<PAGE> 1
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
NEW CENTURY ENERGIES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
<PAGE> 2
The information in this joint proxy statement/prospectus is not complete and may
be changed. We may not sell the securities described in this joint proxy
statement/prospectus until the registration statement filed with the Securities
and Exchange Commission is effective. This joint proxy statement/ prospectus is
not an offer to sell these securities and is not soliciting an offer to buy
these securities in any state where the offer or sale is not permitted.
JOINT PROXY STATEMENT/PROSPECTUS (SUBJECT TO COMPLETION, DATED APRIL 26, 1999)
[NEW CENTURY ENERGIES, INC. ADDRESS LOGO]
Dear Shareholder:
You are cordially invited to attend a special meeting of shareholders of New
Century Energies, Inc. which will be held on , 1999 at
. The meeting will start at a.m. local time.
At this important meeting, you will be asked to approve a merger of equals
between New Century Energies and Northern States Power. The combined company
will be named and will be a holding company for the combined
assets of both companies. This merger creates one of the top ten utilities in
the United States with over 3 million electric and 1.5 million gas customers,
serving twelve states. will have additional operations outside the
U.S. in central Europe, the United Kingdom, Australia, and South America.
In the merger, each New Century Energies common share will be converted into the
right to receive 1.55 shares of common stock of the combined company. Northern
States Power common and preferred shares will remain outstanding after the
merger on a one-for-one basis as shares of the combined company. At the close of
the merger, New Century Energies shareholders would own approximately 54% of the
common stock in the combined company.
Your Board of Directors believes that this merger of equals will benefit
shareholders and customers by creating a financially strong company with a
diversified asset mix, enhanced growth potential, significant cost savings, and
the scale and scope to compete effectively in the deregulating energy industry.
Your Board of Directors has carefully reviewed and considered the terms and
conditions of the merger and believes that they are in the best interests of New
Century Energies and its shareholders. Your Board has unanimously approved the
merger agreement and recommends that you vote FOR approval of the merger.
The attached joint proxy/prospectus gives you detailed information about the
meeting and the proposed merger. We encourage you to read this document
carefully. IN PARTICULAR, YOU SHOULD READ THE "RISK FACTORS" SECTION BEGINNING
ON PAGE 21 FOR A DESCRIPTION OF VARIOUS RISKS YOU SHOULD CONSIDER IN EVALUATING
THE MERGER. The merger requires the approval of shareholders representing at
least 50% of the outstanding shares. YOUR VOTE IS IMPORTANT - no matter how many
shares you hold.
On behalf of your Board of Directors, we thank you for your support.
Sincerely,
BILL D. HELTON
Chairman of the Board and
Chief Executive Officer
The joint proxy statement/prospectus is dated , 1999,
and was first mailed to the shareholders of Northern States Power and the
shareholders of New Century Energies on or about , 1999.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THE SECURITIES TO BE ISSUED UNDER THE
JOINT PROXY STATEMENT/PROSPECTUS OR DETERMINED WHETHER THE JOINT PROXY
STATEMENT/PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
<PAGE> 3
NEW CENTURY ENERGIES, INC.
1225 SEVENTEENTH STREET
DENVER, COLORADO 80202
(303) 571-7511
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
Date: , 1999
Time: a.m., local time
Place: [address]
PURPOSE OF THE MEETING:
- To consider and vote upon the Agreement and Plan of Merger, dated as of
March 24, 1999, between New Century Energies, Inc. and Northern States
Power Company (including the plan of merger that is part of the merger
agreement) and the merger of New Century Energies and Northern States
Power contemplated thereby.
- To consider any other matters that may be properly brought before the
special meeting or any adjournment of the special meeting.
Only shareholders who owned stock at the close of business on
, 1999, are entitled to notice of, and to vote at, this special
meeting or any adjournment of the special meeting.
THE BOARD OF DIRECTORS OF NEW CENTURY ENERGIES HAS UNANIMOUSLY ADOPTED AND
APPROVED THE MERGER AGREEMENT AND THE MERGER AS IN THE BEST INTERESTS OF NEW
CENTURY ENERGIES AND ITS SHAREHOLDERS AND UNANIMOUSLY RECOMMENDS THAT YOU VOTE
"FOR" APPROVAL OF THE MERGER AGREEMENT AND THE MERGER.
The merger is explained in the accompanying joint proxy
statement/prospectus, which you are urged to read carefully. A copy of the
Agreement and Plan of Merger is attached as Appendix A to the joint proxy
statement/prospectus.
YOUR VOTE IS VERY IMPORTANT TO US. Whether or not you plan to attend the
special meeting, please act promptly to vote your shares on the proposals
described above. You may vote your shares by marking, signing and dating the
enclosed proxy card and returning it in the return envelope provided, which
requires no postage if mailed in the United States. You may also vote your
shares by telephone or through the Internet by following the instructions we
have provided on the enclosed proxy card. If you attend the special meeting, you
may vote your shares in person, even if you have previously submitted a proxy in
writing, by telephone or through the Internet.
By order of the Board of Directors
Cathy J. Hart
Secretary
, 1999
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
QUESTIONS AND ANSWERS ABOUT THE MERGER...................... 1
SUMMARY..................................................... 5
The Companies.......................................... 5
The New Century Energies Special Meeting............... 6
The Northern States Power Special Meeting.............. 6
Charter Amendments..................................... 7
The Merger and the Merger Agreement.................... 7
Our Reasons for the Merger............................. 7
Our Recommendations to Shareholders.................... 7
Fairness Opinions...................................... 8
Material Federal Income Tax Consequences............... 8
Board of Directors, Management and Headquarters of the
Combined Company After the Merger..................... 8
Interests of Directors and Officers in the Merger...... 9
Accounting Treatment................................... 9
Regulatory Approvals................................... 9
Northern States Power Restructuring.................... 9
Completion of the Merger............................... 10
Termination and Termination Fees....................... 10
Appraisal Rights for Dissenting Shareholders........... 11
Comparative Per Share Market Price and Dividend
Information........................................... 11
Selected Historical Financial Information.............. 14
Unaudited Selected Pro Forma Combined Condensed
Financial Information................................. 17
Comparative Per Share Data............................. 18
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS... 19
RISK FACTORS................................................ 21
Transaction Risks...................................... 21
Operational Risks...................................... 21
THE COMPANIES............................................... 22
New Century Energies................................... 22
Northern States Power.................................. 23
THE NEW CENTURY ENERGIES SPECIAL MEETING.................... 25
General................................................ 25
Record Date and Voting................................. 25
Voting and Revocation of Proxies....................... 25
THE NORTHERN STATES POWER SPECIAL MEETING................... 27
General................................................ 27
Record Date and Voting................................. 27
Voting and Revocation of Proxies....................... 28
</TABLE>
i
<PAGE> 5
<TABLE>
<CAPTION>
PAGE
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<S> <C>
THE MERGER.................................................. 30
Background............................................. 30
New Century Energies' Reasons for the Merger;
Recommendation of the New Century Energies Board...... 35
Northern States Power's Reasons for the Merger;
Recommendation of the Northern States Power Board..... 37
Potential Cost Savings and Cost Avoidances Resulting
from the Merger....................................... 39
Opinion of the Financial Advisor to the New Century
Energies Board........................................ 40
Opinion of the Financial Advisor to the Northern States
Power Board........................................... 45
Effective Time of the Merger........................... 53
Articles of Incorporation and Bylaws................... 53
Directors and Officers................................. 54
Headquarters and Other Significant Operating
Locations............................................. 54
Material Federal Income Tax Consequences............... 54
Accounting Treatment................................... 56
Regulatory Approvals................................... 56
Listing of the Combined Company Common Stock on Stock
Exchanges............................................. 60
Resale of Shares Issued in the Merger; Affiliates...... 60
Interests of Certain Persons in the Merger............. 61
Amendments to New Century Energies' Shareholder Rights
Plan.................................................. 64
RIGHTS OF DISSENTING NORTHERN STATES POWER SHAREHOLDERS..... 65
THE MERGER AGREEMENT........................................ 67
The Merger............................................. 67
Merger Consideration................................... 68
Conversion of NCE Common Shares........................ 68
Representations and Warranties......................... 69
Conduct of Business Pending the Merger................. 70
No Solicitation........................................ 71
Workforce and Employee Benefit Matters................. 72
Treatment of Incentive, Stock and Other Plans.......... 73
Insurance and Indemnification.......................... 73
Amendment of Articles of Incorporation................. 74
Conditions to the Merger............................... 74
Termination............................................ 75
Expenses............................................... 78
Amendment and Waiver................................... 78
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL
INFORMATION............................................... 79
SECURITY OWNERSHIP OF MANAGEMENT............................ 85
New Century Energies................................... 85
Northern States Power.................................. 86
</TABLE>
ii
<PAGE> 6
<TABLE>
<CAPTION>
PAGE
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<S> <C>
DESCRIPTION OF NORTHERN STATES POWER COMMON SHARES.......... 87
COMPARATIVE RIGHTS OF NEW CENTURY ENERGIES SHAREHOLDERS AND
NORTHERN STATES POWER SHAREHOLDERS........................ 90
Business Combinations.................................. 90
State Takeover Legislation............................. 90
Rights of Dissenting Shareholders...................... 92
Amendments to Charters................................. 92
Amendments to Bylaws................................... 93
Shareholder Action..................................... 93
Shareholder Proposals.................................. 93
Special Meetings of Shareholders....................... 94
Cumulative Voting...................................... 94
Number and Election of Directors....................... 94
Removal of Directors................................... 95
Indemnification of Directors and Officers.............. 95
Limitation of Personal Liability of Directors.......... 96
Shareholder Rights Plans............................... 96
CERTAIN ANTITAKEOVER EFFECTS OF CERTAIN CHARTER AND BYLAWS
PROVISIONS................................................ 98
General................................................ 98
Classified Board of Directors.......................... 99
Advance Notice Provisions for Shareholder Proposals.... 99
Preferred Stock........................................ 99
Common Stock........................................... 100
Antitakeover Legislation............................... 100
LEGAL OPINIONS.............................................. 101
EXPERTS..................................................... 101
SHAREHOLDER PROPOSALS FOR THE 2000 NORTHERN STATES POWER
ANNUAL MEETING AND THE 2000 NEW CENTURY ENERGIES ANNUAL
MEETING................................................... 101
WHERE YOU CAN FIND MORE INFORMATION......................... 102
LIST OF DEFINED TERMS....................................... 104
</TABLE>
APPENDICES
<TABLE>
<S> <C> <C>
Appendix A Agreement and Plan of Merger................................ A-1
Appendix B Opinion of SG Barr Devlin................................... B-1
Appendix C Opinion of The Blackstone Group L.P. ....................... C-1
Appendix D Sections 302A.471 and 302A.473 of the Minnesota Business
Corporation Act............................................. D-1
</TABLE>
iii
<PAGE> 7
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q. WHAT IS THE PROPOSED TRANSACTION?
A. New Century Energies and Northern States Power will combine in a merger of
equals to create a combined company which will be named . We
expect to accomplish this merger of equals and the creation of the combined
company by moving Northern States Power's utility assets to a new
subsidiary and then by merging New Century Energies and Northern States
Power. For regulatory reasons, Northern States Power will be the surviving
corporate entity in the merger and will be a holding company for the
combined assets and operations of Northern States Power and New Century
Energies. In this joint proxy statement/prospectus, we refer to the holding
company after the merger and the reorganization of Northern States Power's
utility assets as the "combined company."
Q. WHAT WILL I RECEIVE IN THE MERGER?
A. You will be a holder of common stock of the combined company after the
merger.
- Each holder of New Century Energies common shares will own 1.55 common
shares in the combined company for each common share of New Century
Energies owned at the time of the merger.
- If you own Northern States Power common shares or preferred shares, your
shares will remain outstanding after the merger on a one-for-one basis as
common shares and preferred shares of the combined company.
After the merger, the holders of New Century Energies common shares will
own approximately 54% of the common shares of the combined company and the
holders of Northern States Power common shares will own approximately 46%
of the common shares of the combined company.
Q. HOW WILL THE MERGER AFFECT MY STOCK DIVIDENDS?
A. The dividend payment level of the combined company after the merger will be
determined by the board of directors of the combined company. We anticipate
that the combined company will adopt an initial dividend policy which:
- will maintain a dividend level equivalent to the current dividend for New
Century Energies shareholders after giving effect to the conversion ratio
of 1.55 common shares of the combined company for each New Century
Energies common share, and
- would represent a slight dividend increase for Northern States Power
shareholders from the current dividend.
Q. WHAT DO I NEED TO DO TO GET MY SHARES OF THE COMBINED COMPANY?
A. After the merger is completed, we will send New Century Energies
shareholders written instructions for exchanging their shares for shares of
the combined company. If you hold New Century Energies shares in
certificate form, you should not send in your share certificates now.
Northern States Power shareholders will not be required to exchange their
share certificates. These certificates will continue to represent the same
number of shares in the combined company.
Q. CAN THE VALUE OF THE TRANSACTION CHANGE BETWEEN NOW AND THE TIME THE MERGER
IS COMPLETED?
A. Yes. Both holders of New Century Energies common shares and holders of
Northern States Power common shares will own a fixed number of shares of
the combined company following the merger. At the time of the merger, the
market value of shares of the combined company
<PAGE> 8
will reflect the valuation of the combined company rather than independent
valuations of New Century Energies and Northern States Power. Therefore the
value of the combined company's common shares at the time of the merger
will reflect changes in the financial position of both New Century
Energies and Northern States Power that occur before the merger, whether
positive or negative.
Q. WHAT ARE MY TAX CONSEQUENCES AS A RESULT OF THE MERGER?
A. New Century Energies Shareholders: The merger is structured so that we may
obtain an opinion of legal counsel that you will not recognize any gain or
loss in exchanging your New Century Energies shares for common shares of
the combined company (except with respect to cash that you receive instead
of any fractional share interest in the combined company's common shares).
Your tax basis in the common shares of the combined company received in
exchange for your New Century Energies shares will be the same as your tax
basis in your exchanged New Century Energies shares, less an amount that
you must allocate to cash that you receive instead of any fractional share
interest.
Northern States Power Shareholders: The merger will not have any tax
consequences for you unless you exercise your dissenters' rights of
appraisal.
For more detail, see page 54 of this joint proxy statement/prospectus.
Q. HOW DO I VOTE?
A. You may vote by indicating on the enclosed proxy form how you want to vote,
and signing and mailing the proxy form in the enclosed prepaid return
envelope. You may also vote by telephone or through the Internet by
following the instructions provided on the enclosed proxy form. Please vote
as soon as possible to ensure that your shares are represented at your
special meeting.
Q. WHAT VOTE IS REQUIRED TO APPROVE THE MERGER?
A. The merger must be approved by:
- A majority of the outstanding New Century Energies common shares, and
- A majority of the outstanding Northern States Power common shares and
preferred shares voting together and a majority of the outstanding
Northern States Power common shares voting as a separate class.
Q. IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A. Your broker will vote your shares only if you provide your broker
instructions on how to vote. You should follow the directions provided by
your broker regarding how to instruct your broker to vote your shares.
Without instructions, your shares will not be voted, which will have the
same effect as voting against the merger.
Q. CAN I CHANGE MY VOTE AFTER I HAVE MAILED IN MY SIGNED PROXY OR VOTED BY
TELEPHONE OR THROUGH THE INTERNET?
A. Yes. You can change your vote at any time before we vote your proxy at your
company's special meeting in one of three ways. First, you can send a
written notice stating that you would like to revoke your proxy to the
Secretary of your company at the address below. Second, you can complete a
new proxy form and send it to the Secretary of your company, and the new
proxy form will automatically replace any earlier proxy form you returned.
Third, you can attend, and vote in person at, your company's special
meeting. If you voted by telephone or through the Internet, you can also
change your vote by any of these three methods or you can revote by
following the instructions on the enclosed proxy form.
2
<PAGE> 9
Northern States Power Shareholders: you should send any written notice or
new proxy to the Secretary of Northern States Power, at the following
address: John P. Moore, Jr., Northern States Power Company, 414 Nicollet
Mall, Minneapolis, Minnesota, 55401, Tel: (612) 330-7550.
New Century Energies Shareholders: you should send any written notice or
new proxy to the Secretary of New Century Energies, at the following
address: Cathy J. Hart, New Century Energies, Inc., 1225 17th Street,
Denver, Colorado 80202, Tel: (303) 571-7511.
Q. DO I HAVE THE RIGHT TO DISSENT?
A. Northern States Power shareholders do have a right to dissent under
Minnesota law, but New Century Energies shareholders do not have a right to
dissent under Delaware law. If you are a Northern States Power shareholder
and you wish to dissent, you must strictly follow certain procedures in
order to do so. For a description of these procedures, see page 65 and
Appendix D of this joint proxy statement/prospectus.
Q. WHEN DO YOU HOPE TO COMPLETE THE MERGER?
A. We hope to complete the merger within 12 to 18 months. Numerous federal and
state regulators must approve the merger before we can complete it, and we
believe it will take about this long to obtain all of the required
regulatory approvals.
Q. WILL MY RIGHTS AS A SHAREHOLDER CHANGE AS A RESULT OF THE MERGER?
A. Currently, the rights of New Century Energies shareholders are governed by
Delaware law and New Century Energies' certificate of incorporation and
bylaws. After the merger, Minnesota law and the articles of incorporation
and bylaws of Northern States Power will continue as the articles of
incorporation and bylaws of the combined company. These organizational
documents will govern the rights of shareholders of the combined company.
For a summary of material differences between the rights of New Century
Energies shareholders and the rights they will have as shareholders of the
combined company, see page 90 of this joint proxy statement/ prospectus.
The rights of shareholders of Northern States Power will remain unchanged
after the merger, except that the combined company will be authorized to
issue an additional 650 million common shares as a result of an amendment
to the combined company's articles of incorporation when the merger occurs.
Q. WHERE CAN I FIND MORE INFORMATION ABOUT NORTHERN STATES POWER AND NEW
CENTURY ENERGIES?
A. You can find more information about Northern States Power and New Century
Energies from various sources described under "WHERE YOU CAN FIND MORE
INFORMATION" on page 102 of this joint proxy statement/prospectus.
3
<PAGE> 10
WHO CAN ANSWER YOUR QUESTIONS?
If you have additional questions, you should contact:
NORTHERN STATES POWER SHAREHOLDERS:
Northern States Power Company
414 Nicollet Mall
Minneapolis, Minnesota 55401
Attention: Fred Eiselein, Shareholder Services Manager
Telephone Number: (612) 330-6959
NEW CENTURY ENERGIES SHAREHOLDERS:
New Century Energies, Inc.
1225 17th Street
Denver, Colorado 80202
Attention: Dianne Perry,
Shareholder Services Analyst
Telephone Number: (303) 294-2566
------------------------------
If you would like additional copies of this
joint proxy statement/prospectus, or if you
have questions about the merger, you may also contact:
NORTHERN STATES POWER SHAREHOLDERS:
Georgeson & Company Inc.
Wall Street Plaza
New York, New York 10005
Banks and Brokers call collect (212) 440-9800
Call Toll Free: 1-800-223-2064
NEW CENTURY ENERGIES SHAREHOLDERS:
Innisfree M&A Incorporated
501 Madison Avenue
20th Floor
New York, New York 10022
Banks and Brokers call collect (212) 750-5833
Call Toll Free: 1-877-750-5836
4
<PAGE> 11
SUMMARY
This summary highlights selected information from this joint proxy
statement/prospectus and may not contain all of the information that is
important to you. To understand the merger fully and for a more complete
description of the legal terms of the merger, you should read carefully this
entire joint proxy statement/prospectus and the documents to which we have
referred you. See "WHERE YOU CAN FIND MORE INFORMATION" on page 102 of this
joint proxy statement/prospectus. Each item in this summary includes a page
reference directing you to a more complete description of that item.
THE COMPANIES
NEW CENTURY ENERGIES, INC. (SEE PAGE 22)
1225 17th Street
Denver, Colorado 80202
Tel: (303) 571-7511
New Century Energies is a public utility holding company which, through its
utility subsidiaries, engages in the generation, purchase, transmission,
distribution and sale of electricity and in the purchase, transportation,
distribution and sale of natural gas. In addition, New Century Energies has
investments in a number of diversified energy related businesses.
New Century Energies serves approximately 1.6 million electricity customers
and more than a million natural gas customers in Colorado, Texas, New Mexico,
Wyoming, Kansas and Oklahoma. New Century Energies has four utility
subsidiaries: Public Service Company of Colorado, Southwestern Public Service
Company, Cheyenne Light, Fuel & Power Company and WestGas Interstate. New
Century Energies' wholly owned subsidiary, New Century International, owns a 50%
interest in Yorkshire Power Group in the United Kingdom. Other wholly owned
subsidiaries include Utility Engineering Corporation, which provides
engineering, design, construction, management and other related services to
utilities; Quixx Corporation, which invests in and develops cogeneration and
other energy related projects; The Planergy Group, which provides energy
management, consulting and demand-side management services; e prime, inc., which
is a commodity marketing affiliate engaged in gas and electricity brokering,
marketing and trading; and New Century Cadence, which, through a partnership,
provides national chain accounts with energy management and information
services. Internet users can obtain information about New Century Energies and
its services at http://www.ncenergies.com
NORTHERN STATES POWER COMPANY (SEE PAGE 23)
414 Nicollet Mall
Minneapolis, Minnesota 55401
Tel: (612) 330-5500
Northern States Power is predominantly an operating public utility which,
through several utility companies, is engaged in the generation, transmission
and distribution of electricity and in the transportation, storage and
distribution of natural gas. In addition, Northern States Power owns, operates
and has investments in many energy related nonregulated businesses throughout
the world.
Northern States Power provides electricity to about 1.5 million customers
in portions of Minnesota, Wisconsin, North Dakota, Michigan and South Dakota. It
distributes natural gas to more than 475,000 customers in Minnesota, Wisconsin,
North Dakota, Michigan and Arizona. Northern States Power has three utility
companies: Northern States Power Company-Minnesota, Northern States Power
Company-Wisconsin, and Viking Gas Transmission Company. Other wholly owned
subsidiaries include: NRG Energy, which operates and has ownership interests in
nonregulated energy
5
<PAGE> 12
businesses around the world, with major projects in the United States, Germany
and Australia; Energy Masters International, an energy services company; Seren
Innovations, which builds communication networks to deliver telephone, cable TV
and high-speed Internet and data services; and Eloigne Company, which has
interests in affordable housing projects. Internet users can obtain information
about Northern States Power and its services at http://www.nspco.com
THE NEW CENTURY ENERGIES SPECIAL MEETING (SEE PAGE 25)
The special meeting of New Century Energies shareholders will be held at
, on , 1999, at a.m., local
time.
At the special meeting, New Century Energies shareholders will be asked to
vote on a proposal to approve the merger agreement between Northern States Power
and New Century Energies and the merger of Northern States Power and New Century
Energies described in the merger agreement. Approval of the merger agreement and
the merger requires the favorable vote of a majority of the outstanding New
Century Energies common shares.
You can vote at the special meeting of New Century Energies shareholders if
you owned New Century Energies common shares at the close of business on the
record date, , 1999. As of , 1999, directors and
executive officers of New Century Energies and their affiliates beneficially
owned approximately % of the outstanding New Century Energies common shares.
If you do not vote your shares, the effect will be a vote against the
merger agreement and the merger.
THE NORTHERN STATES POWER SPECIAL MEETING (SEE PAGE 27)
The special meeting of Northern States Power shareholders will be held at
, on , 1999, at a.m., local
time.
At the special meeting, Northern States Power shareholders will be asked to
vote on a proposal to approve the merger agreement between Northern States Power
and New Century Energies and the merger of Northern States Power and New Century
Energies described in the merger agreement. Approval of the merger agreement and
the merger requires:
- the favorable vote of shares representing a majority of the votes
eligible to be cast by holders of outstanding Northern States Power
common shares and Northern States Power preferred shares, voting
together; and
- the favorable vote of a majority of the outstanding Northern States Power
common shares, voting as a separate class.
You can vote at the special meeting of Northern States Power shareholders
if you owned Northern States Power common shares or preferred shares at the
close of business on the record date, , 1999. As of ,
1999, directors and executive officers of Northern States Power and their
affiliates beneficially owned shares representing approximately % of the
votes entitled to be cast by holders of outstanding Northern States Power common
shares and preferred shares, and approximately % of the outstanding Northern
States Power common shares.
If you do not vote your shares, the effect will be a vote against the
merger agreement and the merger.
6
<PAGE> 13
CHARTER AMENDMENTS (SEE PAGE 53)
When we complete the merger, Northern States Power's articles of
incorporation, which will be the articles of incorporation of the combined
company, will be amended:
- to change the combined company's name to ; and
- to increase the number of authorized common shares of the combined
company from 350 million to one billion.
These amendments do not require a separate vote by shareholders of Northern
States Power under Minnesota law because they are an integral part of the merger
agreement. Thus, by voting to approve the merger agreement and the merger,
Northern States Power shareholders are also voting to approve the amendments
described above.
THE MERGER AND THE MERGER AGREEMENT (SEE PAGES 30 AND 67)
Northern States Power and New Century Energies will combine in a merger of
equals to create a combined company which will be named . The merger
agreement is the legal document that governs the merger. The merger agreement is
attached as Appendix A to this joint proxy statement/prospectus, and we
encourage you to read it carefully.
OUR REASONS FOR THE MERGER
NEW CENTURY ENERGIES (SEE PAGE 35):
The New Century Energies Board of Directors believes that the merger will
provide opportunities to achieve benefits for its shareholders and customers
that would not be available in the absence of a business combination with
Northern States Power. The complementary combination of New Century Energies'
growing core utility business with Northern States Power's sizable, non-
regulated business activities, primarily NRG Energy, provides a foundation for
incremental growth that New Century Energies believes could not be achieved on a
stand-alone basis. The New Century Energies Board believes that the common
vision shared by both companies, in combination with New Century Energies' and
Northern States Power's management, personnel, technical expertise and financial
strength, will create a combined company with the capabilities and resources
required to succeed and grow in the new competitive energy marketplace.
NORTHERN STATES POWER (SEE PAGE 37):
The Northern States Power Board of Directors believes that the merger will
provide the combined company a strong platform for assuring low-cost, quality
services during a time of rapid change in the utility industry and the financial
strength and stability to make planned investments to grow the company's
regulated and nonregulated businesses. The Board further believes that the
combined company will integrate two strong companies with similar demographics
within a single region, creating more growth in shareholder value than Northern
States Power would realize as a stand-alone company.
OUR RECOMMENDATIONS TO SHAREHOLDERS
NEW CENTURY ENERGIES (SEE PAGE 36):
All of the members of the board of directors of New Century Energies
recommend that shareholders vote "FOR" the proposal to approve the merger
agreement and the merger.
7
<PAGE> 14
NORTHERN STATES POWER (SEE PAGE 38):
All of the members of the board of directors of Northern States Power
recommend that shareholders vote "FOR" the proposal to approve the merger
agreement and the merger.
