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File No. 70-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM U-1
APPLICATION/DECLARATION
UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
20 N.W. Fourth Street
Evansville, Indiana 47741-0001
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(Name of company filing this statement and address
of principal executive office)
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
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(Name of top registered (exempt) holding company parent
of applicant or declarant)
A.E. GOEBEL
20 N.W. Fourth Street
Evansville, Indiana 47741-0001
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(Name and address of agent for service)
Copies to:
John W. Byington, Jr., Esq.
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004-1490
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM U-1
APPLICATION/DECLARATION WITH RESPECT TO
ACQUISITION OF INTERESTS IN
NON-AFFILIATED UTILITY COMPANY UNDER
THE PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
INTRODUCTION
Southern Indiana Gas and Electric Company, an Indiana corporation
("SIGECO"), the Applicant herein, hereby seeks the approval of the Securities
and Exchange Commission (the "Commission") under Sections 9(a)(2) and 10 of
the Public Utility Holding Company Act of 1935 (the "Act") for its proposed
acquisition of all of the issued and outstanding shares of common stock, par
value $10 per share ("Lincoln Common Stock"), of Lincoln Natural Gas Company,
Inc. ("Lincoln"), an Indiana public utility corporation engaged in the gas
utility business. A wholly-owned subsidiary of SIGECO, Spencer Energy Corp.,
an Indiana corporation ("Spencer"), will be merged (the "Merger") with and
into Lincoln pursuant to an Agreement and Plan of Merger, dated December 23,
1993, among SIGECO, Spencer and Lincoln (the "Agreement"), with Spencer
ceasing to exist and Lincoln continuing as the surviving corporation in a
transaction qualifying as a tax-free reorganization under Section 368(a) of
the Internal Revenue Code of 1986, as amended. In the Merger, the holders of
Lincoln Common Stock issued and outstanding immediately prior to the Merger
would be entitled to receive shares of common stock, without par value, of
SIGECO ("SIGECO
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Common Stock") having a market value of approximately $1,350,000 in
accordance with the formula contained in the Agreement, and each share of
common stock, no par value ("Spencer Common Stock"), of Spencer issued and
outstanding immediately prior to the Merger would be converted into one share
of Lincoln Common Stock. The number of shares of SIGECO Common Stock to be
exchanged in the transactions will be determined by their average closing
market price over a five-day period before the relevant closing date. The
transaction is intended to result in the liquidation of Spencer and the
survival of Lincoln as a wholly-owned subsidiary of SIGECO. The decision to
merge Spencer into Lincoln was made for tax and regulatory reasons.
Initially, Lincoln will be maintained as a separate company, but, if
appropriate, SIGECO may eventually merge Lincoln into itself.
Item 1. DESCRIPTION OF PROPOSED TRANSACTION
A. Description of Parties to the Transaction
1. Southern Indiana Gas and Electric Company
SIGECO is a publicly held operating public utility incorporated
June 10, 1912, under the laws of the State of Indiana, with its principal
office located in Evansville, Indiana. SIGECO is engaged in the generation,
transmission, distribution and sale of electricity and the purchase of
natural gas and its transportation, distribution and sale in a service area
which covers ten counties in southwestern Indiana. Its principal executive
offices are located at 20 N.W. Fourth Street, Evansville, Indiana 47741-0001.
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Electric service is supplied directly to Evansville and 74 other
cities, towns and communities, and adjacent rural areas. Wholesale electric
service is supplied to an additional nine communities. At December 31, 1993,
SIGECO served 118,163 electric customers.
At December 31, 1993, the SIGECO supplied gas service to 100,398
customers in Evansville and 63 other nearby communities and their environs.
In 1993, SIGECO purchased approximately 29% of its natural gas requirements
from Texas Gas Transmission Corporation ("TGTC") and Texas Eastern
Corporation ("TECO"), its traditional or contract suppliers, and
approximately 71% of such requirements from 22 spot market gas suppliers. As
of November 1, 1993, TGTC and TECO ceased to be suppliers of natural gas to
SIGECO, and SIGECO assumed full responsibility for the purchase of all its
natural gas supplies. During 1993, eighteen of SIGECO's major gas customers
took advantage of SIGECO's gas transportation program to procure a portion of
their gas supply needs from suppliers other than SIGECO.
The only property SIGECO owns outside of Indiana is approximately
eight miles of 138,000 volt electric transmission line which is located in
Kentucky and which interconnects with Louisville Gas and Electric Company's
transmission system at Cloverport, Kentucky. The original cost of that
property is less than $425,000. SIGECO does not distribute any electric
energy in Kentucky.
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SIGECO also engages in certain other nonutility businesses through
its wholly-owned subsidiary, Southern Indiana Properties, Inc.
For the twelve months ended December 31, 1993, approximately 79% of
SIGECO's total utility operating revenues were derived from its electric
operations and approximately 21% from its gas operations.
Operating as a public utility under the laws of Indiana, SIGECO is
subject to regulation by the Indiana Utility Regulatory Commission (the
"IURC") as to its gas and electric rates, services, accounts, depreciation,
issuance of securities, acquisitions and sale of utility properties or
securities, and in other respects as provided by the laws of Indiana. In
addition, SIGECO's wholesale rates and operations are subject to regulation
by the Federal Energy Regulatory Commission ("FERC") under the Federal Power
Act. The jurisdiction of the FERC does not extend to the issuance of
securities by SIGECO since it is a public utility organized and operating in
the State of Indiana, under the laws of which its security issuances are
regulated by the IURC.
SIGECO is a holding company as defined under Section 2(a)(7)(A) of
the Act by virtue of SIGECO's ownership of 33% of the capital stock of
Community Natural Gas Company, Inc. ("Community"), an Indiana corporation,
which is a gas utility company serving customers in southwestern Indiana.
SIGECO is exempt under Sections 3(a)(1) and 3(a)(2) of the Act and Rule 2
thereunder from all of the provisions of the Act, except Section
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9(a)(2). As more fully discussed in Item 3 below, Section 9(a)(2) provides
that unless the acquisition has been approved by the Commission, it shall be
unlawful for any person to acquire any security of a public utility company
if the acquiring person is, or by virtue of such acquisition will become, an
affiliate of such public utility and any other public utility company.
2. Spencer Energy Corp.
Spencer, an Indiana corporation, is a wholly-owned subsidiary of
SIGECO incorporated for the sole purpose of effecting SIGECO's acquisition of
the Lincoln Common Stock and consummating the transactions described herein
and is not engaged in any business. Its principal executive offices are
located at the offices of SIGECO, 20 N.W. Fourth Street, Evansville, Indiana
47741-0001.
3. Lincoln Natural Gas Company, Inc.
Lincoln is a closely held Indiana public utility corporation which
owns and operates a gas distribution system in the City of Rockport, Spencer
County, Indiana, and surrounding territory. Lincoln serves approximately
1,330 customers in Spencer County in southwestern Indiana and owns, operates,
maintains and manages plant, property, equipment and facilities used and
useful for the transmission, transportation, distribution and sale of natural
gas to the public. Lincoln's gas rates and charges, terms of service,
accounting matters, issuance of securities and other operational matters are
subject to regulation by the IURC.
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Lincoln purchases natural gas from American Natural Resources
Pipeline Company, a natural gas company, which transports such gas through
Indiana by means of an interstate pipeline facility, and from Robinson
Engineering, a natural gas company which provides local production gas to
Lincoln at its purchase station and spot market gas from various sources.
Lincoln's gas service territory is adjacent to SIGECO's gas service
territory. Lincoln's principal executive offices are located at 317 Main
Street, Rockport, Indiana 47635.
B. Description of the Proposed Transaction
As previously stated, SIGECO and Lincoln have entered into the
Agreement filed herewith as Exhibit B, whereby Spencer will merge with and
into Lincoln so that Spencer will cease to exist. In the Merger, the holders
of Lincoln Common Stock issued and outstanding immediately prior to the
Merger (other than Dissenting Holders, if any, as defined in the Agreement)
will be entitled to receive shares of SIGECO Common Stock having an aggregate
market value of approximately $1,350,000 in accordance with the formula
contained in the Agreement, and each share of Spencer Common Stock issued and
outstanding to SIGECO immediately prior to the Merger will be converted into
one share of Lincoln Common Stock. Any shares of Lincoln Common Stock held
in treasury by Lincoln at the effective time of the Merger will be canceled.
At the effective time of the Merger, therefore, SIGECO will own all of the
Lincoln Common Stock and Lincoln will survive as a wholly-owned subsidiary of
SIGECO. Consummation of the
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transactions contemplated by the Agreement is subject to, among other
conditions, the approval of the Commission.
After the consummation of the Merger, Lincoln will continue to
operate as a gas utility company as a separate subsidiary of SIGECO.
The "effective time" of the Merger will be the date of filing of
the Certificate of Merger with the Indiana Secretary of State pursuant to the
Indiana Business Corporation Law. SIGECO expects to consummate the Merger as
soon as possible after all regulatory approvals and other conditions
precedent contained in the Agreement have been fulfilled or waived. SIGECO
and Lincoln have filed a joint petition to the IURC requesting authority for
the acquisition and merger. A copy of the IURC Order will be filed as
Exhibit D-2 when issued.
The Agreement will be approved by a vote of the holders of Lincoln
Common Stock. Lincoln has 23 shareholders and is not a public company. To
date, there are no dissenters to the transaction. The names of all persons
holding 1% or more of Lincoln Common Stock are set forth in Exhibit B-6.
C. Reasons for the Transaction
The Boards of Directors and managements of SIGECO and Lincoln
believe that the added capabilities that will result from the proposed
transaction will afford additional benefits and economies which would
otherwise not be possible. These benefits will be derived from improved
long-term planning, the use by Lincoln of certain management services and
technical expertise
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of SIGECO which would otherwise have to be obtained from third parties, and
increased coordination and utilization of facilities. The result will be
greater efficiency and better service for Lincoln's customers over the long
term while SIGECO and its customers are also expected to benefit from the
spread of fixed gas utility costs over a larger customer base and greater
utility efficiencies created by a larger but still very manageable gas
operation. The transaction is expected to present opportunities for
economies of scale by, among other operating benefits, centralized meter
repair, reduced gas cost by larger volume gas purchases, greater efficiency
and economy in management, administration, insurance, training, engineering,
purchasing, human relations and computerization.
Following the effective time of the Merger, Lincoln will be
operated as a separate subsidiary of SIGECO. Lincoln is a well-managed and
efficient company, respected in its local community. It experiences
competitive disadvantages, however, due to its comparatively small size,
which can be alleviated by integration and coordination with the SIGECO
system. For example, it is SIGECO's intention that the size and financial
strength of SIGECO and its access to capital from a variety of sources at
competitive rates will be used to benefit Lincoln when Lincoln needs debt
financing for improvements and extension of facilities over the long term.
In addition, the transaction will provide Lincoln greater gas supply
opportunities and security by providing access to SIGECO's expertise in
supply planning and acquisition, transportation and storage functions.
SIGECO
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believes that the benefits and opportunites discussed above will be realized
whether or not Lincoln is subsequently merged into SIGECO.
The Merger is intended to qualify as a tax-free reorganization
under Sections 368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue Code of
1986, as amended. SIGECO believes that retaining Lincoln as a separate
subsidiary will facilitate utility operations, assure the tax-free nature of
the transaction, and still achieve the essential economies obtainable from an
outright merger of Lincoln into SIGECO.
No associate company or affiliate of SIGECO or any affiliate of any
such associate company has any material interest in the proposed transaction.
Item 2. FEES, COMMISSIONS AND EXPENSES
(a) SIGECO anticipates that it will retain the services of law,
accounting and engineering firms, and possibly other consultants, in
connection with the proposed acquisition of Lincoln Common Stock, but it
cannot yet estimate the amount of the fees that will be involved. At such
time as it becomes possible to make a statement of such fees, this statement
will be submitted by amendment to this Application. Pursuant to the
Agreement, SIGECO and Lincoln have each agreed that each party will pay all
costs and expenses incurred by it in connection with the proposed transaction
whether or not consummated.
(b) Not applicable.
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Item 3. APPLICABLE STATUTORY PROVISIONS
It is believed that Sections 9(a) and 10 of the Act are applicable
to the proposed transactions. To the extent that the proposed transactions
are considered by the Commission to require authorization, approval or
exemption under any section of the Act or provision of the rules or
regulations thereunder other than those specifically referred to herein,
request for such authorization, approval or exemption is hereby made.
SIGECO is a holding company but is predominantly an operating
public utility. SIGECO and its utility subsidiaries are intrastate in
character and carry on their business in Indiana, the state of their
incorporation. Therefore, under Sections 3(a)(1) and 3(a)(2) of the Act and
Rule 2 thereunder, SIGECO is exempt from all the provisions of the Act,
except for Section 9(a)(2) which requires Commission approval of SIGECO's
proposed acquisition of Lincoln Common Stock under the standards set forth
pursuant to Section 10(b), (c) and (f) of the Act.
A. Section 10(b) Analysis
Under Section 10(b), the Commission shall approve the acquisition
of Lincoln by SIGECO unless it finds that:
(1) such acquisition will tend towards interlocking relations or
the concentration of control of public-utility companies, of a kind or
to an extent detrimental to the public interest or the interest of
investors or consumers;
(2) in case of the acquisition of securities or utility assets,
the consideration, including all fees, commissions, and other
remuneration, to whomsoever paid, to be given, directly or indirectly,
in connection with such acquisition is not reasonable or does not bear a
fair relation to the sums invested in or the earning capacity of
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the utility assets to be acquired or the utility assets underlying the
securities to be acquired; or
(3) such acquisition will unduly complicate the capital structure
of the holding-company system of the applicant or will be detrimental to
the public interest or the interest of investors or consumers or the
proper functioning of such holding-company system.
1. Section 10(b)(1)
The pro forma financial statements attached hereto demonstrate that
the acquisition of Lincoln will increase SIGECO's total operating revenues by
less than .3%, gas operating revenues by less than 1.5% and total assets by
less than 0.1%. By virtue of the size of Lincoln and the small nature of
this transaction, interlocking relations or a concentration of control of
public utility companies of a kind detrimental to the public interest or the
interest of investors or consumers is unlikely to occur. In addition, the
proposed transaction will not tend towards the concentration of control of
public utilities to an extent detrimental to the public interest or the
interest of investors or consumers since SIGECO and Lincoln operate
exclusively in Indiana and will be regulated by the IURC.
Given that other large gas distribution companies exist in Indiana,
including Indiana Gas Company, Inc. which supplies gas to over 422,000
customers, Citizens Gas & Coke Utility which supplies gas to over 235,000
customers and Northern Indiana Public Service Company which supplies gas to
over 680,000 customers, the acquisition by SIGECO of Lincoln and Lincoln's
1,330 customers is not a transaction for which an adverse finding under
Section 10(b)(1) should be made by the Commission. This is
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especially true in light of the fact that SIGECO serves over 100,000 gas
customers, and the addition of Lincoln's 1,330 customers is less than a 1.3%
increase in SIGECO's total gas customer base. Due to the existence of other
gas distribution companies in Indiana, the relatively small nature of the
transaction in terms of consumers involved and continuing state regulation of
the provision of gas services to customers in Indiana, the acquisition of
Lincoln by SIGECO will not hinder or foreclose competition in Indiana to the
detriment of consumers, nor will it result in a concentration of control of
public utility companies that is detrimental to the public interest or the
interest of investors or consumers.
2. Section 10(b)(2)
Section 10(b)(2), as applied to this transaction, provides that the
Commission shall approve the transaction unless it finds that the
consideration paid by SIGECO to the shareholders of Lincoln is not reasonable
or does not bear a fair relation to the earning capacity of the utility
assets underlying the Lincoln Common Stock.
The consideration in the acquisition of the Lincoln Common Stock,
consisting of shares of SIGECO Common Stock, is approximately $1,350,000.
The purchase price to be paid by SIGECO was the result of arm's length
negotiations between the senior management of SIGECO and Lincoln, and SIGECO
believes that it is reasonable and bears a fair relation to the assets and
earnings of Lincoln. The Board of Directors of SIGECO and
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Lincoln approved the transaction in meetings on December 21, 1993 and
December, 13, 1993, respectively. The Agreement will be presented to the
Lincoln shareholders for their approval at a shareholders meeting prior to
June 30, 1994.
The consideration to be paid by SIGECO reflects SIGECO's objective
to offer a sum reasonable in relation to the expected value to SIGECO's
shareholders arising from the transaction, but yet a sum sufficient to secure
the approval of the shareholders of Lincoln. In offering this consideration,
SIGECO assumes that it will achieve the economic benefits of the transaction
discussed under Item 1 above sufficient to justify the consideration.
It has been common practice in previous transactions reviewed by
the Commission under Section 10(b)(2) to examine the consideration to be paid
in light of its relation to net income, book value and cash flow of the
company being acquired. Based on a price of $143 per share of Lincoln Common
Stock ($1,350,000/9,417 shares), the multiple of price to book value of
Lincoln at December 31, 1993 ($52.90 per share) is 2.71 times. Since Lincoln
posted a net operating loss and negative cash flow for the twelve months
ended December 31, 1993 (see the financial statements attached hereto),
resulting multiples of price to net income and cash flow are negative. It
should be pointed out, however, that on March 9, 1994 Lincoln was granted a
rate increase by the IURC, effective as of that date, which increased rates
10.39% across-the-board and is expected to result in a concomitant
improvement in its earnings. In negotiating and
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determining a fair price for Lincoln, SIGECO took into account the then
pending rate case and its potential effect on Lincoln's net income. Assuming
Lincoln net income of approximately $70,000 per year after the rate increase
is effective, the price to be paid would amount to a multiple of
approximately 20 times such pro forma net income. In addition, subsequent
savings from the acquisition will only serve to further reduce such multiple
on a pro forma basis.
Although SIGECO has not independently verified such information, it
is SIGECO's understanding that multiples of price paid to net income and book
value in other acquisitions in the gas utility industry approved by the
Commission since 1987 fall in the range of 15.6 to 37.7 times and 1.8 to 3.0
times, respectively. SIGECO believes that a price to book value multiple of
2.71 times and a price to pro forma net income multiple (taking into account
the recent rate increase for Lincoln as discussed above) of approximately 20
times puts the proposed acquisition of Lincoln squarely within the range of
multiples seen in those other acquisitions, further indicating, therefore,
the fairness and reasonableness of the consideration to be paid by SIGECO for
Lincoln.
Also significant is that Lincoln shareholders, as a result of the
proposed transaction, will receive shares of SIGECO Common Stock which are
listed on the New York Stock Exchange, thus providing the Lincoln
shareholders with a public market for their securities that they do not have
as Lincoln shareholders.
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Finally, the consideration is justified by SIGECO because it
provides SIGECO the opportunity to provide gas service in an area where it
already provides retail electric service and it provides SIGECO the franchise
rights to a service area which SIGECO believes has excellent prospects for
industrial development and economic expansion.
Based on the foregoing analyses and observations, SIGECO believes
that the consideration (including all fees paid in connection with the
transaction) to be paid for the Lincoln Common Stock is reasonable and bears
a fair relation to the earnings capacity of the utility assets underlying the
Lincoln Common Stock. Accordingly, the consideration to be paid by SIGECO
meets the standards of Section 10(b)(2).
3. Section 10(b)(3)
The acquisition by SIGECO of the Lincoln Common Stock will neither
unduly complicate the capital structure of the SIGECO holding company system
nor be detrimental to the public interest or the interest of investors or
consumers or the proper functioning of the SIGECO holding company system.
The only structural changes will be the addition of Lincoln as a subsidiary
of SIGECO and the increased number of shareholders of SIGECO resulting from
the exchange of SIGECO common stock for each share of Lincoln Common Stock.
As a result of such exchange, SIGECO will issue approximately 45,000 treasury
shares. This will increase SIGECO's total common shareholders' equity by
only 0.3% (see the pro forma financial statements attached
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hereto). The debt to equity ratio of SIGECO also will not change
significantly as a result of the transaction. As of December 31, 1993,
SIGECO's ratio of long-term debt to total capitalization was approximately
50.13%, as compared to 50.08% on a pro forma basis (see the pro forma
financial statements attached hereto). These slight changes will result in
no detriment to the public interest or the interest of investors or consumers
or the proper functioning of the SIGECO holding company system.
An additional element under Section 10(b)(3) of the Act is whether,
as a combined electric and gas utility, the expansion of SIGECO's gas
operations as a result of the acquisition would be detrimental to the public
interest or the interest of investors or consumers. The Commission has
directly addressed this issue in Dominion Resources, Inc., Release No. 35-
24618 (April 5, 1988), 40 S.E.C. Docket 847. In Dominion Resources, the
Commission took the position that where there is "affirmative state
regulation over the activities of a combination company otherwise entitled to
an exemption under Section 3(a) from the provisions of the Act, we need not
find . . . that permitting retention of the combined operations would be
detrimental to the public interest or the interest of investors or
consumers." Id. at 849. The SIGECO system is, and the combined
SIGECO/Lincoln system that would result from the acquisition would be,
subject to extensive regulation by the IRUC. Indiana law allows the IURC to
oversee day-to-day operations of Indiana utilities and to review intrasystem
transactions and affiliations to insure that they are operated in a manner
that is beneficial to ratepayers.
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Accordingly, the expansion of the SIGECO gas operations would not be
detrimental to the public interest or the interest of investors or consumers.
Therefore, the standards under Section 10(b)(3) are satisfied.
B. Section 10(c) Analysis
Section 10(c) of the Act provides that the Commission shall not
approve the acquisition of securities if such acquisition would result in
certain conditions:
Notwithstanding the provisions of subsection (b), the Commission shall
not approve:
(1) an acquisition of securities or utility assets, or of any
other interest, which is unlawful under the provisions of Section 8 or
is detrimental to the carrying out of the provisions of Section 11; or
(2) the acquisition of securities or utility assets of a public
utility or holding company unless the Commission finds that such
acquisition will serve the public interest by tending towards the
economical and the efficient development of an integrated public utility
system . . . .
1. Section 10(c)(1)
Consistent with the standards set forth in Section 10(c)(1) of the
Act, the proposed acquisition of securities will not be unlawful under the
provisions of Section 8 of the Act (inasmuch as Section 8 applies only to
registered holding companies and, in any event the acquisition is subject to
the prior approval of the IURC), or detrimental to the carrying out of the
provisions of Section 11 of the Act, which also applies, by its terms, only
to registered holding companies.
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Section 11(a) of the Act requires the Commission to examine the
corporate structure of registered holding companies to ensure, inter alia,
that unnecessary complexities are eliminated and voting powers are fairly and
equitably distributed. The proposed acquisition of securities meets the
standards of Section 11(a) of the Act. As discussed with respect to the
requirements of Section 10(b)(3) of the Act, supra, the proposed transaction,
having the effect of adding a gas distribution operating company to the
SIGECO system, will result in a very simple structure and, as such, will be
consistent with the provisions of Section 11. Further, SIGECO will acquire
all of the outstanding Lincoln Common Stock so that there will be no minority
interest in Lincoln.
2. Section 10(c)(2)
Section 10(c)(2) of the Act provides that the Commission shall not
approve the acquisition of securities of a public utility unless the
Commission finds that "such acquisition will serve the public interest by
tending towards the economical and the efficient development of an integrated
public-utility system . . . ." The acquisition is beneficial to all the
parties involved, as well as to investors and the public.
a. Economics and Efficiencies
The acquisition will tend toward certain economies and
efficiencies, affording Lincoln access to developing gas-related technologies
and purchasing opportunities that, without the
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acquisition, Lincoln would not have the financial ability to access.
Moreover, while Lincoln's increased strength as a result of the acquisition
will allow Lincoln to enhance its implementation of conservation programs and
to more readily comply with new and existing environmental standards, the
acquisition will similarly allow Lincoln to expand its operations and allow
SIGECO to expand its investment in the retail gas business.
Although Lincoln will be a separate wholly-owned subsidiary of
SIGECO, the companies will be operated as an integrated public-utility
system. After the acquisition, SIGECO will make gas-supply purchases for
both companies. Other aspects of the Lincoln system will be operated by
SIGECO pursuant to service agreements (i.e., legal, financial, accounting,
engineering, maintenance and other services).
The above-described benefits are those that will immediately inure
to the companies as a result of the acquisition. The benefits associated
with the integrated system that will be created by the acquisition, however,
go further. The ability of Lincoln to access the SIGECO system should result
in what are not quantifiable cost savings. A substantial part of these cost
savings will inure to the benefit of ratepayers of both companies. Moreover,
the addition of the Lincoln service territory to the SIGECO system may
increase the value of SIGECO Common Stock and thus benefit SIGECO's
shareholders.
In light of these cost savings and various efficiencies, the
requirements of the economical and efficient
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development of an integrated utility system of Section 10(c)(2) of the Act
will clearly be met.
b. Integration
As applied to gas utility companies, the term "integrated public
utility system" is defined in Section 2(a)(29)(b) of the Act as:
a system consisting of one or more gas utility companies which are
so located and related that substantial economies may be
effectuated by being operated as a single coordinated system
confined in its operations to a single area or region, in one or
more States, not so large as to impair (considering the state of
the art and the area or region affected) the advantages of
localized management, efficient operation, and the effectiveness of
regulation: Provided, that gas utility companies deriving natural
gas from a common source of supply may be deemed to be included in
a single area or region.
On the basis of this statutory definition, the Commission has
established certain standards that must be met before the Commission will
find that an integrated public-utility system will result from a proposed
acquisition of securities:
(1) the companies are so located and related that substantial economies
may be effected by being operated as a single coordinated system;
(2) the operations of the system are confined to a in single area or
region; and
(3) the system must not be so large as to impair the advantages of
localized management, efficient operation, and the effectiveness of
regulation.
Single Coordinated System. SIGECO and Lincoln can easily be
operated as a single coordinated system with operations confined to a single
area and region since the gas service areas of the two utilities are
adjacent. (See Map showing respective service areas of SIGECO and Lincoln,
attached hereto as
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Exhibit E.) In addition, as the discussion under Section 10(c)(2) above
explains, substantial economies may be effected as a result of the
acquisition.
Single Area or Region. As the Map in Exhibit E clearly shows, the
"single coordinated system" of SIGECO and Lincoln would be confined in its
operations to a single area or region in southwestern Indiana.
