrations, certificates of convenience
and necessity, grants and orders necessary to carry on its business as it is now
conducted and to own, lease and operate its assets and properties.
5.2 CAPITALIZATION.
(a) CAPITALIZATION. The entire authorized capital stock of
Wisconsin Energy consists of: (i) 325,000,000 shares of Common Stock (which will
be increased to 750,000,000 shares upon the consummation of the transactions
described in the Primergy Agreement), $.01 par value, of which 112,465,540
shares were issued and outstanding on May 1, 1997; and (ii) 15,000,000 shares of
Preferred Stock, $.01 par value, none of which are issued and outstanding.
(b) AUTHORIZATION. All of the shares of Wisconsin Energy Common
Stock to be issued pursuant to this Agreement will be, when issued: (i) duly
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authorized, validly issued and fully paid; and (ii) nonassessable, except as
provided in Section 180.0622(2)(b) of the Wisconsin Business Corporation Law 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: (a) are within the corporate
power of Wisconsin Energy and Acquisition; (b) have been duly authorized by all
necessary corporate action by Wisconsin Energy and Acquisition; and (c) do not
require any approval of the shareholders of Wisconsin Energy. 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.
5.4 NO VIOLATION OR CONFLICT. Subject to the receipt of the
approvals and consents described in Section 7.9 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 any Law, the Restated
Articles of Incorporation or Bylaws of Wisconsin Energy, the Articles of
Incorporation or Bylaws of Acquisition or any material contract or agreement to
which Wisconsin Energy or Acquisition is a party or by which either of them is
bound.
5.5 LITIGATION. To the knowledge of Wisconsin Energy, there are no
actions, suits or proceedings against Wisconsin Energy or Acquisition, or both,
by any Person which question the validity, legality or propriety of the
transactions contemplated by this Agreement.
5.6 WISCONSIN ENERGY SEC REPORTS.
(a) WISCONSIN ENERGY SEC REPORTS. The Wisconsin Energy SEC
Reports: (i) include all reports, definitive proxy statements and amendments
thereto filed or required to be filed by Wisconsin Energy with the SEC since
January 1, 1994; and (ii) did not or will not, as the case may be, contain as of
their respective 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.
(b) 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
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unaudited statements as permitted by Form 10-Q of the SEC) and fairly present
the consolidated financial position of Wisconsin Energy as of the dates
thereof and the consolidated results of its 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.
5.7 BROKERS. Except for fees to Barr Devlin Associates, 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
governmental or regulatory authority is 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 7.9 of this Agreement; and (b) the filing of the
Certificate of Merger as described in this Agreement.
5.9 DISCLOSURE. No statement of fact by Wisconsin Energy or
Acquisition contained in this Agreement or in any documents delivered by
Wisconsin Energy or Acquisition to ESELCO for use in the Proxy Statement or the
Registration Statement 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.
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 ESELCO Stockholders and at the time of the ESELCO 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.
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ARTICLE VI
CONDUCT OF BUSINESS BY THE ESELCO COMPANIES
PENDING THE MERGER
Except with the written consent of Wisconsin Energy, from and after
the date of this Agreement and until the Effective Time of Merger, ESELCO shall,
and shall cause each of Edison Sault, ESEG and NTS to:
6.1 CARRY ON IN REGULAR COURSE. Diligently carry on its business in
the regular course and substantially in the same manner as heretofore and shall
not make or institute any unusual or novel methods of purchase, sale, lease,
management, accounting or operation.
6.2 USE OF ASSETS. Use, operate, maintain and repair all of its
assets and properties in a normal business manner.
6.3 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 Contracts.
6.4 EXISTING INSURANCE POLICIES. Use reasonable efforts to maintain
all of the Existing Insurance Policies in full force and effect.
6.5 EMPLOYMENT MATTERS. Not: (a) except as described in the
Disclosure Schedule, grant any increase in the rate of pay of any of its
employees; (b) institute or amend any Employee Benefit Plan; or (c) enter into
or modify any written employment arrangement with any Person.