FAIRNESS OPINIONS
NEW CENTURY ENERGIES (SEE PAGE 40):
New Century Energies' financial advisor, SG Barr Devlin, has given a
written opinion to New Century Energies' Board of Directors that, as of March
24, 1999, the conversion ratio was fair to the holders of New Century Energies
common shares from a financial point of view. This opinion is not a
recommendation to any New Century Energies shareholder as to how to vote. We
have attached a copy of SG Barr Devlin's opinion as Appendix B to this joint
proxy statement/prospectus. New Century Energies shareholders should read this
opinion in its entirety to fully understand it.
NORTHERN STATES POWER (SEE PAGE 45):
Northern States Power's financial advisor, The Blackstone Group L.P., has
given a written opinion to Northern States Power's Board of Directors that, as
of March 24, 1999, the conversion ratio was fair to the holders of Northern
States Power common shares from a financial point of view. This opinion is not a
recommendation to any Northern States Power shareholder as to how to vote.
Blackstone's opinion was based on and subject to factors and assumptions
described in the written opinion. We have attached a copy of Blackstone's
opinion as Appendix C to this joint proxy statement/prospectus. Northern States
Power shareholders should read this opinion in its entirety to fully understand
it.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES (SEE PAGE 54)
It is a condition to the merger that New Century Energies and Northern
States Power each receive a tax opinion that the merger qualifies as a
reorganization within the meaning of Section 368(a) of the Internal Revenue Code
of 1986. In a reorganization, for U.S. federal income tax purposes, New Century
Energies shareholders who exchange their New Century Energies common shares
solely for common shares of the combined company in the merger generally will
recognize no gain or loss (except with respect to cash received instead of any
fractional share interest in the combined company's common shares). The merger
will not have any tax consequences to Northern States Power shareholders who do
not exercise dissenters' rights.
Because of the complexity of the tax laws and the individual nature of the
tax consequences of the merger, we recommend that you consult a tax advisor
concerning the applicable U.S. federal, state and local income tax consequences
of the merger.
BOARD OF DIRECTORS, MANAGEMENT AND HEADQUARTERS OF THE COMBINED COMPANY AFTER
THE MERGER (SEE PAGE 54)
When we complete the merger, the number of directors on the combined
company's board of directors will be an even number, up to 14 directors.
Northern States Power will designate half of the combined company's directors
from Northern States Power's then-existing board of directors and New Centuries
Energies will designate the other half of the combined company's directors from
New Century Energies' then-existing board of directors. James J. Howard, who is
currently Northern States Power's Chairman, President and Chief Executive
Officer, will remain an employee and Chairman of the Board of the combined
company until the first anniversary of the merger. Wayne H.
8
<PAGE> 15
Brunetti, who is currently New Century Energies' President, Chief Operating
Officer and Vice Chairman of the New Century Energies Board, will become
President and Chief Executive Officer of the combined company at the time of the
merger and will succeed Mr. Howard as Chairman of the Board of Directors of the
combined company after the first anniversary of the merger. Mr. Brunetti will
also become a director of the combined company at the time of the merger, as one
of New Century Energies' designees. After the merger, the combined company will
be headquartered in Minneapolis, Minnesota and will maintain significant
operating offices in Denver, Colorado and Amarillo, Texas.
INTERESTS OF DIRECTORS AND OFFICERS IN THE MERGER (SEE PAGE 61)
Certain members of New Century Energies management and Northern States
Power management and of the New Century Energies Board of Directors and the
Northern States Power Board of Directors have interests in the merger that may
conflict with those of the other shareholders of the companies. The New Century
Energies Board of Directors and the Northern States Power Board of Directors
were aware of these interests and considered them when they approved the merger
agreement and the merger.
ACCOUNTING TREATMENT (SEE PAGE 56)
We expect the merger to qualify as a "pooling of interests" for accounting
purposes. Under this method of accounting, the assets and liabilities of New
Century Energies and Northern States Power will be combined based on their
carrying values in the historical financial statements of each company. The
results of operations of the combined company will include the income of New
Century Energies and Northern States Power for the entire fiscal period in which
the merger occurs, and the historical results of operations of the separate
companies for fiscal years before the merger will be combined and reported as
the results of operations of the combined company. We are not required to
complete the merger unless we each receive a letter from our auditors confirming
the availability of pooling of interests accounting treatment for the merger.
REGULATORY APPROVALS (SEE PAGE 56)
In order to complete the merger, we must receive approvals from and/or make
certain filings with various U.S. federal and state governmental agencies.
NORTHERN STATES POWER RESTRUCTURING (SEE PAGE 30)
We expect that just before or at the time we complete the merger, Northern
States Power will contribute all of its assets, other than shares that it owns
in subsidiaries, to a newly formed wholly owned subsidiary. At the same time,
the new subsidiary will assume all of Northern States Power's liabilities
associated with the assets that it receives in the contribution. We plan to take
these actions to separate our utility businesses from our nonutility businesses
and to streamline the regulatory treatment of the combined company under the
Public Utility Holding Company Act of 1935. We refer to this new Northern States
Power subsidiary as NEW NSP UTILITY SUB in this joint proxy
statement/prospectus. The merger agreement requires Northern States Power to
take these actions unless doing so would materially adversely affect Northern
States Power. If this is the case, Northern States Power and New Century
Energies will negotiate a mutually acceptable alternative to this restructuring
of Northern States Power's utility assets.
9
<PAGE> 16
COMPLETION OF THE MERGER (SEE PAGE 74)
Before we can complete the merger, we must satisfy a number of conditions.
These include:
- Northern States Power shareholders and New Century Energies shareholders
approving the merger agreement and the merger;
- obtaining the final approval of the Securities and Exchange Commission,
the Federal Energy Regulatory Commission, the Nuclear Regulatory
Commission and state utility regulators on terms that would not be
reasonably likely to have a material adverse effect on New Century
Energies or Northern States Power;
- obtaining other regulatory approvals that, if not obtained, would have a
material adverse effect on New Century Energies or Northern States Power,
on terms that would not be reasonably likely to have a material adverse
effect on Northern States Power or New Century Energies;
- obtaining all third-party consents that, if not obtained, would have a
material adverse effect on New Century Energies or Northern States Power;
and
- the absence of any event, development or change of circumstance which
would be likely to have a material adverse effect on Northern States
Power or New Century Energies.
The merger will occur as soon as practicable after we satisfy all of the
conditions in the merger agreement.
TERMINATION AND TERMINATION FEES (SEE PAGE 75)
The companies may agree in writing to terminate the merger agreement at any
time without completing the merger, even if shareholders of both companies have
approved it.
In addition, the merger agreement may be terminated:
- by either company, if the merger is not completed by March 24, 2000.
However, we will not be permitted to terminate the merger agreement under
this provision until December 24, 2000, if on March 24, 2000, all
conditions to the merger other than obtaining regulatory approvals have
been satisfied or can be satisfied;
- by either company, if either the New Century Energies shareholders or the
Northern States Power shareholders do not approve the merger agreement
and the merger;
- by New Century Energies (at any time before its shareholders approve the
merger agreement and the merger), if the New Century Energies Board of
Directors determines to accept a transaction with another entity after
having reasonably concluded that the alternative transaction is more
favorable to New Century Energies shareholders than the merger and that
the entity proposing the transaction can adequately finance the
transaction, and having determined that its fiduciary duties require the
board to reconsider its commitment to Northern States Power;
- by Northern States Power (at any time before its shareholders approve the
merger agreement and the merger), if the Northern States Power Board of
Directors determines to accept a transaction with another entity after
having reasonably concluded that the alternative transaction is more
favorable to Northern States Power shareholders than the merger and that
the entity proposing the transaction can adequately finance the
transaction, and having determined that its fiduciary duties require the
board to reconsider its commitment to New Century Energies;
10
<PAGE> 17
- by New Century Energies, if the Northern States Power Board of Directors
withdraws or adversely modifies its recommendation of the merger to
Northern States Power shareholders, does not reaffirm its recommendation
after New Century Energies requests it to do so, or approves or
recommends an alternative transaction; or
- by Northern States Power, if the New Century Energies Board of Directors
withdraws or adversely modifies its recommendation of the merger to New
Century Energies shareholders, does not reaffirm its recommendation after
Northern States Power requests it to do so, or approves or recommends an
alternative transaction.
The merger agreement provides for the payment of termination fees and
expenses in certain cases. For example, if the merger agreement is terminated
under specified circumstances involving an alternative transaction for New
Century Energies, New Century Energies must pay Northern States Power a
termination fee of $150 million and reimburse Northern States Power for up to
$25 million of out-of-pocket expenses. Similarly, if the merger agreement is
terminated under specified circumstances involving an alternative transaction
for Northern States Power, Northern States Power must pay New Century Energies a
termination fee of $150 million and reimburse New Century Energies for up to $25
million of out-of-pocket expenses.
APPRAISAL RIGHTS FOR DISSENTING SHAREHOLDERS (SEE PAGE 65)
Northern States Power Shareholders: Under Minnesota law, Northern States
Power shareholders may dissent from the merger and have the fair value of their
shares paid to them in cash. To exercise this right, Northern States Power
shareholders must follow specified procedures. These procedures include filing
notices with Northern States Power and not voting in favor of the merger. For
more information on how to exercise these rights see "RIGHTS OF DISSENTING
NORTHERN STATES POWER SHAREHOLDERS" on page 65 and Appendix D.
We will not be able to merge if the amounts paid to dissenting shareholders
exceed the limits under the pooling of interests accounting rules.
New Century Energies shareholders: Under Delaware law, New Century Energies
shareholders will not have any appraisal or dissenters' rights.
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
New Century Energies common shares are listed on the New York Stock
Exchange under the symbol "NCE." Northern States Power common shares are listed
and primarily traded on the New York Stock Exchange under the symbol "NSP."
The following tables show the high and low sale prices and the dividends
declared for New Century Energies common shares and Northern States Power common
shares for the periods indicated. New Century Energies was formed from the
business combination of Public Service Company of Colorado and Southwestern
Public Service Company and began operations on August 1, 1997. Before that time,
it was not publicly traded and did not pay dividends. We have included share
price information for Public Service Company of Colorado and Southwestern Public
Service Company for periods before August 1, 1997. In comparing the information
below, it is important to recognize that the share conversion for the business
combination which formed New Century Energies was one share of Public Service
Company of Colorado common stock for one share of New Century Energies common
stock or 0.95 of one share of New Century Energies common stock for one share of
Southwestern Public Service Company common stock. Additionally, in connection
with the formation of New Century Energies, Public Service Company of Colorado
and Southwestern
11
<PAGE> 18
Public Service Company declared partial dividends for the interim periods
through July 31, 1997. All prices shown are as reported on the New York Stock
Exchange Composite Transaction Tape based on published financial sources. We
have adjusted the Northern States Power per share amounts to reflect a 2-for-1
stock split effected on June 1, 1998.
<TABLE>
<CAPTION>
PUBLIC SERVICE COMPANY SOUTHWESTERN PUBLIC
OF COLORADO SERVICE COMPANY
-------------------------------------- -------------------------------------
DIVIDENDS DIVIDENDS
HIGH LOW DECLARED HIGH LOW DECLARED
------------- ------------ --------- ------------ ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1996
First Quarter............. $36 1/2 $33 3/4 $0.525
Second Quarter............ 36 3/4 32 3/8 0.525
Third Quarter............. 36 7/8 34 3/4 0.525
Fourth Quarter............ 39 1/2 35 1/4 0.525
1996 -- FISCAL YEAR
First Quarter ended
November 30, 1995....... $33 7/8 $30 $0.55
Second Quarter ended
February 29, 1996....... 33 7/8 32 1/2 0.55
Third Quarter ended May
31, 1996................ 34 1/8 30 5/8 0.55
Fourth Quarter ended
August 31, 1996......... 33 3/8 30 1/4 0.55
1996 -- TRANSITION PERIOD
First Quarter ended
November 30, 1996....... 36 3/4 31 3/4 0.55
Month ended December 31,
1996.................... 35 7/8 34 3/8
1997
First Quarter............. 40 1/8 38 1/4 0.525 37 1/8 35 3/4 0.55
Second Quarter............ 41 3/4 37 3/4 0.525 39 1/2 37 3/8 0.55
Third Quarter (to August
1, 1997)................ 42 3/16 40 1/8 0.115 40 1/8 37 5/8 0.46
Third Quarter (from August
1, 1997)................
Fourth Quarter............
1998
First Quarter.............
Second Quarter............
Third Quarter.............
Fourth Quarter............
1999
First Quarter.............
Second Quarter (through
April 22, 1999).........
<CAPTION>
NEW CENTURY ENERGIES
---------------------------------------
DIVIDENDS
HIGH LOW DECLARED
------------- ------------- ---------
<S> <C> <C> <C> <C> <C>
1996
First Quarter.............
Second Quarter............
Third Quarter.............
Fourth Quarter............
1996 -- FISCAL YEAR
First Quarter ended
November 30, 1995.......
Second Quarter ended
February 29, 1996.......
Third Quarter ended May
31, 1996................
Fourth Quarter ended
August 31, 1996.........
1996 -- TRANSITION PERIOD
First Quarter ended
November 30, 1996.......
Month ended December 31,
1996....................
1997
First Quarter.............
Second Quarter............
Third Quarter (to August
1, 1997)................
Third Quarter (from August
1, 1997)................ $43 3/16 $39 $0.58
Fourth Quarter............ 49 5/8 40 1/4 0.58
1998
First Quarter............. 51 3/16 44 1/2 0.58
Second Quarter............ 50 3/4 44 5/16 0.58
Third Quarter............. 49 3/16 41 5/8 0.58
Fourth Quarter............ 52 1/4 45 1/2 0.58
1999
First Quarter............. 49 1/16 34 0.58
Second Quarter (through
April 22, 1999)......... 35 7/16 33 5/16
</TABLE>
12
<PAGE> 19
<TABLE>
<CAPTION>
NORTHERN STATES POWER
-----------------------------------------
DIVIDENDS
HIGH LOW DECLARED
-------------- -------------- ---------
<S> <C> <C> <C> <C> <C>
1996
First Quarter............................................. $26 11/16 $23 13/16 $0.3375
Second Quarter............................................ 24 13/16 22 3/4 0.3450
Third Quarter............................................. 24 7/8 22 1/4 0.3450
Fourth Quarter............................................ 24 9/16 22 3/4 0.3450
1997
First Quarter............................................. 24 9/16 22 3/4 0.3450
Second Quarter............................................ 26 22 1/4 0.3525
Third Quarter............................................. 26 15/32 24 0.3525
Fourth Quarter............................................ 29 7/16 24 7/32 0.3525
1998
First Quarter............................................. 29 25/32 26 1/2 0.3525
Second Quarter............................................ 30 7/32 27 11/32 0.3575
Third Quarter............................................. 29 3/16 25 11/16 0.3575
Fourth Quarter............................................ 30 13/16 26 3/16 0.3575
1999
First Quarter............................................. 27 15/16 23 1/16 0.3575
Second Quarter (through April 22, 1999)................... 24 1/16 22 9/16
</TABLE>
The following table presents trading information for New Century Energies
common shares and Northern States Power common shares on March 24, 1999 and
April 22, 1999. March 24, 1999 was the last full trading day before our
announcement of the signing of the merger agreement. April 22, 1999 was the last
practicable trading day for which information was available before the date of
this joint proxy statement/prospectus.
<TABLE>
<CAPTION>
NEW CENTURY ENERGIES NORTHERN POWER STATES
COMMON STOCK COMMON STOCK
----------------------------------- -----------------------------------
HIGH LOW LAST HIGH LOW LAST
---- --- ---- ---- --- ----
<S> <C> <C> <C> <C> <C> <C>
March 24, 1999......................... $38 3/4 $37 7/8 $38 11/16 $27 3/8 $25 15/16 $27 1/4
April 22, 1999......................... 34 11/16 34 34 1/16 23 13/16 23 5/16 23 9/16
</TABLE>
The market prices of the New Century Energies common shares and the
Northern States Power common shares fluctuate. These fluctuations will affect
the price of the common shares of the combined company on the date of the
merger. You should obtain current market quotations.
13
<PAGE> 20
SELECTED HISTORICAL FINANCIAL INFORMATION
NEW CENTURY ENERGIES
In the table below, we provide you with selected historical consolidated
financial data of New Century Energies. New Century Energies prepared this
information using its consolidated financial statements as of the dates
indicated and for each of the fiscal years in the five-year period ended
December 31, 1998. New Century Energies derived the consolidated income
statement data below for each of the five years ended December 31, 1998, and the
consolidated balance sheet data at December 31, 1998, 1997, 1996, 1995 and 1994,
from audited consolidated financial statements.
When you read this selected historical consolidated financial information,
you should consider reading along with it the historical consolidated financial
statements and accompanying notes that New Century Energies has included in its
Annual Report on Form 10-K for the year ended December 31, 1998. You can obtain
this report by following the instructions we provide under "WHERE YOU CAN FIND
MORE INFORMATION" on page 102 of this joint proxy statement/prospectus.
New Century Energies began operations on August 1, 1997 through the
business combination of two companies, one of which had a different fiscal year
prior to that merger. New Century Energies prepared the 1995 and 1994 selected
financial data from the combination of Public Service Company of Colorado
information as of and for the years ended December 31, 1995 and 1994 with the
Southwestern Public Service Company information as of and for the years ended
August 31, 1995 and 1994.
New Century Energies' earnings during the five years presented below were
impacted by the following items, which are discussed in New Century Energies'
Annual Report on Form 10-K for the year ended December 31, 1998. Earnings for
1997 were reduced by an extraordinary loss of $1.06 per share related to the
U.K. windfall tax. Earnings for 1997, 1996 and 1995 include expenses related to
the business combination of Public Service Company of Colorado and Southwestern
Public Service Company on August 1, 1997, which reduced earnings by
approximately $0.28 per share in 1997, $0.17 per share in 1996 and $0.05 per
share in 1995. Earnings for 1997 and 1996 include the write-off of investments
in nonregulated cogeneration projects, which reduced earnings by approximately
$0.10 per share in each year.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1998 1997 1996 1995 1994
------- ------- ------- ------- -------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenues............................. $3,611 $3,343 $3,097 $2,962 $2,910
Operating income............................... 651 629 636 617 497
Income before extraordinary item............... 342 261 272 281 256
Extraordinary item-- U.K. windfall tax......... -- (111) -- -- --
Net income..................................... 342 151 272 281 256
Per share data applicable to common stock:
Basic earnings per share -- before
extraordinary item........................ 3.06 2.50 2.64 2.77 2.54
Diluted earnings per share -- before
extraordinary item........................ 3.05 2.50 2.64 2.77 2.54
Basic earnings per share.................... 3.06 1.44 2.64 2.77 2.54
Diluted earnings per share.................. 3.05 1.44 2.64 2.77 2.54
Dividends declared.......................... 2.32 2.53(1) 2.18 2.15 2.13
</TABLE>
14
<PAGE> 21
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------
1998 1997 1996 1995 1994
------- ------- ------- ------- -------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets................................... $7,672 $7,322 $6,617 $6,261 $6,027
Total common equity............................ 2,615 2,357 2,170 2,064 1,964
Preferred stock of subsidiaries................ -- 182 182 257 258
Obligated mandatorily redeemable preferred
securities of subsidiary trusts............. 294 100 100 -- --
Long-term debt of subsidiaries (including
amounts due within one year)................ 2,344 2,245 2,050 1,855 1,704
Notes payable & commercial paper............... 524 588 299 288 340
Book value per common share.................... 22.84 21.29 20.93 20.19 19.44
</TABLE>
- -------------------------
(1) This amount includes dividends declared by Public Service Company of
Colorado and Southwestern Public Service Company for the period January 1,
1997 through July 31, 1997 including the required proration of dividends to
the date of the business combination between these two companies on August
1, 1997. The amount also includes dividends declared by New Century Energies
for the period August 1, 1997 through December 31, 1997.
15
<PAGE> 22
NORTHERN STATES POWER
In the table below, we provide you with selected historical consolidated
financial data of Northern States Power. Northern States Power prepared this
information using the consolidated financial statements of Northern States Power
as of the dates indicated and for each of the fiscal years in the five-year
period ended December 31, 1998. Northern States Power derived the consolidated
income statement data below for each of the five years ended December 31, 1998,
and the consolidated balance sheet data at December 31, 1998, 1997, 1996, 1995
and 1994, from audited consolidated financial statements.
When you read this selected historical consolidated financial information,
you should consider reading along with it the historical financial statements
and accompanying notes that Northern States Power has included in its Annual
Report on Form 10-K for the year ended December 31, 1998. You can obtain this
report by following the instructions we provide under "WHERE YOU CAN FIND MORE
INFORMATION" on page 102 of this joint proxy statement/prospectus.
Northern States Power's earnings for 1997 include a write-off of deferred
costs incurred in connection with its terminated merger with Wisconsin Energy
Corporation, which reduced earnings by approximately $0.12 per share in 1997.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------
1998 1997 1996 1995 1994
------- ------- ------- ------- -------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Utility operating revenues..................... $2,819 $2,734 $2,654 $2,569 $2,487
Utility operating income....................... 364 362 366 346 308
Net income..................................... 282 237 275 276 243
Earnings available for common shareholders..... 277 226 262 263 231
Per share data applicable to common stock:
Basic earnings per share.................... 1.84 1.61 1.91 1.96 1.73
Diluted earnings per share.................. 1.84 1.61 1.91 1.95 1.73
Dividends declared.......................... 1.425 1.403 1.373 1.343 1.313
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------
1998 1997 1996 1995 1994
------- ------- ------- ------- -------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets................................... $7,396 $7,144 $6,637 $6,229 $5,950
Common stockholders' equity.................... 2,481 2,372 2,136 2,027 1,897
Preferred stock................................ 105 200 240 240 240
Mandatorily redeemable preferred securities of
subsidiary trust............................ 200 200 -- -- --
Long-term debt................................. 1,851 1,879 1,593 1,542 1,463
Short-term debt including current maturities... 609 425 630 384 396
Book value per common share.................... 16.25 15.89 15.47 14.87 14.18
</TABLE>
16
<PAGE> 23
UNAUDITED SELECTED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
In the table below, we provide you with unaudited selected pro forma
combined condensed financial information for the combined company as if the
merger had been completed on January 1, 1996 for income statement purposes and
on December 31, 1998 for balance sheet purposes. The information is based on
adjustments to the historical consolidated financial statements of Northern
States Power and New Century Energies to give effect to the merger using the
pooling of interests method of accounting for business combinations.
It is important that when you read this unaudited selected pro forma
combined condensed financial information, you read along with it the separate
historical financial statements and accompanying notes of Northern States Power
and of New Century Energies, which are incorporated by reference in this joint
proxy statement/prospectus. See "WHERE YOU CAN FIND MORE INFORMATION" on page
102 of this joint proxy statement/prospectus. It is also important that you read
the unaudited pro forma combined condensed financial information and
accompanying discussion and notes that are included in this joint proxy
statement/prospectus under "UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL
INFORMATION" beginning on page 79. You should not rely on the unaudited combined
condensed pro forma financial information as an indication of the results of
operations or financial position that would have been achieved if the merger had
taken place earlier or of the results of operations or financial position of the
combined company after the completion of the merger.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------
1998 1997 1996
------ ------ ------
(DOLLARS IN MILLIONS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Operating revenues........................................ $6,728 $6,353 $6,086
Operating income.......................................... 1,210 1,145 1,156
Income before extraordinary item.......................... 624 499 547
Extraordinary item -- U.K. windfall tax................... -- (111) --
Net income................................................ 624 388 547
Earnings available for common shareholders................ 619 377 535
Per share data applicable to common stock:
Basic and diluted earnings per share -- before
extraordinary item.................................... $ 1.91 $ 1.61 $ 1.80
Basic and diluted earnings per share................... 1.91 1.24 1.80
Dividends declared..................................... 1.46 1.53(1) 1.39
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------
(DOLLARS IN MILLIONS, EXCEPT
PER SHARE AMOUNTS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Total assets.............................................. $15,068
Common stockholders' equity............................... 5,096
Preferred stock........................................... 105
Mandatorily redeemable preferred securities of subsidiary
trusts................................................. 494
Long-term debt............................................ 4,057
Short-term debt including current maturities.............. 1,272
Book value per common share............................... 15.44
</TABLE>
- -------------------------
(1) This amount includes dividends declared by Public Service Company of
Colorado and Southwestern Public Service Company for the period January 1,
1997 through July 31, 1997 including the required proration of dividends to
the date of the business combination between these two companies on August
1, 1997. The amount also includes dividends declared by New Century Energies
for the period August 1, 1997 through December 31, 1997.
17
<PAGE> 24
COMPARATIVE PER SHARE DATA
In the table below, we provide you with historical per share information
for Northern States Power and New Century Energies as of December 31, 1998 and
for each of the years ended December 31, 1998, 1997 and 1996. We also provide
you with unaudited pro forma per share information for the combined company,
which is comparable with Northern States Power, and unaudited pro forma
equivalent per share information for New Century Energies as of December 31,
1998 and for each of the years ended December 31, 1998, 1997 and 1996.
It is important that when you read this information, you read along with it
the financial statements and accompanying notes of Northern States Power and New
Century Energies included in the documents that are described on page 102 of
this joint proxy statement/prospectus under "WHERE YOU CAN FIND MORE
INFORMATION" and are incorporated herein by reference. You should not rely on
the unaudited pro forma financial information as an indication of the results of
operations or financial position that would have been achieved if the merger had
taken place earlier or of the results of operations or financial position of the
combined company after the merger is completed.
The New Century Energies earnings amounts below for 1997 exclude an
extraordinary loss of $1.06 per share related to the U.K. windfall tax. Pro
forma earnings per share for 1997 including this extraordinary loss, on both a
basic and diluted basis, is $1.24 for the combined company and $1.92 for New
Century Energies pro forma equivalent.
<TABLE>
<CAPTION>
NEW CENTURY
NORTHERN NEW CENTURY PRO FORMA ENERGIES
STATES POWER ENERGIES COMBINED PRO FORMA
HISTORICAL HISTORICAL COMPANY EQUIVALENT
------------ ----------- --------- -----------
<S> <C> <C> <C> <C>
Book value per common share:
December 31, 1998................ $16.25 $22.84 $15.44 $23.93
Basic earnings per common share --
before extraordinary item:
Year ended December 31, 1998..... 1.84 3.06 1.91 2.96
Year ended December 31, 1997..... 1.61 2.50 1.61 2.50
Year ended December 31, 1996..... 1.91 2.64 1.80 2.79
Diluted earnings per common share --
before extraordinary item:
Year ended December 31, 1998..... 1.84 3.05 1.91 2.96
Year ended December 31, 1997..... 1.61 2.50 1.61 2.50
Year ended December 31, 1996..... 1.91 2.64 1.80 2.79
Dividends declared per common share:
Year ended December 31, 1998..... 1.425 2.32 1.46 2.26
Year ended December 31, 1997..... 1.403 2.53(1) 1.53(1) 2.37(1)
Year ended December 31, 1996..... 1.373 2.18 1.39 2.15
</TABLE>
- -------------------------
(1) This amount includes dividends declared by Public Service Company of
Colorado and Southwestern Public Service Company for the period January 1,
1997 through July 31, 1997 including the required proration of dividends to
the date of the business combination between these two companies on August
1, 1997. The amount also includes dividends declared by New Century Energies
for the period August 1, 1997 through December 31, 1997.