Lack of Impairment. Finally, the effectiveness of regulation will
not be diminished; SIGECO and Lincoln will each remain subject to regulation
and oversight by the IURC. Further, SIGECO will continue to qualify as an
exempt utility under Section 3(a)(2) of the Act subsequent to the
acquisition. In addition, since headquarters will remain in Indiana, the
advantages of localized management will not be compromised.
C. Conclusion
In sum, no basis exists for the Commission to find that the
standards of Section 10(b) preclude approval of the acquisition. The
acquisition will neither unduly complicate the capital structure of the
SIGECO system nor be detrimental to the public interest, the interest of
investors or consumers or the proper functioning of the SIGECO system. No
complexities proscribed by Section 10(b)(3) will result.
Further, standards under Section 10(c)(2) and Section 10(b)(3) are
satisfied, and the requirements of Rule 51 have been satisfied.
Based on the foregoing, SIGECO respectfully requests that the
Commission issue an order approving the acquisition by
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SIGECO of all of the Lincoln Common Stock and the acquisition itself pursuant
to the Agreement, all as described herein.
Item 4. REGULATORY APPROVAL
(a) The Commission and the IURC have jurisdiction over the
transaction proposed in this Application. SIGECO is subject to the
jurisdiction of the IURC, as is Lincoln.
(b) SIGECO and Lincoln have filed a joint petition with the IURC
for authority to consummate the transaction.
Item 5. PROCEDURE
(a) SIGECO requests the Commission to take action on this
Application by May 19, 1994 or as soon thereafter as is practicable.
(b) SIGECO requests that Commission action on this Application be
taken without a recommended decision by a hearing officer or any other
responsible officer of the Commission, and that there be no waiting period
between the issuance of the Commission's order and the date upon which its is
to become effective. It is requested that the Commission's order with
respect to this Application become effective immediately upon being entered.
The Commission's Division of Corporate Regulation may assist in the
preparation of the Commission's decision with respect to this Application
unless such Office opposes this Application.
-22-
<PAGE>
Item 6. EXHIBITS AND FINANCIAL STATEMENTS
The following exhibits and financial statements are filed as a part
of this Application:
(a) Exhibits
A-1* Amended Articles of Incorporation of SIGECO, as amended
March 26, 1985. (Physically filed and designated in Form
10-K for the fiscal year 1985, File No. 1-3553, as
Exhibit 3-A.) Articles of Amendment of the Amended
Articles of Incorporation of SIGECO, dated March 24,
1987. (Physically filed and designated in Form 10-K for
the fiscal year 1987, File No. 1-3553, as Exhibit 3-A.)
Articles of Amendment of the Amended Articles of
Incorporation of SIGECO, dated November 27, 1992.
(Physically filed and designated in Form 10-K for the
fiscal year 1992, File No. 1-3553, as Exhibit 3-A.)
A-2 Articles of Incorporation of Spencer, as filed with the
Secretary of State, State of Indiana.
A-3 Articles of Incorporation of Lincoln, as filed with the
Secretary of State, State of Indiana.
B-1 Letter of Intent dated November 19, 1993.
B-2 Agreement and Plan of Merger, dated as of December 23,
1993.
B-3 Right of First Refusal Agreement, dated December 23,
1993.
B-4 Indemnity Agreement, dated as of December 23, 1993.
B-5 Letter Agreement, dated as of December 23, 1993,
regarding certain employee matters.
B-6 Names and shareholdings of stockholders of Lincoln
holding 1% or more of Lincoln Common Stock.
D-1 Joint Petition of SIGECO and Lincoln to the Indiana
Utility Regulatory Commission.
D-2 Order of Indiana Utility Regulatory Commission. (To be
filed by amendment.)
-23-
<PAGE>
E Map showing geographical relationship of properties of
SIGECO and Lincoln. (Filed in paper form under Form SE
pursuant to Instruction E to Form U-1 Instructions to
Exhibits.)
F Opinion of counsel to SIGECO. (To be filed by
amendment.)
H Proposed Notice of Application.
* Incorporated by reference.
(b) Financial Statements
1. Southern Indiana Gas and Electric Company Pro Forma Combined
Condensed Balance Sheet of as of December 31, 1993 and Pro
Forma Combined Condensed Statement of Income as of December
31, 1993, with summary of pro forma adjustments.
2. Lincoln Natural Gas Company, Inc. financial statements for the
year ended December 31, 1993.
3. Lincoln Natural Gas Company, Inc. financial statements for the
years ended December 31, 1992 and 1991.
Item 8. INFORMATION AS TO ENVIRONMENTAL EFFECTS
(a) The proposed transaction covered by this Application will not have
any impact on the quality of the environment because such transaction
contemplates only the acquisition of Lincoln Common Stock.
(b) To the best of SIGECO's knowledge, no federal agency has prepared
or is preparing an environmental impact statement with regard to the proposed
transaction covered by this Application.
-24-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Public Utility Holding Company Act
of 1935, the undersigned, as Applicant, has duly caused this statement to be
signed on its behalf by the undersigned thereunto duly authorized.
Date: March 30, 1994
SOUTHERN INDIANA GAS AND
ELECTRIC COMPANY
By: /s/ A.E. GOEBEL
-------------------------------------
A.E. Goebel
Senior Vice President,
Chief Financial Officer,
Secretary and Treasurer
-25-
<PAGE>
Exhibit A-2
-----------
ARTICLES OF INCORPORATION
State Form 4159 (R6/3-88)
ARTICLES OF INCORPORATION OF
Spencer Energy Corp.
The undersigned desiring to form a corporation (hereinafter referred to as
"Corporation") pursuant to the provisions of:
Indiana Business Corporation Law
As amended, executes the following Articles of Incorporation:
ARTICLE I NAME
Name of Corporation
Spencer Energy Corp.
ARTICLE II REGISTERED OFFICE AND AGENT
(The street address of the corporation's initial registered office in Indiana
and the name of its initial registered agent at that office is:)
Name of Agent
A. E. Goebel
Street Address of Registered Office Zip Code
20-24 N.W. Fourth Street, Evansville, IN 47708
ARTICLE III AUTHORIZED SHARES
Number of shares: one thousand (1000)
<PAGE>
ARTICLE IV INCORPORATORS
(The name(s) and address(es) of the incorporator(s) of the corporation:)
NUMBER AND STREET OR
NAME BUILDING CITY STATE ZIP CODE
A. E. Goebel 20-24 N.W. Fourth St. Evansville IN 47708
In Witness Whereof, the undersigned being all the incorporators of said
corporation execute these Articles of Incorporation and verify, subject to
penalties of perjury, that the statements contained herein are true, this
24th day of November 1993.
Signature Printed Name
/s/A. E. Goebel A. E. Goebel
This instrument was prepared by (Name)
Robert M. Becker, Attorney-At-Law
Address (Street, Number, City and State) Zip Code
Post Office Box 657, Evansville, IN 47704
-2-
<PAGE>
EXHIBIT A-3
COMPOSITE COPY
OF
ARTICLES OF INCORPORATION
OF
LINCOLN NATURAL GAS COMPANY, INC.
The undersigned incorporators, desiring to form a corporation
(hereinafter referred to as the "Corporation") pursuant to the provisions of
The Indiana General Corporation Act, as amended (hereinafter referred to as
the "Act"), execute the following Articles of Incorporation.
ARTICLE I
Name
The name of the Corporation is Lincoln Natural Gas Company, Inc.
ARTICLE II
Purposes
The purposes for which the Corporation is formed are: The
purchase, distribution and sale of natural gas and/or liquified petroleum
gases and transportation of non-Company owned gas in Spencer County, Indiana
and adjacent and contiguous territory.
ARTICLE III
Term of Existence
The period during which the Corporation shall continue is
perpetual.
ARTICLE IV
Principal Office and Resident Agent
The post-office address of the principal office of the Corporation
is Rockport, Indiana and the name and post-office address of its Resident
Agent in charge of such office is James O. Martin, Rockport, Indiana.
<PAGE>
ARTICLE V
Amount of Capital Stock
The total number of shares into which the authorized capital stock
of the Corporation is divided is ten thousand shares consisting of _____
shares with the par value of $10.00 per share, and _____ shares without par
value.
ARTICLE VI
Terms of Capital Stock
All shares of stock in the corporation shall be common stock and
shall be of one class.
ARTICLE VII
Voting Rights of Capital Stock
All shares to have equal voting rights.
ARTICLE VIII
Paid-in Capital
The amount of paid-in capital, with which the Corporation is
beginning business, is $1,000.00
ARTICLE IX
Data Respecting Directors
Section 1. Number.
The number of Directors shall be seven (7).
Section 2. Qualifications.
Directors shall be shareholders of the Corporation. A majority of
the Directors at any time shall be citizens of the United States.
- 2 -
<PAGE>
ARTICLE X
Further Data Respecting Directors
Section 1. Names and Post-Office Addresses. The names and post-
office addresses of the first Board of Directors of the Corporation are as
follows:
Number and Street
Name or Building City Zone State
---- ---------------- ---- ---- -----
James O. Martin Washington St. Road Rockport Indiana
Martel Saltsman 117 Eighth Street Owensboro Kentucky
Ralph Bigger 2125 Westview Owensboro Kentucky
Theresa L. Martin Washington St. Road Rockport Indiana
A.B. Swinney Tipton Indiana
Section 2. Citizenship.
All of such Directors are citizens of the United States.
ARTICLE XI
Data Respecting Incorporators
Section 1. Names and Post-Office Addresses.
The names and post-office addresses of the incorporators of the
Corporation are as follows:
Number and Street
Name or Building City Zone State
---- ------------------ ---- ---- -----
James O. Martin Washington St. Road Rockport Indiana
Martel Saltsman 117 Eighth Street Owensboro Kentucky
Theresa L. Martin Washington St. Road Rockport Indiana
Section 2. Age and Citizenship.
All of such incorporators are of lawful age; and all of such
incorporators are citizens of the United States.
- 3 -
<PAGE>
Section 3. Compliance with Provisions of Sections 15 and 16 of the
Act.
The undersigned incorporators hereby certify that the person or
persons intending to form the Corporation first caused lists for
subscriptions to the shares of the capital stock of the Corporation to be
opened at such time and place as he or they determined; when such
subscriptions had been obtained in an amount not less than $1,000, such
person or persons, or a majority of them, called a meeting of such
subscribers for the purpose of designating the incorporators and of electing
the first Board of Directors; the incorporators so designated are those named
in Section 1 of this Article; and the Directors so elected are those named in
Section 1 of Article X.
ARTICLE XII
Provisions for Regulation of Business
and Conduct of Affairs of Corporation
The corporate business shall be conducted in conformity with such
By-Laws as shall from time to time be adopted by said corporation and the
laws of the State of Indiana governing the same.
IN WITNESS WHEREOF, the undersigned, being all of the incorporators
designated in Article XI, execute these Articles of Incorporation and certify
to the truth of the facts herein stated, this 31st day of August, 1955.
/s/ JAMES O. MARTIN
-----------------------------------
(Written Signature)
JAMES O. MARTIN
-----------------------------------
(Printed Signature)
/s/ MARTEL SALTSMAN
-----------------------------------
(Written Signature)
MARTEL SALTSMAN
-----------------------------------
(Printed Signature)
/s/ THERESA L. MARTIN
-----------------------------------
(Written Signature)
THERESA L. MARTIN
-----------------------------------
(Printed Signature)
- 4 -
<PAGE>
STATE OF INDIANA )
: ss.:
COUNTY OF SPENCER)
I, the undersigned, a Notary Public duly commissioned to take
acknowledgments and administer oaths in the State of Indiana, certify that
James O. Martin, Martel Saltsman and Theresa L. Martin, being three of the
incorporators referred to in Article XI of the foregoing Articles of
Incorporation, personally appeared before me; acknowledged the execution
thereof; and swore to the truth of the facts therein stated.
WITNESS my hand and Notarial Seal this 31st day of August, 1955.
/s/ GLADYS MARTIN
-----------------------------------
(Written Signature)
GLADYS MARTIN
-----------------------------------
(Printed Signature)
Notary Public
My commission expires January 1, 1958
_____________________________________
<PAGE>
EXHIBIT B-1
[Letterhead of SOUTHERN INDIANA GAS AND ELECTRIC COMPANY]
November 16, 1993
CONFIDENTIAL - BY HAND
- ----------------------
Mr. James O. Martin
Lincoln Natural Gas Company, Inc.
312 Main Street
Rockport, IN 47635
Re: Proposal of Southern Indiana Gas and Electric Company to
Acquire Lincoln Natural Gas Company, Inc.
--------------------------------------------------------
Dear Mr. Martin:
This letter sets forth a proposal by Southern Indiana Gas and
Electric Company ("Sigeco") for acquisition of Lincoln Natural Gas Company,
Inc. ("Lincoln").
Sigeco has been very interested in Lincoln as a strategic addition
to Sigeco's business for some time, as indicated in prior communications with
you. As yet, we have not had an opportunity to conduct an acquisition
investigation or appraisal of Lincoln in formulating this proposal, however
we have carefully reviewed available public information. Sigeco believes it
is in a unique position to provide maximum value for the shareholders of
Lincoln. Our proposal will expire, if not accepted, by the close of business
on November 23, 1993.
Subject to the foregoing, the terms and conditions of Sigeco's
proposal are as follows:
1. The consideration to be paid by Sigeco for Lincoln would
consist of common stock of Sigeco with a value equal to $1000 times the
number of customers served by Lincoln at the date of closing of the
transaction (i.e. - one thousand dollars per active, current and good
standing customer). For this purpose, Sigeco common stock will be valued at
the average closing price of its common stock as traded on the New York Stock
Exchange for the last five trading days preceding the closing date of the
transaction. Based upon information contained in public
<PAGE>
documents filed by Lincoln, the cash equivalent offered for Lincoln by Sigeco
would presently be approximately $1,277,000.00.
2. The acquisition of Lincoln would be intended to qualify as a
tax-free reorganization under Section 368 of the Internal Revenue Code to the
extent the consideration is paid in shares of Sigeco common stock. The
acquisition is presently planned as a merger of a subsidiary of Sigeco into
Lincoln.
3. Consistent with the intention that the acquisition would
qualify as a pooling-of-interest for accounting purposes, all of the
consideration paid for Lincoln would be in common stock of Sigeco except for
fractional shares.
4. The information in this letter shall be kept confidential. No
press releases shall be issued, nor shall the existence of or terms of this
letter be disclosed to third parties, other than the representatives of the
parties, without the mutual consent of Lincoln and Sigeco. Lincoln and
Sigeco will agree upon the timing and nature of the announcement of the
transaction to employees of Lincoln and Sigeco.
5. Lincoln agrees, effective with the date of acceptance of this
letter, not to solicit offers or negotiate, or to permit its representatives
to solicit offers or negotiate, from or with any other person or entity for
the sale of all or any portion of the equity in or the assets and business of
Lincoln (other than with respect to sales in the ordinary course of business
and disposition of non-material assets) so long as Sigeco and Lincoln are
engaged in discussing or negotiating terms of the proposed transaction.
6. The principal shareholders of Lincoln would agree to grant
Sigeco the right of first refusal prior to any sale or offer to sell any of
such shares to a third party.
7. The definitive agreements to be entered into will include
customary representations and warranties, which will survive the closing,
with respect to Lincoln and its respective businesses, properties, business
prospects, assets, liabilities and financial condition. Representations and
warranties will be included with respect to financial statements, regulatory
compliance, the absence of undisclosed or contingent financial and operating
liabilities, the good operating condition and proper maintenance of utility
plant and equipment, the absence of unusual labor or personnel problems and
the absence of environmental problems, as well as such other representations
and warranties as may be necessary or proper as a result of Sigeco's review
of the business and assets of Lincoln as contemplated by Paragraph 11.
8. The principal shareholders of Lincoln would agree to indemnify
Sigeco from any and all costs, liabilities and damages resulting from:
- 2 -
<PAGE>
(a) breach of the representations and warranties set forth in
the definitive agreements;
(b) liability under any pension or benefit plans of Lincoln;
and
(c) liability for violations of law, including environmental
laws.
9. The transaction would be conditioned, among other things, upon
satisfaction of certain conditions at or prior to the closing, including:
(a) approval of the transaction by the boards of directors of
Sigeco and Lincoln within 60 days after acceptance of
this proposal and by the shareholders of Lincoln;
(b) completion by Sigeco's representatives of a full
financial, environmental and operations review and
appraisal, including a review by Sigeco's independent
public accountants of Lincoln and confirmation to
Sigeco's satisfaction that the representations and
warranties made by Lincoln are true in all material
respects;
(c) negotiation, execution and delivery of the definitive
agreements and other necessary documents;
(d) obtaining all consents required, if any, for the
continued validity of all contracts, franchises, deeds,
easements, intangibles and other rights and entitlements
necessary for the continued operation of Lincoln's
businesses, after closing of the transaction, on the same
basis as presently operated;
(e) making all required applications and filings with
governmental agencies and obtaining all necessary
governmental approvals and consents, including the
approval of the Indiana Utility Regulatory Commission
("IURC") and the Securities and Exchange Commission
("SEC");
(f) no material adverse change in the financial condition,
assets, liabilities (contingent or otherwise), results of
operations, business or business prospects of Lincoln
since the date of the most recent (unaudited) financial
statements delivered to Sigeco prior to execution of the
definitive agreements and no
- 3 -
<PAGE>
material change in the manner of conducting the business
of Lincoln from the manner in which such business is
presently conducted;
(g) the filing with the SEC and effectiveness of a
Registration Statement covering the shares of Sigeco
stock to be issued in the transaction and approval of the
common stock, if so requested, for listing on the New
York Stock Exchange, together with all other required
regulatory approvals, orders and authority necessary to
accomplish and complete the transaction as contemplated
by this proposal.
10. The proposal takes into account Lincoln's present cash and
retained earnings, and Lincoln agrees not to take any action that will dilute
or diminish its current financial position including, but not limited to, the
declaration of dividends, liquidation of assets, payment of increased
compensation, bonuses or pensions, agreement to make or contract for future
payments, issuance of additional stock, warrants or options, or any other
disbursement of cash on hand or retained earnings.
11. Upon acceptance of Sigeco's proposal by execution of this
letter, it is agreed that Sigeco and its representatives may conduct an
investigation of Lincoln to evaluate the basis for the acquisition referred
to herein. Such investigation by Sigeco will include review of all the
books, records and business affairs related to Lincoln at Sigeco's expense; a
review of Lincoln by Sigeco's independent accountants at Sigeco's expense;
and such appraisals, at Sigeco's expense, as Sigeco may wish to make.
12. Information concerning Lincoln or its affiliates disclosed to
Sigeco, its affiliates or representatives and information concerning Sigeco
or its affiliates disclosed to Lincoln, or its affiliates or representatives,
which has not been publicly disclosed shall be kept strictly confidential and
shall not be disclosed or used by the recipients whether or not the closing
occurs. Once the transaction is completed and publicly disclosed, then
information may be released pursuant to Sigeco authorization. In the event
that a definitive agreement is not signed by January 31, 1994, all documents,
if any, of a confidential nature, and copies thereof delivered by Lincoln to
Sigeco, its affiliates or representatives or delivered by Sigeco to Lincoln,
its affiliates or representatives, shall be immediately returned, unless the
said deadline is extended by mutual agreement.
13. Each of the parties hereby agrees that, whether or not the
proposed transaction outlined herein is ever consummated, it will pay its own
(and its representatives') respective fees
- 4 -
<PAGE>
and expenses incurred in connection with the negotiation, preparation,
execution and delivery of this letter and of the definitive agreements and
any other agreements or documents contemplated thereby.
14. Upon acceptance of this proposal, the parties will all fully
cooperate with each other and take all steps necessary or appropriate to
consummate the transaction contemplated hereby, pursuant to approval of the
IURC and any other regulatory agencies, as expeditiously and economically as
possible.
By executing this letter, the parties confirm their intentions
specified herein with respect to the proposed transaction. In the event the
parties fail to execute and deliver a definitive agreement by January 31,
1994, unless extended by mutual agreement of the parties, then this letter of
intention shall terminate automatically (except for the provisions of
Paragraphs 4, 12 and 13 as aforesaid) without liability on the part of any
party and without further action by the parties.
If Sigeco's proposal is acceptable to you, kindly so indicate on
behalf of Lincoln by executing the enclosed copy of this letter in the space
provided below and returning it to the undersigned.
The execution of this letter on behalf of Lincoln has been approved
by a majority of the directors of Lincoln acting individually but not at a
formal meeting.
Yours very truly,
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
By: /s/ Ronald G. Reherman
------------------------------
Ronald G. Reherman
Chairman, President and CEO
Agreed and Accepted this 17th day
of November, 1993, on behalf of:
LINCOLN NATURAL GAS COMPANY, INC.
By: /s/ James O. Martin
---------------------------
James O. Martin
- 5 -
<PAGE>
EXHIBIT B-2
=================================================================
AGREEMENT AND PLAN OF MERGER
among
SOUTHERN INDIANA GAS & ELECTRIC COMPANY
SPENCER ENERGY CORP.,
and
LINCOLN NATURAL GAS COMPANY, INC.
Dated as of December 23, 1993
=================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE I
THE MERGER
Page
----
1.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Effective Time of the Merger . . . . . . . . . . . . . . . . . . . . 2
1.3 Effects of the Merger . . . . . . . . . . . . . . . . . . . . . . . 2
1.4 Directors and Officers of the Surviving
Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 Manner of Converting Shares . . . . . . . . . . . . . . . . . . . . 3
(a) Capital Stock of Spencer . . . . . . . . . . . . . . . . . . . 3
(b) Capital Stock of Lincoln . . . . . . . . . . . . . . . . . . . 3
(c) Cancellation of Treasury Stock . . . . . . . . . . . . . . . . 3
(d) Adjustment Upon Changes in Capitalization . . . . . . . . . . . 4
(e) Shares of Dissenting Holders . . . . . . . . . . . . . . . . . 4
2.2 Exchange of Certificates . . . . . . . . . . . . . . . . . . . . . . 4
(a) Exchange Procedures . . . . . . . . . . . . . . . . . . . . . . 4
(b) Distributions with Respect to
Unexchanged Shares . . . . . . . . . . . . . . . . . . . . . . 5
(c) No Further Ownership Rights in Lincoln
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . 5
(d) No Fractional Shares . . . . . . . . . . . . . . . . . . . . . 5
(e) No Liability for Escheat . . . . . . . . . . . . . . . . . . . 5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF LINCOLN
3.1 Organization, Standing and Power . . . . . . . . . . . . . . . . . 6
3.2 Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.3 Subsidiaries and Equity Investments . . . . . . . . . . . . . . . . 7
3.4 Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . . 7
3.5 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
3.6 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . . 8
3.7 Lincoln IURC Documents . . . . . . . . . . . . . . . . . . . . . . 8
3.8 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . 9
-i-
<PAGE>
3.9 No Undisclosed Liabilities . . . . . . . . . . . . . . . . . . . . 9
3.10 Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.11 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.12 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.13 Employee Benefit Matters . . . . . . . . . . . . . . . . . . . . 10
3.14 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.15 Contracts and Commitments . . . . . . . . . . . . . . . . . . . . 13
3.16 Personal Property . . . . . . . . . . . . . . . . . . . . . . . . 14
3.17 Real Property and Leases . . . . . . . . . . . . . . . . . . . . 14
3.18 Compliance With Law . . . . . . . . . . . . . . . . . . . . . . . 15
3.19 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.20 Suppliers and Customers . . . . . . . . . . . . . . . . . . . . . 19
3.21 Absence of Questionable Payments . . . . . . . . . . . . . . . . 19
3.22 Absence of Certain Changes or Events . . . . . . . . . . . . . . 20
3.23 Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.24 Vote Required . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.25 Accounting Matters . . . . . . . . . . . . . . . . . . . . . . . 20
3.26 Ownership of Parent Stock . . . . . . . . . . . . . . . . . . . . 20
[3.27 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.28 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.29 Lincoln's Best Knowledge . . . . . . . . . . . . . . . . . . . . 21
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND Spencer
4.1 Organization, Standing and Power . . . . . . . . . . . . . . . . 21
4.2 Capital Structure . . . . . . . . . . . . . . . . . . . . . . . . 21
4.3 Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . 22
4.4 No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . 22
4.5 Consents and Approvals . . . . . . . . . . . . . . . . . . . . . 22
4.6 Parent SEC Documents . . . . . . . . . . . . . . . . . . . . . . 22
4.7 Absence of Certain Changes or Events . . . . . . . . . . . . . . 23
4.8 Accounting Matters . . . . . . . . . . . . . . . . . . . . . . . 24
4.9 Ownership of Lincoln Stock . . . . . . . . . . . . . . . . . . . 24
4.10 Interim Operations of Spencer . . . . . . . . . . . . . . . . . . 24
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.2 Dividends; Changes in Stock . . . . . . . . . . . . . . . . . . . 24
5.3 No Issuance of Securities . . . . . . . . . . . . . . . . . . . . 24
5.4 Constituent Documents . . . . . . . . . . . . . . . . . . . . . . 25
5.5 No Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.6 No Dispositions . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.7 No Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.8 No Solicitations . . . . . . . . . . . . . . . . . . . . . . . . 25
5.9 No Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.10 Advice of Changes; Filings with Governmental
Entities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.11 Employee Benefit Covenant . . . . . . . . . . . . . . . . . . . . 26
-ii-
<PAGE>
5.12 Tax Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Access to Information; Confidentiality . . . . . . . . . . . . . 27
6.2 Preparation of the Information Statement . . . . . . . . . . . . 27
6.3 Preparation of Registration Statement . . . . . . . . . . . . . . 27
6.4 Information Supplied . . . . . . . . . . . . . . . . . . . . . . 28
6.5 Blue-Sky Filings . . . . . . . . . . . . . . . . . . . . . . . . 28
6.6 Stock Exchange Listing . . . . . . . . . . . . . . . . . . . . . 29
6.7 Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . 29
6.8 Legal Conditions to Merger . . . . . . . . . . . . . . . . . . . 29
6.9 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
6.10 Brokers or Finders . . . . . . . . . . . . . . . . . . . . . . . 30
6.11 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.12 Tax Treatment . . . . . . . . . . . . . . . . . . . . . . . . . . 30
6.13 Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . 30
6.14 Ancillary Agreements . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation
To Effect the Merger . . . . . . . . . . . . . . . . . . . . . . . 31
(a) Shareholder Approval . . . . . . . . . . . . . . . . . . . . 31
(b) Regulatory Approvals . . . . . . . . . . . . . . . . . . . . 31
(c) No Injunctions or Restraints . . . . . . . . . . . . . . . . 31
(d) Pooling of Interests . . . . . . . . . . . . . . . . . . . . 31
(e) Tax Free Reorganization. . . . . . . . . . . . . . . . . . . 32
7.2 Conditions to Obligations of Parent and Spencer . . . . . . . . . 32
(a) Representations and Warranties . . . . . . . . . . . . . . . 32
(b) Performance of Obligations of Lincoln . . . . . . . . . . . . 32
(c) Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . 32
(d) Board Approval . . . . . . . . . . . . . . . . . . . . . . . 33
(e) Consents Under Agreements . . . . . . . . . . . . . . . . . . 33
(f) Material Adverse Change . . . . . . . . . . . . . . . . . . . 33
(g) Satisfactory Investigation . . . . . . . . . . . . . . . . . 33
(h) Environmental Investigation . . . . . . . . . . . . . . . . . 33
(i) Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.3 Conditions to Obligations of Lincoln . . . . . . . . . . . . . . . 34
(a) Representations and Warranties . . . . . . . . . . . . . . . 34
(b) Performance of Obligations of Parent and Spencer . . . . . . 34
(c) Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . . . 34
(d) Board Approval . . . . . . . . . . . . . . . . . . . . . . . 34
(e) Material Adverse Change . . . . . . . . . . . . . . . . . . . 34
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . . . 35
8.3 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
8.4 Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . 36
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ARTICLE IX
GENERAL PROVISIONS
9.1 Further Assurances . . . . . . . . . . . . . . . . . . . . . . . 36
9.2 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
9.3 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.4 Descriptive Headings . . . . . . . . . . . . . . . . . . . . . . 37
9.5 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 37
9.6 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . 38
9.7 No Third Party Beneficiaries . . . . . . . . . . . . . . . . . . 38
9.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.9 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.10 Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.11 Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
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<PAGE>
AGREEMENT AND PLAN OF MERGER dated as of December 23, 1993
(together with the Schedules and Exhibits attached hereto, referred to as the
"Agreement"), among SOUTHERN INDIANA GAS & ELECTRIC COMPANY, an Indiana
corporation with its principal executive offices at 20 N.W. Fourth Street,
Evansville, Indiana ("Parent"), SPENCER ENERGY CORP., a single purpose
Indiana corporation and a wholly owned subsidiary of Parent ("Spencer"), and
LINCOLN NATURAL GAS COMPANY, INC., an Indiana corporation with its principal
executive offices at 317 Main Street, Rockport, Indiana ("Lincoln").