6.6 CONTRACTS AND COMMITMENTS. Not enter into any contract or
commitment or engage in any transaction not in the usual and ordinary course of
business and consistent with its normal business practices and, except as
described in the Disclosure Schedule, not purchase, lease, sell or dispose of
any capital asset.
6.7 INDEBTEDNESS; INVESTMENTS. Not: (a) make any Investment; or (b)
create, incur or assume any Indebtedness, except for Indebtedness incurred in
the ordinary course of business by the ESELCO Companies as described in the
Disclosure Schedule.
6.8 PRESERVATION OF RELATIONSHIPS. Use its 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.
6.9 COMPLIANCE WITH LAWS. Comply in all respects with all applicable
Laws.
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6.10 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.
6.11 AMENDMENTS. Not amend its Articles of Incorporation or Bylaws,
except that ESELCO may amend its Articles of Incorporation to increase the
authorized number of shares of ESELCO Common Stock from 3,000,000 shares to
9,840,000.
6.12 DIVIDENDS; REDEMPTIONS; ISSUANCE OF STOCK. Not:
(a) except for ESELCO's 3% stock dividend payable to ESELCO
Stockholders on May 15, 1997, issue any additional shares of stock of any class
(including any shares of preferred stock) or grant any warrants, options or
rights to subscribe for or acquire any additional shares of stock of any class;
(b) declare or pay any dividend or make any capital or surplus
distributions of any nature, except for: (i) cash dividends by Edison Sault,
ESEG or NTS to ESELCO; and (ii) regular quarterly cash dividends by ESELCO on
the outstanding ESELCO Common Stock with usual record and payment dates not
exceeding, during any fiscal year of ESELCO, 106% of the cash dividends paid by
ESELCO on the ESELCO Common Stock during the immediately preceding fiscal year
of ESELCO; or
(c) directly or indirectly redeem purchase or otherwise acquire,
recapitalize or reclassify any of its capital stock or liquidate in whole or in
part.
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 and at the Effective Time of Merger shall be
subject to the satisfaction prior to or at the Closing and as of the Effective
Time of Merger of the following express conditions precedent:
7.1 COMPLIANCE WITH AGREEMENT. ESELCO 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 and as of the Effective Time of Merger.
7.2 PROCEEDINGS AND INSTRUMENTS SATISFACTORY. All proceedings,
corporate or other, to be taken in connection with the transactions
contemplated by this Agreement, and all documents incident thereto, shall be
reasonably satisfactory in form and substance to
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Wisconsin Energy, and ESELCO shall have made available to Wisconsin Energy
for examination the originals or true and correct copies of all documents
Wisconsin Energy may reasonably request in connection with the transactions
contemplated by this Agreement.
7.3 NO LITIGATION. No suit, action or other proceeding shall be
pending or threatened before any court in which the consummation of the
transactions contemplated by this Agreement is restrained or enjoined or in
which the relief requested is to restrain, enjoin or prohibit the consummation
of the transactions contemplated by this Agreement.
7.4 REPRESENTATIONS AND WARRANTIES OF ESELCO. The representations
and warranties made by ESELCO in this Agreement shall be true and correct in
all material respects when made, as of the Closing Date and as of the
Effective Time of Merger with the same force and effect as though said
representations and warranties had been made on the Closing Date, subject to
Section 3.4(b) of this Agreement with respect to the Closing Date and the
Effective Time of Merger.
7.5 NO ESELCO MATERIAL ADVERSE EFFECT. During the period from the
date of this Agreement to the Closing Date and as of the Effective Time of
Merger there shall not have occurred, and there shall not exist on the
Closing Date and as of the Effective Time of Merger, any ESELCO Material
Adverse Effect, whether or not previously disclosed pursuant to Section
3.4(b) of this Agreement.
7.6 APPROVAL OF ESELCO STOCKHOLDERS; CERTIFICATE OF MERGER. This
Agreement, the Merger and the transactions contemplated by this Agreement
shall have received the requisite approval and authorization of the ESELCO
Stockholders. The Certificate of Merger and the Plan of Merger shall have
been executed and delivered by ESELCO.