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<PAGE> 25
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This joint proxy statement/prospectus contains certain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 with respect to the financial condition, results of operations, cash flows,
dividends, financing plans, business strategies, operating efficiencies or
synergies, budgets, capital and other expenditures, competitive positions,
growth opportunities for existing products, benefits from new technology, plans
and objectives of management, markets for stock of Northern States Power and New
Century Energies and other matters. Statements in this document that are not
historical facts are hereby identified as "forward-looking statements" for the
purpose of the safe harbor provided by Section 21E of the Securities Exchange
Act of 1934 and Section 27A of the Securities Act of 1933. Such forward-looking
statements, including, without limitation, those relating to the future business
prospects, revenues, working capital, liquidity, capital needs, interest costs
and income, in each case relating to Northern States Power and New Century
Energies, wherever they occur in this joint proxy statement/prospectus, are
necessarily estimates reflecting the best judgment of the senior managements of
Northern States Power and New Century Energies and involve a number of risks and
uncertainties that could cause actual results to differ materially from those
suggested by the forward-looking statements. Such forward-looking statements
should, therefore, be considered in light of various important factors,
including those set forth in this joint proxy statement/prospectus. Important
factors that could cause actual results to differ materially from estimates or
projections contained in the forward-looking statements include without
limitation:
- the effects of vigorous competition in the utility industry, including:
industry restructuring initiatives, transmission system operation and/or
administration initiatives, recovery of investments made under
traditional regulation, nature of competitors entering the industry,
retail wheeling, a new pricing structure, and former customers entering
the generation market;
- economic conditions, including inflation rates and monetary fluctuations;
- trade, monetary, fiscal, taxation and environmental policies of
governments, agencies and similar organizations in geographic areas where
Northern States Power or New Century Energies has a financial interest;
- customer business conditions, including demand for their products or
services and supply of labor and materials used in creating their
products and services;
- financial or regulatory accounting principles or policies imposed by the
Financial Accounting Standards Board, the Securities and Exchange
Commission, the Federal Energy Regulatory Commission and similar agencies
with regulatory oversight;
- factors affecting utility and nonutility operations such as unusual
weather conditions, catastrophic weather-related damage, unscheduled
generation outages, maintenance or repairs, unanticipated changes to
fossil fuel, nuclear fuel or gas supply costs or availability due to
higher demand, shortages, transportation problems or other developments,
nuclear or environmental incidents, or electric transmission or gas
pipeline system constraints;
- employee workforce factors, including loss or retirement of key
executives, collective bargaining agreements with union employees, or
work stoppages;
- rate-setting policies or procedures of regulatory entities, including
environmental externalities, which are values established by regulators
assigning environmental costs to each method of electricity generation
when evaluating generation resource options;
- nuclear regulatory policies and procedures, including operating
regulations and spent nuclear fuel storage;
- cost and other effects of legal and administrative proceedings,
settlements, investigations and claims;
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<PAGE> 26
- technological developments resulting in competitive disadvantages and
creating the potential for impairment of existing assets;
- factors associated with nonregulated investments, including conditions of
final legal closing, foreign government actions, foreign economic and
currency risks, political instability in foreign countries, partnership
actions, competition, operating risks, dependence on certain suppliers
and customers, and domestic and foreign environmental and energy
regulations;
- most of the current project investments made by Northern States Power's
subsidiary NRG, Energy consist of minority interests, and a substantial
portion of future investments may take the form of minority interests,
which limits NRG Energy's ability to control the development or operation
of the project;
- unexpected costs or difficulties related to the integration of New
Century Energies' and Northern States Power's businesses;
- regulatory delays or conditions imposed by regulatory bodies in approving
the merger;
- adverse regulatory treatment, including requirements for rate reductions
or allocations to customers of merger cost savings in excess of what
management had anticipated;
- ability to obtain anticipated merger cost savings;
- unexpectedly difficult or expensive but necessary technological changes
(including changes to address "Year 2000" data systems issues), resulting
in business disruption, operational problems, financial loss, legal
liability and similar risks; and
- adverse changes in the securities markets.
The words "estimate," "project," "intend," "expect," "believe" and similar
expressions are intended to identify forward-looking statements. These
forward-looking statements are found at various places throughout this joint
proxy statement/prospectus and the other documents incorporated herein by
reference, including, but not limited to, the December 31, 1998 Annual Report on
Form 10-K of Northern States Power (including any amendments thereto) and the
December 31, 1998 Annual Report on Form 10-K of New Century Energies (including
any amendments thereto). Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date thereof.
Neither Northern States Power nor New Century Energies undertakes any obligation
to publicly release any revisions to these forward-looking statements to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
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<PAGE> 27
RISK FACTORS
In addition to the other information included and incorporated by reference
in this joint proxy statement/prospectus, you should carefully read and consider
the following factors in evaluating the proposals to be voted on at your
company's shareholder meeting.
TRANSACTION RISKS
WE MAY NOT BE ABLE TO OBTAIN REQUIRED REGULATORY APPROVALS ON SATISFACTORY
TERMS.
Before we can complete the merger, we must receive final approvals from a
number of state utility regulators under applicable state laws, the SEC under
the Public Utility Holding Company Act of 1935, the Federal Energy Regulatory
Commission under the Federal Power Act, and the Nuclear Regulatory Commission
under the Atomic Energy Act. Our merger involves facts not present in
transactions previously approved by the SEC under the Public Utility Holding
Company Act. Obtaining these regulatory approvals could delay the merger for a
significant period of time after the New Century Energies and Northern States
Power shareholders have approved the merger agreement and the merger at the
special meetings. We can not assure you that we will obtain these and other
regulatory approvals, or if we obtain them, whether the terms and conditions of
the approvals will be satisfactory. We also can not give any assurance on
whether intervenors will appeal final orders approving the merger to the
appropriate courts, which can further delay the merger.
We are obligated to use our "reasonable efforts" to obtain all necessary
governmental authorizations for the merger. However, we do not have to complete
the merger if the regulators impose conditions that would be reasonably likely
to materially adversely affect either company. See "REGULATORY APPROVALS" on
page 56 for a more complete discussion of the regulatory approvals required for
the merger.
OPERATIONAL RISKS
WE CANNOT ASSURE YOU THAT OUR TWO COMPANIES WILL BE SUCCESSFULLY INTEGRATED
INTO A SINGLE ENTITY.
After the merger we will need to integrate two large companies. Failure to
successfully integrate our operations may have a material adverse effect on our
business, financial condition or results of operations. Integrating two
companies like New Century Energies and Northern States Power involves a number
of risks, including:
- the diversion of management's attention away from ongoing operations;
- difficulties in the combining of operations and systems;
- difficulties in the assimilation and retention of employees;
- challenges in keeping customers; and
- potential adverse short-term effects on operating results.
Among the factors considered by the boards of directors of each company in
approving the merger agreement were the opportunities for economies of scale and
scope and operating efficiencies that could result from the merger. We have
estimated that the combined company will achieve $1.1 billion of net savings in
operating costs in the first ten years following the merger, however we may not
be able to achieve these cost savings and other size-related benefits because of
difficulties in integrating operations.
OUR NONREGULATED BUSINESSES ARE INHERENTLY RISKIER THAN OUR TRADITIONAL
UTILITY BUSINESSES.
We expect the combined company's nonregulated businesses will contribute a
greater proportion of the combined company's earnings than New Century Energies'
nonregulated businesses currently
21
<PAGE> 28
contribute to its earnings. Nonregulated operations generally carry a higher
level of risk than our regulated utility businesses. As a result, we expect the
operating results of these businesses to exhibit more variability than our
regulated utility businesses. Our nonregulated businesses face relatively higher
project investment and international operational risks than our utility
businesses.
The operation of independent power generation facilities involves many
risks, including the breakdown or failure of generation equipment or other
equipment or processes, labor disputes, fuel interruption and operating
performance below expected levels. Operation below expected capacity levels may
result in lost revenues or increased expenses, including higher maintenance
costs and penalties. This could trigger default provisions in the project
subsidiary's or project affiliate's financing agreements, which might allow the
affected lenders to accelerate that debt.
Independent power generation facilities typically rely on a single supplier
for each of fuel, water and other services required for operation of the
facility and on a single customer or a few customers to purchase all of the
facility's output. These arrangements are made under long-term agreements that
provide the support for any project debt used to finance the facilities. The
facility's financial results could be materially adversely affected if any one
customer or supplier fails to fulfill its contractual obligations. As a result,
the financial performance of this type of facility is dependent on the continued
performance by customers and suppliers of their obligations under their
long-term agreements and, in particular, on the credit quality of the project's
customers.
Most of our current project investments are minority interests in project
affiliates. This means that we beneficially own 50% or less of the ownership
interests. Future investments in projects also may take the form of minority
interests. As a result, our ability to control the development, construction,
acquisition or operation of this type of project may be limited.
The economic and political conditions in some countries where Northern
States Power has interests or where we may explore development or acquisition
opportunities present risks of construction delays and interruption of business,
as well as risks of war, expropriation, nationalization, renegotiation or
nullification of existing contracts and changes in law or tax policy, that are
greater than in the United States. The uncertain legal environment in some
foreign countries where we develop or acquire projects could make it more
difficult for us to obtain non-recourse project financing on satisfactory terms
and could make it more difficult for us to enforce our rights under agreements
relating to these projects.
Operations in foreign countries also present currency exchange, inflation,
convertibility, and repatriation risk. Economic and monetary conditions and
other factors could make it more difficult for us to convert our earnings to
United States dollars or other hard currencies or to move funds offshore from
some countries where we develop or acquire projects.
THE COMPANIES
For your convenience, we have included on page 104 a list of certain
defined terms used in this joint proxy statement/prospectus.
NEW CENTURY ENERGIES
New Century Energies is a public utility holding company which, through its
utility subsidiaries, is principally engaged in the generation, purchase,
transmission, distribution and sale of electricity and in the purchase,
transportation, distribution and sale of natural gas. In addition, New Century
Energies has investments in a number of diversified energy related businesses.
22
<PAGE> 29
Utility Operations
New Century Energies has four utility subsidiaries:
- Public Service Company of Colorado ("PSCO.") provides electric service
for approximately 1.2 million customers and gas service for approximately
1.0 million customers in Colorado.
- Southwestern Public Service Company ("SPS") provides electric utility
service for approximately 385,000 customers in portions of Texas, New
Mexico, Oklahoma and Kansas.
- Cheyenne Light, Fuel & Power provides electric and gas service for
approximately 35,000 electric customers and 28,000 gas customers
primarily in Cheyenne, Wyoming.
- WestGas InterState transports natural gas via a connecting pipeline
between Colorado and Wyoming.
International Operations
Through its wholly owned subsidiary, New Century International, New Century
Energies owns a 50% interest in Yorkshire Power Group, which owns a United
Kingdom regional electricity company whose main businesses are the distribution
and supply of electricity to approximately 2 million electric customers and of
gas to approximately 400,000 gas customers.
Non-Utility Operations
New Century Energies invests in and provides a variety of energy related
services through its nonregulated subsidiaries, including:
- Utility Engineering Corporation provides engineering, design,
construction management and other related services to utilities.
- Quixx Corporation invests in and develops cogeneration and other energy
related projects.
- The Planergy Group provides energy management, consulting and demand-side
management services.
- e prime, inc. is a commodity marketing affiliate which engages in gas and
electricity brokering, marketing and trading and energy consulting.
- New Century Cadence, through a partnership, serves national chain account
clients by analyzing their utility bills and providing information that
enables them to minimize their utility costs.
New Century Energies was incorporated in 1995 under the laws of Delaware
and has its principal executive offices at 1225 17(th) Street, Denver, Colorado
80202 (telephone number 303-571-7511). Internet users can obtain information
about New Century Energies and its services at http://www.ncenergies.com
NORTHERN STATES POWER
Northern States Power is predominantly an operating public utility which,
through several utility companies, is engaged in the generation, transmission
and distribution of electricity throughout an approximately 49,000-square-mile
service area; and the transportation, storage and distribution of natural gas in
approximately 160 communities. In addition, Northern States Power owns, operates
and has investments in many diversified nonregulated businesses throughout the
world.
23
<PAGE> 30
Utility Operations
Northern States Power has three utility companies:
- Northern States Power Company, a Minnesota corporation ("NSP-MINNESOTA"),
provides energy service to approximately 1,240,000 retail electric
customers and 385,000 gas customers in portions of Minnesota, North
Dakota, South Dakota and Arizona.
- Northern States Power Company, a Wisconsin corporation ("NSP-WISCONSIN"),
is a wholly owned subsidiary of NSP-Minnesota which provides energy
service for approximately 220,000 retail electric customers and 83,000
gas customers in portions of Wisconsin and Michigan.
- Viking Gas Transmission Company, a wholly owned subsidiary of
NSP-Minnesota, owns and operates a 500-mile interstate natural gas
pipeline serving portions of Minnesota, Wisconsin and North Dakota.
International Operations
Through its wholly owned subsidiary NRG Energy, Northern States Power owns
various interests in a number of independent power projects and other energy
businesses around the world, including major projects in Australia, Germany and
Latin America. In the international market, NRG Energy will continue to pursue
development and acquisition opportunities in those countries in which it
believes the legal, political and economic environment is conducive to foreign
investment. Outside of the U.S., NRG Energy is currently pursuing development of
additional international energy projects in the United Kingdom, Estonia, the
Czech Republic, Turkey, Poland and further investments in Australia and Latin
America.
Non-Utility Operations
Northern States Power's nonregulated operations are comprised of a number
of diversified businesses, including the following wholly-owned subsidiaries:
- NRG Energy is primarily involved in independent power production (in the
U.S. and internationally, as discussed previously), commercial heating
and cooling, and energy-related refuse derived fuel production. The
majority of NRG Energy's energy business holdings are in the form of
less-than-majority investments in jointly owned power projects.
- Energy Masters International is primarily an energy service company.
- Seren Innovations builds communication networks to deliver telephone,
cable TV and high-speed Internet and data services.
- Eloigne Company has interests in affordable housing projects.
Northern States Power was incorporated in 1909 under the laws of Minnesota
and has its principal executive offices at 414 Nicollet Mall, Minneapolis,
Minnesota 55401 (telephone number 612-330-5500). Internet users can obtain
information about Northern States Power and its services at http://www.nspco.com
24
<PAGE> 31
THE NEW CENTURY ENERGIES SPECIAL MEETING
GENERAL
This joint proxy statement/prospectus is being furnished to New Century
Energies shareholders as part of the solicitation of proxies by the New Century
Energies Board of Directors for use at a special meeting of shareholders of New
Century Energies, to be held on , 1999, at
a.m., local time, at . This joint proxy statement/prospectus and an
enclosed proxy form are first being mailed to shareholders of New Century
Energies on or about , 1999.
At the New Century Energies special meeting, the shareholders of New
Century Energies will be asked to consider and vote upon: (1) a proposal to
approve the Agreement and Plan of Merger, dated as of March 24, 1999, between
Northern States Power and New Century Energies, including the plan of merger
contained as Exhibit A to the merger agreement, and the merger of New Century
Energies and Northern States Power contemplated thereby, and (2) any other
business that may properly come before the New Century Energies special meeting.
Each copy of this joint proxy statement/prospectus mailed to holders of
shares of common stock of New Century Energies ("NCE COMMON SHARES"), is
accompanied by a proxy form for use at the New Century Energies special meeting.
The New Century Energies Board of Directors has unanimously approved the
merger agreement and the merger, and recommends that shareholders vote FOR the
proposal to approve the merger agreement and the merger. Approval of the merger
agreement and the merger by New Century Energies shareholders is a condition to
consummation of the merger.
RECORD DATE AND VOTING
New Century Energies has fixed the close of business on , 1999
as the record date for determining which New Century Energies shareholders are
entitled to notice of and to vote at the special meeting. Only holders of record
on the record date are entitled to notice of and to vote at the special meeting.
Approval of the merger agreement and the merger requires the favorable vote
of a majority of the votes eligible to be cast at the special meeting by holders
of outstanding NCE Common Shares.
Each holder on the record date is entitled to one vote per share, which
votes may be cast in person at the special meeting, by telephone, though the
Internet or by properly executed proxy form. As of the record date, there were
outstanding and entitled to vote NCE Common Shares, which were
held by approximately holders of record. The presence, in person
or by a valid proxy, of the holders of a majority of the outstanding NCE Common
Shares entitled to vote at the special meeting is necessary to constitute a
quorum at the special meeting.
Holders of NCE Common Shares represented in person or by proxy will be
counted for the purposes of determining whether a quorum is present at the
special meeting. Broker non-votes will be treated as NCE Common Shares that are
present and entitled to vote at the special meeting for purposes of determining
whether a quorum exists and will have the same effect as votes against approval
of the merger agreement and the merger.
VOTING AND REVOCATION OF PROXIES
All NCE Common Shares that are entitled to vote and are represented at the
special meeting by valid proxies received before or at the special meeting, and
not revoked, will be voted at the special meeting in accordance with the
instructions indicated on such proxies. If no instructions are indicated
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<PAGE> 32
(other than in the case of broker non-votes), such proxies will be voted in
favor of the proposal to approve the merger agreement and the merger. With
respect to any other business that may properly come before the special meeting
and be submitted to a vote of New Century Energies shareholders, proxies
received by the New Century Energies Board of Directors will be voted in
accordance with the judgment of the designated proxy holders. Under the rules of
the New York Stock Exchange, NCE Common Shares held by a broker or nominee may
not be voted at the special meeting without instructions to do so from the
beneficial owner(s).
The New Century Energies Board does not know of any matters other than the
merger proposal that are to come before the special meeting. If any other
matters are properly presented at the special meeting for consideration,
including, among other things, consideration of a motion to adjourn the special
meeting to another time and/or place (including, without limitation, for the
purposes of soliciting additional proxies or allowing additional time for the
satisfaction of conditions to the merger), the persons named in the enclosed
proxy form and acting thereunder generally will have discretion to vote on these
matters in accordance with their judgment if so authorized by instructions given
on such proxy. Notwithstanding the foregoing, proxies voting against a specific
proposal may not be used by the persons named in the proxies to vote for
adjournment of the special meeting for the purpose of providing New Century
Energies additional time to solicit votes to approve such proposal.
Any proxy given to New Century Energies pursuant to this solicitation may
be revoked by the person giving it at any time before it is voted. Proxies may
be revoked by (1) filing with the Secretary of New Century Energies, at or
before the taking of the vote at the special meeting, a written notice of
revocation bearing a later date than the proxy, (2) duly executing a later-dated
proxy relating to the same NCE Common Shares and delivering it to the Secretary
of New Century Energies before the taking of the vote at the special meeting, or
(3) attending the special meeting and voting in person (although attendance at
the special meeting will not in and of itself constitute a revocation of a
proxy). You may also vote your shares by telephone or through the Internet by
following the instructions provided on the enclosed proxy form. If you have
voted by this method and wish to change your vote, you may follow any of the
procedures listed above, or you may vote again by telephone or through the
Internet.
Any written notice of revocation or subsequent proxy should be sent to New
Century Energies, Inc., 1225 17th Street, Denver, Colorado 80202,
Attention: Corporate Secretary, or be hand delivered to the Secretary of
New Century Energies at or before the taking of the vote at the special
meeting.
All expenses of New Century Energies' solicitation of proxies for the
special meeting will be borne by New Century Energies. In addition to
solicitation by use of the mails, proxies may be solicited from New Century
Energies shareholders by directors, officers and employees of New Century
Energies in person or by telephone, telegram or other means of communication.
These directors, officers and employees will not be additionally compensated,
but may be reimbursed for reasonable out-of-pocket expenses in connection with
the solicitation. New Century Energies has retained Innisfree M&A Incorporated,
a proxy solicitation firm, to assist it in the solicitation of proxies for the
special meeting at a cost of approximately $25,000 plus reimbursement of
reasonable out-of-pocket expenses. In addition, New Century Energies will make
arrangements with brokerage houses, custodians, nominees and fiduciaries for
forwarding of proxy solicitation materials to beneficial owners of NCE Common
Shares held of record by these brokerage houses, custodians, nominees and
fiduciaries, and New Century Energies will reimburse these brokerage houses,
custodians, nominees and fiduciaries for their reasonable expenses.
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<PAGE> 33
THE NORTHERN STATES POWER SPECIAL MEETING
GENERAL
This joint proxy statement/prospectus is being furnished to Northern States
Power shareholders as part of the solicitation of proxies by the Northern States
Power Board of Directors for use at a special meeting of shareholders of
Northern States Power, to be held on , 1999, at a.m., local
time, at . This joint proxy statement/prospectus and an enclosed
proxy form are first being mailed to shareholders of Northern States Power on or
about , 1999.
At the Northern States Power special meeting, the shareholders of Northern
States Power will be asked to consider and vote upon: (1) a proposal to approve
the merger agreement, including the plan of merger contained as Exhibit A to the
merger agreement, and the merger, and (2) any other business that may properly
come before the special meeting.
Each copy of this joint proxy statement/prospectus mailed to holders of
shares of common stock of Northern States Power ("NSP COMMON SHARES"), and
holders of shares of preferred stock of Northern States Power ("NSP PREFERRED
SHARES"), is accompanied by a proxy form for use at the Northern States Power
special meeting.
The Northern States Power Board of Directors unanimously approved the
merger agreement and the merger and recommends that shareholders vote FOR the
proposal to approve the merger agreement and the merger. Approval of the merger
agreement and the merger by Northern States Power shareholders is a condition to
consummation of the merger.
RECORD DATE AND VOTING
Northern States Power has fixed the close of business on ,
1999 as the record date for determining which Northern States Power shareholders
are entitled to notice of and to vote at the special meeting. Only holders of
record on the record date are entitled to notice of and to vote at the special
meeting.
Approval of the merger agreement and the merger requires (1) the favorable
vote of a majority of the votes eligible to be cast at the special meeting by
holders of outstanding NSP Common Shares and NSP Preferred Shares, voting
together as a single class, and (2) the favorable vote of a majority of the
votes eligible to be cast at the special meeting by holders of outstanding NSP
Common Shares, voting as a separate class.
Each NSP Common Share and each NSP Preferred Share carries one vote, except
for shares of Northern States Power Cumulative Preferred Stock $3.60 Series,
which carry three votes each. As of the record date, there were outstanding and
entitled to vote NSP Common Shares, held by approximately
holders of record, and NSP Preferred Shares (including
shares of Cumulative Preferred Stock $3.60 Series) which were held by
approximately holders of record. As of , 1999,
votes were eligible to be cast by holders of NSP Common Shares
and NSP Preferred Shares, and votes were eligible to be cast by
holders of NSP Common Shares, at the special meeting, which votes may be cast in
person at the special meeting, by telephone, through the Internet or by properly
executed proxy form. The presence, in person or by valid proxy, of the holders
of shares representing a majority of the votes entitled to be cast by the NSP
Common Shares and the NSP Preferred Shares outstanding on the record date is
necessary to constitute a quorum at the special meeting for the vote by the
holders of NSP Common Shares and NSP Preferred Shares, voting together as a
single class. The presence, in person or by valid proxy, of a majority of the
NSP Common Shares outstanding on the record date is necessary to constitute a
quorum at the special meeting for the vote by the holders of NSP Common Shares,
voting as a separate class.
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<PAGE> 34
Holders of NSP Common Shares and NSP Preferred Shares represented in person
or by proxy will be counted for the purposes of determining whether a quorum is
present at the special meeting. Broker non-votes will be treated as shares that
are present and entitled to vote at the special meeting for purposes of
determining whether a quorum exists and will have the same effect as votes
against approval of the merger agreement and the merger.
VOTING AND REVOCATION OF PROXIES
All NSP Common Shares and NSP Preferred Shares that are entitled to vote
and are represented at the special meeting by valid proxies received prior to or
at the special meeting, and not revoked, will be voted at the special meeting in
accordance with the instructions indicated on such proxies. If no instructions
are indicated (other than in the case of broker non-votes), such proxies will be
voted in favor of the proposal to approve the merger agreement and the merger.
With respect to any other business that may properly come before the special
meeting and be submitted to a vote of Northern States Power shareholders,
proxies received by the Northern States Power Board will be voted in accordance
with the judgment of the designated proxy holders. Under the rules of the New
York Stock Exchange, NSP Common Shares and NSP Preferred Shares held by a broker
or nominee may not be voted at the special meeting without instructions to do so
from the beneficial owner(s).
The Northern States Power Board does not know of any matters other than the
merger proposal that are to come before the special meeting. If any other
matters are properly presented at the special meeting for consideration,
including, among other things, consideration of a motion to adjourn the special
meeting to another time and/or place (including, without limitation, for the
purposes of soliciting additional proxies or allowing additional time for the
satisfaction of conditions to the merger), the persons named in the enclosed
proxy form and acting thereunder generally will have discretion to vote on these
matters in accordance with their judgment if so authorized by instructions given
on such proxy. Notwithstanding the foregoing, proxies voting against a specific
proposal may not be used by the persons named in the proxies to vote for
adjournment of the special meeting for the purpose of providing Northern States
Power additional time to solicit votes to approve such proposal.
Any proxy given to Northern States Power pursuant to this solicitation may
be revoked by the person giving it at any time before it is voted. Proxies may
be revoked by (1) filing with the Secretary of Northern States Power, at or
before the taking of the vote at the special meeting, a written notice of
revocation bearing a later date than the proxy, (2) duly executing a later-dated
proxy relating to the same NSP Common Shares or NSP Preferred Shares and
delivering it to the Secretary of Northern States Power before the taking of the
vote at the special meeting, or (3) attending the special meeting and voting in
person (although attendance at the special meeting will not in and of itself
constitute a revocation of a proxy). You may also vote your shares by telephone
or through the Internet by following the instructions provided on the enclosed
proxy form. If you have voted by this method and wish to change your vote, you
may follow any of the procedures listed above, or you may vote again by
telephone or through the Internet.
Any written notice of revocation or subsequent proxy should be sent to
Northern States Power Company, 414 Nicollet Mall, Minneapolis, Minnesota
55401, Attention: Corporate Secretary, or be hand delivered to the
Secretary of Northern States Power at or before the taking of the vote at
the special meeting.
