Exhibit (i)(18)
IN THE CIRCUIT COURT OF JACKSON COUNTY, MISSOURI
AT KANSAS CITY
)
Edward Shlomovich, )
Plaintiff, )
)
vs. ) Case No. 01CV226874
) Division No. 12
Robert K. Green, Richard C. Green, )
Jr., Keith G. Stamm, Aquila, Inc., )
and UtiliCorp. United, Inc., )
Defendants. )
SECOND AMENDED CLASS ACTION PETITION
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Plaintiff alleges upon information and belief, except for
paragraph 1 hereof, which is alleged upon knowledge, as follows:
1. Plaintiff has been the owner of shares of the common stock of
Aquila, Inc. ("Aquila" or the "Company") since prior to the wrongs herein
complained of and continuously to date.
2. Aquila is a corporation that maintains its principal offices
at 1100 Walnut Street, Suite 3300, Kansas City, MO 64106. The Company is a
wholesale energy risk merchant that markets and trades commodities
including natural gas, electricity, weather, coal, bandwidth capacity, and
emission allowances.
3. Defendant UtiliCorp United, Inc. ("UtiliCorp") owns or
controls approximately 80% of the Class A shares and 100% of the Class B
shares of the Company's common stock, giving it 98% of the combined voting
power of the Company.
4. Defendant Richard K. Green is Chairman of the Board of
Directors of the Company and President and Chief Operating Officer of
UtiliCorp.
5. Defendant Keith G. Stamm is Chief Executive Officer and a
Director of the Company and Senior Vice President of UtiliCorp.
6. Defendant Richard C. Green, Jr., is a Director of the Company
and Chairman and Chief Executive of UtiliCorp.
7. UtiliCorp, as controlling shareholder, and the director
defendants stand in a fiduciary position relative to the Company's public
shareholders and owe the public shareholders of Aquila the highest duties
of good faith, fair dealing, due care, loyalty, and full and candid
disclosure.
CLASS ACTION ALLEGATIONS
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8. Plaintiff brings this action as a class action, pursuant to
Rule 23 of the Rules of the Circuit Court, on behalf of all security
holders of the Company (except the defendants herein and any person, firm,
trust, corporation, or other entity related to or affiliated with any of
the defendants) and their successors in interest, who are or will be
threatened with injury arising from defendants' actions as more fully
described herein.
9. This action is properly maintainable as a class action.
10. The class is so numerous that joinder of all members is
impracticable. There are approximately 19.975 million shares of Aquila
Class A common stock outstanding owned by hundreds, if not thousands, of
holders other than UtiliCorp and it affiliates.
11. There are questions of law and fact which are common to the
class including, inter alia, the following: (a) whether defendants have
breached their fiduciary and other common law duties owed by them to
plaintiff and the members of the class; (b) whether defendants are pursuing
a scheme and course of business designed to eliminate the public securities
holders of Aquila in violation of the laws of the State of Missouri in
order to enrich UtiliCorp at the expense and to the detriment of plaintiff
and the other public stockholders who are members of the class; (c) whether
the proposed transaction, hereinafter described, constitutes a breach of
the duty of fair dealing with respect to the plaintiff and the other
members of the class; and (d) whether the class is entitled to injunctive
relief or damages as a result of the wrongful conduct committed by
defendants.
12. Plaintiff is committed to prosecuting this action and has
retained competent counsel experienced in litigation of this nature. The
claims of the plaintiff are typical of the claims of other members of the
class and plaintiff has the same interests as the other members of the
class. Plaintiff will fairly and adequately represent the class.
13. Defendants have acted in a manner which affects plaintiff and
all members of the class alike, thereby making appropriate injunctive
relief and/or corresponding declaratory relief with respect to the class as
a whole.
14. The prosecution of separate actions by individual members of
the Class would create a risk of inconsistent or varying adjudications with
respect to individual members of the Class, which would establish
incompatible standards of conduct for defendants, or adjudications with
respect to individual members of the Class which would, as a practical
matter, be dispositive of the interests of other members or substantially
impair or impede their ability to protect their interests.
SUBSTANTIVE ALLEGATIONS
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15. On April 23, 2001 the Company sold 17.5 million shares of its
Class A common stock in an initial public offering at a price of $24.00 per
share (the "IPO"). After the IPO, Aquila shares were listed on the New York
Stock Exchange ("NYSE") under the symbol "ILA." In the IPO prospectus,
UtiliCorp stated that it intended to spin off the remaining Aquila shares
within the 12 months following the IPO.