WHEREAS, the respective Boards of Directors of Parent, Spencer and
Lincoln deem it advisable and in the best interests of their respective
shareholders to consummate the business combination transaction provided for
herein in which Spencer would merge with and into Lincoln (Spencer and
Lincoln sometimes referred to herein as the "Constituent Corporations") with
Lincoln continuing as the surviving corporation (the resultant corporation,
as so merged, sometimes referred to herein as the "Surviving Corporation"),
and Lincoln would become a wholly owned subsidiary of Parent (the "Merger"),
whereby each issued and outstanding share of common stock, par value $10 per
share, of Lincoln ("Lincoln Common Stock"), will be converted into a right to
receive common stock, without par value, of Parent ("Parent Common Stock")
and any associated right (a "Parent Right") that may be issued pursuant to
the Rights Agreement dated as of October 1, 1986, between Parent and
Continental Stock Transfer & Trust Company, as rights agent. All references
in this Agreement to the Parent Common Stock to be received pursuant to the
Merger shall be deemed to include the Parent Rights;
WHEREAS, for Federal income tax purposes, it is intended that the
Merger qualify as a tax-free reorganization within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, for accounting purposes, it is intended that the Merger be
accounted for as a "pooling-of-interests" within the meaning of Opinion 16 of
the Accounting Principles Board; and
WHEREAS, Parent, Spencer and Lincoln desire to make certain
representations, warranties and agreements in connection with the Merger and
also to prescribe various conditions to the Merger;
<PAGE>
NOW, THEREFORE, in consideration of the premises and the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties agree as follows:
ARTICLE I
THE MERGER
1.1 Closing. The closing of the Merger (the "Closing") will take
place at 10:00 a.m., on a date to be specified by the parties, which shall be
no later than the second business day after satisfaction of the latest to
occur of the conditions set forth in Sections 7.1(a), 7.1(b), 7.2(b) (other
than the delivery of the officer's certificate referred to therein) and
7.3(b) (other than the delivery of the officer's certificate referred to
therein) provided, that the other closing conditions set forth in Article VII
have been met or waived as provided in Article VII at or prior to the Closing
(the "Closing Date"), at the offices of Bamberger, Foreman, Oswald and Hahn,
Seventh Floor - Hulman Building, Evansville, Indiana, unless another date or
place is agreed to in writing by the parties hereto.
1.2 Effective Time of the Merger. Subject to the provisions of
this Agreement, articles of merger shall be duly prepared, executed and
acknowledged by an appropriate officer of each of the Constituent
Corporations (the "Articles of Merger") and thereafter delivered on the
Closing Date to the Secretary of State of the State of Indiana for filing, as
provided in the Indiana Business Corporation Law (the "Indiana BCL"), as soon
as practicable on or after the Closing Date. The Merger shall become
effective upon the filing of the Articles of Merger with the Secretary of
State of the State of Indiana or at such time thereafter as is provided in
the Articles of Merger (the "Effective Time").
1.3 Effects of the Merger. At the Effective Time, (i) the
separate existence of Spencer shall cease and Spencer shall be merged with
and into Lincoln with Lincoln continuing as the Surviving Corporation, (ii)
the Amended Articles of Incorporation of Lincoln shall be amended so that
Article V of such Amended Articles of Incorporation reads in its entirety as
follows: "The total number of shares of all classes of stock which the
corporation shall have authority to issue is 1000 shares, all of which shall
consist of Common Stock, no par value.", and that Article IX of such Amended
Articles of Incorporation reads in its entirety as follows: "The number of
directors shall be Seven (7)" (the qualifications on directors being thereby
removed) and, as so amended, such Amended Articles of Incorporation shall be
the Amended Articles of Incorporation of the Surviving Corporation, (iii) the
By-laws of Lincoln as in effect
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immediately prior to the Effective Time shall be the By-laws of the Surviving
Corporation and (iv) the Merger shall have all the effects provided by
applicable law, including Section 23-1-40-6 of the Indiana BCL.
1.4 Directors and Officers of the Surviving Corporation. The
directors and officers identified on Schedule 1.4, from and after the
Effective Time, shall be the directors and officers, respectively, of the
Surviving Corporation until their successors shall have been duly elected or
appointed and qualified or until their earlier death, resignation or removal
in accordance with the Surviving Corporation's Amended Articles of
Incorporation and By-laws.
ARTICLE II
EFFECT OF THE MERGER ON THE CAPITAL STOCK OF THE
CONSTITUENT CORPORATIONS; EXCHANGE OF CERTIFICATES
2.1 Manner of Converting Shares. As of the Effective Time, by
virtue of the Merger and without any action on the part of the holder of any
shares of capital stock of the Constituent Corporations or the Parent:
(a) Capital Stock of Spencer. The shares of common stock of
Spencer, no par value ("Spencer Common Stock"), which are issued and
outstanding immediately prior to the Effective Time, shall be converted into
and become shares of Lincoln Common Stock at a rate of one (1) share of
Lincoln Common Stock for each share of Spencer Common Stock.
(b) Capital Stock of Lincoln. Subject to Section 2.1(c), (d) and
(e) each share of Lincoln Common Stock issued and outstanding immediately
prior to the Effective Time shall be converted into the right to receive, pro
rata, fully paid and nonassessable shares of Parent Common Stock in
accordance with the formula set forth herein. All issued and outstanding
Lincoln Common Stock shall be converted into the right to receive such number
of shares of Parent Common Stock as are equal to (x) 1,000 multiplied by the
number of customers served by Lincoln which are active, current, and in good
standing as of the 15th calendar day immediately preceding the Closing Date;
divided by (y) the per share average closing price of Parent Common Stock on
the New York Stock Exchange ("NYSE") for the last five trading days preceding
the day before the Closing Date. As of the Effective Time, all shares of
Lincoln Common Stock, other than the Lincoln Common Stock referred to in
Section 2.1(a), shall no longer be outstanding and shall automatically be
canceled and retired and shall cease to exist, and each holder of a
certificate representing any such shares shall cease to have any rights with
respect to such certificates except the right to receive shares of Parent
Common Stock to be issued in consideration therefor
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<PAGE>
upon the surrender of such certificate in accordance with Section 2.2,
without interest.
(c) Cancellation of Stock Owned by Lincoln. Any shares of Lincoln
Common Stock that are owned, directly or indirectly, immediately prior to the
Effective Time by Lincoln shall be canceled and retired and shall cease to
exist and no Parent Common Stock or other consideration shall be issued or
delivered in exchange therefor, and each holder of a certificate representing
any such shares shall cease to have any rights with respect thereto.
(d) Adjustment Upon Changes in Capitalization. In the event of
any change in Parent Common Stock by reason of stock dividends, splitups,
mergers (other than the Merger), recapitalizations, combinations, exchange of
shares or the like, the type and number of shares or securities to be issued
upon conversion of the Lincoln Common Stock as provided in Section 2.1(b),
shall be adjusted appropriately.
(e) Shares of Dissenting Holders. Any issued and outstanding
shares of Lincoln Common Stock held by a person who objects to the Merger and
complies with all provisions of the Indiana BCL concerning the right of such
person to dissent from the Merger and demand appraisal of such shares
("Dissenting Holder") shall not be converted into a right to receive Parent
Common Stock as set forth in Section 2.1(b) but shall from and after the
Effective Time represent only the right to receive such consideration as may
be determined to be due to such Dissenting Holder pursuant to the Indiana
BCL; provided, however, that shares of Lincoln Common Stock outstanding
immediately prior to the Effective Time and held by a Dissenting Holder who
shall, after the Effective Time, withdraw the demand for appraisal, or lose
the right of appraisal pursuant to the Indiana BCL, of such shares shall be
deemed to be converted, as of the Effective Time, into the right to receive
the shares of Parent Common Stock specified in Section 2.1(b), without
interest.
2.2 Exchange of Certificates.
(a) Exchange Procedures. As soon as reasonably practicable after
the Effective Time, Parent shall mail to each Shareholder of record of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Lincoln Common Stock (the "Lincoln
Certificates") whose shares were converted into the right to receive shares
of Parent Common Stock pursuant to Section 2.1, (i) a letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and
title to the Lincoln Certificates shall pass, only upon delivery of the
Lincoln Certificates to Parent and shall be in such form and have such other
provisions as Parent may reasonably specify) and (ii) instructions for use in
effecting the surrender of the Lincoln Certificates in exchange for
certificates representing shares of Parent Common Stock. Upon surrender of a
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<PAGE>
Lincoln Certificate for cancellation to Parent, or to such other agent or
agents as may be appointed by Parent, together with such letter of
transmittal, duly executed, the holder of such Lincoln Certificate shall be
entitled to receive in exchange therefor a certificate representing that
number of whole shares of Parent Common Stock (including the right to receive
dividends or distributions thereon and cash in lieu of fractional shares)
which such holder has the right to receive pursuant to the provisions of this
Article II and a check representing any cash payable in lieu of fractional
shares of Parent Common Stock. The Lincoln Certificates so surrendered shall
forthwith be canceled. Until surrendered as contemplated by this Section
2.2, each Lincoln Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive, upon such surrender a
certificate representing shares of Parent Common Stock, dividends or
distributions and cash in lieu of any fractional shares of Parent Common
Stock as contemplated by this Section 2.2.
(b) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the Effective Time
with respect to Parent Common Stock with a record date after the Effective
Time shall be paid to the holder of any unsurrendered Lincoln Certificate
with respect to the shares of Parent Common Stock represented thereby and no
cash payment in lieu of fractional shares shall be paid to any such holder
until the holder of record of such Lincoln Certificate shall surrender such
Lincoln Certificate. Subject to the effect of applicable laws, following
surrender of any such Lincoln Certificate there shall be paid to the record
holder of the certificates representing whole shares of Parent Common stock
issued in exchange therefor, without interest, (i) at the time of such
surrender, the amount of any cash payable in lieu of a fractional share of
Parent Common Stock to which such holder is entitled and the amount of
dividends or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of Parent Common Stock,
and (ii) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time but prior to
surrender and a payment date subsequent to surrender payable with respect to
such whole shares of Parent Common Stock.
(c) No Further Ownership Rights in Lincoln Common Stock. All
shares of Parent Common Stock issued in the Merger upon conversion of shares
of Lincoln Common Stock in accordance with the terms hereof (including any
dividends or distributions and cash paid in lieu of fractional shares shall
be deemed to have been issued in full satisfaction of all rights pertaining
to such shares of Lincoln Common Stock. There shall be no further
registration of transfers on the stock transfer books of Lincoln of the
shares of Lincoln Common Stock which were outstanding immediately prior to
the Effective Time. If, after the Effective Time (but subject to Section
2.1(c)), Lincoln Certificates are
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<PAGE>
presented to Parent for any reason, they shall be canceled and exchanged as
provided in this Article II.
(d) No Fractional Shares. As provided above, no certificates or
scrip representing fractional shares of Parent Common Stock shall be issued
upon the surrender for exchange of Lincoln Certificates, and such fractional
share interests will not entitle the owner thereof to vote or to any rights
of a shareholder of Parent. The value of any fractional shares of Parent
computed above shall be paid by check.
(e) No Liability for Escheat. Neither Parent, Spencer nor Lincoln
shall be liable to any holder of shares of Lincoln Common Stock or Parent
Common Stock, as the case may be, for such shares (or dividends or
distributions with respect thereto) or cash in lieu of fractional shares
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF LINCOLN
Lincoln represents and warrants to Parent and Spencer as follows:
3.1 Organization, Standing and Power. Lincoln is a corporation
duly organized and validly existing under the laws of the state of Indiana
and has all requisite power and authority, and has been duly authorized by
all necessary approvals and orders of the Indiana Utility Regulatory
Commission (the "IURC") to own, lease and operate its properties and to carry
on its business as now being conducted, and is duly qualified and in good
standing to transact business in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties makes such
qualification necessary other than in such jurisdictions where the failure so
to qualify would not have a Material Adverse Effect on Lincoln. In this
Agreement, with reference to any event having a "Material Adverse Effect" on
any entity shall mean, any event, change or effect related to the condition
(financial or otherwise), properties, assets, liabilities, operations,
businesses or business prospects of such entity.
3.2 Capital Structure. As of the date hereof, the authorized
capital stock of Lincoln consists of (i) 10,000 shares of Lincoln Common
Stock of which, as of December 15, 1993, 9,417 shares were issued and
outstanding; (ii) no shares of preferred stock, and (iii) no bonds,
debentures, notes or other indebtedness having the right to vote (or
convertible into securities having the right to vote) on any matters on which
shareholders may vote ("Voting Debt"). All outstanding shares of
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<PAGE>
Lincoln's capital stock are validly issued, fully paid and nonassessable and
are not subject to preemptive rights. As of the date of this Agreement
(except pursuant to this Agreement), there are no options, warrants, calls,
rights, commitments or agreements of any character to which Lincoln is a
party or by which it is bound obligating Lincoln to issue, deliver or sell,
or cause to be issued, delivered or sold, additional shares of capital stock
or any Voting Debt of, or other equity interest in, Lincoln or securities
convertible or exchangeable for such shares, Voting Debt or other equity
interests, or obligating Lincoln to grant, extend or enter into any such
option, warrant, call, right, commitment or agreement.
3.3 No Subsidiaries or Equity Investments. Lincoln does not own,
directly or indirectly, any capital stock or other equity securities of any
corporation or have any direct or indirect equity or ownership interest,
including interests in partnerships and joint ventures, in any other entity
or business.
3.4 Corporate Authority. Lincoln has all requisite corporate
power and authority to enter into this Agreement and, subject to the approval
of this Agreement and the transactions contemplated hereby by the
shareholders of Lincoln, to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Lincoln, subject
to the approval of this Agreement by the shareholders of Lincoln. This
Agreement has been duly executed and delivered by Lincoln and, subject to the
approval of this Agreement by the shareholders of Lincoln, and assuming this
Agreement constitutes a valid and binding obligation of Parent and Spencer,
constitutes a valid and binding obligation of Lincoln enforceable in
accordance with its terms.
3.5 No Violation. The execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated hereby will
not, conflict with, or result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or the loss of a
material benefit under, or the creation of a lien, pledge, security interest
or other encumbrance on assets (any such conflict, violation, default, right
of termination, cancellation or acceleration, loss or creation, a
"Violation"), pursuant to (i) any provision of the Amended Articles of
Incorporation or By-laws or other constituent documents of Lincoln, (ii) any
provision of any loan or credit agreement, note, mortgage, indenture, lease,
Employee Benefit Plans (as defined in Section 3.13) or other agreement,
obligation, instrument, permit, concession, franchise, license, or (iii) any
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Lincoln or its properties or assets, which Violation, in the
case
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<PAGE>
of each of clauses (ii) and (iii), would have a Material Adverse Effect on
Lincoln.
3.6 Consents and Approvals. No consent, approval, order or
authorization of, or registration, declaration or filing with, any court,
administrative agency or commission or other governmental authority or
instrumentality, domestic or foreign (a "Governmental Entity"), is required
by or with respect to Lincoln in connection with the execution and delivery
of this Agreement by Lincoln or the consummation by Lincoln of the
transactions contemplated hereby, the failure to obtain which would have a
Material Adverse Effect on Lincoln except for:
(i) the filing of the Articles of Merger with the Secretary
of State of the State of Indiana in accordance with Section 23-1-40-5 of the
Indiana BCL,
(ii) the obtaining from IURC an order approving the
transactions contemplated hereby (the "IURC Order"), and
(iii) such filings, authorization orders and approvals as may
be required of other state and local governmental authorities, (the "Local
Approvals").
3.7 Lincoln IURC Documents. Lincoln shall deliver to Parent a
true and complete copy of each report and schedule (except Gas Cost
Adjustment filings) filed by Lincoln with the IURC since January 1, 1991 (as
such documents have since the time of their filing been amended, the "IURC
Documents") which are all the documents (other than preliminary material)
that Lincoln was required to file with the IURC since such date. As of their
respective dates, none of the Lincoln IURC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to
be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading. The
financial statements of Lincoln included in the Lincoln IURC Documents comply
as to form in all material respects with applicable accounting requirements
and with the published rules and regulations of the IURC with respect
thereto, have been prepared in accordance with generally accepted accounting
principles ("GAAP") applied on a consistent basis during the periods involved
(except as may be indicated in the notes thereto) and fairly present the
financial position of Lincoln as at the dates thereof and the results of its
operations and cash flows for the periods then ended.
3.8 Financial Statements. (a) Lincoln has furnished Parent with
copies of the following financial statements of Lincoln: (i) balance sheets
as of December 31, 1991, 1992 and September 30, 1993; and (ii) statements of
income for each of the fiscal years ended December 31, 1991, December 31,
1992 and for the nine months ended September 30, 1993 (the "Financial
Statements"). The Financial Statements are complete and correct, were
prepared in accordance with GAAP consistently applied
-8-
<PAGE>
throughout the periods indicated, and present fairly the financial position
of Lincoln. The Financial Statements are attached hereto as Schedule 3.8.
Since January 1, 1991, Lincoln has not made any material change in its
methods of accounting for financial reporting purposes.
3.9 No Undisclosed Liabilities. Except as and to the extent set
forth in the IURC Documents, the Financial Statements or Schedule 3.9,
Lincoln does not have any liabilities or obligations of any nature, whether
or not accrued, absolute, contingent or otherwise (the "Undisclosed
Liabilities").
3.10 Books and Records. Lincoln will make available for
inspection by Parent all the books of account relating to business of
Lincoln. Such books of account of Lincoln reflect all the transactions and
other matters required to be set forth under GAAP applied on a consistent
basis.
3.11 Litigation. As of the date of this Agreement, except as
disclosed on Schedule 3.11, there is no suit, action or proceeding pending,
or, to the knowledge of Lincoln, threatened against or affecting Lincoln
which is reasonably likely to have a Material Adverse Effect on Lincoln, nor
is there any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against Lincoln which has or could have a
Material Adverse Effect on Lincoln.
3.12 Taxes. Lincoln (including any predecessors) has timely filed
when due all Tax returns required to be filed by any of them and has paid (or
Lincoln has paid on its behalf), or has made adequate provision for or set up
in accordance with GAAP an adequate accrual or reserve for the payment of,
all Taxes required to be paid in respect of all periods for which returns
have been filed or are due (whether or not shown as being due on any Tax
returns), and has established an adequate accrual or reserve for the payment
of all Taxes payable in respect of any period for which no return has been
filed or is due, and the most recent financial statements heretofore
delivered to Parent reflect in accordance with GAAP a reserve for all Taxes
payable by Lincoln accrued through the date of such financial statements. No
material deficiencies for any Taxes have been proposed, asserted or assessed
against Lincoln, and no audit of the Tax returns of Lincoln is currently
being conducted by any Taxing authority. Copies of all Federal Tax returns
required to be filed by Lincoln (including any predecessors) for each of the
last three years, together with all schedules and attachments thereto, have
been delivered by Lincoln to Parent. Lincoln (including any predecessors) is
not a party to, is bound by, or has any obligation under any Tax sharing or
similar agreement. For the purpose of this Agreement, the term "Tax"
(including, with correlative meaning, the terms "Taxes", "Taxing", and
"Taxable") shall include all Federal, state, local and foreign income,
profits, franchise, gross receipts, payroll, sales, employment, use,
property, gains, transfer, recording, license,
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value-added, withholding, excise and other taxes, duties or assessments of
any nature whatsoever (whether payable directly or by withholding), together
with any and all estimated Tax interest, penalties and additions to Tax
imposed with respect to such amounts and any obligations in respect thereof
under any Tax sharing, Tax allocation, Tax indemnity or similar agreement as
well as any obligations arising pursuant to Reg. 1.1502-6 or comparable
state, local or foreign provision.
3.13 Employee Benefit Matters. (a) With respect to each employee
benefit plan (including, without limitation, any "employee benefit plan," as
defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA")), and any bonus, pension, profit sharing, deferred
compensation, incentive compensation, stock ownership, stock purchase, stock
option, phantom stock, retirement, vacation, severance, disability, death
benefit, hospitalization, insurance or other plan, arrangement or
understanding (whether or not in writing or legally binding) (all the
foregoing being herein called the "Employee Benefit Plans"), maintained or
contributed to by Lincoln, or any other organization which is a member of a
controlled group of organizations (within the meaning of Sections 414(b),
(c), (m) or (o) of the Code) of which Lincoln is a member ("Controlled
Group"), Lincoln has made available to Parent, or will deliver to Parent
within 30 days after the date hereof, a true and correct copy of (i) the most
recent annual report (Form 5500) filed with the Internal Revenue Service (the
"IRS"), if any, (ii) a copy of any such Employee Benefit Plan and (iii) each
trust agreement and group annuity contract, if any, relating to any such
Employee Benefit Plan.
(b) Since January 1, 1974, neither Lincoln nor any member of its
Controlled Group has at any time maintained or contributed to, or been
obligated to contribute to, a defined benefit plan within the meaning of
Section 3(35) of ERISA.
(c) Each of the Employee Benefit Plans intended to be "qualified"
within the meaning of Section 401(a) of the Code has been determined by the
IRS to be so qualified, and, to the best knowledge of Lincoln, no
circumstances exist that are reasonably expected by Lincoln to result in the
revocation of any such determination. Lincoln is in compliance in all
material respects with, and each Employee Benefit Plan is and has been
operated in all material respects in compliance with, all applicable laws,
rules and regulations governing such plan, including, without limitation,
ERISA and the Code. Each Employee Benefit Plan intended to provide for the
deferral of income, the reduction of salary or other compensation or to
afford other income tax benefits complies with the requirements of the
applicable provisions of the Code or other laws, rules and regulations
required to provide such income tax benefits.
(d) Any Simplified Employee Pension (within the meaning of Section
408(k) of the Code) adopted or contributed to
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by Lincoln or any member of its Controlled Group has been adopted and
maintained in accordance with the applicable provisions of the Code.
(e) With respect to the Employee Benefit Plans, individually and
in the aggregate, no event has occurred, and to the knowledge of Lincoln,
there exists no condition or set of circumstances in connection with which
Lincoln could be subject to any liability that is reasonably likely to have a
Material Adverse Effect on Lincoln (except liability for benefits claims and
funding obligations payable in the ordinary course), under ERISA, the Code or
any other applicable law.
(f) Except as set forth in Schedule 3.13(f), with respect to each
Employee Benefit Plan, there are no funded benefit obligations for which
contributions have not been made or properly accrued and there are no
unfunded benefit obligations which have not been accounted for by reserves,
or otherwise properly footnoted in accordance with GAAP on the Financial
Statements.
(g) Except as set forth in Schedule 3.13(g), none of the Employee
Benefit Plans that are welfare plans (within the meaning of Section 3(l) of
ERISA) ("Welfare Plans") provides for any retiree benefits.
(h) Each Welfare Plan has been adopted and maintained in
accordance with its terms and applicable law.
(i) Except as set forth in Schedule 3.13(i), (i) the consummation
or announcement of any transaction contemplated by this Agreement will not
(either alone or upon the occurrence of any additional or further acts or
events) result in any (A) payment (whether of severance pay or otherwise)
becoming due from Lincoln to any officer, employee, former employee or
director thereof or to the trustee under any "rabbi trust" or similar
arrangement, or (B) benefit under any Employee Benefit Plan being established
or becoming accelerated, vested or payable and (ii) Lincoln is not a party to
(A) any management, employment, deferred compensation, severance (including
any payment, right or benefit resulting from a change in control), bonus or
other contract for personal services with any officer, director or employee,
(B) any consulting contract with any person who prior to entering into such
contract was a director or officer of Lincoln or (C) any plan, agreement,
arrangement or understanding similar to any of the foregoing.