All expenses of Northern States Power's solicitation of proxies for the
special meeting will be borne by Northern States Power. In addition to
solicitation by use of the mails, proxies may be solicited from Northern States
Power shareholders by directors, officers and employees of Northern States Power
in person or by telephone, telegram or other means of communication. These
directors, officers and employees will not be additionally compensated, but may
be reimbursed for reasonable out-of-pocket expenses in connection with the
solicitation. Northern States Power has retained
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Georgeson & Company, Inc., a proxy solicitation firm, to assist it in the
solicitation of proxies for the special meeting at a cost of approximately
$15,000 plus reimbursement of reasonable out-of-pocket expenses. In addition,
Northern States Power will make arrangements with brokerage houses, custodians,
nominees and fiduciaries for forwarding of proxy solicitation materials to
beneficial owners of NSP Common Shares or NSP Preferred Shares held of record by
these brokerage houses, custodians, nominees and fiduciaries, and Northern
States Power will reimburse these brokerage houses, custodians, nominees and
fiduciaries for their reasonable expenses.
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THE MERGER
We are furnishing this joint proxy statement/prospectus to you in
connection with the proposed merger between Northern States Power and New
Century Energies because you are a shareholder of either Northern States Power
or New Century Energies. If completed, the merger will be carried out as
provided in the merger agreement, a copy of which is attached as Appendix A to
this joint proxy statement/prospectus.
The merger agreement provides that the combined company will be created by
first moving Northern States Power's utility assets into a new subsidiary (which
we refer to as New NSP Utility Sub) and then merging New Century Energies into
Northern States Power, with Northern States Power as the surviving corporate
entity in the merger. The surviving corporation, which will be renamed
, will be a holding company for the combined assets and
operations of Northern States Power and New Century Energies. If difficulties
arise in obtaining the approvals and consents required to transfer Northern
States Power's utility assets to New NSP Utility Sub, we may negotiate a
mutually acceptable alternative to this restructuring of Northern States Power's
utility assets.
In the merger, each outstanding NCE Common Share will be converted into the
right to receive 1.55 shares of common stock in the combined company.
Outstanding NSP Common Shares and NSP Preferred Shares will remain outstanding
on a one-for-one basis after the merger as common and preferred shares of the
combined company.
BACKGROUND
NEW CENTURY ENERGIES
New Century Energies believes the business and regulatory environment in
the utility industry that has existed for decades has and will continue to
experience rapid change. Competition is increasing, particularly in energy
supply and retail energy services. Several states in the U.S., including those
states in which New Century Energies currently operates, have either passed or
proposed legislation that provides for retail electric competition and price
deregulation of energy supply. The wholesale electric energy market has expanded
and geographic boundaries are no longer barriers. Increased activity by power
marketers and traders has added new dimensions of complexity. A significant
amount of electric generation assets were purchased, sold or traded in the U.S.
during 1998 and this trend is expected to continue. Consolidation and
globalization is a continuing trend as businesses position themselves for
competition in an unbundled energy industry.
New Century Energies believes that utilities that achieve significant size
and scope of operations, efficient, low cost sources of energy supply and a
diverse customer base will be best positioned to compete in the new energy
marketplace.
Since New Century Energies' inception in 1997, the New Century Energies'
Board has worked to develop an integrated strategic planning process based on
adapting to the evolving competitive environment. The strategic planning
activities focus on the key drivers that would best position New Century
Energies for enhancing shareholder value and becoming a leading utility in the
competitive energy marketplace.
KEY DRIVERS:
- Own or control at least 20,000 megawatts of generating capacity to
achieve benefits through fuel diversification and operational
efficiencies.
- Develop profitable energy marketing capabilities to further optimize the
use of generation assets.
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- Achieve access to a larger, more diverse customer base that would allow
customers to be served more cost effectively.
- Grow the energy services business to enhance the ability to develop and
market new competitive products and services and provide integrated
energy solutions for customers.
- Pursue profitable, value-added international investments to leverage core
competencies and achieve superior risk-adjusted returns.
NORTHERN STATES POWER
Northern States Power believes that electric and gas utility companies face
continued rapid industry changes that will have a significant impact on the
future competitive position of utility companies and their ability to improve
earnings in traditional regulated businesses. These changes are being driven by
technological advances, consumer pressures and federal and state legislative and
regulatory initiatives aimed at introducing greater competition in the wholesale
and retail energy markets. In this changing energy marketplace, Northern States
Power's utility businesses historically have focused on providing customers
continued low-cost reliable energy while maintaining high levels of customer
service. Northern States Power has in addition developed a strategy to enhance
the value of shareholder investments in Northern States Power by actively
pursuing and developing business opportunities in nonregulated businesses
primarily through Northern States Power's wholly owned subsidiary NRG Energy. In
early 1998, Northern States Power developed the following "ten-point game plan"
to position Northern States Power to deal effectively with present and
anticipated changes in the energy business and to ensure that Northern States
Power would have the financial stability and financing capability needed to
achieve the growth objectives established for NRG Energy and other business
segments:
- Grow NRG Energy into a top independent power producer in each of North
America, Europe and Asia-Pacific, its core markets.
- Position Northern States Power's generation business for long-term value
through careful investments to maintain the reliability, efficiency and
competitiveness of Northern States Power's conventional coal-fired,
hydro, refuse-derived fuel, natural gas and oil-fired facilities, and
prepare to operate Northern States Power's generation facilities as a
stand-alone business in a competitive market.
- Enhance the value of Northern States Power's Monticello and Prairie
Island nuclear plants by combining these assets with other well-run
nuclear plants.
- Expand wholesale energy marketing activities.
- Participate in a for-profit, independent transmission company to ensure a
reliable, efficient, customer-focused and investor-responsive electric
transmission network consistent with Federal Energy Regulatory Commission
and State of Wisconsin requirements for functional separation of utility
transmission and generation facilities.
- Expand Northern States Power's core electric and gas distribution
business by actively seeking acquisition and merger opportunities with
other energy companies.
- Continue to develop Seren Innovations's communications and data services
business, which delivers high-speed Internet access, video-on-demand,
telephone service and cable TV.
- Continue to grow Viking Gas Transmission Company's natural gas
distribution business through pipeline expansion.
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- Drive Energy Masters International, an energy services business, toward
profitability by reducing costs and concentrating on retrofitting and
upgrading customer facilities for greater energy efficiency.
- Manage Northern States Power's entire business as a portfolio of assets
with a focus on growth.
DISCUSSIONS BETWEEN NORTHERN STATES POWER AND NEW CENTURY ENERGIES
Over the course of 1998, James J. Howard, Northern States Power's Chairman,
President and Chief Executive Officer, and other members of Northern States
Power senior management had preliminary contacts with a number of potential
transaction partners, including New Century Energies. Throughout this period,
the Northern States Power Board was kept apprised of these contacts with
potential transaction partners and the continued refinement of management's
evaluation of strategic alternatives at regularly scheduled Board meetings.
In July 1998, in connection with its planning initiative, Northern States
Power retained the services of The Blackstone Group L.P. as its financial
advisor to assist Northern States Power in exploring its options.
During 1998, as part of the ongoing execution of New Century Energies'
strategic plan, the senior management team of New Century Energies with the
assistance of outside financial advisors considered a number of strategic
alternatives, including potential acquisitions, an acquisition of New Century
Energies by a larger domestic or international utility and a merger of equals
transaction. Members of the New Century Energies senior management team had
preliminary contacts with a number of potential transaction partners developed
through this analysis, including Northern States Power. The New Century Energies
Board was kept apprised of the status of the contacts with potential transaction
partners.
Following an initial introductory meeting in mid-July 1998 between
representatives of senior management of Northern States Power and New Century
Energies, Messrs. Howard, Helton and Brunetti agreed to meet in early September.
At a meeting on September 9, 1998, Messrs. Helton, Brunetti and Howard
described and compared their companies' strategies and visions for the future.
Based on these discussions, Messrs. Helton, Brunetti and Howard concluded that
the two companies shared sufficiently compatible visions and goals to warrant
exploratory discussions.
New Century Energies and Northern States Power executed a confidentiality
agreement in September 1998.
On September 25, 1998, New Century Energies engaged SG Barr Devlin as its
financial advisor to assist it in exploring a possible transaction with Northern
States Power.
At a regularly scheduled Northern States Power Board meeting in October
1998, Mr. Howard reviewed with the Northern States Board management's analysis
of the strategic alternatives available to Northern States Power, including
potential acquisitions by Northern States Power, an acquisition of Northern
States Power by a larger domestic utility company or an international utility
company seeking to enter the U.S. market, or a merger-of-equals transaction.
Northern States Power evaluated each potential type of transaction with a
variety of potential partners based on, among other criteria, long- and
short-term shareholder value, the strategic rationale supporting a possible
transaction, ability to complete a transaction within an acceptable time frame
and without burdensome conditions to regulatory approval being imposed,
perceived interest and availability of the transaction partner and the financial
characteristics and strength of the combined entity. Mr. Howard also discussed
with the Board the preliminary contacts that he had had with New Century
Energies.
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Beginning in early fall of 1998 and continuing through December 1998,
representatives of management of New Century Energies and Northern States Power
and their financial advisors met and spoke by telephone on numerous occasions to
explore a possible transaction. During these meetings and conversations, New
Century Energies' and Northern States Power's representatives discussed their
companies' businesses and operations, the rationale for a potential business
combination, alternative structures for a possible transaction, a possible basis
for a conversion ratio, required regulatory approvals and the expected timing
for obtaining such approvals, and organizational matters, including board
composition and management structure and succession.
Discussions in person and by telephone between New Century Energies and
Northern States Power representatives continued throughout January 1999. During
this period, the companies exchanged financial information and members of senior
financial management began estimating the level of cost savings and other
financial benefits that might be achievable through a combination of the two
companies. Also during this period, management representatives and the
companies' legal and financial advisors began business and legal due diligence
investigations of the other company. Further discussions continued between the
companies' representatives on the principal terms of a possible transaction,
regulatory approvals and timing, and governance matters.
On January 26, 1999, the New Century Energies Board held a special meeting
at which the Board reviewed the status of the discussions with Northern States
Power. After presentations by members of the senior management of New Century
Energies and outside consultants, the New Century Energies Board authorized
management to continue its discussions with Northern States Power.
At a regularly scheduled meeting of the Northern States Power Board of
Directors on January 27, 1999, the Northern States Power Board received
presentations from members of senior management on Northern States Power's
10-point game plan and financial projections on a stand-alone basis, the
strategic rationale for a business combination with New Century Energies, an
analysis of the ability of a combined company to finance long-term growth
objectives, required regulatory approvals for the combination, projected timing
to obtain such approvals and possible alternative transaction structures.
Following discussion, the Northern States Power Board authorized management to
continue its discussions with New Century Energies.
On February 15, 1999, Mr. Brunetti met with Mr. Howard and several other
members of the Northern States Power Board, and the following week, on February
22, 1999, Mr. Howard met with Messrs. Helton and Brunetti and several other New
Century Energies directors. At those meetings, Messrs. Howard and Brunetti
discussed their management philosophies, their views on the changing competitive
environment in the energy industry and each of the companies' plans for growth
in that environment. During Mr. Howard's meeting with the New Century Energies
directors, those present agreed on the importance to Northern States Power of
significant flexibility, pending completion of a merger, to make planned
investments in the company's regulated and nonregulated businesses. During this
time period, New Century Energies also indicated the importance of similar
flexibility to it.
On February 23, 1999, the New Century Energies Board was updated on the
status of the discussions with Northern States Power at its regular Board
meeting. After presentations by members of the senior management of New Century
Energies and outside consultants, the Board again authorized management to
continue discussions with Northern States Power.
On March 5, 1999, New Century Energies provided to Northern States Power a
proposed merger agreement, and legal counsel and management for Northern States
Power and New Century Energies met on several occasions and held numerous
telephone conversations over the course of the following week to negotiate the
terms of the proposed merger agreement.
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On March 9, 1999, representatives of the companies' senior management and
their financial advisors met to discuss additional financial modeling
requirements and outstanding due diligence questions. The next day
representatives of management met to further develop the estimates of potential
cost savings that could be achieved by combining the companies. Also present
were representatives of a consulting firm that the companies had jointly engaged
to assist the managements of the companies in their estimates of potential cost
savings and representatives of the companies' financial advisors.
The Northern States Power Board held a special meeting on March 15, 1999 to
review the proposed transaction with New Century Energies. At the meeting,
representatives of senior management and legal counsel made presentations on,
among other matters, the rationale for combining with New Century Energies, the
cost savings and other benefits that management expected could be achieved in
the combination, Northern States Power's financial plan on a stand-alone basis
and the strengthened financial stability and financing achievable through
combining with New Century Energies, the proposed terms of the draft merger
agreement, the results of the due diligence investigations that had been
performed, legal matters raised by the potential transaction, the plan to timely
obtain required regulatory approvals and the anticipated schedule for completing
negotiations and obtaining shareholder approvals. Blackstone described the
financial analyses that it would undertake with respect to the final negotiated
conversion ratio.
On March 17, 1999, the New Century Energies Board held a special meeting
for the purpose of hearing a report on the status of the proposed Northern
States Power transaction. At this Board meeting, members of management gave a
detailed report on the results of their due diligence investigation of Northern
States Power, outside legal counsel gave a report as to legal issues raised by
the proposed transaction and representatives of SG Barr Devlin gave their
preliminary financial analysis of the proposed transaction.
During the remainder of the week of March 15, 1999, members of management
of New Century Energies and Northern States Power and their legal advisors
continued to negotiate the terms of the merger agreement. The terms of new
employment agreements for Messrs. Howard and Brunetti also were negotiated
during this period. The managements of both companies agreed on March 23, 1999
to recommend the conversion ratio of 1.55 shares of common stock of the combined
company for each NCE Common Share to their respective boards.
A special meeting of the Northern States Power Board to consider the
proposed transaction was held on March 24, 1999 in Phoenix, Arizona. At the
meeting, the terms and conditions of the proposed transaction were reviewed in
detail by Northern States Power management and legal counsel. In addition,
Northern States Power management and financial advisors described the benefits
and rationales for the transaction. Representatives of Blackstone made a
detailed financial presentation to the Northern States Power Board and advised
the Northern States Power Board that, in its opinion, as of that date and based
upon and subject to factors and assumptions, the conversion ratio was fair to
holders of NSP Common Shares from a financial point of view. Extensive
discussion and numerous questions from Northern States Power Board members
followed the presentations. After considering the matters described under "--
NORTHERN STATES POWER'S REASONS FOR THE MERGER; RECOMMENDATION OF THE NORTHERN
STATES POWER BOARD," the Northern States Power Board concluded that the proposed
transaction was fair to, and in the best interests of, Northern States Power and
Northern States Power shareholders and unanimously adopted and approved the
merger agreement and the merger.
A special meeting of the New Century Energies Board to consider and approve
the proposed transaction was held on March 24, 1999. At that meeting, the terms
and conditions of the proposed transaction were reviewed in detail by New
Century Energies management and legal counsel. In addition, management and legal
counsel summarized certain regulatory and due diligence issues
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presented by the proposed transaction. Representatives of SG Barr Devlin made a
detailed financial presentation and advised New Century Energies that, in its
opinion, the conversion ratio was fair to the holders of NCE Common Shares from
a financial point of view. After extensive discussion and consideration of the
matters described under "-- NEW CENTURY ENERGIES' REASONS FOR THE MERGER,
RECOMMENDATION OF THE NEW CENTURY ENERGIES BOARD," the New Century Energies
Board unanimously adopted and approved the merger agreement and the merger.
The parties executed the merger agreement on the evening of March 24, 1999
and, before the opening of the market on March 25, 1999, announced that they had
entered into the merger agreement.
NEW CENTURY ENERGIES' REASONS FOR THE MERGER; RECOMMENDATION OF THE NEW CENTURY
ENERGIES BOARD
The New Century Energies Board believes that the complementary combination
of New Century Energies' growing core utility business with Northern States
Power's sizable, nonregulated business activities, primarily NRG Energy,
provides a foundation for incremental growth that could not be achieved on a
stand-alone basis. The Board believes that the common vision shared by both
companies, in combination with New Century Energies' and Northern States Power's
management, personnel, technical expertise and financial strength, will create a
combined company with the capabilities and resources required to succeed and
grow in the new competitive energy marketplace.
New Century Energies believes the merger joins two well-managed companies
of similar market capitalization, providing substantial strategic and financial
benefits to New Century Energies' shareholders, employees and customers. These
benefits are expected to include:
- - INCREASED SIZE AND SCALE -- The increased size of the combined company
provides an infrastructure capable of supporting more efficient utility
operations, non-utility business activities and corporate services. Exposure
to changes in economic or competitive conditions in business segments is
expected to be reduced. Significant incremental scale in the mix of generation
assets and expansion of the customer base creates opportunities for improving
competitive position through more stable rates resulting from fuel
diversification, operating efficiencies and better customer service.
- - SIGNIFICANT COST SAVINGS -- Through the elimination of duplication in
corporate and administrative programs, greater efficiencies in operations and
business practices, improved purchasing power, and the combination of the two
workforces, the New Century Energies Board expects the combined company to
capture approximately $1.1 billion in net merger-related cost savings over a
ten-year period. Estimated savings include only those cost savings and cost
avoidance items management expects to achieve as a result of the merger.
- - ENHANCED FINANCIAL STRENGTH -- The combined company would have a significantly
increased market capitalization and a stronger balance sheet that is expected
to result in a stronger financial base and increased financial flexibility,
including improved access to capital markets.
- - FOUNDATION FOR NONREGULATED GROWTH -- The merger is expected to immediately
provide the critical mass, and the development and operating infrastructure to
further develop nonregulated business. The New Century Energies Board believes
the nonregulated energy supply business of NRG Energy will benefit from a
combination with a successful, fast-growing developer and operator of
independent power projects in the U.S. and abroad. In addition, the merger is
expected to allow the companies to realize the benefits, including cost
savings and expanded management expertise, through combining certain other
similar, non-regulated businesses operated by both companies, including
engineering, energy management and consulting businesses.
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New Century Energies believes that the merger will help it achieve its
articulated goals as follows:
- Own or control at least 20,000 megawatts of generating capacity to
achieve cost savings through fuel diversification and operational
efficiencies. Following the merger, and assuming that Northern States
Power's independent power subsidiary, NRG Energy, completes the
acquisition of generation facilities currently under contract, this goal
would be met with the combined company owning 15,133 megawatts of
regulated generation and 5,772 megawatts of unregulated generation.
- Develop profitable energy marketing capabilities to further optimize the
use of generation assets. The merger with Northern States Power will
enhance the growth of the combined company's energy marketing
capabilities. The enhanced energy marketing capacity of the combined
company will assist the combined company to optimize the use of its
generation assets.
- Achieve access to a larger, more diverse customer base that would allow
customers to be serviced more cost-effectively. The combined company will
have 3.1 million electric customers and 1.5 million gas customers in the
United States, almost double the existing U.S. customer base of New
Century Energies, and will serve approximately 2 million electric
customers and 400,000 gas customers in the United Kingdom.
- Grow the energy services business to enhance the ability to develop and
market new competitive products and services and provide integrated
energy solutions for customers. The addition of Northern States Power's
energy service subsidiaries to the existing New Century Energies energy
service companies will result in significant growth in the combined
company's energy service capabilities.
- Pursue profitable, value-added international investments to leverage core
competencies and achieve superior risk-adjusted returns. The combination
of NRG Energy's international power projects and New Century Energies'
investment in Yorkshire Power Group will result in a combined company
with a much stronger international presence and the expertise to identify
attractive investment opportunities.
The New Century Energies Board approved the merger agreement on March 24,
1999 by the unanimous vote of all directors. The New Century Energies Board
believes that the merger is in the best interests of the New Century Energies
shareholders and unanimously recommends that New Century Energies shareholders
vote for approval of the merger agreement and the merger. Certain members of the
New Century Energies Board will become directors and/or officers of the combined
company following the merger and/or may become entitled to severance benefits as
a result of the merger. See "INTERESTS OF CERTAIN PERSONS IN THE MERGER" on page
61.
In its deliberations concerning the merger agreement, the New Century
Energies Board considered the potential benefits from the merger outlined above.
The New Century Energies Board also considered the following:
- The expectation that the merger qualifies for "pooling of interests"
accounting treatment purposes, which avoids any reductions in earnings
that would result from the amortization of goodwill recognized in
purchase accounting.
- The expectation that the merger will be tax-free for New Century Energies
shareholders except with respect to payments made for fractional shares.
- The impact of regulations under various state and federal laws (as
described under "REGULATORY APPROVALS"), including the additional
regulatory oversight that would result from
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the addition of utility operations in six states, and the issues involved
in obtaining approval under the Public Utility Holding Company Act.
- The problems inherent in merging the operations of two large companies
and the super majority vote required to alter certain arrangements
regarding the management of the combined company, including the
composition of the combined company's board of directors, the identity of
the combined company's chairman and chief executive officer and the
location of the combined company's corporate headquarters.
- Whether the merger would be accretive to New Century Energies'
shareholders.
- The results of the due diligence review of Northern States Power and its
subsidiaries.
- The opinion of SG Barr Devlin described under "OPINION OF THE FINANCIAL
ADVISOR TO THE NEW CENTURY ENERGIES BOARD."
After considering these and other matters, the New Century Energies Board
concluded that the potential benefits of the merger outweighed the risks and any
disadvantages that might result from the merger. It is important to note that no
one factor was the reason for any individual director's decision and that each
director attached his or her own weights to the many factors considered.
However, based on the total mix of information available to them, all directors
determined to approve and recommend the merger agreement and the merger to New
Century Energies shareholders.
NORTHERN STATES POWER'S REASONS FOR THE MERGER; RECOMMENDATION OF THE NORTHERN
STATES POWER BOARD
Northern States Power believes that the merger will result in the following
significant benefits to Northern States Power:
ESTABLISHMENT OF A STRONGER COMPETITIVE POSITION IN NORTHERN STATES POWER'S
TRADITIONAL UTILITY BUSINESSES
- Greater scale should result in significant cost efficiencies and lower
per unit costs, thereby improving the utility businesses' competitive
position in a deregulating industry with resulting benefits to utility
customers.
- Critical scale in each business segment should provide a stronger
platform to execute a disaggregation strategy.
- The resulting lower cost structure for Northern States Power's regulated
businesses should reduce potential customer and margin loss that could
occur due to effects of deregulation.
CREATION OF AN ENHANCED PLATFORM FOR GROWTH
- The combined company's larger balance sheet of approximately $15.1
billion in total assets should have greater financial stability and
financing capability to support the growth objectives established for NRG
Energy and other nonregulated businesses. As a result of increased size,
NRG Energy's external financing requirements will account for a smaller
portion of the total capitalization of the combined company than that of
Northern States Power on a stand-alone basis.
- Similar strategies in nonregulated businesses should allow Northern
States Power and New Century Energies to merge operations and create
stronger platforms for growth.
- The combined company's multi-regional, larger generation asset base
should support expansion of marketing and trading activities.
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IMPROVEMENT OF RISK PROFILE AS NONREGULATED BUSINESSES GROW
- The combined company's exposure to different geographic markets, a
broader portfolio of assets and greater financial resources should
provide it a better ability to withstand risk and volatility than
Northern States Power on a stand-alone basis. The combined company will
have a strong global presence, with operations in the United Kingdom,
Central Europe, Australia and South America.
- Because NRG Energy's nonregulated businesses face greater risks than
Northern States Power's regulated businesses, the larger regulated
business of the companies on a combined basis should reduce overall risk
as NRG Energy grows.
The Northern States Power Board has determined that the merger agreement
and the merger are fair to, and in the best interests of, Northern States Power
and Northern States Power shareholders and has recommended that Northern States
Power shareholders approve the merger agreement and the merger.
During the course of its deliberations relating to the merger agreement and
the merger, the Northern States Power Board considered the following factors in
addition to the expected benefits described above:
- Northern States Power Operating and Financial Condition. The Northern
States Power Board's familiarity with, and review of, the business,
assets, management, competitive position and prospects of Northern States
Power, including Northern States Power's prospects if it were to continue
as an independent company, the risks associated with remaining
independent, and the ability of Northern States Power to independently
finance the investments called for by NRG Energy's growth plan.
- New Century Energies Operating and Financial Condition. The business,
operations, financial condition, operating results and prospects of New
Century Energies.
- Terms and Conditions of the Merger Agreement. The terms and conditions of
the merger agreement, including the conversion ratio, the terms of the
termination provisions and the amount and circumstances in which a fee
could become payable by Northern States Power or New Century Energies,
the course of negotiations resulting in the execution of the merger
agreement, and the interests of certain Northern States Power executives
in the merger. The Northern States Power Board also considered the
management succession plan contained in the merger agreement and the
terms of the merger agreement requiring the combined company's
headquarters to remain in Minneapolis, Minnesota for a period of at least
three years following completion of the merger and requiring any
reductions in workforce relating to Northern States Power employees
during the two years following completion of the merger to be made on a
fair and equitable basis.
- Timing and Achievability. The anticipated timing required to complete the
merger including, in particular, the expected timing to obtain required
regulatory approvals and management's view as to the likelihood of
obtaining the required approvals without the imposition of conditions
that would materially adversely affect Northern States Power or New
Century Energies, the issues involved in obtaining approval under the
Public Utility Holding Company Act and the additional regulatory
oversight that would result from the addition of utility operations in
six more states.
- Fixed Conversion Ratio. The possibility that, because the conversion
ratio at which New Century Energies shares will be exchanged in the
merger is fixed, the value of the shares of common stock of the combined
company held by Northern States Power's shareholders at the time of the
merger may increase or decrease.
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- Ownership and Dividends. The projected 46% pro forma ownership of the
combined company by Northern States Power shareholders and the
expectation that the combined company will adopt New Century Energies'
dividend payment level adjusted for the conversion ratio, representing an
increase for Northern States Power shareholders.
- Fit and Compatibility. Northern States Power's and New Century Energies'
strategic fit and compatible corporate cultures and visions of the future
of the energy business.
- Continuing Management Role. The expectation that members of Northern
States Power's senior management will have a continuing significant role
on the senior management team of the combined company.
- Fairness Opinion. The opinion, analyses and presentation of The
Blackstone Group L.P. presented to the Northern States Power Board on
March 24, 1999, and the written opinion of March 24, 1999 from The
Blackstone Group to the effect that, as of that date and based upon and
subject to factors and assumptions, the conversion ratio was fair to
holders of NSP Common Shares from a financial point of view.
- Tax and Accounting Treatment. The expectation that the merger will
qualify for pooling of interests accounting treatment and that the merger
will qualify as a tax-free reorganization under the Internal Revenue Code
of 1986 (the "INTERNAL REVENUE CODE").
The foregoing discussion addresses the material facts considered by the
Northern States Power Board in its consideration of the merger. In view of the
variety of factors and the amount of information considered, the Northern States
Power Board did not find it practicable to, and did not, make specific
assessments of, quantify, or otherwise assign relative weights to the specific
factors considered in reaching its determination. The determination to adopt and
approve the merger agreement and the merger was made after consideration of all
the factors taken as a whole, though individual members of the Northern States
Power Board may have given different weights to different factors.
POTENTIAL COST SAVINGS AND COST AVOIDANCES RESULTING FROM THE MERGER.