7.7 DELIVERIES AT CLOSING. ESELCO shall have delivered to
Wisconsin Energy the following documents, each properly executed and dated
the Closing Date: (a) the ESELCO Closing Certificate; and (b) the ESELCO
Counsel Opinion.
7.8 OTHER DOCUMENTS. ESELCO shall have delivered to Wisconsin
Energy such certificates and documents of officers of ESELCO and public
officials as shall be reasonably requested by Wisconsin Energy to establish
the existence of the ESELCO Companies and the due authorization of this
Agreement and the transactions contemplated by this Agreement by ESELCO.
7.9 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 FERC and SEC,
as may be required by Law or by such Persons: (i) in order for Wisconsin
Energy and Acquisition to consummate the Merger
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and the transactions described in this Agreement; and (ii) so that Wisconsin
Energy is either an exempt holding company under PUHCA or a registered
holding company under 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. The
Wisconsin Energy Common Stock issuable pursuant to the Merger shall have been
registered or shall be exempt from registration 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 7.9(a), 7.9(b)
or 7.9(c) of this Agreement shall contain any condition applicable to the
ESELCO Companies, Wisconsin Energy 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 ESELCO Companies, Wisconsin Energy or
Acquisition.
7.10 LISTING. Wisconsin Energy shall have received notice from the
New York Stock Exchange that the shares of Wisconsin Energy Common Stock to
be issued pursuant to this Agreement are approved for listing on the New York
Stock Exchange subject to official notice of issuance.
7.11 TAX OPINION. Wisconsin Energy shall have received an opinion
of Quarles & Brady, counsel to Wisconsin Energy, 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 ESELCO will each be a party to that reorganization within the
meaning of Section 368(b) of the Code, dated on or about the date that is two
business days prior to the date the Proxy Statement is first mailed to ESELCO
Stockholders, and such opinion shall not have been withdrawn or modified in
any material respect as of the Closing Date and the Effective Time of Merger.
7.12 ACCOUNTANT LETTERS. Wisconsin Energy shall have received a
copy of each of the following letters from Arthur Andersen LLP, each of which
shall be in form and substance reasonably satisfactory to Wisconsin Energy
and shall contain information concerning the financial condition of ESELCO:
(a) the letter described in Section 3.9 of this Agreement; (b) a similar
letter dated the date of the mailing of the Proxy Statement; and (c) a
similar letter dated the Closing Date.
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7.13 POOLING OPINION. Wisconsin Energy shall have received an
opinion from Price Waterhouse LLP to the effect that the Merger qualifies for
pooling-of-interests accounting treatment if consummated in accordance with
this Agreement.
7.14 AFFILIATE LETTERS. Wisconsin Energy shall have received an
Affiliate Letter from each Person who is an Affiliate.
7.15 FRACTIONAL SHARES. The aggregate of the fractional share
interests in Wisconsin Energy Common Stock to be paid in cash pursuant to
Section 2.8(e) of this Agreement shall not be more than 5% of the maximum
aggregate number of shares of Wisconsin Energy Common Stock which could be
issued as a result of the Merger.
7.16 DISSENTING ESELCO STOCK. No more than five percent (5%) of
the shares of ESELCO Common Stock issued and outstanding immediately prior to
the Effective Time of Merger shall be qualified as Dissenting ESELCO Stock in
accordance with the terms of the Michigan Business Corporation Act.
ARTICLE VIII
CONDITIONS PRECEDENT TO THE
OBLIGATIONS OF ESELCO
Each and every obligation of ESELCO to be performed on the Closing
Date and at the Effective Time of Merger shall be subject to the satisfaction
prior to or at the Closing and as of the Effective Time of Merger 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 and as of the Effective Time of
Merger.
8.2 PROCEEDINGS AND INSTRUMENTS SATISFACTORY. All proceedings,
corporate or other, to be taken in connection with the transactions
contemplated by this Agreement, and all documents incident thereto, shall be
reasonably satisfactory in form and substance to ESELCO, and Wisconsin Energy
and Acquisition shall have made available to ESELCO for examination the
originals or true and correct copies of all documents which ESELCO may
reasonably request in connection with the transactions contemplated by this
Agreement.