3.14 Labor Matters. With respect to Lincoln, except as disclosed
in Schedule 3.14, each of the following is true:
(i) Lincoln is not a party to any collective bargaining
agreement.
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(ii) during the last five years, Lincoln has not been subject
to a labor strike, National Labor Relations Board dispute, slowdown or
stoppage and to Lincoln's best knowledge, none are threatened against
Lincoln;
(iii) none of the employees of Lincoln is a member of or
represented by any labor union and, to Lincoln's best knowledge, there
are no attempts of whatever kind and nature being made to organize any
of such employees;
(iv) no agreement (including any collective bargaining
agreement), arbitration or court decision, decree or order or
governmental order which is binding on Lincoln in any way limits or
restricts Lincoln from relocating or closing any of its operations;
(v) there are no charges, administrative proceedings or
formal complaints of discrimination (including but not limited to
discrimination based upon sex, age, marital status, race, national
origin, sexual preference, handicap or veteran status) pending or, to
the Lincoln's knowledge, threatened, or to Lincoln' knowledge, any
investigation pending or threatened before the Equal Employment
Opportunity Commission or any Federal, state or local agency or court;
(vi) no employee, including officers, has been paid
compensation in excess of $35,000 during the year ended December 31,
1992, or at an annual rate in excess of $35,000 during the year that
will end December 31, 1993.
3.15 Contracts and Commitments. (a) Schedule 3.15(a) sets forth
each contract, agreement, or course of dealings, and any sub-contracts
thereto (written or unwritten) outstanding as of the date hereof to which
Lincoln is a party (other than any contract or agreement required to be
disclosed on any other Schedule) and which:
(i) involves future payment or receipt of cash or future
performance or receipt of services or delivery or receipt of goods and
materials, in each case with an aggregate value in excess of $10,000,
including but not limited to sale and purchase agreements,
distributorship and sales representative agreements and loan agreements,
notes, and other financing documents or commitments to enter into any of
the foregoing agreements;
(ii) is a guarantee or indemnity in respect of indebtedness of
any person (including Lincoln, the shareholders of Lincoln, or any other
Affiliate of such shareholders) which may involve future payment by
Lincoln in excess of $10,000 or is a mortgage, security agreement, or
other arrangement intended to secure indebtedness of any person
(including Lincoln, the shareholders of Lincoln or
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any other Affiliate of such shareholders) in excess of $10,000 or creating an
Encumbrance on any asset of the Company; For purposes of this Agreement, the
term "Affiliate" shall mean with respect to any party to this Agreement, any
other individual, corporation, partnership, trust or unincorporated
organization directly or indirectly controlling, controlled by, or under
common control with such party. For purposes of this Agreement, the term
"Affiliate" shall include directors of Lincoln, executive officers of
Lincoln, and any shareholder of Lincoln who owns ten (10) percent or more of
the outstanding common stock of Lincoln.
(iii) is a lease with respect to personal property;
(iv) is an agreement, indenture, or other instrument which
contains restrictions with respect to the payment of dividends or any
other distribution in respect of the capital stock of Lincoln;
(v) imposes a right of first refusal, option, or other
restriction with respect to any assets of Lincoln;
(vi) is a loan or advance to, or investment in, any person or
an agreement, contract, or commitment relating to the making of any such
loan, advance, or investment;
(vii) is an agreement, contract, or commitment limiting the
freedom of Lincoln to engage in any line of business or to compete with
any person; or
(viii) is a shareholders agreement or voting agreement.
(b) Except as set forth in Schedule 3.15(b), each of the
agreements set forth in Schedule 3.15(a) and the agreements or contracts of
Lincoln disclosed in any other Schedule (the "Contracts") was entered into in
a bona fide transaction in the ordinary course of business and is in full
force and effect. Lincoln has heretofore delivered to Parent complete and
correct copies or descriptions (in the case of unwritten contracts) of the
Contracts. There is not under any Contract: (A) any existing default by
Lincoln or, to Lincoln's best knowledge, by any other party thereto, or (B)
any event which, after notice or lapse of time or both, would constitute a
default by Lincoln, or to Lincoln's best knowledge, by any other party, or
result in a right to accelerate or terminate or result in a loss of rights of
Lincoln;
3.16 Personal Property. Schedule 3.18 sets forth a complete list
of all the personal property owned by Lincoln with an original cost of more
than $1,000. Lincoln has good and valid title to all of its personal
property, free and clear of all pledges, liens, charges, encumbrances,
easements, defects,
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security interests, claims, options, and restrictions of every kind
("Encumbrances"). Lincoln owns or has valid rights to use all of the assets
currently used by Lincoln. The machinery, tools, equipment, and other
physical assets of Lincoln are in good working order, normal wear and tear
excepted, are being used or are useful in the business of Lincoln at its
present level of activity and are in an operating condition sufficient to
conduct the business of Lincoln as now being conducted.
3.17 Real Property and Leases. Schedule 3.17 sets forth each and
every parcel of real property, leasehold interest held by Lincoln. In
addition, documentation with respect to easements granted in favor of Lincoln
is available for inspection at Lincoln's offices. Except as disclosed on
Schedule 3.17, Lincoln has good and marketable title in fee simple, free of
any Encumbrances to the real property listed in Schedule 3.17, other than
such Encumbrances disclosed in the Financial Statements or such Encumbrances
which individually or in the aggregate would not have a Material Adverse
Effect on Lincoln. Lincoln is in peaceful and undisturbed possession of each
leasehold estate. There are no material defaults by Lincoln as tenant under
the leasehold estates. Except as disclosed in Schedule 3.17 all of the
buildings, structures, improvements and fixtures used by or useful in the
business of Lincoln, owned or leased by Lincoln, are in a good state of
repair, maintenance and operating condition and, except as so disclosed and,
except for normal wear and tear, there are no defects with respect thereto
which would impair the day-to-day use of any such buildings, structures,
improvements or fixtures or which would subject Lincoln to liability under
applicable law.
3.18 Compliance With Law. (a) Except as set forth in Schedule
3.18(a), the operations and activities of Lincoln (including former
subsidiaries) has complied and are in compliance in all respects with all
applicable Federal, state and local laws, including, without limitation,
health and safety statutes and regulations and all Environmental Laws,
including, without limitation, all restrictions, conditions, standards,
limitations, prohibitions, requirements, obligations, schedules and
timetables contained in the Environmental Laws or contained in any
regulation, code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder.
(b) Schedule 3.18(b) sets forth all Federal, state and local
governmental licenses, permits and other authorizations ("Permits") of the
business of Lincoln and all reports of inspection of Lincoln and its
properties from January 1, 1992 to the date hereof under all applicable
Federal, state and local health and safety laws and regulations; Lincoln has
heretofore delivered to Parent complete and correct copies of all of the
foregoing and applications relating thereto.
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(c) Except as set forth in Schedule 3.18(c), Lincoln has obtained
all Permits that are (i) required under all Federal, state and local laws,
including the Environmental Laws, for the ownership, use and operation of
each location owned, operated or leased by Lincoln (the "Property") or (ii)
otherwise necessary in the conduct of the business of Lincoln. Except as set
forth in Schedule 3.18(c), all such Permits are in effect, no appeal nor any
other action is pending to revoke any such Permit, and Lincoln is in full
compliance with all terms and conditions of all such Permits.
(d) There have been no environmental studies made in the last five
years relating to the Property or any other property or facility previously
owned, operated or leased by Lincoln or any former subsidiary.
(e) Except as set forth in Schedule 3.18(e), there is no civil,
criminal or administrative action, suit, demand, claim, hearing, notice of
violation, investigation, proceeding, notice or demand letter pending
relating to Lincoln (including former subsidiaries), or the Property (or any
other property or facility formerly owned, operated or leased by Lincoln or
its former subsidiaries) or, to Lincoln's best knowledge, threatened relating
to Lincoln (including former subsidiaries) or the Property (or any other such
property or facility formerly owned, operated or leased by Lincoln or its
former subsidiaries) and relating in any way to the Environmental Laws or any
regulation, code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder.
(f) Except as set forth in Schedule 3.18(f), Lincoln (including
former subsidiaries) has not, and to Lincoln's best knowledge, no other
Person has, Released, placed, stored, buried or dumped any Hazardous
Substances, Oils, Pollutants or Contaminants or any other wastes produced by,
or resulting from, any business, commercial, or industrial activities,
operations, or processes, on, beneath, or adjacent to the Property (or any
other property or facility formerly owned, operated or leased by Lincoln or
its former subsidiaries) except for inventories of such substances to be
used, and wastes generated therefrom, in the ordinary course of business of
Lincoln (including former subsidiaries) (which inventories and wastes, if
any, were and are stored or disposed of in accordance with applicable laws
and regulations and in a manner such that there has been no Release of any
such substances into the environment).
(g) Except as set forth in Schedule 3.18(g), no Release or Cleanup
occurred at the Property (or any other property or facility formerly owned,
operated or leased by Lincoln or its former subsidiaries) which could result
in the assertion or creation of a lien on the Property by any Governmental
Entity with respect thereto, nor has any such assertion of a lien been made
by any Governmental Entity with respect thereto.
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(h) Except as set forth in Schedule 3.18(h), no employee of
Lincoln (including former subsidiaries) in the course of his or her
employment with Lincoln (including former subsidiaries) has been exposed to
any Hazardous Substances, Oils, Pollutants, Contaminants or other substance,
generated, produced or used by Lincoln (including former subsidiaries) which
could give rise to any claim against Lincoln (including former subsidiaries).
(i) Except as set forth in Schedule 3.18(i), Lincoln (including
former subsidiaries) has not received any notice or order from any
Governmental Entity advising it that Lincoln (including former subsidiaries)
is responsible for or potentially responsible for Cleanup or paying for the
cost of Cleanup of any Hazardous Substances, Oils, Pollutants or Contaminants
or any other waste or substance, and Lincoln (including former subsidiaries)
has not entered into any agreements concerning such Cleanup, nor is Lincoln
aware of any facts which might reasonably give rise to such notice, order or
agreement.
(j) Except as set forth in Schedule 3.18(j), the Property does not
contain any: (a) underground storage tanks; (b) asbestos; (c) equipment
using PCBs; (d) underground injection wells; or (e) septic tanks in which
process wastewater or any Hazardous Substances, Oils, Pollutants or
Contaminants have been disposed;
(k) Except as set forth in Schedule 3.18(k), with regard to
Lincoln and the Property (or any other property or facility formerly owned,
operated or leased by Lincoln or any former subsidiary of Lincoln), there
are no past or present (or, to Lincoln's best knowledge, future) events,
conditions, circumstances, activities, practices, incidents, actions or plans
which may interfere with or prevent compliance or continued compliance with
the Environmental Laws as in effect on the date hereof or with any
regulation, code, plan, order, decree, judgment, injunction, notice or demand
letter issued, entered, promulgated or approved thereunder, or which may give
rise to any common law or legal liability under the Environmental Laws, or
otherwise form the basis of any claim, action, demand, suit, proceeding,
hearing, notice of violation, study or investigation, based on or related to
the manufacture, generation, processing, distribution, use, treatment,
storage, place of disposal, transport or handling, or the Release or
threatened Release into the indoor or outdoor environment by Lincoln or a
present or former facility of Lincoln or any former subsidiary of Lincoln, of
any Hazardous Substances, Oils, Pollutants or Contaminants.
(l) There are no former manufactured gas plant sites which were
owned, operated or leased by Lincoln or any former Subsidiary of Lincoln.
(m) Lincoln has not entered into any agreement that may require it
to pay to, reimburse, guaranty, pledge, defend,
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indemnify or hold harmless any person for or against Environmental
Liabilities and Costs.
(n) The following terms shall be defined as follows:
(i) Cleanup - means all actions required to: (1) cleanup,
remove, treat or remediate Hazardous Substances, Oils, Pollutants or
Contaminants in the indoor or outdoor environment; (2) prevent the
Release of Hazardous Substances, Oils, Pollutants or Contaminants so
that they do not migrate, endanger or threaten to endanger public health
or welfare or the indoor or outdoor environment; (3) perform pre-
remedial studies and investigations and post-remedial monitoring and
care; or (4) respond to any government requests for information or
documents in any way relating to cleanup, removal, treatment or
remediation or potential cleanup, removal, treatment or remediation of
Hazardous Substances, Oils, Pollutants or Contaminants in the indoor or
outdoor environment.
(ii) Environmental Laws - means all foreign, Federal, state
and local laws, regulations, rules and ordinances relating to pollution
or protection of the environment, including, without limitation, laws
relating to Releases or threatened Releases of Hazardous Substances,
Oils, Pollutants or Contaminants into the indoor or outdoor environment
(including, without limitation, ambient air, surface water, groundwater,
land, surface and subsurface strata) or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, Release,
transport or handling of Hazardous Substances, Oils, Pollutants or
Contaminants, and all laws and regulations with regard to recordkeeping,
notification, disclosure and reporting requirements respecting Hazardous
Substances, Oils, Pollutants or Contaminants.
(iii) Environmental Liabilities and Costs - means all
liabilities, obligations, responsibilities, obligations to conduct
Cleanup, losses, damages, deficiencies, punitive damages, consequential
damages, treble damages, costs and expenses (including, without
limitation, all fees, disbursements and expenses of counsel, expert and
consulting fees and costs of investigations and feasibility studies and
responding to government requests for information or documents), fines,
penalties, restitution and monetary sanctions, interest, direct or
indirect, known or unknown, absolute or contingent, past, present or
future, resulting from any claim or demand, by any Person, whether based
in contract, tort, implied or express warranty, strict liability, joint
and several liability, criminal or civil statute, including any
Environmental Law, or arising from environmental, health or safety
conditions, the Release or threatened Release of Hazardous Substances,
Oils, Pollutants or Contaminants into the environment, as a result of
past or
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present ownership, leasing or operation of any properties, owned, leased or
operated by Lincoln or any former subsidiary of Lincoln, including, without
limitation, any of the foregoing incurred in connection with the conduct of
any Cleanup.
(iv) Hazardous Substances, Oils, Pollutants or Contaminants -
means all substances defined as such in the National Oil and Hazardous
Substances Pollution Contingency Plan, 40 C.F.R. 300.5, or defined as
such by, or regulated as such under, any Environmental Law.
(v) Release - means, when used as a noun, any release, spill,
emission, discharge, leaking, pumping, injection, deposit, disposal,
discharge, dispersal, leaching or migration into the indoor or outdoor
environment (including, without limitation, ambient air, surface water,
groundwater, and surface or subsurface strata) or into or out of any
property, including the movement of Hazardous Substances, Oils,
Pollutants or Contaminants through or in the air, soil, surface water,
groundwater or property, and when used as a verb, the occurrence of any
Release.
3.19 Insurance. (a) Schedule 3.19 sets forth (i) Lincoln's
policies of insurance presently in force and, including without limitation,
those covering Lincoln's public and product liability and its personnel,
properties, buildings, machinery, equipment, furniture, fixtures, and
operations, specifying with respect to each such policy, the name of the
insurer, type of coverage, term of policy, limits of liability and annual
premium; (ii) Lincoln's premiums, by year, by type of coverage, for the past
three years based on information received from Lincoln's insurance
carrier(s); (iii) all outstanding insurance claims by Lincoln for damage to
or loss of property or income which have been referred to insurers or which
Lincoln believes to be covered by commercial insurance; (iv) general
comprehensive liability policies carried by Lincoln since 1989, including
excess liability policies; and (v) any agreements, arrangements, or
commitments by or relating to Lincoln under which Lincoln indemnifies any
other Person or is required to carry insurance for the benefit of any other
Person.
(b) The insurance policies set forth in Schedule 3.19 are in full
force and effect, all premiums with respect thereto covering all periods up
to and including the date of the Closing shall be paid when due, and no
notice of cancellation or termination has been received with respect to any
such policy. Such policies are sufficient for compliance with all
requirements of law and all agreements to which Lincoln is a party; are
valid, outstanding and enforceable policies; provide adequate insurance
coverage for the assets and operations of Lincoln; will remain in full force
and effect through the respective dates set forth in Schedule 3.19 without
the payment of additional premiums; and
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will not in any way be affected by, or terminate or lapse by reason of, the
transactions contemplated by this Agreement.
3.20 Suppliers and Customers. Except as disclosed on Schedule
3.20, no supplier, customer, distributor or sales representative of Lincoln
has canceled or otherwise terminated, or made any written threat to Lincoln
or to any of its Affiliates to cancel or otherwise terminate, for any reason,
including the consummation of the transactions contemplated hereby, its
relationship with Lincoln, or has at any time after July 31, 1993, materially
decreased its services or supplies provided to Lincoln or its usage of the
services or products of Lincoln. Except as disclosed on Schedule 3.20, to
Lincoln's best knowledge, no supplier, customer, distributor or sales
representative of Lincoln intends to cancel or otherwise terminate its
relationship with Lincoln or to materially decrease its services or supplies
provided to Lincoln or its usage of the services or products of Lincoln.
3.21 Absence of Questionable Payments. Except as disclosed on
Schedule 3.21, neither Lincoln nor any director, officer, agent, employee, or
other Person acting on behalf of Lincoln, has used any corporate or other
funds for unlawful contributions, payments, gifts, or entertainment, or made
any unlawful expenditures relating to political activity to government
officials or others or established or maintained any unlawful or unrecorded
funds in violation of applicable law. Except as disclosed on Schedule 3.21,
neither Lincoln nor any current director, officer, agent, employee, or other
Person acting on behalf of Lincoln, has accepted or received any unlawful
contributions, payments, gifts, or expenditures.
3.22 Absence of Certain Changes or Events. Since the date of the
most recent Financial Statements, Lincoln has conducted its business only in
the ordinary and usual course, and, as of the date of this Agreement, there
has not been (i) any damage, destruction or loss, whether covered by
insurance or not, which has, or insofar as reasonably can be foreseen in the
future is reasonably likely to have, a Material Adverse Effect on Lincoln;
(ii) any declaration, setting aside or payment of any dividend or other
distribution (whether in cash, stock or property) with respect to any of
Lincoln's capital stock; or (iii) any transaction, commitment, dispute or
other event or condition (financial or otherwise) of any character (whether
or not in the ordinary course of business) individually or in the aggregate
having or which, insofar as reasonably can be foreseen, in the future is
reasonably likely to have, a Material Adverse Effect on Lincoln, except for
the previously disclosed negative impact upon income resulting from a union
strike at Peerless Pottery.
3.23 Shareholders. Attached hereto as Schedule 3.23, is a
complete and accurate list of the shareholders of Lincoln
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containing the number of shares and percentage of Lincoln Common Stock owned
by each such shareholder.
3.24 Vote Required. The affirmative vote of the holders of a
majority of the outstanding shares of Lincoln Common Stock is the only vote
of the holders of any class or series of Lincoln capital stock necessary to
approve this Agreement and the transactions contemplated hereby.
3.25 Accounting Matters. Neither Lincoln nor, to its best
knowledge, any of its Affiliates, has through the date of this Agreement,
taken or agreed to take any action that would prevent Parent from accounting
for the business combination to be effected by the Merger as a "pooling-of-
interests" within the meaning of Opinion 16 of the Accounting Principles
Board.
3.26 Ownership of Parent Stock. Neither Lincoln nor any of its
Affiliates "beneficially own", in the aggregate, more than 1% of the
outstanding shares of Parent Common Stock.
3.27 Restricted Securities. Lincoln hereby acknowledges that the
shares of Parent Common Stock to be issued in exchange for the shares of
Lincoln Common Stock in the Merger, will be issued in a transaction which is
exempt from registration with the Securities and Exchange Commission (the
"SEC"), pursuant to Section 4(2) of the Securities Act of 1933, as amended
(the "Securities Act") and Regulation D promulgated thereunder, and that
therefor such shares of Parent Common Stock are "restricted securities" as
defined in Section (a)(3) of Rule 144 promulgated under the Securities Act.
Lincoln further acknowledges that the shareholders of Lincoln may not sell,
assign or transfer the Parent Common Stock received by such shareholder
pursuant to the Merger unless such Parent Common Stock is registered under
the Securities Act or an exemption from registration is available. Lincoln
further acknowledges that appropriate legends will be placed on certificates
representing Parent Common Stock received by the shareholders of Lincoln in
the Merger.
3.28 Disclosure. (a) No representations or warranties by Lincoln
in this Agreement, including the Schedules hereto, and no statement contained
in any document (including, without limitation, the Financial Statements,
certificates, or other writings furnished or to be furnished by Lincoln to
Parent or any of its representatives pursuant to the provisions hereof or in
connection with the transactions contemplated hereby), contains or will
contain any untrue statement of material fact or omits or will omit to state
any material fact necessary, in light of the circumstances under which it was
made, in order to make the statements herein or therein not misleading.
There is no fact known to Lincoln which has or could have a Material Adverse
Effect on Lincoln and which has not been set forth in this Agreement, the
Financial Statements, or any Schedule, Exhibit, or certificate delivered, or
to be delivered, in accordance with the terms hereof.
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(b) Lincoln has furnished or will cause to be furnished to Parent
complete and correct copies of all agreements, certificates of compliance,
instruments and documents set forth on a Schedule, or to be set forth on a
Schedule, or underlying a disclosure set forth on a Schedule. Each of the
Schedules will be complete and correct when delivered to Parent in accordance
with the terms of this Agreement.
3.29 Lincoln's Best Knowledge. The term "Lincoln's best
knowledge", shall mean the best knowledge of Lincoln, or its directors,
officers or employees, after due inquiry.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND SPENCER
Each of Parent and Spencer represents and warrants to Lincoln as
follows:
4.1 Organization, Standing and Power. Each of Parent and Spencer
is a corporation duly organized and validly existing under the laws of the
state of Indiana and has all requisite power and authority, and in the case
of Parent has been duly authorized by all necessary approvals and orders of
the Indiana Utility Regulatory Commission to own, lease and operate its
properties and to carry on its business as now being conducted.
4.2 Capital Structure. As of September 30, 1993 the authorized
capital stock of Parent consists of (i) 50,000,000 shares of Parent Common
Stock of which 15,705,427 shares were issued and outstanding, (ii) 800,000
shares of cumulative preferred stock, $100 par value, issuable in series of
which (A) 85,895 shares of 4.8% Series nonredeemable cumulative preferred
stock were issued and outstanding, (B) 25,000 shares of 4.75% nonredeemable
cumulative preferred stock were issued and outstanding, (C) 75,000 shares of
8.75% Series nonredeemable cumulative preferred stock were issued and
outstanding, and (D) 75,000 shares of 6.50% redeemable cumulative preferred
stock were issued and outstanding, and (iii) 5,000,000 shares of special
preferred stock, no par value, issuable in series of which 21,150 shares were
issued and outstanding. As of the date hereof, the authorized capital stock
of Spencer consists of 1000 shares of Spencer Common Stock, 100 shares of
which are issued and outstanding and are owned by Parent. All outstanding
shares of Parent's capital stock and Spencer Common Stock are validly issued,
fully paid and nonassessable and are not subject to preemptive rights.
4.3 Corporate Authority. Parent and Spencer have all requisite
corporate power and authority to enter into this Agreement and to consummate
the transactions contemplated hereby. The execution, delivery and
performance of this Agreement and the
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consummation of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and
Spencer. This Agreement has been duly executed and delivered by Parent and
Spencer, as the case may be, and assuming this Agreement constitutes a valid
and binding obligation of Lincoln, constitutes a valid and binding obligation
of Parent and Spencer enforceable in accordance with its terms.
4.4 No Violation. The execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated hereby will
not result in any Violation pursuant to (i) any provision of the Amended
Articles of Incorporation or By-laws of Parent or the Articles of
Incorporation or By-laws of Spencer or (ii) any provision of any loan or
credit agreement, note, mortgage, indenture, lease, or other agreement,
obligation, instrument, permit, concession, franchise, license or (iii) any
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Parent or Spencer or their respective properties or assets,
which Violation, in the case of each of clauses (ii) and (iii), would have a
Material Adverse Effect on Parent, Spencer and Parent's subsidiaries taken as
a whole.
4.5 Consents and Approvals. No consent, approval, order or
authorization of, or registration, declaration or filing with, any
Governmental Entity is required by or with respect to Parent, Spencer or any
of Parent's subsidiaries in connection with the execution and delivery of
this Agreement by Parent and Spencer or the consummation by Parent or Spencer
of the transactions contemplated hereby, the failure to obtain which would
have a Material Adverse Effect on Parent, Spencer and Parent's subsidiaries,
taken as a whole, except for:
(i) the filing of the Articles of Merger with the Secretary
of State of the State of Indiana in accordance with Section 23-1-40-5 of the
Indiana BCL,
(ii) the obtaining of the IURC Order,
(iii) the obtaining from the SEC of an order pursuant to the
Public Utility Holding Company Act of 1935, as amended ("PUCHA"), approving
the transactions contemplated hereby (the "SEC PUHCA Order"),
(iv) the filing of such documents with, and the qualification
with, the various state securities authorities under state securities (the
"Blue-Sky Laws"), that are required in connection with the transactions
contemplated by this Agreement (the "Blue-Sky Filings"), and
(v) the Local Approvals.
4.6 Parent SEC Documents. Parent has made available to Lincoln a
true and complete copy of each report, schedule, registration statement and
definitive proxy statement filed by
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Parent with the SEC since January 1, 1991 (as such documents have since the
time of their filing been amended, the "Parent SEC Documents") which are all
the documents (other than preliminary material) that Parent was required to
file with the SEC since such date. As of their respective dates, the Parent
SEC Documents complied in all material respects with the requirements of the
Securities Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), as the case may be, and the rules and regulations of the SEC
promulgated thereunder applicable to such Parent SEC Documents, and none of
the Parent SEC Documents contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading. The financial statements of Parent included
in the Parent SEC Documents comply as to form in all material respects with
applicable accounting requirements and with the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with GAAP applied on a consistent basis during the periods involved (except
as may be indicated in the notes thereto, or in the case of the unaudited
statements, as permitted by Form 10-Q of the SEC) and fairly present
(subject, in the case of the unaudited statements, to normal, recurring audit
adjustments) the consolidated financial position of Parent and its
consolidated subsidiaries as at the dates thereof and the consolidated
results of their operations and cash flows for the periods then ended.