We believe that the merger will result in significant cost savings and cost
avoidances that will benefit our customers and shareholders. We have limited our
estimates of the potential cost savings and cost avoidances from combining our
operations to quantifiable amounts estimated by our managements. The estimates
we describe are net of costs to achieve these potential savings and avoidances
and reflect the time required to integrate our operations. These estimated
savings and avoidances do not include savings and avoidances that might be
achieved without the merger. In addition, we will continue our ongoing efforts
to increase productivity and reduce costs by redesigning and reengineering key
business processes.
We estimate operating efficiencies from the merger to generate total net
cost savings and cost avoidances of $1.1 billion over a ten-year period. Our
managements identified the following major components of these anticipated cost
savings and cost avoidances:
- Integration of corporate functions -- The combined company should be able
to eliminate redundant functions in a number of areas, including
accounting and finance, human resources, information services, external
relations, legal and executive administration. The staffing levels for
these functions are relatively fixed and do not directly vary with an
increase or decrease in employees or customers.
- Integration of corporate programs -- The combined company should be able
to integrate a number of corporate and administrative functions which
will reduce non-labor costs in the areas of insurance, advertising,
professional services, benefits plan administration, credit
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<PAGE> 46
facilities, association dues, and shareholder services among others. In
addition, future operational expenditures in the area of information
systems that we would each make on a stand-alone basis should be
significantly reduced.
- Other purchasing economies -- The combined company should be able to
centralize purchasing functions. It should also be able to obtain
purchasing leverage resulting in volume discounts for materials and
services.
- Fuel procurement -- The combined company should achieve economies as a
result of its larger combined fuel requirements.
- Joint dispatch -- The combined company may also realize savings in power
purchases from the interchange of power between its combined operations.
OPINION OF THE FINANCIAL ADVISOR TO THE NEW CENTURY ENERGIES BOARD
On September 25, 1998, New Century Energies retained SG Barr Devlin to act
as its financial and strategic advisor in pursuing a possible business
combination with Northern States Power. SG Barr Devlin delivered its written
opinion to the New Century Energies Board dated March 24, 1999 that, as of the
date of the opinion, the conversion ratio was fair from a financial point of
view to holders of NCE Common Shares.
A copy of SG Barr Devlin's opinion dated March 24, 1999 is attached as
Annex B and incorporated herein by reference. Holders of NCE Common Shares
should read the attached opinion carefully and in its entirety.
In connection with rendering its opinion dated March 24, 1999, SG Barr
Devlin reviewed and relied upon:
- the annual reports, Forms 10-K and selected other public filings of New
Century Energies, Northern States Power and certain related subsidiaries
for the three years ended December 31, 1997;
- the Forms 10-Q and related unaudited financial information of New Century
Energies, Northern States Power and certain related subsidiaries for the
quarterly periods ended March 31, 1998, June 30, 1998 and September 30,
1998;
- certain internal information (including financial projections) provided
by New Century Energies and Northern States Power;
- the merger agreement; and
- certain other materials deemed by SG Barr Devlin to be necessary or
appropriate.
SG Barr Devlin also:
- conducted discussions with members of senior management of New Century
Energies and Northern States Power about their businesses, regulatory
environments, prospects and strategic objectives, as well as possible
benefits which might be realized following the merger;
- reviewed the historical market prices and trading activity for NCE Common
Shares and NSP Common Shares;
- compared certain financial and operational information for New Century
Energies and Northern States Power with similar information for certain
other companies;
- compared the proposed financial terms of the merger with similar
information from certain utility industry business combinations;
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<PAGE> 47
- assessed the value of NCE Common Shares and NSP Common Shares using a
variety of valuation methodologies; and
- performed such other studies and analyses as it deemed appropriate.
SG Barr Devlin relied upon the accuracy and completeness of all financial
and other information publicly available or otherwise provided to it by New
Century Energies and Northern States Power, and upon the assurances of
management of New Century Energies and Northern States Power that they were not
aware of any facts that would make such information inaccurate or misleading. SG
Barr Devlin also relied upon the assurances of management of New Century
Energies and Northern States Power that all financial projections, as well as
estimates of cost savings expected to result from the merger, were reasonably
prepared and reflected the best currently available estimates and judgments
regarding future financial performance and outcomes of legal, regulatory and
other contingencies. These projections and estimates do not necessarily indicate
actual values or predict future results or values, which may be significantly
more or less favorable than projected or estimated. SG Barr Devlin was not
provided with and did not undertake an independent evaluation of the assets or
liabilities of New Century Energies or Northern States Power, nor did SG Barr
Devlin make any physical inspection of the properties or assets of New Century
Energies or Northern States Power.
SG Barr Devlin's opinion is directed to the New Century Energies Board and
the fairness of the conversion ratio to holders of NCE Common Shares from a
financial point of view. It does not address any other aspect of the merger and
does not constitute a recommendation to any holder of NCE Common Shares as to
how such holder should vote at New Century Energies' special meeting. The
conversion ratio itself was determined by New Century Energies and Northern
States Power through arm's-length negotiations. New Century Energies did not
place any limitations upon SG Barr Devlin regarding the procedures followed or
factors considered by SG Barr Devlin in rendering its opinion.
In rendering its fairness opinion and making its written and oral
presentations to the New Century Energies Board, SG Barr Devlin performed a
variety of financial and comparative analyses and considered a variety of
factors. While the material analyses and factors are summarized below, this
summary is not a complete description. Furthermore, SG Barr Devlin did not
attribute any particular weight to any analysis or factor; rather, SG Barr
Devlin made its determinations on the basis of qualitative judgments regarding
the significance and relevance of each analysis and factor. Accordingly, SG Barr
Devlin believes that its analyses must be considered as a whole, and that only
considering portions of these analyses and factors could create a misleading or
incomplete view of the evaluation process underlying its opinion. The results of
these analyses were discussed with the New Century Energies Board at its meeting
on March 24, 1999.
Stock Trading History. SG Barr Devlin reviewed the historical prices and
trading volumes of NCE Common Shares and NSP Common Shares and compared them to
(i) the Standard and Poor's Utility Index and (ii) the Standard and Poor's 500
Composite Index to provide perspective on the current and historical stock price
performance of New Century Energies and Northern States Power relative to one
another and to the selected market indices. SG Barr Devlin also calculated the
ratio of the daily closing market price per NCE Common Share to the daily
closing market price per NSP Common Share for the period August 4, 1997 to March
23, 1999. The results of this analysis showed that NCE Common Shares traded at a
price as high as 1.81 times, as low as 1.41 times and at an average of 1.67
times the then-current price of NSP Common Shares. This analysis was utilized to
provide historical background regarding the manner in which the public trading
market had valued New Century Energies and Northern States Power in absolute
terms and relative to each other.
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<PAGE> 48
Discounted Cash Flow Analysis. SG Barr Devlin prepared and reviewed the
results of unleveraged discounted cash flow analyses for both New Century
Energies and Northern States Power, assuming that New Century Energies and
Northern States Power performed according to the operating and financial
projections provided by their management for the period 1999 through 2003, as
revised by SG Barr Devlin in the exercise of its professional judgment. The
purpose of the discounted cash flow analysis was to estimate a range of present
values for the stock of New Century Energies and Northern States Power. The
ratio of these values constitutes a range of conversion ratios for holders of
NCE Common Shares. To calculate these values, each company's projected cash flow
stream during each year of the projections, together with the estimated value of
each company at the end of 2003, were discounted to the present using discount
rates that ranged from 5.75% to 6.75% for New Century Energies and 5.25% to
12.5% for Northern States Power. SG Barr Devlin estimated values at the end of
2003 for New Century Energies and Northern States Power by applying the
following multiples which were derived from those of certain comparable public
companies.
<TABLE>
<CAPTION>
NORTHERN STATES
NEW CENTURY ENERGIES POWER
-------------------- ---------------
<S> <C> <C>
Earnings before interest and taxes................. 9.5x - 10.5x 9.0x - 10.5x
Earnings before interest, taxes, depreciation and
amortization..................................... 6.75x - 7.5x 6.25x - 6.75x
Net income......................................... 12.0x - 14.0x 12.0x - 20.0x
</TABLE>
This analysis produced reference values of $45.54 to $55.01 per NCE Common
Share and $27.61 to $36.67 per NSP Common Share. The implied range of conversion
ratios resulting from these reference values was 1.24 to 1.99, with a midpoint
value of 1.56.
Publicly Traded Comparable Company Analysis. SG Barr Devlin compared
selected financial information and ratios for the domestic regulated/utility
businesses of New Century Energies and Northern States Power with the
corresponding financial information and ratios for a group of publicly traded
electric or electric and gas utilities (or their holding companies) deemed by SG
Barr Devlin to be comparable to New Century Energies and Northern States Power.
These comparable companies were selected on the basis of being companies which
possessed general business, operating and financial characteristics
representative of companies in the regulated/utility industries in which New
Century Energies and Northern States Power operate. The following table lists
the comparable companies that were used for New Century Energies and Northern
States Power.
<TABLE>
<CAPTION>
NEW CENTURY ENERGIES NORTHERN STATES POWER
- ------------------------ ----------------------------------
<S> <C>
Allegheny Energy, Inc. Ameren Corporation
Cinergy Corp. Baltimore Gas and Electric Company
DPL Inc. Carolina Power and Light Company
LG&E Energy Conectiv
NIPSCO Industries Inc. Florida Progress Corporation
Puget Sound Energy, Inc. FPL Group, Inc.
TECO Energy, Inc. Interstate Energy Corporation
PP&L Resources, Inc.
Wisconsin Energy Corporation
</TABLE>
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<PAGE> 49
SG Barr Devlin determined ranges of multiples for the comparable companies
based on the following financial ratios:
- common stock market value as a multiple of
- net income for the 12-month period ended September 30, 1998;
- projected net income for the 12-month period ended December 31, 1999;
- projected net income for the 12-month period ended December 31, 2000;
- cash flow from operations for the 12-month period ended September 30,
1998; and
- common stock dividends paid during the 12-month period ended September
30, 1998;
- aggregate market value (defined as the sum of the common stock market
value, plus any preferred stock, debt, capitalized lease obligations and
minority interests, minus cash and cash equivalents) as a multiple of
- earnings before interest and taxes for the 12-month period ended
September 30, 1998; and
- earnings before interest, taxes, depreciation and amortization for the
12-month period ended September 30, 1998.
These multiples were applied to the corresponding data for the domestic
regulated/utility businesses of New Century Energies and Northern States Power.
Taken together with the estimated ranges of values for the remaining businesses
of New Century Energies and Northern States Power, this analysis produced
reference values of $36.68 to $43.95 per NCE Common Share and $23.91 to $29.10
per NSP Common Share. The implied range of conversion ratios resulting from
these reference values was 1.26 to 1.84, with a midpoint value of 1.52.
Because of the inherent differences between the operations of New Century
Energies, Northern States Power and the comparable companies, SG Barr Devlin
believes that a purely quantitative analysis is not particularly meaningful in
the context of the merger. In this instance, SG Barr Devlin believes that an
appropriate use of the comparable company analysis also involves qualitative
judgments concerning differences between the characteristics of the comparable
companies, New Century Energies and Northern States Power.
Comparable Transaction Analysis. SG Barr Devlin reviewed certain
comparable transactions involving mergers between regulated electric or electric
and gas utilities (or their holding companies). These comparable transactions
were selected because they were strategic combinations of companies which
possessed general business, operating and financial characteristics
representative of companies in industries in which New Century Energies and
Northern States Power operate. The comparable transactions included:
- Nevada Power Company/Sierra Pacific Resources;
- Enova Corporation/Pacific Enterprises;
- WPL Holdings, Inc./IES Industries, Inc./Interstate Power Company;
- Public Service Company of Colorado/Southwestern Public Service Company;
- Wisconsin Energy Corporation/Northern States Power Company;
- Midwest Resources Inc./Iowa Illinois Gas and Electric Company;
- The Washington Water Power Company/Sierra Pacific Resources; and
- The Cincinnati Gas & Electric Company/PSI Resources, Inc.
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<PAGE> 50
SG Barr Devlin determined implied ranges of multiples from the comparable
transactions based on the following financial ratios:
- implied stock consideration as a multiple of
- net income for the most-recent 12-month period available;
- projected net income for the current fiscal year;
- projected net income for the next fiscal year; and
- cash flow from operations for the most-recent 12-month period available;
- implied aggregate consideration (defined as the sum of the implied stock
consideration, plus any preferred stock, debt, capitalized lease
obligations and minority interests, minus cash and cash equivalents) as a
multiple of
- earnings before interest and taxes for the most-recent 12-month period
available; and
- earnings before interest, taxes, depreciation and amortization for the
most-recent 12-month period available.
Applying such multiples to the corresponding data for New Century Energies
and Northern States Power, this analysis produced reference values of $32.25 to
$40.70 per NCE Common Share and $22.19 to $26.89 per NSP Common Share. The
implied range of conversion ratios resulting from these reference values was
1.20 to 1.83, with a midpoint value of 1.49.
Because the reasons for each of the comparable transactions were diverse
and because of the inherent differences between the operations of New Century
Energies, Northern States Power and the companies in the selected transactions,
SG Barr Devlin believes that a purely quantitative analysis is not particularly
meaningful in the context of the merger. In this instance, SG Barr Devlin
believes that an appropriate use of the comparable transaction analysis also
involves qualitative judgments concerning differences between the
characteristics of these transactions and the merger which would affect the
relative values of New Century Energies and Northern States Power.
Contribution Analysis. SG Barr Devlin calculated the relative contribution
from New Century Energies and Northern States Power to the combined company for
the years 1999 through 2003 based on:
- net income;
- earnings before interest and taxes; and
- earnings before interest, taxes, depreciation and amortization.
This analysis produced an implied range of conversion ratios from 1.32 to
1.70, with a midpoint value of 1.51.
Pro Forma Merger Analysis. SG Barr Devlin analyzed certain pro forma
effects of the merger to holders of NCE Common Shares for the period 2001
through 2003. This analysis was based upon the revised financial projections
previously discussed, with an adjustment for the retention of a portion of the
estimated cost savings and operating synergies which might be realized following
the merger. The analysis showed an improvement in earnings per share to holders
of NCE Common Shares, with no expected impact on dividends per share.
SG Barr Devlin was selected as New Century Energies' financial advisor
because SG Barr Devlin and principals of SG Barr Devlin have significant
experience in the investment banking and electric and gas utility industries. SG
Barr Devlin is a division of SG Cowen Securities Corporation specializing in
strategic and merger advisory services to the electric and gas utility
industries, the
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<PAGE> 51
energy industry and selected other industries. In this capacity, SG Barr Devlin
and principals of SG Barr Devlin have been involved as advisors in numerous
transactions and advisory assignments in the electric, gas and energy industries
and are constantly engaged in the valuation of businesses and securities in
these industries.
New Century Energies has agreed to pay SG Barr Devlin for its services
related to the merger:
- a financial advisory retainer fee of $100,000 per quarter commencing
September 25, 1998 and terminating upon execution of the merger
agreement;
- a transaction fee, based on the common stock market value of Northern
States Power at the time of closing, which would range from 0.38% of such
market value (if the market value were $3,000,000,000) to 0.30% of such
market value (if the market value were $6,000,000,000). The transaction
fee is payable in three installments:
-- one-third upon execution of the merger agreement;
-- one-third upon approval of the merger by New Century Energies
shareholders, less a credit of $500,000 for prior fees paid; and
-- one-third at the time of closing, less a credit of $700,000 for prior
fees paid.
New Century Energies has agreed to reimburse SG Barr Devlin for its
out-of-pocket expenses (including fees and expenses of legal counsel and other
advisors engaged with the consent of New Century Energies) and to indemnify SG
Barr Devlin against certain liabilities (including liabilities under the federal
securities laws) relating to or arising out of its engagement.
OPINION OF THE FINANCIAL ADVISOR TO THE NORTHERN STATES POWER BOARD
At a meeting of Northern States Power's Board held on March 24, 1999,
Blackstone delivered its oral opinion to the Northern States Power Board that,
as of such date and subject to the various considerations set forth in the
opinion, the conversion ratio was fair to the holders of NSP Common Shares from
a financial point of view. Blackstone delivered a written opinion dated March
24, 1999, confirming its oral opinion.
The full text of Blackstone's opinion letter is attached hereto as Appendix
C and is incorporated in this document by reference. Holders of NSP Common
Shares are urged to, and should, read the opinion in its entirety. Blackstone's
opinion is directed only to the fairness of the conversion ratio to the holders
of NSP Common Shares from a financial point of view and does not constitute a
recommendation to any shareholder as to how such holder should vote with respect
to the merger and should not be relied on by any shareholder as such. The
summary of Blackstone's opinion as set forth in this joint proxy
statement/prospectus is qualified in its entirety by reference to the full text
of the opinion letter.
In connection with its opinion, Blackstone:
- reviewed, among other things, certain publicly available information
concerning the business, financial condition and operations of Northern
States Power and New Century Energies which Blackstone believed to be
relevant to its inquiry;
- reviewed certain internal financial analyses, estimates and forecasts
relating to Northern States Power and New Century Energies prepared by,
and furnished to Blackstone by, the respective managements of Northern
States Power and New Century Energies;
- reviewed estimates of certain operating efficiencies and synergies
expected to be achieved as a result of the Merger that were prepared by
the managements of Northern States Power and
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<PAGE> 52
New Century Energies with the assistance of a third-party consultant, and
furnished to Blackstone by the management of Northern States Power;
- held discussions with members of management of Northern States Power and
New Century Energies concerning their respective businesses, operating
environments, financial condition, prospects and strategic objectives;
- reviewed the historical market prices and trading activity for NSP Common
Shares and NCE Common Shares;
- compared certain financial and stock market information for Northern
States Power and New Century Energies with similar information for
certain other companies the securities of which are publicly traded;
- reviewed the financial terms of certain recent business combinations in
the electric utility industry;
- considered the pro forma financial effect of the merger on Northern
States Power;
- participated in discussions among representatives of Northern States
Power and New Century Energies and their respective financial and legal
advisors;
- reviewed the merger agreement; and
- performed such other studies and analyses, and took into account such
other matters, as Blackstone deemed appropriate.
In arriving at its opinion, Blackstone:
- relied without independent verification upon the accuracy and
completeness of all of the financial and other information reviewed by
Blackstone that was publicly available, that was supplied or otherwise
made available to Blackstone by Northern States Power and New Century
Energies or that was otherwise reviewed by Blackstone;
- assumed that the financial forecasts and the estimates prepared by
Northern States Power and New Century Energies and provided to
Blackstone, and the estimates of operating efficiencies and synergies
that would result from the combination of Northern States Power and New
Century Energies provided to Blackstone, had been reasonably determined
on a basis reflecting the best currently available judgments and
estimates of Northern States Power and New Century Energies, and that
these forecasts and estimates will be realized in the amounts and at the
times contemplated thereby; and
- relied upon the assurances of management of Northern States Power and New
Century Energies that they were not aware of any facts that would make
the information described in the two preceding bullet points inaccurate,
incomplete or misleading.
In addition, Blackstone did not:
- conduct a physical inspection of the properties and facilities of
Northern States Power or New Century Energies;
- make an independent evaluation or appraisal of the assets and liabilities
of Northern States Power or New Century Energies; or
- consider the relative merits of the merger as compared to any other
business plan or opportunity that might be available to Northern States
Power or the effect of any other arrangement in which Northern States
Power might engage.
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<PAGE> 53
Blackstone assumed that the merger and the other transactions contemplated
by the merger agreement will be consummated on substantially the same terms set
forth in the merger agreement and will be accounted for as a
pooling-of-interests under generally accepted accounting principles and will
qualify as a tax-free reorganization within the meaning of section 368(a) of the
Internal Revenue Code. Blackstone's opinion is based upon economic, market,
monetary, regulatory and other conditions as they exist and can be evaluated,
and the information made available to Blackstone, as of the date of the opinion.
Furthermore, Blackstone expressed no opinion as to the prices or trading ranges
at which NSP Common Shares will trade at any time. Blackstone assumed, with the
permission of Northern States Power management, that in the course of obtaining
the necessary regulatory or other consents or approvals (contractual or
otherwise) for the merger, no restrictions or requirements will be imposed that
will have a material adverse effect on the contemplated benefits of the merger.
The following is a summary of the analyses and examinations performed by
Blackstone that were presented to the Northern States Power Board on March 24,
1999 and were utilized by Blackstone in preparation of its opinion.
Historical Relative Trading Analysis. Blackstone reviewed the ratio of the
daily trading prices of NCE Common Shares to the daily trading prices of NSP
Common Shares for the historical period from August 4, 1997, which was the first
day of New Century Energies public market trading following the merger of Public
Service Company of Colorado and Southwestern Public Service Company, which
resulted in New Century Energies' formation, through March 19, 1999, and for
selected periods within such period. Representative ranges for this ratio were
as follows:
<TABLE>
<CAPTION>
HISTORICAL PERIOD LOW HIGH AVERAGE
----------------- --- ---- -------
<S> <C> <C> <C>
August 4, 1997 through March 19, 1999....................... 1.438 1.811 1.667
One year historical period ending March 19, 1999............ 1.438 1.811 1.668
Three month historical period ending March 19, 1999......... 1.438 1.779 1.635
Two week historical period ending March 19, 1999............ 1.438 1.582 1.493
</TABLE>
The ratio of the closing market price of NCE Common Shares to NSP Common Shares
on March 19, 1999 was approximately 1.442.
Relative Contribution Analysis. Using publicly available information and
projections regarding Northern States Power and New Century Energies supplied by
the companies' respective managements, Blackstone calculated and analyzed the
relative contribution of Northern States Power and New Century Energies to the
combined company with respect to the 1997 and 1998 actual and the 1999 and 2000
projected (a) revenues, (b) earnings before interest, taxes, depreciation and
amortization ("EBITDA"), (c) earnings before interest and taxes ("EBIT"), (d)
net income adjusted for non-recurring items, (e) total assets, (f) common book
equity; (g) net property, plant and equipment, and (h) free cash flow, which
Blackstone defined as cash flow from operations minus cash flow from investing
activities, adjusted for extraordinary items. Blackstone then calculated the
implied exchange ratios necessary to give Northern States Power and New Century
Energies percentage ownership positions in the combined company that matched
their respective contributions for each performance measure. The analysis did
not take into account any potential cost savings, revenue enhancements or margin
improvements realizable as a result of, or any other effects from, the merger.
The analysis demonstrated an overall range of Northern States Power's
contribution to the combined company with respect to the above performance
measures of 40.9% to 50.2% and a range of implied exchange ratios of 1.326 to
1.925. Blackstone calculated a midpoint for the overall range of implied
exchange ratios of 1.626.
Blackstone noted that at an exchange ratio of 1.55, assuming 152.7 million
shares of common stock outstanding for Northern States Power and 114.5 million
shares of common stock outstanding
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<PAGE> 54
for New Century Energies, holders of NSP Common Shares would own 46.3% of the
pro forma equity in the pro forma combined company and holders of NCE Common
Shares would own 53.7% of the pro forma equity in the pro forma combined
company.
Discounted Cash Flow Analysis. In order to determine an implied exchange
ratio range based on a discounted cash flow analysis, Blackstone performed
discounted cash flow analyses for both the utility and the nonregulated
businesses of Northern States Power and New Century Energies using (a) financial
projections provided by the companies' respective managements for the period
from January 1, 1999 through December 31, 2003 and (b) varying sensitivities
relating to the nonregulated portion of each company's management forecasts, as
provided by the management of Northern States Power.
Blackstone performed separate discounted cash flow analyses for Northern
States Power's utility business and Northern States Power's nonregulated
operations. The Northern States Power utility business discounted cash flow
analysis was based upon the discount to present value, assuming discount rates
ranging from 6.0% to 7.0% based on weighted average cost of capital, of
projected free cash flow for the period from 1999 through 2003 and projected
2003 perpetual free cash flow assuming growth rates ranging from 2.0% to 3.0%.
Blackstone calculated a range of values for Northern States Power's nonregulated
operations using sensitivities provided by Northern States Power's management
and added the discounted cash flow values of the nonregulated operations to the
discounted cash flow values of the regulated operations to calculate a range of
values for NSP Common Shares of approximately $26.40 through $51.90 per share.
Blackstone also performed separate discounted cash flow analyses for New
Century Energies' utility business and New Century Energies' nonregulated
businesses. The New Century Energies utility business discounted cash flow
analysis was based upon the discount to present value, assuming discount rates
ranging from 6.0% to 7.0% based on weighted average cost of capital, of
projected free cash flow for the period from 1999 through 2003 and projected
2003 perpetual free cash flow assuming growth rates of 2.0% to 3.0%. Blackstone
calculated a range of values for New Century Energies' nonregulated operations
using sensitivities provided by Northern States Power's management and added the
discounted cash flow values of the nonregulated operations to the discounted
cash flow values of the regulated operations to calculate a range of values for
NCE Common Shares of approximately $40.60 to $72.60 per share.
Based upon the ranges of values calculated in the discounted cash flow
analyses, Blackstone calculated a range of implied conversion ratios for NCE
Common Shares to NSP Common Shares of approximately 0.782 to 2.750, with a
midpoint of 1.766.
Discounted Dividend Analyses. Based on forecasts and assumptions prepared
by Northern States Power's management regarding Northern States Power's earnings
per share, dividends per share and compound annual growth rate for 1998 through
2003, Blackstone calculated the net present value of Northern States Power's
future dividends using a range of equity discount rates of 8.0% to 9.0% and
assuming a perpetuity growth rate range on Northern States Power's 2003
projected dividend per share of 3.0% to 5.0%. This analysis indicated a range of
values for NSP Common Shares of approximately $23.80 to $43.90 per share.
Blackstone also performed a discounted dividend analysis for New Century
Energies. Using forecasts and assumptions prepared by New Century Energies
management regarding New Century Energies' earnings per share, dividends per
share and compound annual growth rate for 1998 through 2003, Blackstone
calculated the net present value of New Century Energies' future dividends using
the same ranges of discount rates and perpetuity growth rate range as it used in
its discounted dividend analysis of Northern States Power. The analysis
indicated a range of approximately $36.50 to $67.10 for each NCE Common Share.
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<PAGE> 55
Based on the ranges of values calculated in the discounted dividend
analyses, Blackstone calculated a range of implied exchange ratios for NCE
Common Shares to NSP Common Shares of approximately 0.831 to 2.819, with a
midpoint of 1.825.
Selected Comparable Publicly Traded Companies Analysis. Blackstone reviewed
and compared certain actual and estimated financial and stock market information
of Northern States Power with selected public utility companies that Blackstone
believed were comparable to Northern States Power. The group of comparable
companies, which Blackstone selected based on their comparability to Northern
States Power in terms of size characteristics; ratio of cost position to
profitability; growth prospects and dividends; supplier and customer mix; and
generation capacity mix, are:
- Carolina Power & Light Company
- Ameren Corporation
- PP&L Resources, Inc.