16. Since the time of the IPO, the Individual Defendants, who are
also officers and/or directors of UtiliCorp, have constituted Aquila's
Board of Directors. NYSE Rules require that a company traded on the NYSE
appoint at least two independent directors to its Board within 90 days of
its initial public offering. To date, Defendants have violated and continue
to violate NYSE Rules by failing to appoint any independent directors to
the Aquila Board. Defendants refusal to appoint any independent directors
to the Aquila Board ensures that the UtiliCorp defendants retain unfettered
discretion in their dealings with Aquila and its public shareholders.
17. On November 7, 2001, UtiliCorp announced that it had made a
proposal to acquire all of the shares of common stock of the Company not
held by UtiliCorp and its affiliates. Under the terms of the UtiliCorp
proposal, the Company's public shareholders will receive 0.6896 shares of
UtiliCorp common stock for each share outstanding share of Aquila Class A
common stock (the "Exchange Offer"). The Exchange Offer is subject to the
condition that a majority of the outstanding shares held by the public
shareholders tender their shares. If this condition is satisfied, UtiliCorp
intends to acquire the remaining shares in a short form merger that does
not require the consent of Aquila's public shareholders.
18. The Exchange Offer contemplates a fixed exchange ratio; there
is no "collar" or other mechanism to protect Aquila shareholders against a
decline in the price of UtiliCorp stock.
19. At the time the Exchange Offer was announced and based on the
November 6, 2001 closing price of $30.00 per share for UtiliCorp stock,
each Aquila Class A share was valued at approximately $20.69, significantly
below the IPO price and wholly inadequate consideration.
20. However, since the announcement of the Exchange Offer, the
price of UtiliCorp stock has declined significantly, closing at $25.62 on
December 4, 2001. As a result, the consideration Aquila shareholders will
receive has fallen to approximately $17.67 per share, nearly 27% below the
IPO price.
21. The Exchange Offer is coercive because it contains a fixed
exchange ratio that has not and will not protect Aquila shareholders
against a decline in the price of UtiliCorp's stock. Aquila's public
shareholders are compelled to tender their shares in the Exchange Offer or
risk receiving UtiliCorp stock worth significantly less in the short form
merger in the event of a severe decline in UtiliCorp's stock price.
22. At a minimum, Aquila shareholders who do not tender in the
Exchange Offer should be guaranteed to receive minimum consideration for
their shares having at least the value of the Exchange Offer ($20.69 per
share) on the day the Exchange Offer was announced. Absent this condition,
Aquila shareholders will not be able to consider the Exchange Offer in an
atmosphere free from coercion.
23. Moreover, because defendants have refused to appoint any
independent directors to the Aquila Board (in violation of NYSE Rules), it
is not possible to form a special committee of independent directors to
negotiate on behalf of, or at least opine as to the adequacy of the
Exchange Offer to Aquila's public shareholders. Absent the protection of a
special committee, the Company's public shareholders are unable to make an
informed decision as to whether to tender in the Exchange Offer or not.
Accordingly, defendants should be compelled to immediately appoint at least
two independent directors to the Aquila Board.
24. On December 3, 2001, UtiliCorp filed a Registration Statement
on Form S-4 (the "Registration Statement") in connection with the Exchange
Offer. The Registration Statement contained the terms of the Exchange Offer
as well as other purportedly relevant information about the two companies.
However, the Registration Statement, which was not vetted by any
disinterested persons, fails to disclose material information about Aquila
and UtiliCorp.
25. The Registration Statement contains financial forecasts for
both UtiliCorp and Aquila. However, the Aquila forecasts were prepared by
UtiliCorp management and not by the management of Aquila. In light of
UtiliCorp's conflicts with Aquila shareholders, these forecasts are highly
suspect and cannot be relied on by Aquila shareholders.
26. Moreover, the Registration Statement only provides a cursory
summary of the Company's projected financial results for 2001 and 2002. The
Registration Statement merely states "beyond 2002, we target 25% average
annual growth for Aquila." No meaningful or detailed information is
provided to the Company's public shareholders concerning Aquila's growth
beyond 2002. Similarly, the Registration Statement only provides cursory
summary financial forecasts for UtiliCorp for 2001 and 2002. The
Registration Statement also notes that "beyond 2002, we target 15% average
annual growth for UtiliCorp." No meaningful or detailed information is
provided to the Company's public shareholders concerning UtiliCorp's growth
beyond 2002. This information is vital to the ability of Aquila's
shareholders to properly evaluate the Exchange Offer.
27. The Registration Statement discloses that UtiliCorp retained
Lehman Brothers, Inc. ("Lehman") to serve as its financial adviser in this
transaction. However, the Registration Statement is silent with respect to
the valuation analyses performed by Lehman. Accordingly, Aquila
shareholders cannot determine from these materials what the intrinsic value
of the Aquila shares is and why the proposed acquisition by UtiliCorp is
preferable to other alternatives or is fair.