4.7 Absence of Certain Changes or Events. Except as disclosed in
the Parent SEC Documents filed prior to the date of this Agreement or in the
unaudited consolidated balance sheet of Parent and its subsidiaries as at
September 30, 1993, and the related consolidated statements of income, cash
flows and changes in shareholders' equity (the "Parent 1993 Financials"),
true and correct copies of which have been delivered to Lincoln, or except as
contemplated by this Agreement, since the date of the Parent 1993 Financials,
Parent and its subsidiaries have conducted their respective businesses only
in the ordinary and usual course, and, as of the date of this Agreement,
there has not been (i) any damage, destruction or loss, whether covered by
insurance or not, which has, or insofar as reasonably can be foreseen in the
future is reasonably likely to have, a Material Adverse Effect on Parent and
its subsidiaries taken as a whole; (ii) any declaration, setting aside or
payment of any dividend or other distribution (whether in cash, stock or
property) with respect to any of Parent's or its subsidiaries' capital stock,
except for regular cash dividends on Parent Common Stock and preferred stock;
or (iii) any transaction, commitment, dispute or other event or condition
(financial or otherwise) of any character (whether or not in the ordinary
course of business) individually or in the aggregate having or which, insofar
as reasonably can be foreseen, in the future is reasonably likely to have, a
Material Adverse Effect on Parent and its subsidiaries taken as a whole.
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4.8 Ownership of Lincoln Stock. Parent and its Affiliates do not
"beneficially own" any shares of Lincoln Common Stock.
4.9 Interim Operations of Spencer. Spencer was formed solely for
the purpose of engaging in the transactions contemplated hereby, has engaged
in no other business activities and has conducted its operations only as
contemplated hereby.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
During the period from the date of this Agreement and continuing
until the Effective Time (except as expressly contemplated or permitted by
this Agreement, or to the extent that the parties shall otherwise consent in
writing), Lincoln and Parent each agree that:
5.1 Ordinary Course. Lincoln shall carry on its business in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted and use all reasonable efforts to preserve intact its
present business organization, keep available the services of its present
officers and employees and preserve its relationships with customers,
suppliers and others having business dealings with it to the end that its
goodwill and ongoing business shall not be impaired in any material respect
at the Effective Time.
5.2 Dividends; Changes in Stock. Lincoln shall not (i) declare or
pay any dividends on or make other distributions in respect of any of its
capital stock, (ii) split, combine or reclassify any of its capital stock or
issue or authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock or (iii)
repurchase or otherwise acquire any shares of its capital stock.
5.3 No Issuance of Securities. Lincoln shall not issue, deliver
or sell, or authorize or propose the issuance, delivery or sale of, any
shares of its capital stock or any securities convertible into, or any
rights, warrants or options to acquire, any such shares.
5.4 Constituent Documents. Except as contemplated by Section 1.3,
Lincoln shall not amend or propose to amend its Amended Articles of
Incorporation or its By-laws.
5.5 No Acquisitions. Lincoln shall not acquire or agree to
acquire by merging or consolidating with, or by purchasing a substantial
equity interest in or substantial portion of the assets of, or by any manner,
any business or any
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corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets not in
the ordinary course of business.
5.6 No Dispositions. Lincoln shall not sell, lease, license,
encumber or otherwise dispose of, or agree to sell, lease, license, encumber
or otherwise dispose of, any of its assets, which are material, individually
or in the aggregate, to Lincoln.
5.7 No Indebtedness. Lincoln shall not incur any indebtedness for
borrowed money or guarantee any such indebtedness or issue or sell any debt
securities or warrants or rights to acquire any debt securities of Lincoln or
guarantee any debt securities of others other than in each case in the
ordinary course of business consistent with prior practice.
5.8 No Solicitations. Lincoln shall not, nor shall it permit any
of its officers, directors or employees or any investment banker, financial
advisor, attorney, accountant or other representative to solicit or encourage
(including by way of furnishing information) or take any other action to
facilitate, any inquiries or the making of any proposal which constitutes, or
may reasonably be expected to lead to, any Alternate Proposal, or agree to or
endorse any Alternate Proposal. "Alternate Proposal" shall mean any offer or
proposal for a merger, consolidation or other business combination involving
Lincoln or any offer or proposal to acquire in any manner a substantial
equity interest in, or a substantial portion of the assets of Lincoln other
than the transactions contemplated by this Agreement. Lincoln shall promptly
orally, and within fifteen (15) business days in writing, advise Parent of
any such inquiries or Alternate Proposals. If, in such notice of the
Alternate Proposal, the price to be paid for shares of Lincoln Common Stock
is greater than the price to be paid for such shares pursuant to this
Agreement, Parent shall have thirty (30) days to match the price of such
Alternate Proposal, with all other terms and conditions contained in this
Agreement remaining constant. If Parent shall have exercised its rights to
match the price of such Alternate Proposal, this Agreement shall remain in
full force and binding effect. If Parent shall not have exercised its rights
to match the price of such Alternate Proposal, this Agreement will remain in
full force and binding effect, unless within 60 days of the day Parent
receives notice of such Alternate Proposal, Lincoln executes definitive
agreements with such third party with respect to such Alternate Proposal.
5.9 No Actions. Except as may be required by law, no party shall
take any action that would or is reasonably likely to result in any of its
representations and warranties set forth in this Agreement being untrue as of
the date made or in any of the conditions to the Merger set forth in Article
VII not being satisfied.
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5.10 Advice of Changes; Filings with Governmental Entities. Each
party shall confer on a regular and frequent basis with the other, report on
operational matters and promptly advise the other of any change or event
having, or which, insofar as reasonably can be foreseen, could have, a
Material Adverse Effect on such party and its subsidiaries taken as a whole.
Each party shall promptly provide the other party (or the other party's
counsel) copies of all filings made by such party with any state or Federal
Governmental Entity in connection with this Agreement and the transactions
contemplated hereby.
5.11 Employee Benefit Covenant. During the period from the date
of this Agreement and continuing until the Effective Time, Lincoln agrees
that it will not, without the prior written consent of Parent, (i) enter
into, adopt, amend (except as may be required by law) or terminate any
agreement, arrangement, benefit plan or policy between Lincoln and one or
more of its directors, officers or employees or (ii) except for normal
increases in the ordinary course of business consistent with past practice
that, in the aggregate, do not result in a material increase in benefits or
compensation expense to Lincoln, increase in any manner the compensation or
fringe benefits of any director, officer or employee or (iii) pay any benefit
not required by any arrangement as in effect as of the date hereof or (iv)
enter into any contract, agreement, commitment or arrangement to do any of
the foregoing.
5.12 Tax Covenant. During the period from the date of this
Agreement and continuing until the Effective Time, Lincoln agrees (i) to file
all returns required to be filed by it and shall pay all Taxes required to be
paid, whether or not shown on such returns, and (ii) that it will not, except
in the ordinary course of business consistent with prior practice, make any
Tax election or settle or compromise any Tax liability.
5.13 IURC Proceedings. During the period from the date of this
Agreement and continuing until the Effective Time, Lincoln hereby agrees, as
to itself and its officers employees, agents and attorneys, to diligently
pursue its rights and obligations with respect to all proceedings before the
IURC, including the current gas rate proceeding.
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ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Access to Information; Confidentiality. Upon reasonable
notice, Lincoln shall afford to the officers, employees, accountants, counsel
and other representatives of Parent, reasonable access, during normal
business hours during the period prior to the Effective Time, to all its
properties, books, contracts, commitments and records and, during such
period, Lincoln shall furnish promptly to Parent all information concerning
its business, properties and personnel as Parent may reasonably request.
Unless otherwise required by law, Parent shall hold any such information
delivered by Lincoln to Parent which is non-public in confidence until such
time as such information otherwise becomes publicly available through no
wrongful act of Parent, and in the event of termination of this Agreement for
any reason, Parent shall promptly return all non-public documents obtained
from Lincoln, and all copies of such documents, to Lincoln.
6.2 Preparation of the Information Statement. Lincoln shall
promptly as reasonably practicable after the date of this Agreement, prepare
an information statement (the "Information Statement") for use in connection
with obtaining the approval of Lincoln's shareholders as provided in Section
6.7. Parent shall provide information to Lincoln for use in the Information
Statement as is reasonably necessary, and Lincoln shall include all
information provided by Parent, including without limitation any information
provided to comply with the Securities Act. Lincoln and Parent shall
cooperate in all reasonable respects in the preparation and distribution of
the Information Statement. Lincoln shall not distribute the Information
Statement without the prior approval of Parent, which approval shall not be
unreasonably withheld.
6.3 Preparation of Registration Statement. (a) Parent will use
its commercially reasonable best efforts, to prepare and file with the SEC as
promptly as reasonably practicable a registration statement on Form S-3 (the
"Registration Statement") providing for a secondary offering after the
Closing of the Merger, on a continuous basis pursuant to Rule 415 promulgated
under the Securities Act, covering the resale of the Parent Common Stock
received by the shareholders of Lincoln in connection with the transactions
contemplated by this Agreement, pursuant to "brokers' transactions" (within
the meaning of Rule 144 promulgated under the Securities Act) on the NYSE.
The Registration Statement shall comply as to form in all material respects
with the provisions of the Securities Act and the rules and regulations
promulgated thereunder. Lincoln shall furnish to Parent all information
concerning Lincoln and the holders of the Lincoln Common Stock for use in the
Registration Statement as may be required by the Securities Act. Lincoln
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acknowledges that until the Registration Statement becomes effective, the
shares of Parent Common Stock issued at the Effective Time will be subject to
transfer restrictions under the Securities Act, and until the effective date
of the Registration Statement, the certificates representing such shares
shall contain appropriate restrictive legends. Parent and Lincoln shall
cooperate in all reasonable respects in the preparation and filing of the
Registration Statement.
6.4 Information Supplied. None of the information supplied or to
be supplied by Lincoln for inclusion or incorporation by reference in (i) the
Registration Statement will, at the time it 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, in the light
of the circumstances under which they are made, not misleading and (ii) the
Information Statement will, at the date distributed to the shareholders of
Lincoln and at the time of the meeting of such shareholders to be held in
connection with the Merger, 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 the light of the circumstances
under which they are made, not misleading. None of the information supplied
or to be supplied by Parent for inclusion or incorporation by reference in
(i) the Registration Statement will, at the time it 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, in the light
of the circumstances under which they are made, not misleading and (ii) the
Information Statement will, at the date distributed to the shareholders of
Lincoln and at the time of the meeting of such shareholders to be held in
connection with the Merger, 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 the light of the circumstances
under which they are made, not misleading.
6.5 Blue-Sky Filings. Parent shall make all necessary filings
under state securities or "Blue Sky" laws in connection with the issuance by
Parent of Parent Common Stock in connection with the Merger and Parent shall
use its best efforts to obtain all qualifications as may be required under
such laws in connection therewith; provided, however, that Parent shall not
be required to register or qualify as a foreign corporation or to take any
action which would subject it to the service of process in suits, in any
jurisdiction where it is not then so subject. Lincoln shall furnish to Parent
all information concerning Lincoln and the holders of the Lincoln Common
Stock as may be reasonably requested in connection with any such filings.
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6.6 Stock Exchange Listing. Parent shall use its best efforts to
cause the shares of Parent Common Stock to be issued in the Merger to be
approved for listing on the NYSE and any other national securities exchange
on which shares of Parent Common Stock may at such time be listed, subject to
official notice of issuance, prior to the effective date of the Registration
Statement.
6.7 Shareholder Approval. Lincoln shall take all action necessary
in accordance with applicable law and its Amended Articles of Incorporation
and By-laws to convene a meeting of its shareholders for the purpose of
considering the approval of this Agreement and the transactions contemplated
hereby. Prior to the date of such shareholder meeting Lincoln shall
distribute the Information Statement to each shareholder. Lincoln shall,
through its Board of Directors, recommend to its shareholders approval of the
Merger and transactions contemplated hereby; provided, however, that the
Board of Directors shall not be obligated to recommend approval of such
matters if such Board of Directors, acting with the written advice of
counsel, determines that such recommendation would be contrary to their legal
obligations as Directors. Lincoln and Parent will coordinate and cooperate
with respect to the timing of such shareholder meeting and shall use their
best efforts to hold such meeting as soon as practicable after the receipt of
the required regulatory approvals of the transactions contemplated hereby.
6.8 Legal Conditions to Merger. Each of Lincoln, Parent and
Spencer will take all reasonable actions necessary to comply promptly with
all legal requirements which may be imposed on itself with respect to this
Agreement, including furnishing all information required under applicable law
to any Governmental Entity, and will promptly cooperate with and furnish
information to each other in connection with any such requirements imposed
upon any of them or any of their subsidiaries in connection with the Merger.
Each of Lincoln, Parent and Spencer will take all reasonable actions
necessary to obtain (and will cooperate with each other in obtaining) any
consent, authorization, order or approval of, or any exemption by, any
Governmental Entity or other public or private third party, required to be
obtained or made by Parent, Lincoln, Spencer or any of their subsidiaries in
connection with the Merger or the taking of any action contemplated thereby
or by this Agreement.
6.9 Expenses. Whether or not the Merger is consummated, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expense, and,
in connection therewith, each of Parent and Lincoln shall pay, with its own
funds and not with funds provided by the other party, any and all property or
transfer taxes imposed on such party resulting from the Merger.
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6.10 Brokers or Finders. Each of Parent and Lincoln represents,
as to itself, and its Affiliates, that no agent, broker, investment banker,
financial advisor or other firm or person is or will be entitled to any
broker's or finder's fee or any other commission or similar fee in connection
with any of the transactions contemplated by this Agreement, Parent and
Lincoln agree to indemnify and hold the other harmless from and against any
and all claims, liabilities or obligations with respect to any other fees,
commissions or expenses asserted by any person on the basis of any act or
statement alleged to have been made by such party or its Affiliate.
6.11 Best Efforts. Subject to the terms and conditions of this
Agreement, each of the parties hereto agrees to use best efforts to take, or
cause to be taken, all action and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement
and the Ancillary Agreements.
6.12 Tax Treatment. Parent, Spencer and Lincoln each agree to
treat the Merger as a reorganization within Section 368(a)(2)(E) of the Code.
6.13 Accounting Treatment. Parent, Spencer and Lincoln each agree
to account for the Merger as a "pooling-of-interests" within the meaning of
Opinion 16 of the Accounting Principles Board, and each of Parent and Lincoln
shall use its best efforts to provide all information necessary for Arthur
Andersen & Co. to prepare the "pooling-of-interest" letter referred to in
Section 7.1(d).
6.14 Compliance Letters. (a) Prior to the Closing Date, Lincoln
shall deliver to Parent a letter substantially in the form attached hereto as
Exhibit A, identifying all persons who may be, at the time this Agreement is
submitted for approval to the shareholders of Lincoln, Affiliates of Lincoln
for purposes of "pooling-of-interests" accounting treatment and for purposes
of Rule 145 promulgated under the Securities Act.
(b) As of the Closing Date, Lincoln shall use its best efforts to
cause each Affiliate of Lincoln to deliver to Parent, a written agreement
substantially in the form attached hereto as Exhibit B, with respect to
certain matters relating to the Federal securities laws and "pooling-of-
interest" accounting treatment.
(c) As of the Closing Date, Lincoln shall use its best efforts to
cause each of its shareholders to deliver to Parent a written agreement
substantially in the form attached hereto as Exhibit C, with respect to
certain matters relating to the Federal securities laws.
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6.15 Ancillary Agreements. Simultaneous with the execution of
this Agreement, certain shareholders of Lincoln have entered into (i) an
indemnification agreement, agreeing to indemnify Parent for certain
liabilities of Lincoln in connection with the transactions contemplated
hereby, and (ii) an agreement granting Parent certain rights with respect to
Lincoln Common Stock owned by such shareholders. Lincoln and Parent have
also executed a letter agreement dated December 22, 1993, with respect to
certain employee matters. The indemnification agreement, the rights
agreement and the employee matter letter are collectively referred to
hereinafter as the "Ancillary Agreements".
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation To Effect the Merger.
The respective obligation of each party to effect the Merger shall be subject
to the satisfaction prior to the Closing Date of each of the following
conditions:
(a) Shareholder Approval. This Agreement, and the transactions
contemplated hereby, shall have been approved and adopted by the affirmative
vote of the holders of a majority of the outstanding shares of Lincoln Common
Stock.
(b) Regulatory Approvals. Other than the filing provided for by
Section 1.2, all authorizations, consents, orders or approvals of, or
declarations or filings with, or expirations of waiting periods imposed by,
any Governmental Entity the failure to obtain which would have a Material
Adverse Effect on the Surviving Corporation, shall have been filed, occurred
or been obtained, including but not limited to the SEC PUHCA Order, the IURC
Order and the Local Approvals, and all applicable waiting periods, if any,
including any extensions thereof, under any applicable law, statute,
regulations or rule, shall have expired or terminated. Parent shall have
received all permits and other authorizations necessary under the Blue-Sky
Laws to issue the Parent Common Stock in exchange for the Lincoln Common
Stock and to consummate the Merger.
(c) No Injunctions or Restraints. No temporary restraining order,
preliminary or permanent injunction or other order issued by any court of
competent jurisdiction or other legal restraint or prohibition (an
"Injunction") preventing the consummation of the Merger, or materially
changing the transactions contemplated hereby, shall be in effect.
(d) Pooling of Interests. Parent shall have received a letter
from Arthur Andersen & Co., dated a date within two business days before the
Closing Date and addressed to Parent, stating that the Merger will qualify as
a "pooling-of-interests"
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transaction under Opinion 16 of the Accounting Principles Board.
(e) Tax Free Reorganization. Each of Lincoln and Parent shall
have received a certificate, in form and substance satisfactory to Lincoln or
Parent, as the case may be, from each shareholder of Lincoln that owns seven
(7) percent or more of the outstanding common stock of Lincoln issued and
outstanding immediately prior to the Effective Time, representing that such
shareholder has no plan or intention to sell, exchange, or otherwise dispose
of (i) shares of Parent Common Stock received in the Merger, (ii) shares of
Parent Common Stock held by such shareholder prior to the Effective Time, or
(iii) except as provided in the Merger Agreement, shares of Lincoln Common
Stock held by such shareholder prior to the Effective Time.
7.2 Conditions to Obligations of Parent and Spencer. The
obligation of Parent and Spencer to effect the Merger is subject to the
satisfaction of each of the following conditions unless waived by Parent and
Spencer:
(a) Representations and Warranties. Except as otherwise
contemplated by this Agreement, the representations and warranties of Lincoln
set forth in this Agreement shall be true and correct in all material
respects as of the date of this Agreement (except to the extent such
representations and warranties speak as of an earlier date) and as of the
Closing Date as though made on and as of the Closing Date, and Parent shall
have received a certificate signed on behalf of Lincoln by an executive
officer of Lincoln to such effect.
(b) Performance of Obligations of Lincoln. Lincoln shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and Parent shall
have received a certificate signed on behalf of Lincoln by an executive
officer of Lincoln to such effect.
(c) Tax Opinion. Parent shall have received the opinion of
Winthrop, Stimson, Putnam & Roberts, counsel to Parent, based on the
appropriate representations of Lincoln and Parent in form and substance
satisfactory to such counsel, to the effect that the Merger will be treated
for Federal income tax purposes as a reorganization within the meaning of
Section 368(a)(2)(E) of the Code, and that Parent, Spencer and Lincoln will
each be a party to that reorganization within the meaning of Section 368(b)
of the Code, dated on or about the date of the Closing.
(d) Board Approval. The Board of Directors of Parent shall have
approved this Agreement by January 15, 1994.
(e) Consents Under Agreements. Lincoln shall have obtained the
consent or approval of each person (other than the Government Entities),
whose consent or approval shall be required
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in order to permit Lincoln to consummate the transactions contemplated hereby
(including, without limitation, consents or approvals incident to contracts,
franchises, deeds, easements, intangibles and other rights and entitlements
necessary for the continued operation of Lincoln's business), except those
for which failure to obtain such consents and approvals would not,
individually or in the aggregate, have a Material Adverse Effect (i) on the
Surviving Corporation or (ii) upon the consummation of the transactions
contemplated hereby.
(f) Material Adverse Change. Since December 31, 1992, there shall
not have been any material adverse change, or changes which in the aggregate
are materially adverse, in the financial condition, assets, liabilities
(contingent or otherwise) results of operations, business or business
prospects of Lincoln.
(g) Compliance Letters. Parent shall have received from Lincoln
an executed copy of the agreement in the form of Exhibit A hereto designating
each Affiliate of Lincoln, and Parent shall have received from each Affiliate
so designated an executed copy of the agreement in the form of Exhibit B.
Parent shall have also received from each shareholder who is not an Affiliate
of Lincoln an executed copy of the agreement in the form of Exhibit C.
(h) Satisfactory Investigation. Parent shall have
satisfactorily completed its investigation, including a review by Parent's
independent public accountants, of the assets, equipment, facilities,
liabilities (contingent or otherwise) financial condition, business and
business prospects of Lincoln in connection with the transactions
contemplated hereby and shall have been satisfied with such results. Parent
shall have satisfactorily completed its investigation of any event or
condition arising or discovered after the date of this Agreement that, could
reasonably be expected to result in a Material Adverse Effect on Lincoln.
(i) Environmental Investigation. Parent shall have completed, to
its satisfaction, an environmental inspection of the facilities of Lincoln,
and Parent shall not have discovered, either in the course of the
environmental inspection or at any time prior to the Closing Date, any actual
or potential liabilities (contingent or otherwise) relating to environmental
matters which could reasonably be expected to result in a Material Adverse
Effect on Lincoln.
(j) Schedules. Lincoln shall have provided to Parent the detailed
Schedules and other information required by this Agreement by February 15,
1994 and the information in such Schedules shall not disclose any material
adverse change, or changes since December 31, 1992 which in the aggregate are
materially adverse, in the assets, liabilities (contingent or otherwise),
financial condition, results of operations, business or business prospects of
Lincoln, other than such changes
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disclosed in the IURC Documents filed prior to the date of this Agreement.
7.3 Conditions to Obligations of Lincoln. The obligation of
Lincoln to effect the Merger is subject to the satisfaction of each of the
following conditions unless waived by Lincoln:
(a) Representations and Warranties. Except as otherwise
contemplated by this Agreement, the representations and warranties of Parent
and Spencer set forth in this Agreement shall be true and correct in all
material respects as of the date of this Agreement (except to the extent such
representations speak as of an earlier date) and as of the Closing Date as
though made on and as of the Closing Date, and Lincoln shall have received a
certificate signed on behalf of Parent by an executive officer of Parent to
such effect.
(b) Performance of Obligations of Parent and Spencer. Parent and
Spencer shall have performed in all material respects all obligations
required to be performed by them under this Agreement at or prior to the
Closing Date, and Lincoln shall have received a certificate signed on behalf
of Parent by an executive officer of Parent to such effect.
(c) Tax Opinion. Lincoln shall have received the opinion of its
counsel based on the appropriate representations of Parent and Lincoln in
form and substance satisfactory to such counsel, to the effect that the
Merger will be treated for Federal income tax purposes as a reorganization
within the meaning of Section 368(a)(2)(E) of the Code, and that Parent,
Spencer and Lincoln will each be a party to that reorganization within the
meaning of Section 368(b) of the Code, dated on or about the date of the
Closing.
(d) Material Adverse Change. Since December 31, 1992, there shall
not have been any material adverse change, or changes which in the aggregate
are materially adverse, in the financial condition, assets, liabilities
(contingent or otherwise) results of operations, business or business
prospects of Parent, Spencer and subsidiaries of Parent taken as a whole.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination. At any time prior to the Effective Time, whether
before or after approval of the matters presented in connection with the
Merger by the holders of Lincoln Common Stock, this Agreement may be
terminated:
(a) by mutual consent of Parent and Lincoln;
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(b) by either Parent or Lincoln if the Merger shall not have been
consummated before July 1, 1994, unless extended by mutual agreement;
(c) by either Parent or Lincoln if there has been a material
breach of any representation, warranty, covenant or agreement on the part of
the other set forth in this Agreement which breach has not been cured within
ten (10) business days following receipt by the breaching party of notice of
such breach or adequate assurance of such cure shall not have been given by
or on behalf of the breaching party within such ten (10) business day period;
(d) by either Parent or Lincoln if any permanent Injunction or
other order of a court or other competent authority preventing the
consummation of the Merger shall have become final and nonappealable;
(e) by either Parent or Lincoln if the required approval of the
holders of Lincoln Common Stock shall not have been obtained by reason of the
failure to obtain the required approval upon a vote taken at a duly held
meeting of shareholders or at any adjournment thereof, or
(f) by either Parent or Lincoln pursuant to Section 5.8.
8.2 Effect of Termination. In the event of termination of this
Agreement by either Lincoln or Parent as provided in Section 8.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of Parent, Spencer or Lincoln or their respective
officers or directors, except to the extent that such termination results
from the breach by a party hereto of any of its representations, warranties,
covenants or agreements set forth in this Agreement.
8.3 Amendment. This Agreement may be amended by the parties
hereto, by action taken or authorized by their respective Boards of
Directors, at any time before or after approval of the matters presented in
connection with the Merger by the holders of Lincoln Common Stock but, after
any such approval, no amendment shall be made which by law requires further
approval by such shareholders without such further approval. This Agreement
may not be amended except by an instrument in writing signed on behalf of
each of the parties hereto.
8.4 Extension; Waiver. At any time prior to the Effective Time,
the parties hereto, by action duly taken, may, to the extent legally allowed,
(i) extend the time for the performance of any of the obligations or other
acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions contained herein. Any
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agreement on the part of a party hereto to any such extension or waiver shall
be valid only if set forth in a written instrument signed on behalf of such
party.
ARTICLE IX
GENERAL PROVISIONS
9.1 Further Assurances. Each party will execute and deliver all
such further documents and instruments and take all such further action as
may be necessary in order to consummate the transactions contemplated hereby.
9.2 Notices. Any notice or communication required or permitted
hereunder shall be in writing and either delivered personally or telecopied
(with confirmation of receipt) or sent by certified or registered mail,
postage prepaid, and shall be deemed to be given, dated and received when so
delivered personally or telecopied (with confirmation of receipt) or, if
mailed, five business days after the date of mailing to the following address
or telecopy numbers, or to such other address or addresses as such person may
subsequently designate by notice given hereunder.