- Baltimore Gas and Electric Company
- DQE, Inc.
- Wisconsin Energy Corporation
For this analysis, Blackstone based Northern States Power's stock price on
its closing price as of March 19, 1999, calculated earnings per share based on
IBES mean estimates as of March 19, 1999 and utilized the period ending on
September 30, 1998 for the latest twelve months' EBIT and EBITDA multiples for
the comparable companies. The analysis indicated that: (a) the ratio of total
enterprise value (defined as the market value of common equity plus net debt,
preferred stock and minority interest) to the latest twelve months' EBIT for
Northern States Power was 12.2x, as compared to an average for the comparable
companies of 11.3x (with a range of 9.5x to 15.6x); (b) the ratio of total
enterprise value to the latest twelve months' EBITDA for Northern States Power
was 7.3x, as compared to an average for the comparable companies of 7.1x (with a
range of 5.8x to 8.7x); (c) Northern States Power's price to earnings multiple
based on IBES mean estimates of 1998 earnings per share was 14.6x, as compared
to an average for the comparable companies of 13.6x (with a relevant range of
10.0x to 15.9x); (d) Northern States Power's price to earnings multiple based on
IBES mean estimates of 1999 earnings per share was 13.4x, as compared to an
average for the comparable companies of 12.9x (with a range of 10.6x to 15.0x);
(e) Northern States Power's price to earnings multiple based on IBES mean
estimates of 2000 earnings per share was 12.6x, as compared to an average for
the comparable companies of 12.0x (with a range of 10.4x to 13.3x); and (f)
Northern States Power's price to latest quarter ended book price per common
share was 1.7x, as compared to an average of 1.8x for the comparable companies
(with a range of 1.3x to 2.3x).
Blackstone also reviewed and compared certain actual and estimated
financial and stock market information of New Century Energies with selected
public utility companies that Blackstone believed were comparable to New Century
Energies. Using the same criteria as it used to select the companies it deemed
comparable to Northern States Power, Blackstone selected the following companies
as being comparable to New Century Energies:
- Cinergy Corp.
- Allegheny Energy, Inc.
- DPL Inc.
- LG&E Energy Corp.
- TECO Energy, Inc.
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For this analysis, Blackstone based New Century Energies' stock price on
its closing price as of March 19, 1999, calculated earnings per share based on
IBES mean estimates as of March 19, 1999 and utilized the period ending on
September 30, 1998 for the latest twelve month EBIT and EBITDA multiples for the
comparable companies, except Cinergy Corp., which utilized the period ending
December 31, 1998. Blackstone's analysis indicated, among other things, that:
(a) the ratio of total enterprise value, which Blackstone defined as the market
value of common equity plus net debt, preferred stock and minority interest, to
the latest twelve months' EBIT for New Century Energies was 11.0x, as compared
to an average for the comparable companies of 10.7x (with a range of 9.4x to
13.0x); (b) the ratio of total enterprise value to the latest twelve months'
EBITDA for New Century Energies was 7.8x, as compared to an average for the
comparable companies of 7.4x (with a range of 6.5x to 8.6x); (c) New Century
Energies' price (based on closing stock prices as of March 19, 1999) to earnings
multiple based on IBES mean estimates (as of March 19, 1999) of 1998 earnings
per share was 12.7x, as compared to an average for the comparable companies of
13.1x (with a range of 12.0x to 14.2x); (d) New Century Energies' price to
earnings multiple based on IBES mean estimates of 1999 earnings per share was
11.6x, as compared to an average for the comparable companies of 12.0x (with a
range of 10.9x to 13.4x); (e) New Century Energies' price to earnings multiple
based on IBES mean estimates of 2000 earnings per share was 11.0x, as compared
to an average for the comparable companies of 11.4x (with a range of 10.5x to
12.9x); and (f) New Century Energies' price to latest quarter ended book price
per common share was 1.7x, as compared to an average of 1.9x for the comparable
companies (with a range of 1.8x to 2.3x).
Blackstone noted that the trading statistics of Northern States Power and
New Century Energies were generally within the range of comparable companies
based on the above financial ratios. Blackstone calculated the implied stock
prices of Northern States Power and New Century Energies, in each case based on
the appropriate financial results for Northern States Power or New Century
Energies, as applicable, and the appropriate range of multiples for the
companies with which they were comparable. The analysis indicated a range of
implied conversion ratios of 1.039 to 2.389, with a midpoint of 1.714.
No public company utilized as a comparison is identical to Northern States
Power or New Century Energies. Accordingly the preceding analysis necessarily
involves complex considerations and judgments concerning differences in
financial and operating characteristics of companies and other factors that
could affect the public trading value of Northern States Power, New Century
Energies and the comparable companies.
Selected Precedent Transaction Analysis. Blackstone reviewed and analyzed
selected financial, operating and stock market information relating to selected
announced merger of equals transactions in the utility industry announced since
July 1994 that Blackstone deemed to be comparable to the merger. The selected
precedent business combinations and the dates that the transactions were
announced are as follows:
- Nevada Power Co.'s pending merger with Sierra Pacific Resources (April
1998)
- Atlantic Energy Inc.'s merger with Delmarva Power & Light (August 1996)
- Utilicorp's abandoned merger with Kansas City Power & Light (January
1996)
- Potomac Electric's abandoned merger with Baltimore Gas & Electric Company
(September 1995)
- Southwestern Public Service's merger with Public Service Company of
Colorado (April 1995) (the transaction that created New Century Energies)
- Northern States Power's abandoned merger with Wisconsin Electric (April
1995)
- Iowa-Illinois Gas & Electric's merger with Midwest Resources (July 1994)
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Blackstone compared certain financial and market statistics for the above
transactions (based upon multiples for both parties to the transaction) with
those for the merger. The analysis showed that, with a conversion ratio of 1.55,
the merger has:
- a common equity value per share to the latest twelve months' earnings per
share multiple of 13.6x for New Century Energies and 14.6x for Northern
States Power, as compared to a mean of 13.2x for the comparable
transactions (with a range of 10.5x to 16.1x);
- a common equity value per share to the current fiscal year's estimated
earnings per share multiple, based on mean IBES estimates, of 12.4x for
New Century Energies and 13.4x for Northern States Power, as compared to
a mean of 13.0x for the comparable transactions (with a range of 11.0x to
15.1x);
- a common equity value per share to the next fiscal year's estimated
earnings per share multiple, based on mean IBES estimates, of 11.9x for
New Century Energies and 12.6x for Northern States Power, as compared to
a mean of 12.6x for the comparable transactions (with a range of 10.7x to
14.4x);
- a common equity value per share to latest quarter ended book value per
share multiple of 1.8x for New Century Energies and 1.7x for Northern
States Power, as compared to a mean of 1.5x for the comparable
transactions (with a range of 1.0x to 1.8x);
- a total enterprise value, calculated by adding the company's equity
value, net debt, preferred stock and minority interest, to latest twelve
months' EBITDA multiple of 8.1x for New Century Energies and 7.3x for
Northern States Power, as compared to a mean of 7.6x for the comparable
transactions (with a range of 6.3x to 10.2x); and
- a total enterprise value to latest twelve months' EBIT multiple of 11.5x
for New Century Energies and 12.2x for Northern States Power, as compared
to a mean of 11.0x for the comparable transactions (with a range of 8.6x
to 14.9x).
Using the average values for implied share prices at the low and high ends of
the ranges, Blackstone calculated an overall range of implied conversion ratios
of 0.873 to 2.679, with a midpoint of 1.776.
None of the comparable acquisition transactions or other business
combinations utilized as a comparison is identical to the merger. Accordingly,
an analysis of comparable precedent transactions is not mathematical; rather, it
involves complex considerations and judgments concerning companies and other
factors that could affect the public trading value of the companies selected for
the precedent transaction analysis or the company to which they are being
compared.
Pro Forma Merger Analysis. Blackstone analyzed the pro forma impact of the
merger on the earnings per NSP Common Share for the years 2001, 2002 and 2003
under two operating scenarios. In each case, Blackstone assumed that the
combined company will assume New Century Energies' dividend policy and Northern
States Power shareholders would receive a $.01 increase in dividends per share
in 2001. Blackstone also included in each case the after-tax income statement
contribution of certain anticipated operating efficiencies and synergies that
Northern States Power management believes can be achieved as a result of the
merger. In the first case, Blackstone used IBES mean estimates as of March 19,
1999 for both companies and assumed a closing date of December 31, 2000. This
analysis demonstrated that the merger would result in accretion to Northern
States Power's earnings per share of 5.4% in 2001, 7.1% in 2002 and 9.2% in
2003. In the second case, Blackstone used the forecasts provided by the
respective managements of Northern States Power and New Century Energies
regarding estimated earnings per share in each of the first three full years
following the assumed completion of the merger. Using the second earnings
forecast scenario, the analysis showed that the merger would result in accretion
to Northern States Power's earnings per share of 1.7% in 2001, 4.9% in 2002 and
9.3% in 2003.
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The summary set forth above does not purport to be a complete description
of the presentation by Blackstone to the Northern States Power Board or the
analyses performed by Blackstone in arriving at its opinion. The preparation of
a fairness opinion involves various determinations as to the most appropriate
and relevant methods of financial analysis and the application of these methods
to the particular circumstances and, therefore, such an opinion is not readily
suited to summary description. The preparation of a fairness opinion does not
involve a mathematical evaluation or weighing of the results of the individual
analyses performed, but requires Blackstone to exercise its professional
judgment, based on its experience and expertise, in considering a wide variety
of analyses taken as a whole. Each of the analyses conducted by Blackstone was
carried out in order to provide a different perspective on the transaction and
add to the total mix of information available. Blackstone did not form a
conclusion as to whether any individual analysis, considered in isolation,
supported or failed to support an opinion as to fairness. Rather, in reaching
its conclusion, Blackstone considered the results of the analyses in light of
each other and ultimately reached its opinion based on the results of all
analyses taken as a whole. Accordingly, Blackstone believes that its analyses
must be considered as a whole and that considering any portion of such analyses
and factors, without considering all analyses and factors, could create a
misleading or incomplete view of the process underlying its opinion.
The analyses were prepared solely for the purpose of Blackstone providing
its opinion letter to the Northern States Power Board as to the fairness of the
conversion ratio from a financial point of view to holders of NSP Common Shares
and do not purport to be appraisals or necessarily reflect the prices at which
businesses or securities actually may be sold, which are inherently subject to
uncertainty. Any estimates incorporated in the analyses performed by Blackstone
are not necessarily indicative of the actual past or future values or results,
which may be significantly more or less favorable than any such estimates.
Analyses based upon forecasts of future results are not necessarily indicative
of actual future results, which may be significantly more or less favorable than
suggested by such analyses.
As described above, the opinion and presentation of Blackstone to the
Northern States Power Board was only one of many factors taken into
consideration by the Northern States Power Board in making its determination to
approve the merger agreement. In addition, the terms of the merger agreement
were determined through negotiations between Northern States Power and New
Century Energies and were approved by the Northern States Power Board. Although
Blackstone provided advice to Northern States Power during the course of these
negotiations, the decision to enter into the merger agreement and to accept the
exchange ratio was solely that of the Northern States Power Board.
Northern States Power retained Blackstone because of its experience and
expertise. Blackstone has an internationally recognized merger and acquisition
advisory business. Blackstone, as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions. Blackstone is familiar with Northern
States Power, having provided certain investment banking services to Northern
States Power from time to time and having acted as its financial advisor in
connection with the merger.
Pursuant to a letter dated January 11, 1999, Northern States Power engaged
Blackstone to act as its financial advisor with respect to a possible
transaction with New Century Energies. Pursuant to the terms of the letter,
Northern States Power has agreed to pay Blackstone a success fee of 0.35% of the
aggregate equity value of Northern States Power Common Shares based on the
conversion ratio, valued upon consummation of the merger, in three installments:
one third upon execution of the merger agreement, one third upon the Northern
States Power shareholders approval of the merger agreement and the remaining
portion upon the closing of the Merger. An additional retainer fee of $625,000
payable to Blackstone pursuant to a letter agreement dated July 28, 1998 may be
credited
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against the success fee, pursuant to the terms of the engagement letter. Under
the July 28 letter agreement, Northern States Power retained Blackstone to
provide financial advisory services to Northern States Power. In addition,
Northern States Power has agreed to reimburse Blackstone for its reasonable
out-of-pocket expenses, including fees and disbursements of their attorneys, and
to indemnify Blackstone and certain related persons against certain liabilities
that may arise out of its engagement and the rendering of its opinion.
EFFECTIVE TIME OF THE MERGER
Unless we agree to a later time and date, the merger will become effective
when we file articles of merger with the Secretary of State of Minnesota and a
certificate of merger with the Secretary of State of Delaware. Unless we agree
otherwise, we will complete the merger on the second business day after all of
the conditions to the merger are satisfied or waived. We expect to complete the
merger in about 12 to 18 months, although we can give no assurance when, or if,
all the conditions to completion of the merger will be satisfied or waived. See
"-- REGULATORY APPROVALS" and "THE MERGER AGREEMENT -- CONDITIONS TO THE
MERGER."
ARTICLES OF INCORPORATION AND BYLAWS
After we complete the merger, Northern States Power's articles of
incorporation will be the articles of incorporation of the combined company,
except that they will be amended at the time of the merger:
- to change the combined company's name to ; and
- to increase the number of authorized shares of common stock of the
combined company from 350 million to one billion.
These amendments do not require a separate vote by shareholders of Northern
States Power under Minnesota law because they are an integral part of the merger
agreement. Thus, by voting to approve the merger agreement and the merger,
Northern States Power shareholders are also voting to approve the amendments
described above. The amendments will not be put into effect if Northern States
Power shareholders do not approve the merger agreement and the merger or if the
merger is not completed for any other reason. Northern States Power's articles
of incorporation are filed as an exhibit to Northern States Power's Annual
Report on Form 10-K for the year ended December 31, 1998. Northern States Power
has proposed amendments to the terms of the NSP Preferred Shares contained in
its articles of incorporation, which will be considered at Northern States
Powers' annual meeting of stockholders on April 28, 1998. You can obtain a copy
from Northern States Power free of charge. See "WHERE YOU CAN FIND MORE
INFORMATION" on page 102. The merger agreement generally prohibits Northern
States Power from amending its articles of incorporation before the merger
without New Century Energies' consent.
We believe that the continued availability of shares of common stock is
advisable to provide the combined company with the flexibility to take advantage
of opportunities to issue common stock for corporate purposes (such as stock
splits, stock options and equity financings) and as consideration for possible
future acquisitions. If any plans, understandings, arrangements or agreements
are made concerning the issuance of any shares of common stock of the combined
company after the merger, holders of the then outstanding shares of common stock
or preferred stock of the combined company may or may not be given the
opportunity to vote on that issuance, depending on the nature of the
transaction, the applicable law, the policy of any stock exchange on which the
combined company's stock may then be listed and the judgment of the board of
directors of the combined company regarding the submission of the issuance to
shareholders. See "CERTAIN ANTITAKEOVER EFFECTS OF CERTAIN CHARTER AND BYLAW
PROVISIONS" beginning on page 98 for a discussion of the potential anti-
takeover
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effects of an increase in authorized capital stock and other provisions of
Northern States Power's articles of incorporation and bylaws.
When we complete the merger, Northern States Power's bylaws will be the
bylaws of the combined company. The merger agreement prohibits Northern States
Power from amending its bylaws before the merger without New Century Energies'
consent.
DIRECTORS AND OFFICERS
When we complete the merger, the number of directors on the combined
company's board of directors will be an even number, up to 14. Northern States
Power will designate half of the combined company's directors before the merger
from Northern States Power's then-existing board of directors, and New Century
Energies will designate the other half before the merger from New Century
Energies' then-existing board of directors. For three years after the merger,
the remaining designees of Northern States Power will designate any replacement
for a director designated by Northern States Power who declines or is unable to
serve as a director of the combined company, and the remaining designees of New
Century Energies will designate any replacement for a director designated by New
Century Energies who declines or is unable to serve as a director of the
combined company.
James J. Howard, who is currently Northern States Power's Chairman,
President and Chief Executive Officer, will remain an employee and Chairman of
the Board of the combined company until the first anniversary of the merger.
Wayne H. Brunetti, who is currently New Century Energies' President, Chief
Operating Officer and Vice Chairman of the New Century Energies Board, will
become President and Chief Executive Officer of the combined company at the time
of the merger and will succeed Mr. Howard as Chairman of the Board of the
combined company after the first anniversary of the merger. If Mr. Brunetti
declines or is unable to serve at any time before the third anniversary of the
merger, a two-thirds vote by the directors of the combined company then serving
on its board of directors will be required to elect Mr. Brunetti's replacement
as chief executive officer. Mr. Brunetti will also become a director of the
combined company at the time of the merger, as one of New Century Energies'
designees.
HEADQUARTERS AND OTHER SIGNIFICANT OPERATING LOCATIONS
After the merger, we will locate the combined company's corporate
headquarters in Minneapolis, Minnesota. The combined company will also maintain
significant operating offices in Denver, Colorado and Amarillo, Texas. Until the
third anniversary of the merger, two-thirds of the directors then serving on the
board of directors of the combined company must approve any relocation of the
combined company's corporate headquarters.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following discussion is intended to be only a summary of the material
U.S. federal income tax consequences of the merger and not a complete analysis
or listing of all potential tax effects relative to a decision whether to vote
for the approval of the merger agreement and the merger. The discussion does not
address all aspects of U.S. federal income taxation that may apply to New
Century Energies or Northern States Power shareholders who are subject to
special U.S. federal income tax treatment, including non-U.S. persons, insurance
companies, tax-exempt entities, retirement plans and persons who acquired their
NCE Common Shares or NSP Common Shares upon the exercise of employee stock
options or otherwise as compensation. For example, the discussion does not
address the effect, if any, of the Foreign Investment in Real Property Tax Act
on non-U.S. persons holding New Century Energies shares. The discussion below
applies to New Century Energies and Northern States Power shareholders who hold
their NCE Common Shares or
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NSP Common Shares as a capital asset within the meaning of Section 1221 of the
Internal Revenue Code. The discussion addresses neither the effect of applicable
state, local or non-U.S. tax laws, nor the effect of any U.S. federal tax laws
other than those pertaining to U.S. federal income tax.
OPINIONS
It is a condition of the merger that New Century Energies receive an
opinion of counsel to the effect that:
- the merger will be treated as a transaction described in Section 368(a)
of the Internal Revenue Code; and
- shareholders of New Century Energies who are United States persons and
who exchange NCE Common Shares solely for shares of common stock of the
combined company in the merger will not recognize any gain or loss
(except with respect to cash received instead of fractional shares).
It is a condition of the merger that Northern States Power receive an opinion of
counsel to the effect that:
- the merger will be treated as a transaction described in Section 368(a)
of the Internal Revenue Code.
Opinions of counsel are not equivalent to rulings from the IRS and the IRS
could challenge the conclusions expressed in the opinions. They will be based on
the Internal Revenue Code, the regulations under the Internal Revenue Code,
administrative rulings of the IRS and court decisions, all of which are subject
to change. Any such change, which may or may not be retroactive, could alter the
tax consequences discussed below. The opinions will also be based on customary
assumptions and representations made by New Century Energies and Northern States
Power. The discussion below assumes that the merger will be treated as a
transaction described in Section 368(a) of the Internal Revenue Code.
NEW CENTURY ENERGIES SHAREHOLDERS
New Century Energies shareholders will not recognize any gain or loss with
respect to the shares of common stock of the combined company received in the
merger if the merger is a reorganization under Section 368(a) of the Internal
Revenue Code. The tax basis of the shares of common stock of the combined
company received by a New Century Energies shareholder in the merger will be
equal to the tax basis of the NCE Common Shares exchanged for those shares,
reduced by any amount of basis allocable to fractional share interests for which
the shareholder receives cash. For determining whether gain or loss on the
subsequent disposition of shares of common stock of the combined company
received in the merger is long-term or short-term, the holding period of the
shares of common stock of the combined company received by the New Century
Energies shareholders will include the holding period of the NCE Common Shares
exchanged for those shares.
The receipt of cash in lieu of a fractional share of common stock of the
combined company by a New Century Energies shareholder in the merger will result
in taxable gain or loss to the shareholder for U.S. federal income tax purposes
based on the difference between the amount of cash received by the shareholder
and the shareholder's basis in the fractional share as described above. That
gain or loss will be a capital gain or loss.
NORTHERN STATES POWER SHAREHOLDERS
The merger will not have any tax consequences to Northern States Power
shareholders who do not exercise dissenters' rights. Northern States Power
shareholders who exercise dissenters' rights and
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receive cash in exchange for all their NSP Common Shares or NSP Preferred Shares
will generally recognize gain or loss equal to the difference between the amount
of cash received and the shareholder's basis in the shareholder's NSP Common
Shares or NSP Preferred Shares.
BACKUP WITHHOLDING
Backup withholding at a rate of 31% will apply to any cash payments to a
shareholder of New Century Energies or Northern States Power unless either (1)
the shareholder or payee provides or has provided its taxpayer identification
number (social security or employer identification number) and certifies that
the number is correct or (2) an exemption from backup withholding applies under
the applicable law and regulations.
THE FOREGOING DISCUSSION OF MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
IS FOR GENERAL INFORMATION PURPOSES ONLY AND IS NOT TAX ADVICE. BECAUSE OF THE
COMPLEXITY OF THE TAX LAWS, AND BECAUSE THE TAX CONSEQUENCES TO ANY PARTICULAR
SHAREHOLDER MAY BE AFFECTED BY MATTERS NOT DISCUSSED IN THIS JOINT PROXY
STATEMENT/PROSPECTUS, EACH NEW CENTURY ENERGIES AND NORTHERN STATES POWER
SHAREHOLDER IS URGED TO CONSULT HIS TAX ADVISOR WITH RESPECT TO HIS OWN
PARTICULAR CIRCUMSTANCES AND WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF
THE MERGER TO HIM, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL AND
NON-U.S. TAX LAWS, ESTATE TAX LAWS AND PROPOSED CHANGES IN APPLICABLE TAX LAWS.
NON-U.S. PERSONS, IF ANY, WHO HOLD OR HAVE HELD (DIRECTLY, CONSTRUCTIVELY OR BY
ATTRIBUTION) MORE THAN 5% OF THE OUTSTANDING NCE COMMON SHARES SHOULD CONSULT
THEIR TAX ADVISORS REGARDING THE CONSEQUENCES TO THEM OF THE MERGER UNDER THE
FOREIGN INVESTMENT IN REAL PROPERTY TAX ACT, INCLUDING ANY TAX FILING
REQUIREMENTS THAT MAY APPLY.
ACCOUNTING TREATMENT
We expect that the merger will be treated as a "pooling of interests" for
accounting purposes. Under this method of accounting, the assets and liabilities
of New Century Energies and Northern States Power will be combined based on
their carrying values in the historical financial statements of each company.
The results of operations of the combined company will include the income of New
Century Energies and Northern States Power for the entire fiscal period in which
the merger occurs, and the historical results of operations of the separate
companies for fiscal years before the merger will be combined and reported as
the results of operations of the combined company. See "UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL INFORMATION" beginning on page 79.
It is a condition to completing the merger that we each receive an opinion
from our auditors confirming the availability of pooling of interests accounting
treatment. Northern States Power and New Century Energies have each agreed in
the merger agreement not to take any actions that would prevent pooling of
interests accounting treatment for the merger.
REGULATORY APPROVALS
Before we complete the merger, we must obtain a number of regulatory
approvals. We currently expect to receive those approvals in about 12 to 18
months. These regulatory approval requirements are described below.
STATE APPROVALS AND RELATED MATTERS
Northern States Power is currently subject to the jurisdiction of the
Minnesota Public Utilities Commission, the North Dakota Public Service
Commission, the South Dakota Public Utilities Commission and the Arizona
Corporation Commission. Northern States Power-Wisconsin, the utility subsidiary
of Northern States Power which provides utility service in Wisconsin and the
Upper Peninsula of Michigan, is subject to the jurisdiction of the Wisconsin
Public Service Commission and the Michigan Public Service Commission.
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PSCo. is subject to the jurisdiction of the Public Utilities Commission of
the State of Colorado. Cheyenne Light, Fuel & Power is subject to the
jurisdiction of the Wyoming Public Service Commission. SPS is subject to the
jurisdiction of the New Mexico Public Regulation Commission, the Public Utility
Commission of Texas, the Kansas Corporation Commission and the Oklahoma
Corporation Commission.
We will file applications for approval of the merger and related
transactions, including, where necessary, the issuance of securities, with the
Arizona Commission, the Minnesota Commission, the North Dakota Commission, the
Colorado Commission, the New Mexico Commission and the Wyoming Commission.
Generally, each of these state Commissions must find that the merger is in the
public interest and/or benefits customers. The state commissions may attach to
their approvals any conditions that they deem appropriate or necessary,
including mechanisms for sharing benefits from the merger. Approval of the
merger is not required in South Dakota, Wisconsin or Michigan, however the
transfer of the utility assets to New NSP Utility Sub may require the approval
of the Arizona and South Dakota Commissions as well as the Minnesota and North
Dakota Commissions. Approval of the merger also is not required in Texas,
however, unless the Texas Commission determines that the merger is in the public
interest, the Texas Commission may take its findings about the merger into
account in future rate making proceedings, thus we will file with the Texas
Commission for a determination that the merger is in the public interest.
Approval of the merger in Kansas is not required, however the combined company
must agree to submit to the jurisdiction of the Kansas Commission insofar as
transactions between SPS and the combined company affect the rates or charges to
be made by SPS. No approval or authorization from any Oklahoma public regulatory
body is required. Following the merger, the regulatory authorities in all of the
states where we have utility operations will retain applicable authority over
the rates and dividends of the utilities, affiliated interest transactions and
nonutility businesses.
PUBLIC UTILITY HOLDING COMPANY ACT
New Century Energies has registered as a public utility holding company
under the Public Utility Holding Company Act. Northern States Power is a holding
company that is exempt from most provisions of the Public Utility Holding
Company Act.
The SEC must approve the merger under the Public Utility Holding Company
Act. We expect to file our application for that approval by the end of June
1999.
The Public Utility Holding Company Act directs the SEC to approve the
merger unless it finds that (1) the merger would tend to create detrimental
interlocking relations or detrimental concentration of control, (2) the
consideration to be paid in the merger is not reasonable or (3) the merger would
unduly complicate the capital structure of the holding company system after the
merger or would be detrimental to the proper functioning of that holding company
system. The SEC must also find that the merger complies with applicable state
law, tends toward the development of an integrated public utility system and
otherwise conforms to the Public Utility Holding Company Act's integration and
corporate simplification standards.