8.3 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.
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8.4 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 material
respects when made, as of the Closing Date and as of the Effective Time of
Merger with the same force and effect as though such representations and
warranties had been made on the Closing Date.
8.5 APPROVAL OF ESELCO STOCKHOLDERS; CERTIFICATE OF MERGER. This
Agreement, the Merger and the other transactions contemplated by this
Agreement shall have received the requisite approval and authorization of the
ESELCO Stockholders. The Certificate of Merger and the Plan of Merger shall
have been executed and delivered by Acquisition.
8.6 DELIVERIES AT CLOSING. Wisconsin Energy and Acquisition shall
have delivered to ESELCO the following documents, each properly executed and
dated the Closing Date: (a) the Wisconsin Energy Closing Certificate; and
(b) the Wisconsin Energy Counsel Opinion.
8.7 OTHER DOCUMENTS. Wisconsin Energy shall have delivered to
ESELCO such certificates and documents of officers of Wisconsin Energy and
Acquisition and of public officials as shall be reasonably requested by
ESELCO to establish the existence of Wisconsin Energy and Acquisition and the
due authorization of this Agreement and the transactions contemplated by this
Agreement by Wisconsin Energy and Acquisition.
8.8 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 FERC and SEC,
as may be required by Law or by such Persons in order for ESELCO 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. The
Wisconsin Energy Common Stock issuable pursuant to the Merger shall have been
registered or shall be exempt from registration 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.
8.9 TAX OPINION. ESELCO shall have received an opinion of Quarles
& Brady, counsel to Wisconsin Energy, to the effect that the Merger will be
treated for federal
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income tax purposes as a reorganization within the meaning of Section 368(a)
of the Code, and that Wisconsin Energy, Acquisition and ESELCO will each be a
party to that reorganization within the meaning of Section 368(b) of the
Code, dated on or about the date that is two business days prior to the date
the Proxy Statement is first mailed to ESELCO Stockholders, and such opinion
shall not have been withdrawn or modified in any material respect as of the
Closing Date and the Effective Time of Merger.
8.10 ACCOUNTANT LETTERS. ESELCO shall have received a copy of each
of the following letters from Price Waterhouse LLP, each of which shall be in
form and substance reasonably satisfactory to ESELCO and shall contain
information concerning the financial condition of Wisconsin Energy: (a) the
letter described in Section 3.10 of this Agreement; (b) a similar letter
dated the date of the mailing of the Proxy Statement; and (c) a similar
letter dated the Closing Date.
8.11 NO MATERIAL ADVERSE CHANGE. During the period from the date of
this Agreement to the Closing Date there shall not have occurred any event,
condition or fact which is continuing on the Closing Date and which is
materially adverse to the financial condition of Wisconsin Energy and the
Subsidiaries of Wisconsin Energy, taken as a whole; provided that the status
of the closing of the transactions under, or the termination of, the Primergy
Agreement shall not be considered for any purpose under this Section 8.11 of
this Agreement.
8.12 LISTING. Wisconsin Energy shall have received notice from the
New York Stock Exchange that the shares of Wisconsin Energy Common Stock to
be issued pursuant to this Agreement are approved for listing on the New York
Stock Exchange subject to official notice of issuance.
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 ESELCO Stockholders), as follows:
(a) by mutual written agreement of Wisconsin Energy and
ESELCO;
(b) by Wisconsin Energy if any of the conditions set forth in
Article VII of this Agreement shall not have been fulfilled by the Closing;
(c) by ESELCO if any of the conditions set forth in Article VIII
of this Agreement shall not have been fulfilled by the Closing;
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(d) by Wisconsin Energy pursuant to Section 3.4(b) of this
Agreement;
(e) by ESELCO pursuant to Section 3.8(d) of this Agreement;
(f) by Wisconsin Energy pursuant to Section 2.11(b) of this
Agreement; or
(g) by either Wisconsin Energy or ESELCO if the Closing has
not occurred on or before December 31, 1998 (the "Initial Termination Date"),
provided however that if on the Initial Termination Date the conditions to
the Closing set forth in Sections 7.9 and 8.8 of this Agreement shall not
have been fulfilled, then the Initial Termination Date shall be extended to
June 30, 1999.