(a) if to Parent or Spencer, to:
Southern Indiana Gas & Electric Company
20 N.W. Fourth Street
Evansville, Indiana 47741-0001
Telecopy: (812) 464-4554
Telephone: (812) 424-5300
Attention: Mr. Andrew E. Goebel
with a copies to:
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, NY 10004-1490
Telecopy: (212) 858-1500
Telephone: (212) 858-1000
Attention: John H. Byington, Jr., Esq.
-36-
<PAGE>
and to:
Bamberger, Foreman, Oswald and Hahn
Seventh Floor - Hulman Building
Evansville, Indiana 47704-0657
Telecopy: (812) 425-1591
Telephone: (812) 421-4936
Attention: George A. Porch, Esq.
(b) if to Lincoln, to:
Lincoln Natural Gas Company, Inc.
317 Main Street
Rockport, Indiana 47635
Telecopy: (812) 649-9524
Telephone: (812) 649-2311
Attention: Mr. James O. Martin
with a copy to:
Lindsey & Lindsey
217 Main Street
Rockport, Indiana 47635
Telecopy: (812) 649-9676
Telephone: (812) 649-4571
Attention: Sid Lindsey, Esq.
9.3 Interpretation. When a reference is made in this Agreement to
Sections, such reference shall be to a Section of this Agreement unless
otherwise indicated. Whenever the words "include", "includes" or "including"
are used in this Agreement, they shall be deemed to be followed by the words
"without limitation". The phrase "made available" in this Agreement shall
mean that the information referred to has been made available if requested by
the party to whom such information is to be made available.
9.4 Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of
or to affect the meaning or interpretation of this Agreement.
9.5 Counterparts. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when such counterparts have been signed by each of the
parties and delivered to the other parties, it being understood that all
parties need not sign the same counterpart.
-37-
<PAGE>
9.6 Entire Agreement. This Agreement (including the documents and
the instruments referred to herein, including without limitation, the
Ancillary Agreements) constitutes the entire agreement and supersedes all
prior agreements and understandings, both written and oral, among the parties
with respect to the subject matter hereof.
9.7 No Third Party Beneficiaries. This Agreement (including the
documents and the instruments referred to herein) is not intended to confer
upon any person other than the parties hereto any rights or remedies
hereunder.
9.8 Governing Law. This Agreement shall be governed and construed
in accordance with the internal substantive laws of the State of Indiana
without regard to any applicable conflicts of law principles.
9.9 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability
of the other provisions of this Agreement, which shall remain in full force
and effect. In the event any court or other competent authority holds any
provision of this Agreement to be null, void or unenforceable, the parties
hereto shall negotiate in good faith the execution and delivery of an
amendment to this Agreement in order, as nearly as possible, to effectuate,
to the extent permitted by law, the intent of the parties hereto with respect
to such provision.
9.10 Publicity. Except as otherwise required by law or the rules
of the NYSE, so long as this Agreement is in effect, neither Lincoln nor
Parent shall, nor shall permit any of its Affiliates to, issue or cause the
publication of any press release or other public announcement with respect to
the transactions contemplated by this Agreement without the consent of the
other party, which consent shall not be unreasonably withheld.
9.11 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that Spencer may assign, in its sole
discretion, any or all rights, interests and obligations hereunder to Parent
or to any direct or indirect wholly owned subsidiary of Parent. Subject to
the preceding sentence, this Agreement will be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors
and assigns.
-38-
<PAGE>
IN WITNESS WHEREOF, Parent, Spencer and Lincoln have caused this
Agreement to be signed by their respective officers thereunto duly
authorized, all as of the date first above written.
SOUTHERN INDIANA GAS & ELECTRIC COMPANY
BY /s/ R.G. Reherman
---------------------------
Name: R.G. Reherman
Title: Chairman, President & C.E.O.
SPENCER ENERGY CORP.
BY /s/ R.G. Reherman
----------------------------
Name: R.G. Reherman
Title: Chairman, President & C.E.O.
LINCOLN NATURAL GAS COMPANY, INC.
BY /s/ James Orville Martin
---------------------------
Name: James Orville Martin
Title:
-39-
<PAGE>
EXHIBIT A
[LETTERHEAD OF LINCOLN]
Date
Southern Indiana Gas and Electric Company
20 N.W. Fourth Street
Evansville, Indiana 47741-0001
Gentlemen:
The following persons may be deemed to be affiliates of
Lincoln Natural Gas Company, Inc. within the meaning of Rule 145 under the
Securities Act of 1933, as amended, and the Securities and Exchange
Commission's Accounting Series Release 135 and for purposes of "pooling-of-
interest" accounting treatment:
______________________
______________________
______________________
______________________
______________________
______________________
______________________
______________________
______________________
Very truly yours,
Lincoln Natural Gas
Company, Inc.
By: ______________________
Name:
Title:
<PAGE>
EXHIBIT B
(Affiliate)
Gentlemen:
The undersigned, a holder of shares of Common Stock, par value
$___ per share ("Lincoln Common Stock"), of Lincoln Natural Gas Company, Inc.
an Indiana corporation ("Lincoln"), is entitled to receive in connection with
the merger (the "Merger") of Spencer Energy Corp., an Indiana corporation,
with and into Lincoln, Common Stock, no par value per share (the "Parent
Common Stock") of Southern Indiana Gas & Electric Company (the "Parent").
The undersigned acknowledges that it has received shares of
Parent Common Stock in a transaction which was exempt from registration with
the Securities and Exchange Commission pursuant to Section 4(2) of the
Securities Act of 1933, as amended (the "Act"), and Regulation D promulgated
thereunder, and that therefor such shares of Parent Common Stock are
"restricted securities" as defined in Section (a)(3) of Rule 144 promulgated
under the Act. The undersigned further acknowledges that the undersigned may
not sell, assign or transfer the Parent Common Stock received pursuant to the
Merger unless such Parent Common Stock is registered under the Act or an
exemption from registration is available. The undersigned understands that
such exemptions are limited and the undersigned has obtained advice of
counsel as to the nature and conditions of such exemptions, including
information with respect to the applicability to the sales of such securities
of Rule 144 promulgated under the Act.
The undersigned hereby represents to and covenants with the
Parent that the undersigned will not sell, assign or transfer any of the
Parent Common Stock received by the undersigned in exchange for shares of
Company Stock pursuant to the Merger except (i) pursuant to an effective
Registration Statement under the Act, or (ii) in a transaction which, in the
opinion of independent counsel reasonably satisfactory to Parent (the fees of
which counsel will be paid by the undersigned) or described in a "no-action"
or other interpretive letter from the Staff of the Securities and Exchange
Commission, is not required to be registered under the Act.
The undersigned acknowledges and agrees that the appropriate
legends will be placed on certificates representing Parent Common Stock
received by the undersigned in the Merger or held by a transferee thereof,
which legends will be removed by delivery of substitute certificates upon (i)
the effective date of a Registration Statement under the Act filed with
respect to such Parent Common Stock held by the undersigned, or (ii) receipt
of an opinion in form and substance reasonable satisfactory to Parent from
independent counsel reasonably satisfactory to Parent (the fees of which
counsel will be paid by the undersigned) to the effect that such legends are
no longer required for purposes of the Act.
The undersigned acknowledges that the undersigned may be
deemed an "affiliate" of Lincoln for purposes of the federal securities laws
and for purposes of "pooling-of-interests" accounting treatment, although
nothing contained herein should be construed as an admission of such fact.
The undersigned acknowledges that "affiliates" who desire to sell their
Parent Common Stock at such a time when the Registration Statement under the
Act may no longer be effective (two years after the Effective Date), shall
consult with Parent as to the availability of an exemption from the
registration requirements of the Act.
<PAGE>
The undersigned further represents to and covenants with
Parent that it will not sell, assign, transfer, exchange or otherwise dispose
of any of the Parent Common Stock prior to such time as Lincoln shall have
published a quarterly earnings report, including combined sales and net
income information, covering at least 30 days of post-Merger combined
operations.
The undersigned acknowledges that (i) it has carefully read
this letter and understands the requirements hereto and the limitations
imposed upon the distribution, sale, transfer or other disposition of shares
of Parent Common Stock and (ii) the receipt by Parent of this letter is an
inducement and a condition to Parent's obligations to consummate the Merger.
Very truly yours,
Name
Dated:
-2-
<PAGE>
EXHIBIT C
(Non-Affiliate)
Gentlemen:
The undersigned, a holder of shares of Common Stock, par value
$___ per share ("Lincoln Common Stock"), of Lincoln Natural Gas Company,
Inc., an Indiana corporation ("Lincoln"), is entitled to receive in
connection with the merger (the "Merger") of Spencer Energy Corp., an Indiana
corporation, with and into Lincoln, Common Stock, no par value per share (the
"Parent Common Stock") of Southern Indiana Gas & Electric Company (the
"Parent").
The undersigned acknowledges that it has received shares of
Parent Common Stock in a transaction which was exempt from registration with
the Securities and Exchange Commission pursuant to Section 4(2) of the
Securities Act of 1933, as amended (the "Act"), and Regulation D promulgated
thereunder, and that therefor such shares of Parent Common Stock are
"restricted securities" as defined in Section (a)(3) of Rule 144 promulgated
under the Act. The undersigned further acknowledges that the undersigned may
not sell, assign or transfer the Parent Common Stock received pursuant to the
Merger unless such Parent Common Stock is registered under the Act or an
exemption from registration is available. The undersigned understands that
such exemptions are limited and the undersigned has obtained advice of
counsel as to the nature and conditions of such exemptions, including
information with respect to the applicability to the sales of such securities
of Rule 144 promulgated under the Act.
The undersigned hereby represents to and covenants with the
Parent that the undersigned will not sell, assign or transfer any of the
Parent Common Stock received by the undersigned in exchange for shares of
Company Stock pursuant to the Merger except (i) pursuant to an effective
Registration Statement under the Act, or (ii) in a transaction which, in the
opinion of independent counsel reasonably satisfactory to Parent (the fees of
which counsel will be paid by the undersigned) or described in a "no-action"
or other interpretive letter from the Staff of the Securities and Exchange
Commission, is not required to be registered under the Act.
The undersigned acknowledges and agrees that the appropriate
legends will be placed on certificates representing Parent Common Stock
received by the undersigned in the Merger or held by a transferee thereof,
which legends will be removed by delivery of substitute certificates upon (i)
the effective date of a Registration Statement under the Act filed with
respect to such Parent Common Stock held by the undersigned, or (ii) receipt
of an opinion in form and substance reasonable satisfactory to Parent from
independent counsel reasonably satisfactory to Parent (the fees of which
counsel will be paid by the undersigned) to the effect that such legends are
no longer required for purposes of the Act.
<PAGE>
The undersigned acknowledges that (i) it has carefully read
this letter and understands the requirements hereto and the limitations
imposed upon the distribution, sale, transfer or other disposition of shares
of Parent Common Stock and (ii) the receipt by Parent of this letter is an
inducement and a condition to Parent's obligations to consummate the Merger.
Very truly yours,
Name
Dated:
-2-
<PAGE>
EXHIBIT B-3
=================================================================
RIGHT OF FIRST REFUSAL AGREEMENT
among
SOUTHERN INDIANA GAS & ELECTRIC COMPANY,
LINCOLN NATURAL GAS COMPANY, INC.,
and certain shareholders of
LINCOLN NATURAL GAS COMPANY, INC.
Dated as of December 23, 1993
=================================================================
RIGHT OF FIRST REFUSAL
AGREEMENT
RIGHT OF FIRST REFUSAL AGREEMENT dated as of December 23, 1993,
(the "Rights Agreement"), among SOUTHERN INDIANA GAS & ELECTRIC COMPANY, an
Indiana corporation with its principal executive offices at 20 N.W. Fourth
Street, Evansville, Indiana ("Parent"), LINCOLN NATURAL GAS COMPANY, INC., an
Indiana corporation with its principal executive offices at 317 Main Street,
Rockport, Indiana ("Lincoln") and the shareholders of Lincoln which are
signatories to this Rights Agreement (the "Principal Shareholders").
WHEREAS, concurrently with the execution and delivery of this
Rights Agreement, Parent, Lincoln, and Spencer Energy Corp., a single purpose
Indiana corporation and a wholly owned subsidiary of Parent ("Spencer") are
entering into an Agreement and Plan of Merger (the "Merger Agreement")
(capitalized terms not defined herein shall have the meanings set forth in
the Merger Agreement), which provides that, among other things, upon the
terms and subject to the conditions thereof, Spencer will be merged with and
into Lincoln (the "Merger"), with Lincoln continuing as the surviving
corporation; and
WHEREAS, as a condition to Parent's and Spencer's willingness to
enter into the Merger Agreement, Parent has requested that the Principal
Shareholders agree, and the Principal Shareholders so agree, to grant to
Parent a right of first refusal with respect to certain securities of Lincoln
on the terms and subject to the conditions set forth herein;
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein and in the Merger Agreement and for
other good and valuable consideration, the receipt of which are hereby
acknowledged, the parties hereto agree as follows:
1.1 Right of First Refusal. The Principal Shareholders hereby
grant to Parent the right of first refusal to purchase all or any part of the
Lincoln Common Stock held by the Principal Shareholders. In the event a
Principal Shareholder receives an offer from a third party to sell such
securities, that Principal Shareholder shall give to Parent written notice of
such offer within fifteen (15) days. Such notice shall describe the type of
securities proposed to be purchased, the identity of the third party offering
to purchase the securities, and the price, amount and other terms which the
third party has offered for the securities. Parent shall have thirty (30)
days from the date of receipt of such notice to agree to purchase (subject to
obtaining the SEC PUHCA Order and the IURC Order) from that
<PAGE>
Principal Shareholder any of such securities for the price stated in the
notice but with all other terms remaining as in the Merger Agreement, by
responding in writing to that Principal Shareholder and stating the quantity
of securities to be purchased by Parent. If Parent fails to exercise its
right of first refusal within the thirty day period, the selling Principle
Shareholder shall have sixty (60) days thereafter to sell the securities not
elected to be purchased by Parent at the price, to the third person, and upon
the terms specified in the notice provided by that Principal Shareholder to
Parent. If that Principal Shareholder has not so sold the securities within
the sixty day period to the third person, then that Principal Shareholder
shall not thereafter sell any such securities without first offering to
Parent in the manner provided above.
1.2 No Solicitations. Each of the Principal Shareholders agree
that it shall not, nor shall it permit any investment banker, financial
advisor, attorney, accountant or other representative to solicit or encourage
(including by way of furnishing information) or take any other action to
facilitate, any inquiries or the making of any proposal which constitutes, or
may reasonably be expected to lead to, an offer to purchase the shares of
Lincoln Common Stock held by any of the Principal Shareholders.
1.3 Termination. This Rights Agreement shall expire at the
Effective Time (as defined in the Merger Agreement).
1.4 Enforceability. The parties hereto represent and warrant that
this Rights Agreement has been duly and validly executed and delivered, and
is a valid and binding instrument enforceable against the parties hereto and
their respective estates, heirs, executors, administrators and legal
successors in accordance with its terms. The parties agree that the non-
enforceability of any part or parts of this agreement renders only that part
or parts of the agreement, and not the entire agreement, non-enforceable.
1.5 Further Assurances. Each party will execute and deliver all
such further documents and instruments and take all such further action as
may be necessary in order to consummate the transactions contemplated hereby.
1.6 Notices. Any notice or communication required or permitted
hereunder shall be in writing and either delivered personally or telecopied
(with confirmation of receipt) or sent by certified or registered mail,
postage prepaid, and shall be deemed to be given, dated and received when so
delivered personally or telecopied (with confirmation of receipt) or, if
mailed, five business days after the date of mailing to the following address
or telecopy number, or to such other address or addresses as such person may
subsequently designate by notice given hereunder.
-2-
<PAGE>
(a) if to Parent, to:
Southern Indiana Gas & Electric Company
20 N.W. Fourth Street
Evansville, Indiana 47741-0001
Telecopy: (812) 464-4554
Telephone: (812) 424-5300
Attention: Mr. Andrew E. Goebel
with a copy to:
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004-1490
Telecopy: (212) 858-1500
Telephone: (212) 858-1000
Attention: John H. Byington, Jr., Esq.
and to:
Bamberger, Foreman, Oswald and Hahn
Seventh Floor - Hulman Building
Evansville, Indiana 47704-0657
Telecopy: (812) 425-1591
Telephone: (812) 421-4936
Attention: George A. Porch, Esq.
(b) if to the Principal Shareholders, to
Lindsey & Lindsey
217 Main Street
Rockport, Indiana 47635
Telecopy: (812) 649-9676
Telephone: (812) 649-4571
Attention: Sid Lindsey, Esq.
1.7 Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of
or to affect the meaning or interpretation of this Rights Agreement.
1.8 Counterparts. This Rights Agreement may be executed in two or
more counterparts, all of which shall be considered one and the same
agreement and shall become effective when such counterparts have been signed
by each of the parties
-3-
<PAGE>
and delivered to the other parties, it being understood that all parties need
not sign the same counterpart.
1.9 Entire Agreement. This Rights Agreement (including the
documents and the instruments referred to herein) constitutes the entire
agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter
hereof.
1.10 Governing Law. This Rights Agreement shall be governed and
construed in accordance with the internal substantive laws of the State of
Indiana without regard to any applicable conflicts of law principles.
1.11 Assignment. Neither this Rights Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence,
this Rights Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
1.12 Amendments; Waiver. This Rights Agreement may be amended by
the parties hereto and the terms and conditions hereof may be waived only by
an instrument in writing signed on behalf of each of the parties hereto, or,
in the case of a waiver, by an instrument signed on behalf of the party
waiving compliance.
-4-
<PAGE>
IN WITNESS WHEREOF, Parent and Lincoln have caused this Rights
Agreement to be signed by their respective officers thereunto duly
authorized, and the Principle Shareholders, listed below, have caused this
Rights Agreement to be signed, all as of the date first above written.
SOUTHERN INDIANA GAS &
ELECTRIC COMPANY
BY /s/ R.G. Reherman
----------------------------------------
Name: R.G. Reherman
Title: Chairman, President & C.E.O.
LINCOLN NATURAL GAS COMPANY, INC.
BY /s/ James Orville Martin
----------------------------------------
Name: James Orville Martin
Title:
THE PRINCIPAL SHAREHOLDERS:
THE JAMES ORVILLE MARTIN TRUST
BY /s/ James Orville Martin, Trustee
------------------------------------
James Orville Martin, Trustee
THE THERESA L. MARTIN TRUST
BY /s/ Theresa L. Martin
-----------------------------------
Theresa L. Martin, Trustee
/s/ Robert M. Arnold
-----------------------------------
Robert M. Arnold
as tenant in common with
Susan Arnold
/s/ Susan Arnold
-----------------------------------
Susan Arnold
as tenant in common with
Robert M. Arnold
<PAGE>
EXHIBIT B-4
=================================================================
INDEMNITY AGREEMENT
among
SOUTHERN INDIANA GAS & ELECTRIC COMPANY,
LINCOLN NATURAL GAS COMPANY, INC.,
and certain shareholders of
LINCOLN NATURAL GAS COMPANY
Dated as of December 23, 1993
=================================================================
<PAGE>
INDEMNITY AGREEMENT
INDEMNITY AGREEMENT dated as of December 23, 1993, (the "Indemnity
Agreement"), among SOUTHERN INDIANA GAS & ELECTRIC COMPANY, an Indiana
corporation with its principal executive offices at 20 N.W. Fourth Street,
Evansville, Indiana ("Parent"), LINCOLN NATURAL GAS COMPANY, INC., an Indiana
corporation with its principal executive offices at 317 Main Street,
Rockport, Indiana ("Lincoln") and the shareholders of Lincoln referred to in
Exhibit A attached hereto (the "Principal Shareholders").
WHEREAS, concurrently with the execution and delivery of this
Indemnity Agreement, Lincoln, Parent, and Spencer Energy Corp., a single
purpose Indiana corporation and a wholly owned subsidiary of Parent
("Spencer") are entering into an Agreement and Plan of Merger (the "Merger
Agreement") (capitalized terms not defined herein shall have the meanings set
forth in the Merger Agreement), which provides that, among other things, upon
the terms and subject to the conditions thereof, Spencer will be merged with
and into Lincoln (the "Merger"), with Lincoln continuing as the surviving
corporation; and
WHEREAS, as a condition to Parent's and Spencer's willingness to
enter into the Merger Agreement, Parent has requested that the Principal
Shareholders agree, and the Principal Shareholders so agree, to indemnify
Parent on the terms and subject to the conditions set forth herein;
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements set forth herein and in the Merger Agreement and for
other good and valuable consideration, the receipt of which are hereby
acknowledged, the parties hereto agree as follows:
ARTICLE I
REPRESENTATIONS AND WARRANTIES
Each of the Principal Shareholders represents and warrants to
Parent as follows:
1.1 Ownership of Shares. Each Principal Shareholder is the lawful
legal and beneficial owner of that number of shares of Lincoln Common Stock
set forth by such Principal Shareholder's name on Exhibit A. Each
Shareholder owns such shares free and clear of all pledges, liens, charges,
encumbrances, easements, defects, security interests, claims, options, and
restrictions of every kind ("Encumbrances"). Upon the delivery of the shares
of Lincoln Common Stock to Parent in the manner contemplated by
<PAGE>
Article II of the Merger Agreement, Parent shall acquire the legal and
beneficial, valid and indefeasible title to such shares of Lincoln Common
Stock, free and clear of all Encumbrances.
1.2 Restricted Securities. Each Principal Shareholder hereby
acknowledges that the shares of Parent Common Stock to be issued in exchange
for the shares of Lincoln Common Stock in the Merger, will be issued in a
transaction which is exempt from registration with the SEC, pursuant to
Section 4(2) of the Securities Act and Regulation D promulgated thereunder,
and that therefor such shares of Parent Common Stock are "restricted
securities" as defined in Section (a)(3) of Rule 144 promulgated under the
Securities Act. Each Principal Shareholder further acknowledges that he/she
may not sell, assign or transfer the Parent Common Stock received by him/her
pursuant to the Merger unless such Parent Common Stock is registered under
the Securities Act or an exemption from registration is available. Each
Principal Shareholder further acknowledges that appropriate legends will be
placed on certificates representing Parent Common Stock received by such
Principal Shareholder in the Merger.
ARTICLE II
ASSIGNMENT AND ASSUMPTION
2.1 Assignment. Lincoln hereby assigns and transfers to the
Principal Shareholders, to the extent accepted by them in Section 2.2 hereof,
all liabilities, costs and expenses associated with, or arising out of,
Undisclosed Liabilities (as defined in Section 3.9 of the Merger Agreement).
2.2 Acceptance and Assumption. The Principal Shareholders hereby,
jointly and severally, assume, undertake and accept, up to a maximum amount
of $100,000 each, any and all liabilities, costs and expenses associated
with, or arising out of, the Undisclosed Liabilities (as defined in Section
3.9 of the Merger Agreement) which become known within one year of the
Closing Date and which they, or any of them, had, or could have had with the
exercise of reasonable diligence, knowledge of at the Closing Date.
2.3 Effectiveness. The assignment and assumption contemplated by
Article II of this Indemnity Agreement shall become effective, automatically
and without further action, upon the Effective Time of the Merger.
-2-
<PAGE>
ARTICLE III
INDEMNIFICATION
3.1 Indemnification by the Principal Shareholders. The Principal
Shareholders (up to a maximum limit of $100,000 each) hereby agree to jointly
and severally defend, indemnify and hold harmless, for a period of one year
from the Closing Date, the Parent, Lincoln, and their respective successors,
assigns and affiliates (collectively, the "Parent Indemnitees") from and
against any and all losses, deficiencies, liabilities, damages, assessments,
judgments, costs and expenses, including, but not limited to, court costs and
attorneys' fees (including those incurred in connection with the defense or
prosecution of the indemnifiable claim, those incurred in connection with the
enforcement of this provision, and all other court costs and attorneys' fees
assessed against the Parent Indemnitees), including environmental liabilities
and costs (collectively, "Parent Losses"), caused by, resulting from or
arising out of:
(a) (i) breaches of any representation or warranty on the part of
the Principal Shareholders hereunder; (ii) breaches of any representation or
warranty on the part of Lincoln pursuant to the Merger Agreement and its
related documents; (ii) failures by the Principal Shareholders to perform or
otherwise fulfill any undertaking, assumption, agreement, covenant or
obligation hereunder; and (iv) failures by the Lincoln to perform or
otherwise fulfill any undertaking, assumption, agreement, covenant or
obligation hereunder, or pursuant to the Merger Agreement and its related
documents;
(b) any and all Undisclosed Liabilities;
(c) any and all claims arising in connection with breach of
contract, death, personal injury, other injury to Persons, property damage,
losses or deprivation of rights (whether based on statute, negligence, breach
of warranty, strict liability or any other theory) caused by or resulting
from, directly or indirectly, the manufacture or sale of any product, or the
provision of any services, by Lincoln on or before the Closing Date, or any
other claims asserted against Lincoln arising from any action or inaction of
the Principal Shareholders or Lincoln on or before the Closing Date,
including but not limited to, the actions set forth in Schedule 3.11 of the
Merger Agreement;
(d) (i) each and every item set forth in Schedules 3.18(a) through
3.18(k) of the Merger Agreement; (ii) the actual, alleged or threatened
release, storage, transportation, treatment or generation of hazardous
substances, oils, pollutants or contaminants generated, stored, used,
disposed of, treated, handled or shipped by the Principal Shareholders,
Lincoln, any
-3-
<PAGE>
former subsidiary of Lincoln, or any prior owner of the Property on or before
the Closing Date; or (iii) any cleanup of hazardous substances, oils,
pollutants or contaminants released, disposed of or discharged: (A) on,
beneath or adjacent to the Property prior to or on the Closing Date, or (B)
at any other location if such substances were generated, used, stored,
disposed of, treated, transported or released by the Principal Shareholders,
Lincoln, any former subsidiary of Lincoln, or any prior owner of the Property
prior to or on the Closing Date;
(e) any and all Federal taxes not paid by Lincoln for, or relating
to, periods before the Closing Date; and
(f) any and all actions, suits, proceedings, claims, and demands,
incident to any of the foregoing or such indemnification;
provided, however, that if any claim, liability, demand, assessment, action,
suit or proceeding shall be asserted in respect of which a Parent Indemnitee
proposes to demand indemnification ("Parent Indemnified Claims"), the Parent
or such other Parent Indemnitee shall notify the Principal Shareholders
thereof, provided further, however, that the failure to so notify the
Principal Shareholders shall not reduce or affect the Principal Shareholders'
obligations with respect thereto except to the extent that the Principal
Shareholders are materially prejudiced thereby. Subject to rights of or
duties to any insurer or other third Person having liability therefor, the
Principal Shareholders shall have the right promptly upon receipt of such
notice to assume the control of the defense, compromise, or settlement of any
such Parent Indemnified Claims (provided that any compromise or settlement
must be reasonably approved by the Parent), including, at its own expense,
employment of counsel reasonably satisfactory to the Parent; provided,
however, that if the Principal Shareholders shall have exercised their right
to assume such control, the Parent may, in its sole discretion and at its
expense, employ counsel to represent it (in addition to counsel employed by
the Principal Shareholders) in any such matter, and in such event counsel
selected by the Principal Shareholders shall be required to cooperate with
such counsel of the Parent in such defense, compromise, or settlement.