Historically, the SEC generally has construed the integration requirements
of the Public Utility Holding Company Act to require combining electric
utilities to show that: (1) their electric systems are or can be physically
interconnected, (2) the combined electric systems, under normal conditions, can
be operated as a single interconnected and coordinated system and (3) the
combined electric systems are confined in their operation to a single area or
region not so large as to impair the advantage of localized management,
efficient operation and the effectiveness of regulation, taking into account the
state of the art and the area or region affected. The electric systems of New
Century Energies and Northern States Power are approximately 650 miles apart and
are not interconnected by a transmission line or lines owned by the companies or
their subsidiaries. However, New Century
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Energies and Northern States Power believe that their electric systems are
capable of physical interconnection through contract paths, common power pools
and other means. Although the SEC has not before found that an electric system
as geographically separated as the New Century Energies and Northern States
Power electric systems meets the integration requirements of the Public Utility
Holding Company Act, we believe that a favorable finding is consistent with the
Public Utility Holding Company Act and should be made. We also believe that the
balance of the conditions for approval of the merger under the Public Utility
Holding Company Act can be met. Nevertheless, we cannot give assurances that the
SEC will approve the merger under the Public Utility Holding Company Act or, if
such approval is obtained, when such approval will be obtained or whether the
terms of the approval will ultimately be acceptable.
In order to complete the merger, Northern States Power will register as a
public utility holding company under the Public Utility Holding Company Act. The
Public Utility Holding Company Act imposes a number of restrictions on the
operations of registered holding company systems. These restrictions include a
requirement that the SEC approves in advance, securities issuances, sales and
acquisitions of utility assets or of securities of utility companies and
acquisitions of other businesses. The Public Utility Holding Company Act also
limits the ability of registered holding companies to engage in activities
unrelated to the utility operations of the holding companies and regulates
holding company system service companies that provide services to the utility
affiliates in the holding company system. We believe that we will be able to
satisfy the SEC's requirements for approval of the registration of Northern
States Power under the Public Utility Holding Company Act and we will seek any
SEC approvals which we believe are necessary to allow the continued growth of
our unregulated businesses.
The SEC could require, as a condition to its approval of the merger under
the Public Utility Holding Company Act, that we divest certain of our activities
which are unrelated to the combined company's post-merger utility operations. In
several cases, the SEC has allowed the retention of non-utility related
activities or deferred the question of divesture for a substantial period of
time. In cases where divestiture has been ordered, the SEC has usually allowed
enough time to complete the divestiture to avoid a "fire sale" of the divested
assets. We believe strong policy reasons and prior SEC decisions and policy
statements support the retention of our non-utility related investments, or,
alternatively, support deferring the question of divestiture for a substantial
period of time. The SEC could also require, as a condition to its approval of
the merger under the Public Utility Holding Company Act, that we divest all or
part of our gas distribution businesses. However, in approving the creation of
New Century Energies, the SEC agreed that New Century Energies could retain its
gas distribution businesses. We believe that strong policy reasons in prior SEC
decisions and policy statements, including the SEC decision approving the
creation of New Century Energies, support the retention of our gas distribution
businesses.
The foregoing discussion assumes that, as a part of the merger, the utility
assets of Northern States Powers will be transferred to New NSP Utility Sub. If
this transfer of assets does not occur, the merger approvals discussed above
would be unaffected, but Northern States Power's operations following the merger
might be subject to additional restrictions.
FEDERAL POWER ACT
The Federal Energy Regulatory Commission ("FERC") also must approve the
merger. Under Section 203 of the Federal Power Act, the FERC will approve a
merger if it finds that merger is "consistent with the public interest." In
reviewing a merger, the FERC generally evaluates: whether (1) the merger will
adversely affect competition, (2) the merger will adversely affect operating
costs and rates and, (3) the merger will impair the effectiveness of regulation.
We will file a combined application with the FERC requesting that the FERC
approve the merger, including transfer of the
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utility assets to New NSP Utility Sub and associated changes to the
NSP-Minnesota/NSP-Wisconsin Interchange Agreement, under Section 203 of the
Federal Power Act. In connection with this application, we will also file a
comparable transmission service tariff and an interchange agreement under
Section 205 of the Federal Power Act, to become effective upon consummation of
the merger.
In addition, Northern States Power holds certain hydroelectric project
licenses, as well as certificates of public convenience and necessity under
Section 7 of the Natural Gas Act. The transfer of utility assets of Northern
States Power to New NSP Utility Sub will constitute transfers of the
hydroelectric project licenses and the certificates of public convenience and
necessity, requiring approval from the FERC.
Furthermore, prior to the transfer of the utility assets of Northern States
Power to New NSP Utility Sub, the approval of the FERC under Section 204 of the
Federal Power Act may be required for New NSP Utility Sub to assume the debt of
Northern States Power.
We believe that as a condition to obtaining approval of the merger from the
FERC, we may be required to commit to form, join or work toward developing an
independent regional transmission organization which will control some of the
combined company's transmission facilities. Wisconsin law requires similar
action with respect to transmission facilities located in Wisconsin by June 30,
2000.
ANTITRUST CLEARANCE
The Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the related
rules and regulations prohibit us from completing the merger until we submit
required information to the Antitrust Division of the Department of Justice and
the Federal Trade Commission ("FTC") and specified Hart-Scott-Rodino Antitrust
Improvement Act waiting period requirements have been satisfied. Even after the
Hart-Scott-Rodino Antitrust Improvement Act waiting period expires or
terminates, the Antitrust Division or the FTC may later challenge the merger on
antitrust grounds. We do not believe that the merger will violate federal
antitrust laws. If the merger is not completed within 12 months after the
expiration or earlier termination of the initial Hart-Scott-Rodino Antitrust
Improvement Act waiting period, we would be required to submit new information
to the Antitrust Division and the FTC, and a new Hart-Scott-Rodino Antitrust
Improvement Act waiting period would begin. We intend to time the filing of our
premerger notifications under the Hart-Scott-Rodino Antitrust Improvement Act so
that the waiting period will expire or terminate within 12 months before the
anticipated closing date of the merger.
ATOMIC ENERGY ACT
Northern States Power holds Nuclear Regulatory Commission ("NRC") operating
licenses for its Prairie Island and Monticello nuclear generating facilities.
The operating licenses authorize Northern States Power to own and operate the
facilities. The Atomic Energy Act provides that a license may not be transferred
or in any manner disposed of, directly or indirectly, through transfer of
control unless the NRC finds that the transfer complies with the Atomic Energy
Act and consents to the transfer. We will seek approval from the NRC of the
change of control of Northern States Power resulting from the merger and to
reflect the fact that after the merger, New NSP Utility Sub, although continuing
to own and operate the Prairie Island and Monticello facilities, will become an
operating company subsidiary of the combined company.
OTHER APPROVALS AND FILINGS
In addition to the above described approvals, the consent or approval of
numerous third parties is required to transfer the utility assets of Northern
States Power to New NSP Utility Sub. At this
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time, we do not anticipate any difficulties in obtaining such consents. If
difficulties do arise, Northern States Power and New Century Energies may
negotiate a mutually acceptable alternative to this restructuring.
Northern States Power and PSCo. possess municipal franchises and
environmental permits and licenses that may need to be renewed or replaced as a
result of the merger. We do not anticipate any difficulties at the present time
in obtaining these renewals or replacements. British regulatory approval may
also be required because of New Century Energies' ownership interest in
Yorkshire Electricity and Northern States Power's indirect investments in the
United Kingdom.
GENERAL
Under the merger agreement, Northern States Power and New Century Energies
have each agreed to use all reasonable efforts to obtain all material permits,
licenses, franchises and other governmental authorizations necessary or
advisable to complete the transactions contemplated by the merger agreement.
Various parties may oppose the merger or seek to have conditions imposed upon
the receipt of necessary approvals. While we believe that we will receive the
requisite regulatory approvals for the merger, we cannot give assurance as to
timing or our ability to obtain the required approvals on satisfactory terms.
The merger is conditioned on our obtaining final orders approving the merger
from the various federal and state commissions described above on terms and
conditions which would not have, or would not be reasonably likely to have, a
material adverse effect on the business, assets, financial condition or results
of operations of New Century Energies and its subsidiaries as a whole, or on
Northern States Power and its subsidiaries as a whole. We can give no assurance
that any conditions imposed for obtaining the required approvals will satisfy
this standard.
LISTING OF THE COMBINED COMPANY COMMON STOCK ON STOCK EXCHANGES
We have agreed to take all reasonably required actions to obtain approvals
to list the shares of common stock of the combined company to be issued in the
merger on the New York Stock Exchange, the Chicago Stock Exchange and the
Pacific Stock Exchange, subject to official notice of issuance. Approval for
listing on the New York Stock Exchange is a condition to the merger.
RESALE OF SHARES ISSUED IN THE MERGER; AFFILIATES
The common stock of the combined company issued to New Century Energies
shareholders in the merger will be freely transferable under the Securities Act
except for shares issued to an affiliate of New Century Energies for purposes of
Rule 145 under the Securities Act at the time of the New Century Energies
special meeting. These persons may not sell the combined company common stock
that they acquired in the merger except under an effective registration
statement under the Securities Act, or in compliance with Rule 145 under the
Securities Act or another applicable exemption from the registration
requirements of the Securities Act. The merger agreement requires New Century
Energies to use its reasonable best efforts to cause each of its affiliates to
execute a written agreement to comply with the foregoing requirements.
In addition, in order for the merger to qualify for pooling of interests
accounting treatment, an affiliate of either New Century Energies or Northern
States Power may not sell, transfer or dispose (subject to certain de minimis
exceptions) of NCE Common Shares or NSP Common Shares during the period
beginning 30 days before the merger is completed and ending when the combined
company publishes results covering at least 30 days of combined operations of
Northern States Power and New Century Energies. The merger agreement requires
Northern States Power and New Century Energies to use their reasonable best
efforts to cause each of their affiliates to execute a written agreement to
comply with the foregoing requirements.
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Northern States Power Board that
shareholders vote for approval of the merger agreement and the merger, Northern
States Power shareholders should be aware that certain members of Northern
States Power management and of the Northern States Power Board have interests in
the merger that may be considered different from, or in addition to, the
interests of the shareholders of Northern States Power generally. The Northern
States Power Board was aware of these interests and considered them when it
approved the merger agreement and the merger. Similarly, in considering the
recommendation of the New Century Energies Board that shareholders vote for
approval of the merger agreement and the merger, New Century Energies
shareholders should be aware that certain members of New Century Energies
management and of the New Century Energies Board have interests in the merger
that may be considered different from, or in addition to, the interests of the
shareholders of New Century Energies generally. The New Century Energies Board
was aware of these interests and considered them when it approved the merger
agreement and the merger. See also "THE MERGER AGREEMENT -- INSURANCE AND
INDEMNIFICATION" and "THE MERGER AGREEMENT -- WORKFORCE AND EMPLOYEE BENEFIT
MATTERS" for a description of additional interests of these individuals.
NEW HOWARD EMPLOYMENT AGREEMENT
At the time we entered into the merger agreement, Northern States Power
also entered into a new employment agreement with Mr. Howard, which will replace
his current employment agreement when the merger takes place. Under this new
agreement, Mr. Howard will continue to be an employee of the combined company
and will serve as Chairman of the Board of Directors of the combined company for
one year following the merger. He will also be forbidden from competing with the
combined company and its affiliates for two years following the termination of
his employment or for one year after the merger, whichever is longer, and from
disclosing confidential information of the combined company and its affiliates.
Under his new employment agreement, Mr. Howard will receive the following
compensation and benefits during the year following the merger:
- a base salary not less than the higher of his base salary immediately
before the merger and his current base salary of $730,000;
- an annual bonus on the same basis as other senior executives, with a
target bonus of 65% of his base salary;
- the same employee benefits as other senior executives of the combined
company; and
- the same fringe benefits as he receives under his current employment
agreement.
In addition, Mr. Howard will receive a special retention bonus in recognition
of:
- his remaining employed for one year following the merger, even though he
will no longer be chief executive officer;
- the special efforts he will be making to cause the merger to take place
and to implement a successful transition to combined operations of
Northern States Power and New Century Energies; and
- his agreement to the noncompetition and confidentiality covenants
described above.
If the merger does take place and Mr. Howard remains employed for one year
after the merger, he will be paid a special retention bonus of $7.6 million one
year after the merger. If the merger does not take place, or if the merger takes
place but Mr. Howard dies or becomes disabled within one year after the merger,
a special retention bonus of $2.5 million will be paid on the day his employment
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terminates. In either case, $2.5 million is being paid specifically for the
noncompetition and confidentiality covenants described above, and Mr. Howard
will be obligated to return that amount if he breaches the covenants in any
material way.
If Mr. Howard's employment were to be terminated by the combined company
without cause or if he were to terminate his employment for good reason after
the merger, he would be entitled to receive the compensation and benefits
described above as if he had remained employed under the new employment
agreement for the remainder of the year following the merger. Mr. Howard's new
employment agreement also preserves the supplemental retirement benefit to which
he is entitled under his current employment agreement. Finally, the combined
company is obligated to make Mr. Howard whole for any excise tax on excess
parachute payments that he may incur.
NEW BRUNETTI EMPLOYMENT AGREEMENT
At the time we entered into the merger agreement, New Century Energies and
Northern States Power also entered into a new employment agreement with Mr.
Brunetti, which will replace his current employment agreement with New Century
Energies when the merger takes place. The initial term of the new agreement is
four years, with automatic one-year extensions beginning at the end of the
second year and continuing each year thereafter, unless notice is given by
either party that the agreement will not be extended. Under the agreement, Mr.
Brunetti will serve as Chief Executive Officer and President and a member of the
board of directors of the combined company for one year following the merger and
thereafter, he will serve as Chief Executive Officer and Chairman of the Board
of Directors of the combined company. Beginning no later than the date of the
first annual meeting of the combined companies, Mr. Brunetti will be required to
perform the majority of his duties at the headquarters of the combined companies
in Minneapolis, Minnesota and to relocate the residence at which he spends the
majority of his time to the Twin Cities area. The new agreement also provides
that if Mr. Brunetti becomes entitled to receive severance benefits under the
agreement, he will be forbidden from competing with the combined company and its
affiliates for two years following the termination of his employment, and from
disclosing confidential information of the combined company and its affiliates.
Under his new employment agreement, Mr. Brunetti will receive the following
compensation and benefits:
- a base salary not less than his base salary immediately before the
merger;
- the opportunity to earn annual and long-term incentive compensation
amounts not less than he was able to earn immediately before the merger;
- life insurance coverage and participation in a supplemental executive
retirement plan;
- the same employee benefits as other senior executives of the combined
company;
- the same fringe benefits as he receives under his current employment
agreement; or, if greater, as those of the next highest executive officer
of the combined company; and
- an apartment in Minneapolis and reimbursement for certain related living
and travel expenses during the period before he relocates to the Twin
Cities area, plus reimbursement for his relocation costs.
If Mr. Brunetti's employment were to be terminated by the combined company
without cause or if he were to terminate his employment for good reason, he
would be entitled to receive the compensation and benefits described above as if
he had remained employed for the employment period remaining under his
employment agreement and then retired, at which time he would be eligible for
all retiree benefits provided to retired senior executives of the combined
company. In determining the level of his compensation following termination of
employment, the amount of
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incentive compensation he would receive would be based upon the target level of
incentive compensation he would have received in the year in which his
termination occurred, and he would receive cash equal to the value of stock
options, restricted stock and other stock-based awards he would have received
instead of receiving the awards. In addition, the restrictions on his restricted
stock would lapse and his stock options would become vested. Finally, the
combined company would be obligated to make Mr. Brunetti whole for any excise
tax on excess parachute payments that he incurs.
Mr. Brunetti also has a change-of-control employment agreement with New
Century Energies. The merger will not cause a "change of control" under this
agreement, so it will not become effective as a result of the merger. However,
in case this agreement becomes effective because of a later change of control,
Mr. Brunetti has waived his right to receive any severance benefits under the
change-of-control employment agreement to the extent they would duplicate
severance benefits under his new employment agreement.
SEVERANCE POLICIES
Northern States Power and New Century Energies each adopted senior
executive severance policies shortly before they entered into the merger
agreement. These policies will continue for five years, and may be extended
beyond five years. All of the executive officers of Northern States Power other
than Mr. Howard participate in the Northern States Power policy, and all of the
executive officers of New Century Energies other than Messrs. Helton and
Brunetti participate in the New Century Energies policy.
Under the policies, a participant whose employment is terminated at any
time before the third anniversary of the merger will receive severance benefits
unless
- the employer terminated the participant for cause,
- the termination was because of the participant's death, disability, or
retirement,
- the division or subsidiary in which the participant worked was sold and
the buyer agreed to continue the participant's employment with specified
protections for the participant, or
- the participant terminated voluntarily without good reason. To receive
the severance benefits, the participant must also sign an agreement
releasing all claims against the employer and its affiliates, and
agreeing not to compete with the employer and its affiliates and not to
solicit their employees and customers.
The severance benefits for executive officers under the policies include
the following:
- a cash payment equal to 2.5 (2.0 in the case of specified officers of New
Century Energies) times the participant's annual base salary, annual
bonus and annualized long-term incentive compensation, plus pro-rated
incentive compensation for the year of termination;
- a cash payment equal to the additional amounts that would have been
credited to the executive under pension and retirement savings plans, if
the participant had remained employed for another 2.5 (2.0 in the case of
specified officers of New Century Energies) years;
- continued welfare benefits and, for New Century Energies participants
only, a perquisite allowance, for 2.5 (2.0 in the case of specified
officers of New Century Energies) years;
- financial planning benefits for two years, and outplacement services
costing not more than $30,000; and
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- an additional cash payment to make the participant whole for any excise
tax on excess parachute payments that he or she may incur, with certain
limitations specified in the policies.
The benefits under Northern States Power's severance policy described above
will be reduced by any severance benefits that the participant receives under
the senior executive severance policy that Northern States Power adopted in
1995.
Some of the executive officers of New Century Energies who participate in
the severance policy also have change-of-control employment agreements with New
Century Energies. The merger will not be considered a change of control under
these agreements, so they will not become effective as a result of the merger.
However, if they become effective because of a later change of control, the
severance benefits under the New Century Energies senior executive severance
policy will be reduced by any severance benefits that the participant receives
under such an employment agreement.
We cannot be sure whether any executive officers of Northern States Power
or New Century Energies will terminate employment and receive severance
benefits. Also, even if we assume that they will get the benefits, the actual
amount of the benefits will depend on when their employment actually terminates
and other factors which we cannot now determine. However, based on current
compensation levels, we have estimated that if (1) the merger occurs on March
24, 2000, (2) all of the executive officers of both companies were terminated at
the time the merger occurs, and (3) the other assumptions we used to make the
calculations are correct, then the cash payments they would receive under the
policies would be approximately as follows: Richard C. Kelly, $2.4 million; Paul
J. Bonavia, $1.7 million; David M. Wilks, $1.8 million; all other New Century
Energies executive officers as a group, $10.5 million; and Edward J. McIntyre,
$4.1 million; Paul E. Anders, $2.6 million; Loren L. Taylor, $3.0 million; all
other executive officers of Northern States Power as a group, $27.4 million.
NORTHERN STATES POWER STOCK OPTIONS AND RESTRICTED STOCK
If the shareholders of Northern States Power approve the merger agreement
and the merger, then, upon regulatory approval, all stock options and restricted
stock granted under the Northern States Power Company Executive Long-Term
Incentive Award Stock Plan that have not already vested or been forfeited will
vest. Assuming that the shareholders of Northern States Power had approved the
merger agreement and the merger and regulatory approvals had been obtained on
April 16, 1999, the executive officers of Northern States Power would have
vested in options on 456,592 shares and 51,790 shares of restricted stock.
AMENDMENTS TO NEW CENTURY ENERGIES' SHAREHOLDER RIGHTS PLAN
New Century Energies has amended its shareholder rights plan to provide
that:
- so long as the merger agreement is not terminated, no distribution date
for the rights issued under the rights plan will occur, and the rights
will not become exercisable, as a result of New Century Energies having
entered into the merger agreement or performing its obligations under the
merger agreement, and
- the rights issued under the rights plan will expire immediately before
the merger is consummated.
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RIGHTS OF DISSENTING NORTHERN STATES POWER SHAREHOLDERS
Under Sections 471 and 473 of Chapter 320A of the Minnesota Business
Corporation Act, each Northern States Power shareholder is permitted to dissent
from the merger, and to obtain the fair value of his Northern States Power NSP
Common Shares and NSP Preferred Shares in the event the merger takes place
("DISSENTERS' RIGHTS"). The following summary of Dissenters' Rights under
Sections 471 and 473 does not purport to be complete and is subject in all
respects to the provisions of Sections 472 and 473, complete copies of which are
attached as Appendix D to this joint proxy statement/prospectus and incorporated
herein by reference. Any Northern States Power shareholder who intends to
dissent from the merger should carefully review the text and comply with the
requirements of Sections 471 and 473, as well as consult with an attorney.
FAILURE TO COMPLY WITH THE PROCEDURES PRESCRIBED BY SECTIONS 471 AND 473 WILL
RESULT IN THE LOSS OF DISSENTERS' RIGHTS. Except as provided below, no further
notices will be given to Northern States Power shareholders by Northern States
Power regarding the existence of Dissenters' Rights or the time periods within
which they must exercise Dissenters' Rights or the procedures they must follow
to do so.
Any Northern States Power shareholder who wishes to dissent from the merger
must give Northern States Power, and Northern States Power must actually
receive, before a vote on the proposal to approve the merger agreement and the
merger (the "MERGER PROPOSAL") is taken at the Northern States Power special
meeting, written notice of the shareholder's intent to demand payment for his
Northern States Power shares if the merger is consummated. Any such notice
should be mailed to the Corporate Secretary of Northern States Power at the
following address: 414 Nicollet Mall, Minneapolis, Minnesota 55401,
Attention: Corporate Secretary. A vote against the Merger Proposal will not be
deemed to satisfy this notice requirement. A Northern States Power shareholder
who provides such written notice, does not vote in favor of the Merger Proposal
and follows the other procedures in Section 473 will be entitled to receive the
fair value of such shareholder's NSP Common Shares and NSP Preferred Shares in
compliance with Sections 471 and 473.
A Northern States Power shareholder dissenting from the merger must not
vote his Northern States Power Common Shares or Northern States Power Preferred
Shares in favor of the Merger Proposal, but must, instead, either vote against
or abstain from voting on the Merger Proposal. NORTHERN STATES POWER
SHAREHOLDERS WHO RETURN A SIGNED PROXY BUT FAIL TO PROVIDE INSTRUCTIONS AS TO
THE MANNER IN WHICH SUCH NSP COMMON SHARES OR NSP PREFERRED SHARES ARE TO BE
VOTED WILL BE DEEMED TO HAVE VOTED IN FAVOR OF THE MERGER PROPOSAL AND WILL NOT
BE ENTITLED TO ASSERT DISSENTERS' RIGHTS. A Northern States Power shareholder of
record may assert Dissenters' Rights as to fewer than all of the shares
registered in his name only if he dissents with respect to all shares
beneficially owned by any one beneficial shareholder and notifies Northern
States Power in writing of the name and address of each person on whose behalf
he asserts Dissenters' Rights. The rights of such a partial dissenting
shareholder are determined as if the shares as to which he dissents and his
other shares were registered in the names of different shareholders. A
beneficial owner of shares who is not the record holder may assert Dissenters'
Rights with respect to the shares held on the beneficial owner's behalf, if the
beneficial owner submits to Northern States Power at the time of or before the
assertion of the rights a written consent of the record holder.
If the merger is authorized by Northern States Power shareholders at the
Northern States Power special meeting (or at any adjournment of the meeting),
Northern States Power must send a written notice (the "DISSENTERS' NOTICE") to
each dissenting Northern States Power shareholder who satisfies the requirements
described in the preceding two paragraphs. The Dissenters' Notice will contain:
- the address where the demand for payment and the dissenting shareholder's
NSP Common Share and/or NSP Preferred Share certificates must be sent and
the date by which they must be received (which date will be the 30th day
after the Dissenters' Notice is given);
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- any restrictions on transfer of uncertificated shares that will apply
after the demand for payment is received;
- a form to be used to certify the date on which the dissenting
shareholder, or the beneficial owner on whose behalf dissent is asserted,
acquired the shares (or an interest in them) and to demand payment; and
- a copy of the provisions of the Minnesota Business Corporation Act set
forth in Appendix D to this joint proxy statement/prospectus with a brief
description of the procedures to be followed under those provisions.
Northern States Power shareholders receiving the Dissenters' Notice must,
within 30 days, then demand payment and deposit their share certificates in
compliance with the terms of the Dissenters' Notice to be entitled to
Dissenters' Rights. Any Northern States Power shareholder who demands payment
and deposits his share certificates in compliance with Sections 471 and 473 will
retain all other rights as a Northern States Power shareholder until the
effective time of the merger. Thereafter, dissenting Northern States Power
shareholders will no longer be entitled to any rights of a shareholder,
including, but not limited to, the right to receive notice of meetings, to vote
at any meetings or to receive dividends, and will only be entitled to any rights
of appraisal as provided by the Minnesota Business Corporation Act. A dissenting
Northern States Power shareholder who has failed to perfect or has effectively
withdrawn or lost such right will not be entitled to fair value for the
dissenting shares and the dissenting shares will remain outstanding.
After the effective time of the merger or upon receipt of a valid demand
for payment, whichever is later, Northern States Power must remit to each
dissenting shareholder who complied with the requirements of the Minnesota
Business Corporation Act the amount that Northern States Power estimates to be
the fair value of the dissenting shareholder's NSP Common Shares and NSP
Preferred Shares, plus interest accrued at a statutory rate from the fifth day
after the effective time of the merger to the date of payment. The payment also
must be accompanied by financial data, Northern States Power's estimate of the
fair value of the shares and a description of the method used to reach that
estimate, and a copy of the applicable provisions of the Minnesota Business
Corporation Act with a brief description of the procedures to be followed in
demanding supplemental payment. Dissenting Northern States Power shareholders
receiving such payment may decline to accept the amount remitted by Northern
States Power and demand payment for an amount equal to their estimate of the
fair value of their dissenting shares. Failure to make such demand within 30
days after the payment is mailed entitles dissenting Northern States Power
shareholders only to the amount initially remitted by Northern States Power. If
Northern States Power fails to remit payment within 60 days of the deposit of a
dissenting shareholder's share certificates or the imposition of transfer
restrictions on uncertificated shares, Northern States Power must return all
deposited share certificates and cancel all transfer restrictions. However,
Northern States Power may again give notice regarding the procedure to exercise
Dissenters' Rights and require deposit or restrict transfer at a later time. If
you believe that the amount remitted is less than the fair value of your
dissenting shares (including statutory interest), you may give written notice to
Northern States Power of your own estimate of the fair value of the shares, plus
interest, within 30 days after Northern States Power mails its remittance, and
demand payment of the difference. Otherwise you are entitled only to the amount
remitted by Northern States Power.
If Northern States Power receives a demand from you to pay such difference,
Northern States Power will, within 60 days after receiving the demand, either
pay to you the amount demanded or agreed to by you after discussion with
Northern States Power or file in court a petition requesting that the court
determine the fair value of your dissenting shares, plus interest.