28. Moreover, the UtiliCorp defendants, in breach of NYSE Rules
and their fiduciary duties, have refused to appoint any independent Aquila
directors who would be in a position to retain their own financial advisors
and otherwise protect Aquila's public shareholders. Accordingly, UtiliCorp
should be compelled to disclose the various valuation methodologies
employed by Lehman and the results of those valuation analyses.
29. Since the Company went public in April 2001 at $24.00 per
share, its stock has traded as high as $35.00 per share. However, due to a
temporary downturn in Aquila's market and in general economic conditions,
Aquila's stock price has declined. In breach of its fiduciary duties as
controlling shareholder, UtiliCorp has timed the Exchange Offer to take
advantage of this temporary downturn to eliminate Aquila's public
shareholders for inadequate consideration. It is clear that UtiliCorp has
timed the transaction to buy Aquila on the cheap because UtiliCorp itself
projects earnings per share growth of 25% for Aquila beyond 2002.
30. The consideration to be paid to class members, now valued at
$17.67 per share, is unfair and inadequate consideration because, among
other things: (a) the intrinsic value of the stock of Aquila is materially
in excess of $17.67 per share, giving due consideration to the prospects
for growth and profitability of Aquila (particularly beyond 2002) in light
of its business, earnings and earnings power, present and future; (b) the
$17.67 per share price offers an inadequate premium to the public
stockholders of Aquila and is well below the April 23, 2001 IPO price; and
(c) the $17.67 per share price is not the result of arm's length
negotiations but was fixed arbitrarily by UtiliCorp to "cap" the market
price of Aquila stock, as part of a plan for UtiliCorp to obtain complete
ownership of Aquila, its assets and businesses at the lowest possible
price.
31. The proposal is an attempt by UtiliCorp to unfairly
aggrandize UtiliCorp at the expense of Aquila's public stockholders. The
proposal will, for inadequate consideration, deny plaintiff and the other
members of the class their right to share proportionately in the future
success of Aquila and its valuable assets, while permitting UtiliCorp to
benefit wrongfully from the transaction.
32. Given the UtiliCorp defendants' stock ownership in Aquila and
the fact that all of the Directors are also officers and/or directors of
UtiliCorp, none of the directors will protect the Company's public
shareholders in transactions which benefit UtiliCorp at the expense of
Aquila's public shareholders, as exemplified by the Exchange Offer.
33. Because of UtiliCorp's stock ownership and the offices held
by UtiliCorp personnel, no third party, as a practical matter, can attempt
any competing bid for Aquila, as the success of any such bid would require
the consent and cooperation of the UtiliCorp defendants. Moreover,
UtiliCorp has indicated that it will not sell its shares to a third party
nor spin off the rest of Aquila to the public.
30. Plaintiff and the other members of the Class will suffer
irreparable damage unless defendants are enjoined from breaching their
fiduciary duties to Aquila's public shareholders in a proposed transaction
which will benefit fiduciaries at the expense of the public shareholders of
the Company.
31. Plaintiff and the other members of the Class have no adequate
remedy at law.
WHEREFORE, plaintiff demands judgment against defendants, jointly
and severally, as follows:
(1) declaring this action to be a class action and certifying
plaintiff as the Class representative and plaintiff's counsel as Class
counsel;
(2) enjoining, preliminarily and permanently, the transaction
complained of herein;
(3) ordering defendants to appoint at least two independent
directors to the Aquila Board and to disclose all relevant information,
including detailed projections and a description of the financial analyses
performed by Lehman;
(4) ordering defendants to guarantee that Aquila shareholders who
do not tender will receive consideration having a minimum value of the
Exchange Offer on the date the transaction was announced;
(5) the value of to the extent, if any, that the transaction or
transactions complained of are consummated prior to the entry of this
Court's final judgment, rescinding such transaction or transactions, or
granting the Class rescissory damages;
(6) directing that defendants account to plaintiff and the other
members of the Class for all damages caused to them and account for all
profits and any special benefits obtained as a result of their unlawful
conduct;
(7) awarding plaintiff the costs and disbursements of this
action, including a reasonable allowance for the fees and expenses of
plaintiff's attorneys and experts; and
(8) Granting plaintiff and the other members of the Class such
other and further relief as may be just and proper.
SWANSON MIDGLEY, LLC
/s/ Don R. Lolli, Esq.
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Don R. Lolli, Esq. MO #24012
SWANSON, MIDGLEY, LLC
Crown Center
2420 Pershing Road, Suite 400
Kansas City, Missouri 64108
(816) 842-6100
BERNSTEIN LIEBHARD & LIFSHITZ, LLP
Stanley D. Bernstein, Esq.
Michael S. Egan, Esq.
10 East 40th Street
New York, New York 10016
(212) 779-1414
Attorneys for Plaintiff