3.2 Indemnification by the Parent. Parent hereby agrees to
defend, indemnify and hold harmless the Principal Shareholders and their
successors, assigns and affiliates (collectively, "Shareholder Indemnitees")
from and against any and all losses, deficiencies, liabilities, damages,
assessments, judgments, costs and expenses, including, without limitation,
court costs and attorneys' fees (including those incurred in connection with
the defense or prosecution of the indemnifiable claim, those incurred in
connection with the enforcement of this provision, and all other court costs
and attorneys' fees assessed against the Shareholder Indemnitees)
(collectively, "Shareholder Losses"), resulting from or arising out of:
-4-
<PAGE>
(a) (i) breaches of representation and warranty on the part of
Parent or Spencer in the Merger Agreement; and (ii) failures by Parent or
Spencer to perform or otherwise fulfill any undertaking, assumption,
agreement, covenant or obligation hereunder or in the Merger Agreement, as
the case may be; and
(b) any and all actions, suits, proceedings, claims, and demands
incident to any of the foregoing or such indemnification;
provided, however, that if any claim, liability, demand, assessment, action,
suit or proceeding shall be asserted in respect of which a Shareholder
Indemnitee proposes to demand indemnification ("Shareholder Indemnified
Claims"), the Principal Shareholders or such other Shareholder Indemnitee
shall notify the Parent thereof, provided further, however, that the failure
to so notify the Parent shall not reduce or affect the Parent's obligations
with respect thereto except to the extent that the Parent is materially
prejudiced thereby. Subject to rights of or duties to any insurer or other
third Person having liability therefor, the Parent shall have the right
promptly upon receipt of such notice to assume the control of the defense,
compromise, or settlement of any such Shareholder Indemnified Claims
(provided that any compromise or settlement must be reasonably approved by
the Principal Shareholders) including, at its own expense, employment of
counsel reasonably satisfactory to the Principal Shareholders; provided,
however, that if the Parent shall have exercised its right to assume such
control, the Principal Shareholders may, in their sole discretion and at
their expense, employ counsel to represent them (in addition to counsel
employed by the Parent) in any such matter, and in such event counsel
selected by the Parent shall be required to cooperate with such counsel of
the Principal Shareholders in such defense, compromise, or settlement.
3.3 Non-Exclusive Remedy. The indemnification provisions provided
in this Indemnity Agreement shall not constitute the exclusive remedies
available to the Parent or the Principal Shareholders.
3.4 Death. Upon the death of a Principal Shareholder, the
indemnification obligations arising under this Indemnity Agreement (including
obligations that may arise in the future) shall become the obligations of
such Principal Shareholder's estate, heirs, executors, administrators, and
legal successors.
3.5 Survival of Representations and Warranties. The respective
representations and warranties of Parent, Spencer and Lincoln contained in
the Merger Agreement shall survive the Closing Date for a period of 12
months. The representations and warranties of the Principal Shareholders
contained in this Indemnity Agreement shall survive the Closing Date without
limitation.
-5-
<PAGE>
3.6 Survival of Covenants. The respective undertakings,
assumptions, agreements, covenants or obligations of Parent, Spencer, Lincoln
and the Principal Shareholders contained in this Indemnity Agreement and the
Merger Agreement shall survive the Closing Date, except as previously limited
herein.
ARTICLE IV
GENERAL PROVISIONS
4.1 Further Assurances. Each party will execute and deliver all
such further documents and instruments and take all such further action as
may be necessary in order to consummate the transactions contemplated hereby.
4.2 Notices. Any notice or communication required or permitted
hereunder shall be in writing and either delivered personally or telecopied
(with confirmation of receipt) or sent by certified or registered mail,
postage prepaid, and shall be deemed to be given, dated and received when so
delivered personally or telecopied (with confirmation of receipt) or, if
mailed, five business days after the date of mailing to the following address
or telecopy number, or to such other address or addresses as such person may
subsequently designate by notice given hereunder.
(a) if to Parent, to:
Southern Indiana Gas & Electric Company
20 N.W. Fourth Street
Evansville, Indiana 47741-0001
Telecopy: (812) 464-4554
Telephone: (812) 424-5300
Attention: Mr. Andrew E. Goebel
with a copy to:
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, NY 10004
Telecopy: (212) 858-1500
Telephone: (212) 858-1000
Attention: John H. Byington, Jr., Esq.
-6-
<PAGE>
and to:
Bamberger, Foreman, Oswald and Hahn
Seventh Floor - Hulman Building
Evansville, Indiana 47704-0657
Telecopy: (812) 425-1591
Telephone: (812) 421-4936
Attention: George A. Porch, Esq.
(b) if to the Principal Shareholders, to:
Lindsey & Lindsey
217 Main Street
Rockport, Indiana 47635
Telecopy: (812) 649-9676
Telephone: (812) 649-4571
Attention: Sid Lindsey, Esq.
4.3 Descriptive Headings. The descriptive headings herein are
inserted for convenience of reference only and are not intended to be part of
or to affect the meaning or interpretation of this Indemnity Agreement.
4.4 Counterparts. This Indemnity Agreement may be executed in two
or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when such counterparts have been signed
by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
4.5 Entire Agreement. This Indemnity Agreement (including the
documents and the instruments referred to herein), constitutes the entire
agreement and supersedes all prior agreements and understandings, both
written and oral, among the parties with respect to the subject matter
hereof.
4.6 Governing Law. This Indemnity Agreement shall be governed and
construed in accordance with the internal substantive laws of the State of
Indiana without regard to any applicable conflicts of law principles.
4.7 Assignment. Neither this Indemnity Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties. Subject to the preceding sentence,
this Indemnity Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
-7-
<PAGE>
4.8 Amendments; Waiver. This Indemnity Agreement may be amended
by the parties hereto and the terms and conditions hereof may be waived only
by an instrument in writing signed on behalf of each of the parties hereto,
or, in the case of a waiver, by an instrument signed on behalf of the party
waiving compliance.
-8-
<PAGE>
IN WITNESS WHEREOF, Parent and Lincoln have caused this Indemnity
Agreement to be signed by their respective officers thereunto duly
authorized, and the Principal Shareholders, listed below, have caused this
Indemnity Agreement to be signed, all as of the date first above written.
SOUTHERN INDIANA GAS & ELECTRIC COMPANY
BY /s/ R.G. Reherman
-------------------------------------------
Name: R.G. Reherman
Title: Chairman, President & C.E.O.
LINCOLN NATURAL GAS COMPANY, INC.
BY /s/ James Orville Martin
-------------------------------------------
Name: James Orville Martin
Title:
THE PRINCIPAL SHAREHOLDERS:
THE JAMES ORVILLE MARTIN TRUST
BY /s/ James Orville Martin, Trustee
--------------------------------------
James Orville Martin, Trustee
THE THERESA L. MARTIN TRUST
BY /s/ Theresa L. Martin, Trustee
-------------------------------------
Theresa L. Martin, Trustee
/s/ Robert M. Arnold
-------------------------------------
Robert M. Arnold
as tenant in common with
Susan Arnold
/s/ Susan Arnold
-------------------------------------
Susan Arnold
as tenant in common with
Robert M. Arnold
-9-
<PAGE>
EXHIBIT A
Shareholders Number of Shares Percent of Ownership
------------ ---------------- --------------------
The James Orville 2249 23.9%
Martin Trust
The Theresa L. Martin 2080 22.1%
Trust
Robert M. Arnold and 1170 12.4%
Susan Arnold as
Tenants in Common
<PAGE>
EXHIBIT B-5
[Letterhead of Southern Indiana Gas and Electric Company]
December 22, 1993
Mr. James O. Martin, President
Lincoln Natural Gas Company, Inc.
317 Main Street
Rockport, Indiana 47635
Dear Mr. Martin:
This letter is to confirm previous verbal commitments, should the
parties successfully conclude the merger transaction agreed to by them as
evidenced by execution this date of "The Agreement and Plan of Merger" among
Southern Indiana Gas and Electric Company, Spencer Energy Corp., and Lincoln
Natural Gas Company, Inc., as follows:
1. Southern Indiana Gas and Electric Company has no plans to
terminate any of the present full-time employees of Lincoln
holding the position of Manager or below as a result of the
transaction; and
2. Should future changes in operation, organizational structure
or other causes result in a reduction in the number of
employees assigned to the current Lincoln operations, Southern
Indiana Gas and Electric Company will, assuming acceptable job
performance by the respective employees, provide employment
opportunities for such employees elsewhere in its utility
organization.
We look forward to a long and mutually rewarding relationship with
the employees of Lincoln and will strive to complete the merger formalities
as expeditiously as possible.
Sincerely,
/s/ R.G. Reherman
R.G. Reherman
EXHIBIT B-6
-----------
Names and Shareholdings of Stockholders
of Lincoln Natural Gas Company, Inc.
Holding 1% or More of its Common Stock
---------------------------------------
SHAREHOLDERS NO. SHARES PERCENT
------------ ---------- -------
James Orville Martin, Trustee <F1> 2,249 23.9%
Theresa L. Martin, Trustee <F2> 2,080 22.1%
Robert M. & Susan Arnold <F3> 1,170 12.4%
Mildred Samuels 600 6.3%
Phyllis Blakeslee 450 4.7%
Josephine Bigger 432 4.5%
Joe W. & Jean Parsley 400 4.2%
Joan E. Martin 400 4.2%
Michael & Ellen Martin Sarver 400 4.2%
Lawrence & Karen Marie Martin 400 4.2%
Robert & Virginia Richard 200 2.1%
Anabel Wood 100 1.0%
Margaret W. Mason, Trustee 100 1.0%
Theresa H. Wiener 100 1.0%
James L. Wright and/or Carol Wright 100 1.0%
- ------------------
[FN]
<F1> Of the James Orville Martin Trust.
<F2> Of the Theresa L. Martin Trust.
<F3> Tenants in common.
<PAGE>
EXHIBIT D-1
STATE OF INDIANA
INDIANA UTILITY REGULATORY COMMISSION
JOINT PETITION OF SOUTHERN INDIANA GAS )
AND ELECTRIC COMPANY ("SIGECO") AND )
LINCOLN NATURAL GAS COMPANY, INC. )
("LINCOLN") FOR AUTHORITY TO ) CAUSE NO.
IMPLEMENT A TRANSACTION WHEREBY )
SIGECO'S WHOLLY OWNED SUBSIDIARY )
SPENCER ENERGY CORP. ("SPENCER") ) ___________________
WILL ACQUIRE THE STOCK OF LINCOLN )
AND MERGE INTO LINCOLN AND FOR )
AUTHORITY FOR NECESSARY FINANCING )
BY SIGECO THEREFOR AND FOR APPROVAL )
OF THE TRANSACTION )
PETITION
TO THE INDIANA UTILITY REGULATORY COMMISSION:
The Joint Petitioners, Southern Indiana Gas and Electric Company
("SIGECO"), and Lincoln Natural Gas Company, Inc. ("Lincoln") represent, show
and petition the Commission as follows:
1. Characteristics of SIGECO. SIGECO is an Indiana public
utility corporation with its principal office located in Evansville,
Vanderburgh County, Indiana. It is engaged in the electric and gas utility
business in eight counties in extreme southwestern Indiana. At present
SIGECO serves approximately 99,000 gas customers and 118,000 electric
customers. It owns, operates, maintains and manages plant, property,
equipment and facilities used and useful for the generation, transmission,
transportation, storage, distribution and sale of electricity and for the
transmission, transportation, storage, distribution and sale of gas to the
public. SIGECO is subject to the jurisdiction
<PAGE>
of the Commission in the manner and to the extent provided by the laws of the
State of Indiana and it operates under indeterminate permits and certificates
for convenience and necessity duly acquired.
2. Characteristics of SIGECO's Subsidiary Spencer Energy Corp.
("Spencer"). Spencer is an Indiana corporation which is a wholly owned
subsidiary of SIGECO. Through its acquisition of all of the capital stock of
Lincoln, Spencer will become the sole owner of Lincoln and will then merge
into Lincoln to cause Lincoln to continue to exist and operate as a wholly
owned subsidiary of SIGECO.
3. Characteristics of Lincoln. Lincoln is a closely held Indiana
corporation which owns and operates the gas utility in Rockport, Spencer
County, Indiana, and surrounding territory. Lincoln is an Indiana public
utility corporation engaged in the gas utility business, and it presently
serves approximately 1,330 customers in Spencer County in southwestern
Indiana and owns, operates, maintains and manages plant, property, equipment
and facilities used and useful for the production, transmission,
transportation, distribution and sale of natural gas to the public. Lincoln
is subject to the jurisdiction of the Commission in the manner and to the
extent provided by the laws of the State of Indiana and it operates under
indeterminate permits and certificates of convenience and necessity duly
acquired.
4. Relief Sought. SIGECO seeks authority and approval of the
Commission for financing necessary for SIGECO to conclude the transaction
described. SIGECO and Lincoln also jointly request
-2-
<PAGE>
Commission authority for and approval of the said entire transaction
including, but not limited to, approval of the issuance by SIGECO of its
common stock in order to carry out the acquisition by its subsidiary Spencer
of all of the capital stock of Lincoln and the subsequent merger of Spencer
into Lincoln.
5. The Transaction. SIGECO, Spencer and Lincoln have entered
into an agreement dated December 23, 1993 (the "Agreement") whereby Spencer
will acquire the common stock of Lincoln and Spencer will then merge into
Lincoln so that Spencer will cease to exist. The result will be that Lincoln
will become a wholly owned subsidiary of SIGECO. A copy of the final
Agreement will be provided as a supplemental exhibit within thirty (30) days.
The Agreement will be approved by all of the directors and
shareholders of Spencer and by the necessary majority of shareholders of
Lincoln and by the directors of SIGECO. Certified copies of the resolution
adopted by the individual corporations will also be provided as supplementary
exhibits within fifteen (15) days.
The price to be paid by Spencer for Lincoln is a fair and
reasonable price resulting from arms' length negotiations between the parties
to the Agreement. The requested approval by the Commission and the
consummation of the transaction so that Spencer becomes the owner of Lincoln
and is then merged so that Lincoln is owned by SIGECO is in the public
interest and in the best interests of the Joint Petitioners and their
customers, and Lincoln and its shareholders. Accordingly, Petitioners submit
that this Commission
-3-
<PAGE>
should approve the acquisition of Lincoln and the issuance of common stock
requested by SIGECO therefor.
6. Request for Authorization to Own and Operate Lincoln. SIGECO
intends, for the immediate future, to own and operate Lincoln separately as a
wholly owned subsidiary. As such, SIGECO will own all of the capital stock
of Lincoln and control all of Lincoln's assets, including but not limited to
its indeterminate permits, franchises, certificates, plant and properties,
contracts and business. SIGECO therefore requests Commission authority and
approval of the transaction and the ownership and operation of Lincoln as
provided therein.
7. Accounting and Financial Information. A description of the
accounting journal entries which SIGECO proposes to record on its books once
the transaction is complete will be provided. As contemplated, and set forth
in item 12 herein, the transaction will be accounted for as a pooling of
interests. Therefore it will have only a slight effect on the capitalization
of SIGECO, with the ultimate result being a small increase in the common
equity component of SIGECO's capital structure and essentially no change in
the other components. Financial statements of the parties will be provided.
8. Benefits of Transaction. Petitioner represents that the
transaction will benefit all concerned. Lincoln's present holders will
receive a fair price for their stock and Lincoln will then be owned by
SIGECO. Lincoln will continue to operate essentially as it presently does
for the immediate future. Inasmuch as both Lincoln and SIGECO are gas
utilities that have
-4-
<PAGE>
contiguous service areas, over time the two gas systems may be consolidated--
if appropriate and in the public interest. The Petitioner expects that,
after a reasonable time for planning and implementation, benefits can be
derived from the expertise, purchasing power and other similar advantages of
all or some combined operations. This will result in greater efficiency and
better service for Lincoln's customers over the long term while SIGECO and
its customers are also expected to benefit from the eventual spread of fixed
gas utility costs over a larger customer base and greater utility
efficiencies created by a larger but still very manageable gas operation.
The transaction is expected to eventually present opportunities for economies
of scale by, among other operating benefits, centralized meter repair,
reduced gas cost by larger volume gas purchases, greater efficiency and
economy in management, administration, insurance, training, engineering,
purchasing, human relations and computerization.
9. Attorneys for SIGECO. George A. Porch, Bamberger, Foreman,
Oswald and Hahn, 7th Floor Hulman Building, P.O. Box 657, Evansville, Indiana
47704, are the attorneys for SIGECO and are duly authorized to accept service
of papers in this case on behalf of SIGECO. Sidney Lindsey, Lindsey &
Lindsey, 217 Main Street, Rockport, Indiana 47635, is counsel for Lincoln and
is duly authorized to accept service of papers in this case on behalf of
Lincoln.
10. Relevant Statutes. The Joint Petitioners consider that
Indiana Code Sections 8-1-2-6; 12; 14; 23; 48; 49; 78; 79; 80;
-5-
<PAGE>
and 83 among others, may be applicable and requests Commission authority and
approval pursuant thereto.
11. Request for Expedited Action. Time is of the essence in
consummating the transaction. Petitioner therefore requests that action on
this Petition be expedited so that a final order will be issued no later than
March 1, 1994.
12. Requested Financing and Issuance of Securities. The Merger
Agreement provides for the shareholders of Lincoln to transfer to Spencer
100% of the capital stock of Lincoln in exchange for payment by Spencer of
SIGECO common stock in the principal amount of approximately One Million
Three Hundred Fifty Thousand Dollars ($1,350,000) in accordance with the
formula contained in the Agreement. SIGECO intends to issue new common stock
for this purpose. SIGECO requests authority to issue such new common stock.
WHEREFORE, Joint Petitioners pray that the Commission enter an
order in this cause approving the Agreement and the transaction therein
contemplated whereby Spencer will acquire and own all of the stock of Lincoln
and then merge into Lincoln so that SIGECO becomes the sole owner of Lincoln;
and approving and issuing all necessary certificates and authorizations
enabling and empowering SIGECO to own and operate Lincoln for the present as
its wholly owned operating subsidiary, and authorizing and approving SIGECO's
proposed
-6-
<PAGE>
financing by the issuance of its securities as described herein; for approval
of the entire transaction, and for all other relief appropriate in the
premises.
Southern Indiana Gas and Electric Company
By: /s/ Ronald G. Reherman
------------------------------------------
Ronald G. Reherman, Its Chairman,
President and Chief Executive Officer
Attest:
/s/ A.E. Goebel
- -------------------------------
A.E. Goebel, Its Secretary
The undersigned, R.G. REHERMAN and A.E. GOEBEL, affirm, under the
penalty of perjury, that they are, respectively, the Chairman, President and
Chief Executive Officer and Secretary of Southern Indiana Gas and Electric
Company; that in such capacities they have executed the foregoing Petition
and that the representations contained therein are true to the best of their
respective knowledge, information and belief.
/s/ R.G.Reherman /s/ A.E. Goebel
- --------------------------- ---------------------------
R.G. Reherman A.E. Goebel
George A. Porch
BAMBERGER, FOREMAN, OSWALD
AND HAHN
7th Floor Hulman Building
P.O. Box 657
Evansville, IN 47704-0657
Attorneys for Petitioner,
Southern Indiana Gas and
Electric Company
-7-
<PAGE>
STATE OF INDIANA )
: ss.:
COUNTY OF VANDERBURGH )
Before me the undersigned, a Notary Public in and for Vanderburgh
County, State of Indiana, personally appeared R.G. Reherman and A.E. Goebel
and acknowledged the execution of the foregoing instrument this 23rd day of
December, 1993.
WITNESS MY HAND and Notarial Seal this 23rd day of December, 1993.
/s/ Donnal S. Welden
-----------------------------------
Notary Public
Donna S. Welden
-----------------------------------
(Printed)
My Commission Expires:
11/29/96
- ----------------------------
My County of Residence:
Vanderburgh
- ----------------------------
Lincoln Natural Gas Company, Inc.
By: /s/ James Orville Martin
-------------------------------------
James Orville Martin, Its President
Attest:
/s/ Robert M. Arnold
- -------------------------------
Robert M. Arnold, Its Secretary
The above signed, ORVILLE MARTIN and ROBERT ARNOLD, affirm, under
the penalty of perjury, that they are, respectively, the President and
Secretary of Lincoln Natural Gas Company, Inc.; that in such capacities they
have executed the foregoing Petition and that the representations contained
therein are true to the best of their respective knowledge, information and
belief.
-8-
<PAGE>
STATE OF INDIANA )
: ss.:
COUNTY OF VANDERBURGH )
Before me the undersigned, a Notary Public in and for
Vanderburgh County, State of Indiana, personally appeared Orville Martin and
Robert Arnold and acknowledged the execution of the foregoing instrument this
23rd day of December, 1993.
WITNESS MY HAND and Seal this 23rd day of December, 1993.
/s/ Donnal S. Welden
-----------------------------------
Notary Public
Donna S. Welden
-----------------------------------
(Printed)
My Commission Expires:
11/29/96
- ----------------------------
My County of Residence:
Vanderburgh
- ----------------------------
Sidney R. Lindsey
LINDSEY & LINDSEY
217 Main Street
Rockport, IN 47635
Attorneys for Petitioner,
Lincoln Natural Gas Company, Inc.
-9-
<PAGE>
CERTIFICATE OF SERVICE
I hereby certify I have this 27th of December, 1993, mailed a true
and correct copy of the above and foregoing document to the Office of Utility
Consumer Counselor, Indiana Government Center North, 100 N. Senate Ave., Room
N-501, Indianapolis, Indiana 46204-2208.
/s/ George A. Porch
-----------------------------------
GEORGE A. PORCH, #5791-82
A Member of the Firm of
BAMBERGER, FOREMAN, OSWALD AND HAHN
7th Floor, Hulman Building
P.O. Box 657
Evansville, Indiana 47704-0657
Telephone: (812) 425-1591
ATTORNEYS FOR PETITIONER,
SOUTHERN INDIANA GAS AND ELECTRIC CO.
<PAGE>
STATE OF INDIANA
INDIANA UTILITY REGULATORY COMMISSION
PETITION OF SOUTHERN INDIANA GAS )
AND ELECTRIC COMPANY FOR A ) DOCKET NO. 39812
NECESSITY CERTIFICATE TO RENDER )
GAS SUPPLY, DISTRIBUTION, )
TRANSPORTATION SERVICE AND SALES )
IN CERTAIN RURAL AREAS IN SPENCER )
COUNTY, INDIANA )
JOINT MOTION FOR
VACATION OF PROCEDURAL SCHEDULE
AND TO SET A NEW PREHEARING
Petitioner, Southern Indiana Gas and Electric Company
("SIGECO"), and Intervening Petitioner, Lincoln Natural Gas Company, Inc.
("Lincoln"), jointly move the Commission for an order vacating the procedural
schedule in the captioned cause and setting a new prehearing. In support of
their Motion, the movants show the Commission as follows:
1. On December 27, 1993, movants filed a joint petition for
Commission approval of a transaction whereby SIGECO will acquire Lincoln and
thereafter operate Lincoln as a separate entity.
2. The captioned cause concerns the issuance of a
Certificate for Territorial Authority ("CTA") for SIGECO and/or Lincoln to
provide gas service to certain open sections of Spencer County.
3. SIGECO and Lincoln do not believe it desirable to proceed
with what may be a contested CTA hearing when SIGECO may, in the relatively
near future, acquire Lincoln.
<PAGE>
4. The procedural schedule set in this cause pursuant to the
Prehearing Conference Order of December 8, 1993, sets prefiling dates in
January, 1994, and a hearing for January 28, 1994. Movants do not believe
the Commission will have acted on their pending joint motion for approval of
the acquisition transaction prior to March 1, 1994.
5. Movants do desire to have a CTA granted herein, but in
the interest of administrative economy request that the present procedural
schedule be vacated and that a new schedule be set pursuant to a prehearing
to be held in April, 1994.
6. Counsel has discussed the filing of this Joint Motion
with Counsel for the Office of the Utility Consumer Counselor and that office
has no objection to the filing and granting of this Motion.
Respectfully submitted,
/s/ J. Herbert Davis, for
-----------------------------------
Mr. George A. Porch
BAMBERGER, FOREMAN, OSWALD AND HAHN
7th Floor Hulman Building
P.O. Box 657
Evansville, Indiana 47704-0657
Counsel for Southern Indiana Gas and
Electric Company
/s/ Sidney R. Lindsey
-----------------------------------
Sidney R. Lindsey
Lindsey & Lindsey
217 Main Street
Rockport, Indiana 47635
(812) 649-4571
Counsel for Lincoln Natural Gas
Company, Inc.
-2-
<PAGE>
CERTIFICATE OF SERVICE
I hereby certify I have this 27 of December, 1993, mailed a
true and correct copy of the above and foregoing document to the Office of
the Utility Consumer Counselor, Indiana Government Center North, 100 North
Senate Avenue, Room N-501, Indianapolis, Indiana 46204-2208.