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 2.11(c), 3.3(b), 3.13, 9.2, 9.4, 9.5, 9.8,
9.12 and 9.13 of this Agreement shall survive any such termination; (b) the
obligations of ESELCO contained in Sections 3.8(e) (except as described in
Section 3.8(f) of this Agreement), 3.13, 9.2, 9.4, 9.5, 9.7, 9.8, 9.12 and
9.13 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, ESELCO 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 2.8, 2.9, 2.10,
9.3, 9.4, 9.5, 9.8 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 the Letter of Intent and all
prior and contemporaneous
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agreements, understandings, negotiations and discussions of the parties,
whether oral or written, 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. This
Agreement may be amended by the parties at any time before or after approval
of this Agreement by the ESELCO Stockholders, except that after such
approval, no amendment shall be made without the further approval of the
ESELCO Stockholders if any such amendment: (a) changes the Exchange Ratio; or
(b) materially adversely affects the rights of the ESELCO Stockholders. No
amendment, supplement, modification, waiver or termination of this Agreement
shall be binding unless executed in writing by the party to be bound thereby.
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. (a) 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 that: (i) Wisconsin
Energy shall pay the filing fee relating to the filing required by the HSR
Act; and (ii) 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 ESELCO, on the one hand, and Wisconsin
Energy, on the other hand.
(b) The Disclosure Schedule includes an estimate by ESELCO of
all costs and expenses incurred or to be incurred by ESELCO in connection
with the transactions contemplated by this Agreement except for those costs
shared by ESELCO pursuant to Section 9.5(a) of this Agreement.
9.6 GOVERNING LAW. This Agreement shall be construed and interpreted
according to the Laws of the State of Michigan.
9.7 ASSIGNMENT. Prior to the Effective Time of Merger, this
Agreement shall not be assigned:
(a) by ESELCO except with the prior written consent of Wisconsin
Energy; and
(b) by Wisconsin Energy or Acquisition, except: (i) with the
prior written consent of ESELCO; 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; or (iv) in connection
with the consummation of the transactions contemplated by the Primergy
Agreement.
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
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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 Wisconsin Energy Corporation
Acquisition: Attention: Calvin H. Baker
231 West Michigan Street
P.O. Box 2949
Milwaukee, WI 53201
Fax No: 414-221-5068
with a copy to:
Quarles & Brady
Attention: Patrick M. Ryan
411 East Wisconsin Avenue
Milwaukee, WI 53202
Fax No: 414-271-3552
If to ESELCO: ESELCO, Inc.
Attention: William R. Gregory
725 East Portage Avenue
Sault Ste., MI 49733
Fax No: 906-632-8444
with a copy to:
Kutak Rock
Attention: Joe E. Armstrong
The Omaha Building
1650 Farnam Street
Omaha, Nebraska 68102-2186
Fax No: 402-346-1148
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
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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.
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 ESELCO 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 and any
assignees permitted by Section 9.7 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 ESELCO, the officers of the
Surviving Corporation are fully authorized to take any such action in the
name of Acquisition or ESELCO.
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IN WITNESS WHEREOF, the parties have caused this Agreement and Plan
of Reorganization 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
Attest:
/s/ Ann Marie Brady
----------------------------------------
Ann Marie Brady, Secretary
ESELCO, INC
By/s/ William R. Gregory
-----------------------------------------
William R. Gregory, President and
Chief Executive Officer
Attest:
/s/ Donald C. Wilson
-----------------------------------------
Donald C. Wilson, Secretary
ESL ACQUISITION, INC.
By/s/ Richard A. Abdoo
-----------------------------------------
Richard A. Abdoo,
Chairman of the Board, President and Chief
Executive Officer
Attest:
/s/ Ann Marie Brady
-----------------------------------------
Ann Marie Brady, Secretary
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