/s/ George A. Porch
-----------------------------------
George A. Porch #5791-82
-3-
<PAGE>
EXHIBIT H
SECURITIES AND EXCHANGE COMMISSION
(Release No. 35 - ________)
Filings Under the Public Utility Holding Company Act of 1935 ("Act")
March __, 1994
Notice is hereby given that the following filing(s) has/have been
made with the Commission pursuant to provisions of the Act and rules
promulgated thereunder. All interested persons are referred to the
application(s) and/or declaration(s) for complete statements of the proposed
transaction(s) summarized below. The application(s) and/or declaration(s)
and any amendments thereto is/are available for public inspection through the
Commission's Office of Public Reference.
Interested persons wishing to comment or request a hearing on the
application(s) and/or declaration(s) should submit their views in writing by
April __, 1994 to the Secretary, Securities and Exchange Commission,
Washington, D.C. 20549, and serve a copy on the relevant applicant(s) and/or
declarant(s) at the address(es) specified below. Proof of service (by
affidavit or, in case of an attorney at law, by certificate) should be filed
with the request. Any request for hearing shall identify specifically the
issues of fact or law that are disputed. A person who so requests will be
notified of any hearing, if ordered, and will receive a copy of any notice or
order issued in
<PAGE>
the matter. After said date, the application(s) and/or declaration(s), as
filed or as amended, may be granted and/or permitted to become effective.
Southern Indiana Gas and Electric Company (70- )
Southern Indiana Gas and Electric Company ("SIGECO"), 20-24 N.W.
Fourth Street, Evansville, Indiana 47741, an Indiana public utility holding
company exempt from registration under Sections 3(a)(1) and 3(a)(2) of the
Act pursuant to Rule 2, has filed an application under Sections 9(a)(2) and
10 of the Act. SIGECO proposes to acquire all of the issued and outstanding
shares of common stock, par value $10 per share ("Lincoln Common Stock"), of
Lincoln Natural Gas Company, Inc. ("Lincoln"), an Indiana public utility
corporation.
SIGECO provides retail electric service directly to Evansville and
74 other cities, towns and communities, and adjacent rural areas, wholesale
electric service to an additional nine communities and gas service to
Evansville and 63 other nearby communities and their environs. At December
31, 1993, SIGECO served 118,163 electric customers and 100,398 gas customers.
Lincoln is a closely held Indiana public utility corporation which
owns and operates a gas distribution system in the City of Rockport, Spencer
County, Indiana, and surrounding territory. Lincoln serves approximately
1,330 customers in Spencer County in southwestern Indiana. Lincoln's gas
service territory is adjacent to SIGECO's gas service
-2-
<PAGE>
territory. There are currently 9,417 issued and outstanding shares of
Lincoln Common Stock held by 23 shareholders.
A wholly-owned subsidiary of SIGECO, Spencer Energy Corp., an
Indiana corporation ("Spencer"), will be merged (the "Merger") with and into
Lincoln pursuant to an Agreement and Plan of Merger, dated December 23, 1993,
among SIGECO, Spencer and Lincoln (the "Agreement"), with Spencer ceasing to
exist and Lincoln continuing as the surviving corporation in a transaction
qualifying as a tax-free reorganization under Section 368(a) of the Internal
Revenue Code of 1986, as amended. In that the Merger, the holders of Lincoln
Common Stock issued and outstanding immediately prior to the Merger would be
entitled to receive shares of common stock, without par value, of SIGECO
("SIGECO Common Stock") having a market value of approximately $1,350,000 in
accordance with the formula contained in the Agreement, and each share of
common stock, no par value, of Spencer issued and outstanding immediately
prior to the Merger would be converted into one share of Lincoln Common
Stock. The number of shares of SIGECO Common Stock to be exchanged in the
transactions will be determined by their average closing market price over a
five-day period before the relevant closing date. The transaction is
intended to result in the liquidation of Spencer and the survival of Lincoln
as a wholly-owned subsidiary of SIGECO.
-3-
<PAGE>
For the Commission, by the Division of Investment Management,
pursuant to delegated authority.
Secretary
-4-
<PAGE>
Appendix 6(b)(1)
<TABLE>
<CAPTION>
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY (SIGECO)
PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF DECEMBER 31, 1993
(DOLLARS IN THOUSANDS)
PRO FORMA
ASSETS SIGECO LINCOLN GAS ADJUSTMENTS CONSOLIDATED
------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Utility plant, net $635,461 $ 408 $ 0 $635,869
--------
Total other investments and property 90,557 0 0 90,557
------ ------
Current assets:
Cash and cash equivalents 5,756 127 0 5,883
Other current assets 84,885 283 0 85,168
------ --- - ------
Total current assets 90,641 410 0 91,051
------ --- - ------
Total deferred charges 43,364 0 0 43,364
------ - - ------
$ 860,023 $ 818 $ 0 $ 860,841
============ ============ =========== ===============
SHAREHOLDERS' EQUITY AND LIABILITIES
Capitalization:
Common shareholders' equity $ 107 <fb>
Common stock $ 102,691 $ 97 -97 <fa> $ 102,798
Additional paid-in-capital 0 18 -18 <fa> 0
Retained earnings 204,058 391 0 <fa> 204,449
Less treasury stock, at cost 24,540 8 -8 <fa> 24,540
------ - -- ------
282,209 498 0 282,707
------- --- - -------
Preferred stock 19,605 0 0 19,605
Long-term debt 273,981 0 0 273,981
------- - - -------
Total capitalization 575,795 498 0 576,293
------- --- - -------
Current liabilities 125,611 276 0 125,887
Deferred income taxes and other credits 158,617 44 0 158,661
------- -- - -------
$ 860,023 $ 818 $ 0 $ 860,841
============ ============ ============ ===============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY (SIGECO)
PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
AS OF DECEMBER 31, 1993
(DOLLARS IN THOUSANDS)
SIGECO LINCOLN GAS ADJUSTMENTS CONSOLIDATED
------ ----------- ----------- ------------
<S> <C> <C> <C> <C>
Operating revenues:
Electric $ 258,405 $ 0 $ 0 $ 258,405
Gas 70,116 968 0 71,084
------ --- - ------
328,521 968 0 329,489
------- --- - -------
Operating expenses
Operation
Fuel for electric generation 81,080 0 0 81,080
Purchased electric energy 9,348 0 0 9,348
Cost of gas sold 50,544 725 0 51,269
Other 40,541 177 0 40,718
------ --- - ------
Total operation 181,513 902 0 182,415
------- --- - -------
Maintenance 26,655 120 0 26,775
Depreciation and amortization 36,939 21 0 36,960
Federal and state income taxes 18,325 (19) 0 18,306
Property and other taxes 13,447 21 0 13,468
------ -- - ------
276,879 1,045 0 277,924
------- ----- - -------
Operating income 51,642 (77) 0 51,565
------ ---- - ------
Other income:
Allowance for other funds used
during construction 3,092 0 0 3,092
Interest 920 10 0 930
Other, net 2,530 3 0 2,533
----- - - -----
6,542 13 0 6,555
----- -- - -----
Income before interest charges 58,184 (64) 0 58,120
------ ---- - ------
Interest and other charges:
Interest on long-term debt 18,437 0 0 18,437
Other interest 746 1 0 747
Allowance for borrowed funds, used
during construction (1,425) 0 0 (1,425)
Amortization of premium, discount
and expense on debt, net 773 0 0 773
--- - - ---
18,531 1 0 18,532
------ - - ------
Net income 39,653 (65) 0 39,588
------ ---- - ------
Preferred stock dividends 1,105 0 0 1,105
----- - - -----
Net income applicable to common stock $ 38,548 $ (65) $ 0 $ 38,483
=========== =========== ========== ===========
Average common shares outstanding 15,705 9 (9) <fa> 15,749
44 <fc>
Earnings per average common share $ 2.45 $ (6.93) $ 0.00 $ 2.44
<PAGE>
The transaction will be accounted for as a pooling of interest so the SIGECO stock issued will be recorded at Lincoln
Natural Gas Company, Inc.'s net book value. The pro forma information was prepared based on the assumption that the price
of Southern Indiana Gas and Electric Company's (SIGECO) common shares used in determining the exchange is $30.50 per share
and that the consideration paid by SIGECO in the Lincoln Natural Gas Company, Inc. transaction is composed 100% of SIGECO
stock.
The following is a summary of the pro forma adjustments to the combined condensed financial statements (in thousands):
<fa> Elimination of Lincoln Natural Gas
Company, Inc. equity accounts:
Common Stock . . . . . . . . . . . . . . $ 97,500
Additional Paid-In-Capital . . . . . . . $ 17,606
Treasury Stock . . . . . . . . . . . . . $ 8,130
<fb> Recording of Sigeco Stock Exchanged:
Common Stock . . . . . . . . . . . . . . $ 106,976
<fc> Issuance of shares:
Estimated number of customers of Lincoln
Natural Gas, Inc. at the date of closing 1,330
of the transaction . . . . . . . . . . .
Price per customer . . . . . . . . . . . $ 1,000
$ 1,330,000
Share price (estimated) . . . . . . . . . $ 30.50
Shares issued . . . . . . . . . . . . . . 43,607
</TABLE>
<PAGE>
Appendix 6(b)(2)
LINCOLN NATURAL GAS COMPANY
---------------------------
FINANCIAL STATEMENTS
--------------------
Year Ended December 31, 1993
----------------------------
<PAGE>
LINCOLN NATURAL GAS COMPANY, INC.
BALANCE SHEET
DECEMBER 31, 1993
ASSETS
- ------
UTILITY PLANT
-------------
Gas Property and System $ 764,432
Less: Accumulated Depreciation (356,172)
----------
Total Property, Net 408,260
CURRENT AND ACCRUED ASSETS
--------------------------
Cash and Cash Equivalents 126,711
Temporary Cash Investments 100,000
Accounts Receivable - Trade 165,975
Other Current Assets 17,369
---------
Total Current and Accrued Assets 410,055
_________
TOTAL ASSETS $ 818,315
=========
LIABILITIES AND CAPITAL
- -----------------------
CAPITAL
-------
Common Stock, ($10 par, 10,000 shares $ 97,500
authorized, 9,750 shares issued
and 9,417 shares outstanding)
Additional Paid-in-Capital 17,606
Unappropriated Retained Earnings 391,175
---------
506,281
Less: Treasury Stock (333 Shares) (8,130)
---------
Total Capital 498,151
CURRENT AND ACCRUED LIABILITIES
-------------------------------
Accounts Payable 186,992
Notes Payable 40,025
Customer Advances for Construction 15,119
Accrued Taxes 9,527
Accumulated Provision for Rate Refunds 20,362
Other Accrued Liabilities 3,886
---------
Total Current Liabilities 275,911
NON-CURRENT LIABILITIES
-----------------------
Regulatory Liability 4,523
Accumulated Deferred Income Taxes 36,656
Deferred Investment Tax Credits 3,074
--------
Total Non-Current Liabilities 44,253
TOTAL LIABILITIES AND CAPITAL $ 818,315
=========
The accompanying Notes To Financial Statements
are an integral part of this financial statement.
<PAGE>
LINCOLN NATURAL GAS COMPANY, INC.
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1993
OPERATING REVENUES
- ------------------
Sales of Gas $ 720,505
Transmission of Customer Owned Gas 158,709
GCA Adjustment 72,943
Other 16,120
--------
Total Operating Revenues 968,277
OPERATING EXPENSES
- ------------------
Cost of Gas Sold 725,181
Maintenance 119,609
Other 178,065
Depreciation 20,720
Other Taxes 21,360
---------
Total Operating Expenses 1,064,935
---------
Net Operating Loss (96,658)
---------
OTHER INCOME
- ------------
Interest, net 8,981
Miscellaneous Revenue 3,304
----------
Total Other Income 12,285
----------
Net Loss Before Income Taxes (84,373)
----------
Federal Income Tax Benefit 19,071
----------
Net Loss $ (65,302)
=========
Average Common Shares Outstanding 9,417
Loss Per Share of Common Stock $ (6.93)
=========
The accompanying Notes To Financial Statements
are an integral part of this financial statement.
<PAGE>
LINCOLN NATURAL GAS COMPANY, INC.
STATEMENT OF RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1993
------------------------------------
Unappropriated Retained Earnings,
Beginning of the Year 460,244
Net Loss (65,302)
Common Stock Dividends ($.40 per share in 1993) (3,767)
---------
Unappropriated Retained Earnings,
End of Year 391,175
=========
The accompanying Notes To Financial Statements
are an integral part of this financial statement.
<PAGE>
LINCOLN NATURAL GAS COMPANY, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1993
------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $ (65,302)
Add (Deduct) adjustments to
reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 20,720
Change in accounts receivable (11,154)
Change in accounts payable 79,889
Change in other assets and
liabilities (74,616)
---------
Net Cash From Operations (50,463)
CASH FLOWS FROM FINANCING ACTIVITIES
Change in notes payable 40,025
Payment of Dividends (3,767)
---------
Net Cash From Financing 36,258
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and
equipment (87,066)
---------
Net Cash From Investing (87,066)
NET DECREASE IN CASH AND CASH EQUIVALENTS (101,271)
CASH AND CASH EQUIVALENTS
Beginning of period 227,982
---------
End of period $ 126,711
=========
The accompanying Notes To Financial Statements
are an integral part of this financial statement.
<PAGE>
LINCOLN NATURAL GAS COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 1993
-----------------------------
Note 1 - Accounting Policies
The following is a summary of significant accounting policies of the Company:
Nature of Business
Lincoln Natural Gas Co., Inc., is a public utility distributor of
natural gas. On December 13, 1993, the Board of Directors of the
Company approved in principal an agreement and plan of merger pursuant
to which Southern Indiana Gas & Electric Company, Inc. would acquire the
Company. The merger is subject to certain conditions, including
approval by the Company's shareholders, the Indiana Utility Regulatory
Commission (IURC) and the Securities and Exchange Commission pursuant to
the Public Utility Holding Company Act of 1935. The merger is expected
to be completed in 1994.
Property, Plant and Equipment
Property, plant and equipment, consisting of gas property and systems,
equipment, and vehicles, are stated principally at cost. Provisions for
depreciation of property and equipment have been computed on the
straight-line method at rates established in 1969, as dictated by the
IURC. The Accelerated Cost Recovery System is used for additions after
1980, and the Modified Cost Recovery System for additions after 1985,
for tax purposes.
Operating Revenues and Cost of Gas Sold
Revenues include all gas service provided during the year. At year-end,
an estimate is recorded for gas delivered to customers but not yet
billed. At December 31, 1993, this amount was $25,750 and is included
in revenues and accounts receivable. All metered gas rates contain a
gas cost adjustment (GCA) clause which allows for adjustment in charges
for changes in the cost of purchased gas. The GCA clause provides that
any under or over recovery will be included in adjustment factors for
future periods.
The cost of gas sold is charged to operating expense as delivered.
-1-
LINCOLN NATURAL GAS COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 1993
-----------------------------
On March 9, 1994, the IURC approved an overall increase in revenues of
approximately 10.4%, or about $100,000, in the Company's base rates.
Income Taxes
Deferred income taxes have been provided in temporary timing differences
between tax and financial accounting income. Timing differences relate
primarily to differences between tax and book depreciation methods.
Investment tax credits recorded have been deferred and are amortized
through credits to income over the lives of the related property.
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes".
SFAS No. 109 requires an asset and liability approach for financial
accounting and reporting for income taxes. The new standard requires
the Company to establish deferred tax assets and liabilities, as
appropriate, for all temporary differences and to adjust deferred tax
balances to reflect changes in tax rates expected to be in effect during
the period the temporary differences reverse. Effective January 1,
1993, because of the effects of rate regulation, the Company recorded a
decrease of $7,987 in deferred tax liabilities and established a
corresponding regulatory liability of $7,987, primarily to recognize the
probable future reduction in rates to flow back to customers deferred
taxes previously collected in excess of current tax rates. The adoption
of this standard did not have a material impact on the results of
operations, cash flow or financial position.
-2-
<PAGE>
LINCOLN NATURAL GAS COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 1993
-----------------------------
The components of the deferred income tax liability at January 1, 1993 and
December 31, 1993 are as follows:
January 1 December 31
--------- -----------
Depreciation and cost recovery
differences $41,725 $44,497
Regulatory liabilities to be
settled through future rates (7,987) (4,523)
Deferred tax asset (net operating
loss carryforward) 0 (3,313)
-------- -------
Net Deferred Income Tax
Liability $33,738 $36,656
======== =======
The components of the current and deferred income tax benefit for the year
ended December 31, 1993 were $18,525 and $546, respectively. A
reconciliation of the statutory tax (benefit) rates to the Company's
effective income tax (benefit) rate for the year ended December 31, 1993 is
as follows:
Statutory federal and state rate (18.8%)
Refund from prior years (3.7%)
-----
Effective (benefit) rate (22.5%)
=====
Accounts Receivable
The direct charge-off method is used to account for losses in the collection
of accounts receivable. An allowance for uncollectible accounts is
considered unnecessary by management because all significant accounts
receivable expected to be uncollected have been written off. Bad debt
expense consists of accounts written off, net of recoveries.
Notes Payable
The Company has a note with a bank totalling $40,060. The note is payable on
demand, but if no demand is made, then the note is payable on October 1,
1994. The interest rate on the note is 5.4%.
-3-
<PAGE>
LINCOLN NATURAL GAS COMPANY
NOTES TO FINANCIAL STATEMENTS
December 31, 1993
-----------------------------
Note 2 - Property, Plant and Equipment
Property and equipment at December 31, 1993 consisted of the following:
Cost
----
Land and land rights $ 17,581
Gas property and systems 667,876
Vehicles 29,399
Machinery and equipment 29,769
Office Furniture 19,807
--------
764,432
Less: Accumulated depreciation (356,172)
--------
Net Plant $408,260
========
Depreciation expense for the year ended December 31, 1993 was $20,720.
Note 3 - Pension Expense
The Company has a retirement plan covering substantially all of its
employees. In 1982, the Company amended its pension plan in order to convert
to a simplified employee pension plan. Pension expense charged to costs for
the year ended December 31, 1993 was $8,310.
Note 4 - Treasury Stock
Treasury stock at December 31, 1993 equaled 333 shares at a cost of $8,130.
Note 5 - Interest and Federal Income Tax
The Company paid no interest or income taxes during 1993.
-4-
<PAGE>
Appendix 6(b)(3)
LINCOLN NATURAL GAS COMPANY, INC.
---------------------------------
FINANCIAL STATEMENTS
--------------------
Years Ended December 31, 1992 and 1991
--------------------------------------
<PAGE>
LINCOLN NATURAL GAS COMPANY, INC.
--------------------------------
BALANCE SHEET
-------------
December 31, 1992 and 1991
--------------------------
1992 1991
---- ----
ASSETS
------
Property
--------
Property and Equipment-Note 2 677,366 662,889
Less: Accumulated Depreciation (335,452) (315,742)
-------- --------
Net Property 341,914 347,147
Current Assets
--------------
Cash and Temporary Investments 327,982 267,754
Accounts Receivable - Trade 152,970 170,384
Accounts Receivable - Other 1,851 1,851
Prepaid Expense 20,343 20,330
State and Federal Income Tax Refunds 6,550 6,943
------- -------
Total Current Assets 509,696 467,262
TOTAL ASSETS 851,610 814,409
======= =======
LIABILITIES AND CAPITAL
-----------------------
Capital Stock and Retained Earnings
-----------------------------------
Common Stock, par value $10 per
share; 10,000 authorized, 9750 shares
issued, 9417 shares outstanding 97,500 97,500
Retained Earnings 460,244 496,197
Premium on Sale 17,606 17,606
Less: Treasury Stock (333 shares) - (8,130) (8,130)
Note 5 ------- -------
Total Capital 567,220 603,173
Deferred Income Taxes
--------------------- 44,799 44,799
Current Liabilities
-------------------
1992 1991
---- ----
Accounts Payable 124,496 129,825
Customers' Deposits 3,512 2,257
Accrued Taxes 8,357 7,362
Accrued Expenses 9,921 14,728
Accumulated Provision for Rate Refunds 93,305 12,265
------- -------
239,591 166,437
TOTAL LIABILITIES AND CAPITAL 851,610 814,409
======= =======
The accompanying notes are an integral part of these financial statements.
<PAGE>
LINCOLN NATURAL GAS COMPANY, INC.
---------------------------------
STATEMENTS OF INCOME
--------------------
Years Ended December 31, 1992 and 1991
--------------------------------------
1992 1991
---- ----
Operating Income
----------------
Residential Sales 498,102 453,223
Commercial and Industrial Sales 254,988 235,831
Customers' Forfeited Discounts 5,722 5,924
Servicing Customers' Installations 2,021 2,213
Transmission - Customer Owned Gas 278,567 446,247
Pipeline Refund 0 50,289
GCA Adjustment (81,040) (12,895)
-------- ---------
Total Operating Income 958,360 1,180,632
Operating Expenses
------------------
Gas Purchased 590,170 665,581
Distribution 198,911 232,007
Collection 2,023 2,435
Sales Promotion 1,353 1,287
Administrative and General 148,408 215,257
Depreciation 19,710 18,515
Taxes 22,291 30,219
-------- ---------
Total Operating Expenses 982,866 1,165,301
Operating Income (Loss)
----------------------- (24,506) 15,331
1992 1991
---- ----
Other Income
------------
Non-Operating Revenues 1,109 1,912
Interest 14,282 23,584
-------- ---------
15,391 25,496
Income (Loss) Before Income Taxes
--------------------------------- (9,115) 40,827
Provision for Federal Income Tax 0 6,124
---------- ----------
NET INCOME (LOSS) (9,115) 34,703
========== =========
The accompanying notes are an integral part of these financial statements.
<PAGE>
LINCOLN NATURAL GAS COMPANY, INC.
---------------------------------
STATEMENTS OF RETAINED EARNINGS
-------------------------------
Years Ended December 31, 1992 and 1991
--------------------------------------
1992 1991
---- ----
Retained Earnings at Beginning of Year 496,197 487,862
Net Income (9,115) 34,703
Less: Dividends Declared/Paid (26,838) (26,368)
-------- --------
RETAINED EARNINGS AT END OF YEAR 480,244 496,197
======= =======
The accompanying notes are an integral part of these financial statements.
<PAGE>
LINCOLN NATURAL GAS COMPANY, INC.
---------------------------------
STATEMENTS OF CASH FLOWS
------------------------
Years Ended December 31, 1992 and 1991
---------------------------------------
1992 1991
---- ----
Cash Flows From Operating
Activities
-------------------------
Cash Received from Customers 975,774 1,164,396
Interest Income 14,282 23,584
Non-Operating Income 1,109 1,912
-------- ----------
Cash Provided by Operating
Activities 991,165 1,189,892
Cash Paid for Merchandise, (889,622) (1,227,119)
Supplies, and Employees -------- ----------
NET CASH FROM OPERATING
ACTIVITIES 101,543 (37,227)
Cash Flows From Investing
Activities
-------------------------
Purchase of Equipment (14,477) (19,528)
Dividends Paid (26,838) (26,368)
------- -------
NET CASH FROM INVESTING
ACTIVITIES (41,315) (45,896)
Cash Flows From Financing
Activities
-------------------------
Payment of Debt 0 0
Sale of Capital Stock 0 0
--------- ---------
NET CASH FROM FINANCING
ACTIVITIES 0 0
NET INCREASE (DECREASE) IN CASH 60,228 (83,123)
======== ========
The accompanying notes are an integral part of these financial statements.
<PAGE>
LINCOLN NATURAL GAS COMPANY, INC.
---------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
December 31, 1992 and 1991
--------------------------
Note 1 - Accounting Policies
The following is a summary of significant accounting policies of the Company.
Nature of Business
Lincoln Natural Gas Co., Inc., is a public utility distributor of
natural gas.
Property and Equipment
Property and equipment, consisting of gas property and systems,
equipment, and vehicles, are stated principally at cost. Provisions for
depreciation of property and equipment have been computed on the
straight-line method at rates established in 1969, as dictated by the
Public Service Commission. The Accelerated Cost Recovery System is used
for additions after 1980, and the Modified Cost Recovery System for
additions after 1985, for tax purposes.
Income Taxes
Income taxes have been provided on timing differences between income tax
and financial accounting. Timing differences relate primarily to
depreciation methods.
Accounts Receivable
The direct charge-off method is used to account for losses in the
collection of accounts receivable. An allowance for uncollectible
accounts is considered unnecessary by management because all significant
accounts receivable expected to be uncollected have been written off.
Bad debt expense consists of accounts written off, net of recoveries.
-1-
<PAGE>
LINCOLN NATURAL GAS COMPANY, INC.
--------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
December 31, 1992 and 1991
--------------------------
Note 2 - Property and Equipment
Property and equipment at December 31, 1992 and 1991 consisted of the
following:
1992 1991
----------------------- -----------------------
Cost Accumulated Cost Accumulated
Depreciation Depreciation
Land & land rights $ 17,581 $ 134 $ 17,285 $ 109
Gas property & systems 583,598 288,310 569,973 274,154
Vehicles 29,399 19,899 29,399 16,790
Machinery 29,018 20,197 29,018 18,538
Office Furniture 17,770 6,912 17,214 6,151
-------- ---------- -------- -----------
Total $ 677,366 $ 335,452 $ 662,889 $ 315,742
======== ========== ========= ==========
Depreciation expense for the years ended December 31, 1992 and 1991 was
$19,710 and $18,515, respectively.
Note 3 - Pension Expense
The Company has a retirement plan covering substantially all of its
employees. In 1982, the Company amended its pension plan in order to convert
to a simplified employee pension plan. Pension expense charged to costs for
the years ended December 31, 1992 and 1991 was $9,705 and $24,356,
respectively.
-2-
<PAGE>
LINCOLN NATURAL GAS COMPANY, INC.
--------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
December 31, 1992 and 1991
--------------------------
Note 4 - Profit Sharing Plan
In 1988, the Company started a profit sharing plan covering substantially all
employees. Profit sharing expense for the years ended December 31, 1992 and
1991 was $0 and $0, respectively.
Note 5 - Treasury Stock
Treasury stock at December 31, 1992 and 1991 equaled 333 shares at a cost of
$8,130.
Note 6 - Deferred Federal Income Tax
Deferred Federal Income Tax has been computed on timing differences between
book and taxable income. Deferred Federal Income Tax for the year ended
December 31, 1992 was $0.
-3-