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The court may appoint one or more appraisers to receive evidence and make
recommendations to the court on the amount of the fair value of the dissenting
shares. The court will determine whether the dissenting shareholder has complied
with the requirements of Section 473 of the Minnesota Business Corporation Act
and will determine the fair value of the dissenting shares, taking into account
any and all factors the court finds relevant, computed by any method or
combination of methods that the court, in its discretion, sees fit to use. The
fair value of the shares as determined by the court is binding on all dissenting
shareholders and may be less than, equal to or greater than the current market
price of the NSP Common Shares or NSP Preferred Shares. If the court determines
that the fair value of the shares is in excess of the amount, if any, remitted
by Northern States Power, then the court will enter a judgment for cash in favor
of the dissenting shareholders in an amount by which the value determined by the
court, plus interest, exceeds the amount previously remitted. A dissenting
shareholder will not be liable to Northern States Power if the amount, if any,
originally remitted to such shareholder by Northern States Power exceeds the
fair value of the shares, as determined by the court, plus interest.
Costs of the court proceeding will be determined by the court and assessed
against Northern States Power, except that part or all of the costs may be
assessed against any dissenting shareholders whose actions in demanding
supplemental payments are found by the court to be arbitrary, vexatious or not
in good faith.
If the court finds that Northern States Power did not substantially comply
with the relevant dissenters' provisions of the Minnesota Business Corporation
Act, the court may assess the fees and expenses, if any, of attorneys or experts
as the court deems equitable. Fees and expenses may also be assessed against any
party if the court finds that the party in bringing the proceeding has acted
arbitrarily, vexatiously or not in good faith, and may be awarded to a party
injured by those actions. The court may award, in its discretion, fees and
expenses of any attorney for the dissenting shareholders out of the amount
awarded to those shareholders, if any.
For a discussion of certain tax consequences applicable to dissenting
Northern States Power shareholders who receive cash upon the exercise of
Dissenters' Rights, see "THE MERGER -- MATERIAL FEDERAL INCOME TAX
CONSEQUENCES."
THE MERGER AGREEMENT
The following is a description of the material provisions of the merger
agreement, a copy of which is attached as Appendix A to this joint proxy
statement/prospectus and incorporated herein by reference. This description may
not include all of the information that interests you. We urge you to read the
entire merger agreement.
THE MERGER
The merger agreement provides that Northern States Power will move its
utility assets to New NSP Utility Sub and that New Century Energies will then
merge with Northern States Power to create the combined company. Northern States
Power will be the surviving corporate entity in the merger and will be a holding
company for the combined assets and operations of Northern States Power and New
Century Energies. In addition to a number of required regulatory approvals,
transfer of Northern States Power's utility assets to New NSP Utility Sub
requires the consent or approval of numerous third parties. If difficulties
arise in obtaining those consents and approvals, we may negotiate a mutually
agreeable alternative to this restructuring. The merger will occur after the
approval of the merger by both New Century Energies and Northern States Power
shareholders and the satisfaction or waiver of the other conditions to the
merger described in the merger agreement.
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The merger will become effective upon the later to occur of:
- the last of the merger filings made with the Secretaries of State of
Delaware and Minnesota as required by Delaware and Minnesota law, or
- any later time to which New Century Energies and Northern States Power
have agreed and specified in those merger filings.
MERGER CONSIDERATION
At the effective time of the merger, each outstanding NCE Common Share will
automatically be converted into the right to receive 1.55 shares of common stock
of the combined company and cash instead of any fractional shares. However, any
NCE Common Share which Northern States Power or any of its subsidiaries owns or
which New Century Energies holds in its treasury will be canceled without
consideration and will cease to exist. No fractional shares of common stock of
the combined company will be issued in the merger. Each holder of NCE Common
Shares who would otherwise be entitled to receive a fractional share of common
stock of the combined company will be paid an amount in cash equal to such
fraction multiplied by the closing sales price of NSP Common Shares as reported
under the New York Stock Exchange Composite Transaction Reports in The Wall
Street Journal on the trading day immediately before the effective time of the
merger.
Northern States Power Common Shares and Northern States Power Preferred
Shares will remain outstanding after the merger as shares of common stock and
preferred stock of the combined company.
CONVERSION OF NCE COMMON SHARES
It is VERY IMPORTANT that New Century Energies shareholders NOT SEND in
their NCE Common Share certificates until they receive transmittal instructions
from the exchange agent.
EXCHANGE AGENT
The combined company will deposit shares of combined company common stock
to be issued in the merger with an exchange agent selected by Northern States
Power and New Century Energies.
EXCHANGE PROCEDURES
As soon as practical after we complete the merger, the exchange agent will
mail a transmittal letter and instructions to each holder of NCE Common Shares
of record at the close of business the day before the effective time of the
merger. The instructions will explain exactly what the New Century Energies
shareholders need to do to convert their NCE Common Shares (whether in
certificated or book-entry form) into shares of common stock of the combined
company.
After the effective time of the merger, each holder of NCE Common Shares
will have the right to receive shares of common stock of the combined company,
but will not receive their shares until they have complied with the exchange
agent's instructions and transmitted the required documents, including share
certificates if their NCE Common Shares are in certificated form. The exchange
agent will not issue any fractional shares that result from the conversion of
NCE Common Shares, but will instead issue a check for the value of any such
fractional share determined as described above under "-- MERGER CONSIDERATION."
TRANSFER OF OWNERSHIP
Any certificates representing NCE Common Shares will be delivered, and risk
of loss and title will pass to the exchange agent, ONLY when the exchange agent
receives such certificates. We urge
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New Century Energies shareholders to mail their certificates by certified mail
or some other secure method when they receive instructions to do so from the
exchange agent.
PAYMENTS FOLLOWING SURRENDER
New Century Energies shareholders who have not exchanged their NCE Common
Shares for shares of common stock of the combined company as described above
will not receive any dividends or other distributions declared or made after the
effective time of the merger. Once a New Century Energies shareholder has
exchanged his or her NCE Common Shares, the shareholder will be entitled to
receive, without interest:
- any cash payable instead of a fractional share of combined company common
stock to which such holder is entitled, and
- any dividends or other distributions paid after the effective time of the
merger on whole shares of common stock of the combined company, but
before the NCE Common Shares were exchanged.
ADJUSTMENT OF CONVERSION RATIO
If, prior to the effective time of the merger, the outstanding NCE Common
Shares or the outstanding NSP Common Shares are changed to a different number of
shares or a different class as a result of a stock split, reverse stock split,
stock dividend, subdivision, reclassification, combination, exchange,
recapitalization or other similar transaction, then the number of shares of
common stock of the combined company into which NCE Common Shares will be
converted in the Merger will be adjusted to provide the holders of NCE Common
Shares with the same economic equivalent of shares of common stock of the
combined company as they were entitled to receive before the change.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains representations and warranties of Northern
States Power and New Century Energies as to:
- organization and qualification,
- capital structure,
- authority and no conflicts as to the merger agreement,
- required statutory approvals for the merger,
- compliance with applicable laws and agreements,
- required filings of reports and financial statements with governmental
authorities, the compliance of those reports and filings with applicable
requirements and the absence of material misstatements or omissions from
those reports and filings and related matters,
- absence of material adverse changes or events,
- absence of material litigation,
- absence of material misstatements or omissions from the information
supplied for use in this joint proxy statement/prospectus,
- tax matters,
- employee benefit and labor matters,
- environmental matters,
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- utility regulatory status,
- the vote required to approve the merger agreement and the merger,
- absence of actions that would prevent the merger from being accounted for
as a pooling of interests,
- receipt of fairness opinions from financial advisors,
- insurance coverage,
- ownership of each other's common stock,
- implementation of programs to ensure Year 2000 functionality and related
matters, and
- non-applicability of specified statutory and company specific
anti-takeover provisions.
The merger agreement also contains some additional representations and
warranties by Northern States Power as to the nuclear operations of Northern
States Power and its subsidiaries and joint ventures; and by New Century
Energies as to the non-applicability of provisions of its rights agreement to
the merger and related matters.
CONDUCT OF BUSINESS PENDING THE MERGER
Northern States Power and New Century Energies have agreed to carry on
their businesses and that of their subsidiaries in the ordinary course until the
merger is completed or the merger agreement is terminated and to use all
commercially reasonable efforts to preserve their current business organizations
and goodwill, their customer and supplier goodwill and relationships and,
subject to prudent workforce management and ongoing or planned downsizing and
other programs, use reasonable best efforts to keep available the services of
their present officers and employees, so that their goodwill and ongoing
businesses will not be materially impaired before the merger.
In addition, each company has agreed to certain customary restrictions for
the conduct of their businesses as to:
- dividends and distributions,
- changes in capital structure,
- acquisition or disposition of stock and related securities,
- organizational documents,
- acquisitions and other uses of funds, with each company provided
significant flexibility to make acquisitions,
- dispositions of assets,
- incurrence or guarantees of indebtedness,
- capital expenditures,
- employee benefit plans and similar arrangements,
- compensation and severance agreements and other arrangements with
directors and officers,
- changes in status under the Public Utility Holding Company Act,
- accounting matters,
- payment or discharge of claims and liabilities, and
- tax status of exempt revenue bonds.
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Each company has also agreed that it and each of its subsidiaries will do
the following, except as expressly permitted by the merger agreement or with the
prior written consent of the other:
- confer with the other regularly and frequently regarding its ongoing
operations, promptly notify the other of any significant changes in
operations and provide copies of filings and cooperate with each other,
- consult with each other regarding regulated rates or charges or standards
of service or accounting or regulatory filings and not make any filing to
change rates that would have a material adverse effect on the benefits
associated with the merger,
- use commercially reasonable efforts to obtain all required third-party
consents and to notify each other of any failure to obtain such consents,
- maintain insurance in such amounts and against such risks and losses as
are customary in their respective industries, and
- use reasonable efforts to maintain existing permits.
NO SOLICITATION
The merger agreement requires each company to immediately stop all existing
discussions and negotiations about a Takeover Proposal (which is defined below),
if any, with any other persons conducted prior to the date of the merger
agreement.
Both companies have also agreed that they, their subsidiaries and their
directors, officers, employees, accountants, counsel, investment banker,
financial advisor and other representatives, directly or indirectly, will not:
- initiate, solicit or encourage, or take any action to facilitate the
making of any Takeover Proposal, or
- engage in negotiations or provide any confidential information or data to
any person relating to any Takeover Proposal.
A "TAKEOVER PROPOSAL" means any offer or proposal that constitutes or is
reasonably likely to lead to any inquiry, proposal or offer from any person
relating to any:
- direct or indirect acquisition or purchase of a business that constitutes
15% or more of the net revenues, net income or the assets of such company
and its subsidiaries taken as a whole or 15% or more of any class of its
equity securities or the equity securities of any of its significant
subsidiaries, or
- any merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving such company or
any of its significant subsidiaries, other than the transactions
contemplated by the merger agreement.
In addition, each company will notify the other company of any such
inquiries, offers or proposals within 24 hours of its receipt and will give the
other company five days advance notice of any agreement to be entered into with,
or any information to be supplied to, any person making such an inquiry, offer
or proposal.
However, before the shareholders of each of Northern States Power and New
Century Energies have approved the merger, if (1) there is an unsolicited
Takeover Proposal for the acquisition, directly or indirectly, of 50% or more of
the combined voting power of the shares of the common stock of either company or
all or substantially all of the assets of either company and its subsidiaries
and (2) such Takeover Proposal did not result from a breach of the merger
agreement, the company which is the subject of the Takeover Proposal may
participate in discussions or negotiations regarding
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the Takeover Proposal and furnish information to and afford access to the
properties, books and records of such company and its subsidiaries to the party
making the Takeover Proposal, if:
- the board of the directors of the company has reasonably concluded in
good faith (after consultation with its financial advisors) that the
person or group making the Takeover Proposal will have adequate sources
of financing to consummate the Takeover Proposal and that the Takeover
Proposal is more favorable to the company's shareholders than the merger,
- the board of directors of the company has determined in good faith, based
on advice of outside counsel with respect to the board's fiduciary duties
under applicable law with respect to the proposed Takeover Proposal and
such other matters as the board deems relevant, that it is necessary to
do so in order to act in a manner consistent with its fiduciary duties to
its shareholders, and
- the company has entered into a confidentiality agreement with the person
or group making the Takeover Proposal containing terms and conditions no
less favorable to the company than the existing confidentiality agreement
between Northern States Power and New Century Energies.
WORKFORCE AND EMPLOYEE BENEFIT MATTERS
CONTINUATION OF AGREEMENTS
New Century Energies and Northern States Power agreed that the combined
company and its subsidiaries will honor, without modification, all contracts,
agreements, collective bargaining agreements and commitments applicable to any
current or former employees or directors of Northern States Power and New
Century Energies. However, this undertaking is not intended to prevent the
combined company from enforcing its contracts, agreements and commitments in
accordance with their terms or from enforcing any right to amend, modify,
suspend, revoke or terminate them.
EMPLOYEE BENEFIT PLANS
Under the merger agreement, employee benefit plans will be treated in the
following manner:
- anyone who was employed by Northern States Power or New Century Energies
or any of their subsidiaries immediately before the merger and who
continues to be employed by the combined company or any of its
subsidiaries after the merger will be credited with his or her pre-merger
years of service with Northern States Power or New Century Energies under
any employee benefit plan providing benefits after the merger, unless
providing credit would result in a duplication of benefits,
- any continuing employee will also be immediately eligible to participate
in new plans without any waiting time or other conditions to
participation to the extent they replace existing plans, except for
conditions that were applicable under the old plans, and
- for a period of one year after the merger, the compensation and employee
benefits provided to continuing employees will be no less favorable, in
the aggregate, than the compensation and employee benefits provided to
them immediately before the merger.
WORKFORCE REDUCTIONS
Subject to applicable collective bargaining agreements, for a period of two
years following the merger:
- any workforce reductions will be made on a fair and equitable basis, in
light of the circumstances and the objectives to be achieved, and without
regard to whether the affected
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individuals were employed by Northern States Power and its subsidiaries
or New Century Energies and its subsidiaries before the merger, and
- any employee whose employment is terminated or whose job is eliminated by
the combined company or any of its subsidiaries during the two year
period will be entitled to participate on a fair and equitable basis in
the job opportunity and placement programs offered by the combined
company or any of its subsidiaries.
TREATMENT OF INCENTIVE, STOCK AND OTHER PLANS
Each company will take action so that after the merger, the New Century
Energies equity plans and the New Century Energies Dividend Reinvestment and
Cash Payment Plan will provide for the issuance only of the common stock of the
combined company, with adjustments to reflect the merger. All outstanding
options will be adjusted so that the options cover an appropriate number of
shares of the common stock of the combined company, with appropriate adjustments
to the exercise price.
In addition, the combined company will:
- take steps to enable such plans to provide appropriate exemptions under
Rule 16b-3 of the Securities Exchange Act, if it decides such steps are
advisable;
- reserve for issuance or otherwise provide a sufficient number of shares
of common stock of the combined company for delivery under such plans,
and
- file any necessary registration statements under the Securities Act for
the shares of common stock of the combined company subject to such plans
as soon as practicable after the merger, and use reasonable best efforts
to keep the registration statements effective as necessary.
INSURANCE AND INDEMNIFICATION
INSURANCE
For six years after the merger, the combined company will maintain in
effect Northern States Power's and New Century Energies' current directors' and
officers' liability insurance (or policies containing substantially similar
coverage) covering matters occurring at or prior to the effective time of the
merger. The combined company will not, however, be required to pay, in total, an
annual premium for the insurance described in this paragraph in excess of 200%
of the current annual premiums paid by Northern States Power and New Century
Energies for their existing coverage prior to the merger. However, if the annual
premiums of that insurance coverage exceed that amount, the combined company
will be obligated to obtain a policy with the best coverage available for a cost
up to but not exceeding that amount.
INDEMNIFICATION
To the extent not already provided by a current indemnification right or
agreement, from and after the merger, the combined company will, to the fullest
extent permitted under applicable law, indemnify each person who is, or has
been, an officer, director or management employee of Northern States Power or
New Century Energies or any of their subsidiaries against (1) all losses,
damages and expenses, including reasonable attorney's fees, in connection with
any claim, lawsuit or investigation arising out of or pertaining to acts or
omissions, or alleged acts or omissions by them in their capacities as such at
or prior to the effective time of the merger or (2) all liabilities arising out
of or pertaining to the merger agreement and the transactions contemplated by
the merger agreement.
If the merger is completed, each director, officer, employee or agent of
Northern States Power or New Century Energies or their subsidiaries will, for a
period of six years after the merger, be entitled to the benefit of all existing
indemnification rights with respect to their activities as such as provided
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in the charter documents, by-laws or indemnification agreements of their
respective companies as existing at the time of such activities or otherwise in
effect on the date of the merger agreement.
AMENDMENT OF ARTICLES OF INCORPORATION
At the effective time of the merger, as part of the merger, the articles of
incorporation of the combined company will be amended to increase the authorized
number of shares of common stock from 350 million to one billion shares and to
reflect the combined company's new name.
CONDITIONS TO THE MERGER
CONDITIONS TO EACH COMPANY'S OBLIGATIONS TO COMPLETE THE MERGER
Unless waived in writing, the obligations of each company to complete the
merger are subject to the satisfaction of the following conditions:
- the shareholders of each of New Century Energies and Northern States
Power having approved the merger agreement and the merger,
- no temporary restraining order, preliminary or permanent injunction or
other order by any federal or state court being in effect that prevents
the merger, and the merger and the other transactions contemplated by the
merger agreement not having been prohibited by any applicable federal or
state law or regulation,
- the registration statement filed with this joint proxy
statement/prospectus having become effective and not being the subject of
any stop order suspending its effectiveness,
- the shares of common stock of the combined company issuable in the merger
having been approved for listing on the New York Stock Exchange, subject
to official notice of issuance,
- each company having received the letter of its independent public
accountants, dated the closing date of the merger, with respect to the
accounting of the merger as a pooling-of-interests, and
- New Century Energies and Northern States Power having obtained the
statutory approvals required by the merger agreement, those approvals
having become final orders and no final order imposing terms and
conditions that would have, or would be reasonably likely to have, a
material adverse effect on the business of either New Century Energies
and its subsidiaries as a whole or Northern States Power and its
subsidiaries as a whole.
CONDITIONS TO THE OBLIGATIONS OF NEW CENTURY ENERGIES
The obligations of New Century Energies to complete the merger are subject
to the following additional conditions, unless waived in writing:
- Northern States Power having performed the agreements and covenants
required to be performed by it under the merger agreement in all material
respects (except that the agreement of Northern States Power as to the
issuance of dividends must be performed in all respects),
- the representations and warranties of Northern States Power being true
and correct as of the closing date of the merger as if they had been made
on and as of that date, other than as expressly provided in the merger
agreement, except for any inaccuracies which would not, in the aggregate,
be reasonably expected to have a material adverse effect on the business
of Northern States Power and its subsidiaries as a whole,
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- New Century Energies having received an officers' certificate from
Northern States Power stating that specified conditions in the merger
agreement have been satisfied,
- no material adverse effect having occurred and no fact or circumstance
existing that would have, or would be reasonably likely to have a
material adverse effect on the business of Northern States Power and its
subsidiaries taken as a whole,
- New Century Energies having received an opinion of counsel that the
merger will be treated as a transaction described in Section 368(a) of
the Internal Revenue Code and that no gain or loss will be recognized by
the shareholders of New Century Energies who are United States persons
and who exchange NCE Common Shares solely for shares of common stock of
the combined company in the merger (except with respect to cash received
instead of fractional shares), and
- Northern States Power having obtained all third-party consents required
by the merger agreement if Northern States Power's failure to obtain them
would cause a material adverse effect on the business of Northern States
Power and its subsidiaries taken as a whole.
CONDITIONS TO THE OBLIGATIONS OF NORTHERN STATES POWER
The obligations of Northern States Power to complete the merger are subject
to the following additional conditions, unless waived in writing:
- New Century Energies having performed the agreements and covenants
required to be performed by it under the merger agreement in all material
respects (except that the agreement of New Century Energies as to the
issuance of dividends must be performed in all respects),
- the representations and warranties of New Century Energies being true and
correct as of the closing date of the merger as if they had been made on
and as of that date, other than as expressly provided in the merger
agreement, except for any inaccuracies which would not, in the aggregate,
be reasonably expected to have a material adverse effect on the business
of New Century Energies and its subsidiaries as a whole,
- Northern States Power having received an officers' certificate from New
Century Energies stating that specified conditions in the merger
agreement have been satisfied,
- no material adverse effect having occurred and no fact or circumstance
existing that would have, or would be reasonably likely to have a
material adverse effect on the business of New Century Energies and its
subsidiaries as a whole,
- Northern States Power having received an opinion of counsel that the
merger will be treated as a transaction described in Section 368(a) of
the Internal Revenue Code, and
- New Century Energies' having obtained all third-party consents required
by the merger agreement if New Century Energies' failure to obtain them
would cause a material adverse effect on the business of New Century
Energies and its subsidiaries as a whole.
TERMINATION
TERMINATION CONDITIONS
The merger agreement may be terminated at any time prior to the closing
date of the merger, whether before or after approval by the shareholders of
either company:
- by mutual written consent of the Boards of Directors of Northern States
Power and New Century Energies,
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- by either Northern States Power or New Century Energies, if the effective
time of the merger has not occurred on or before March 24, 2000. However,
we will not be permitted to terminate the merger agreement under this
provision until December 24, 2000, if on March 24, 2000, all conditions
other than obtaining regulatory approvals have been or can be satisfied,
- by either Northern States Power or New Century Energies, if the
shareholders of either company do not approve the merger agreement and
the merger at their special meeting or any adjournment,
- by either Northern States Power or New Century Energies, if any state or
federal law, rule, order, rule or regulation prohibits the merger or
causes a material adverse effect on the business of either company and
its subsidiaries as a whole (such determination must be supported by an
opinion of outside counsel),
- by either Northern States Power or New Century Energies if any court or
governmental authority issues a nonappealable final order or other
permanent action, restraining, enjoining or otherwise prohibiting the
merger or causing a material adverse effect on the business of either
company and its subsidiaries as a whole,
- by either Northern States Power or New Century Energies, if there have
been any breaches of any representation or warranty of the other company
under the merger agreement which, individually or together, would or
would be reasonably likely to have a material adverse effect on the
business of the breaching company and its subsidiaries as a whole and the
breaches remain uncured 20 days after notice from the terminating
company,
- by either Northern States Power or New Century Energies, if there has
been (1) any breach of the other company's agreement as to the issuance
of dividends, (2) any material breach of the other company's agreement as
to the issuance of securities or the incurrence of debt or (3) any
material breach of the other company's other agreements under the merger
agreement, which remains uncured 20 days after notice from the
terminating company,
- by either Northern States Power or New Century Energies, if the board of
directors of the other company (1) withdraws or modifies its approval of
the merger agreement and the merger in a manner adverse to the
terminating company, (2) fails to reaffirm its approval within 15 days
after the request of the terminating company, (3) approves or recommends
any third-party Takeover Proposal, or (4) resolves to take any of the
preceding actions, or
- by Northern States Power, if New Century Energies takes specified actions
with respect to its existing shareholder rights plan.
In addition, either Northern States Power or New Century Energies, upon two
days written notice to the other, may terminate the merger agreement if its
board of directors determines to accept a third-party tender offer or any
written offer or proposal to acquire, directly or indirectly, 50% or more of the
combined voting power of the company's common stock or all or substantially all
of its and its subsidiaries' assets as a whole (each a "BUSINESS COMBINATION").
However, neither company is permitted to terminate under this provision unless:
- its board of directors reasonably concludes in good faith (after
consultation with its financial advisors) that the person or group
proposing the Business Combination will have adequate financing to
consummate the Business Combination and that the Business Combination is
more favorable to its shareholders than the merger,
- prior to terminating, it has negotiated with the other company to make
such adjustments in the terms and conditions of the merger agreement
which would allow the terminating company to proceed with the merger, and
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- its board of directors determines in good faith, based on advice of
outside counsel with respect to its fiduciary duties under applicable law
with respect to the proposed Business Combination and such other matters
as the board of directors deems to be relevant that, despite the binding
commitment to consummate an agreement like the merger agreement and
despite all concessions which may be offered by the other company in the
negotiations described above, the directors' fiduciary duties would
require them to reconsider such commitment as a result of the tender
offer or written offer or proposal.
EFFECT OF TERMINATION
If the merger agreement is terminated, Northern States Power, New Century
Energies and their officers or directors will have no liability under the merger
agreement, other than as provided in the merger agreement and as described below
under "-- TERMINATION FEES."
TERMINATION FEES
If either company terminates the merger agreement because of a breach of a
representation or warranty or covenant or agreement by the other company as
described above under "-- TERMINATION CONDITIONS," the breaching company will
pay in cash to the terminating company all out-of-pocket expenses and fees
incurred by the terminating company up to $25 million. However, if the merger
agreement is terminated as the result of a willful breach, the terminating
company may recover additional amounts at law or in equity and the company's
out-of-pocket expenses will not be limited to $25 million.
If either company terminates the merger agreement because its board of
directors determines that its fiduciary duties make it necessary to accept an
alternative business combination as described above under "-- TERMINATION
CONDITIONS," the terminating company will pay the other company $150 million
plus out-of-pocket expenses and fees up to $25 million.
If either company terminates the merger agreement because the other
company's board of directors modifies or withdraws its approval of the merger
and the merger agreement, the nonterminating company will pay the other company
$150 million plus out-of-pocket expenses.
In addition, if the merger agreement terminates because (1) the merger does
not occur by the required date, (2) the shareholders of either company fail to
approve the merger or (3) there is a breach of certain agreements of that
company in connection with obtaining its shareholder approval and, at the time
of termination (or at the time of such failure to approve the merger), there was
a third-party Takeover Proposal involving that company which, at the time of
termination was not rejected by that company and its board of directors and
withdrawn by the third-party and that company enters into a definitive business
combination within 18 months of the termination of the merger agreement, then it
shall pay the other company $150 million plus out-of-pocket expenses and fees up
to $25 million.
Finally, if Northern States Power terminates the merger agreement because
New Century Energies takes specified actions with respect to its existing
shareholder rights plan as described above under "-- TERMINATION CONDITIONS,"
New Century Energies will pay Northern States Power $150 million plus
out-of-pocket expenses and fees up to $25 million.
However, no such amount will be payable if and to the extent the company
obligated to make such payment has already paid such amounts pursuant to any
other termination fee provision of the merger agreement.
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EXPENSES
Northern States Power and New Century Energies are sharing equally the
expenses of printing and filing this joint proxy statement/prospectus. New
Century Energies and Northern States Power will pay all other costs and expenses
that they separately incur in connection with the merger agreement.
AMENDMENT AND WAIVER
AMENDMENT
The merger agreement may be amended by action taken by the boards of
directors of Northern States Power and New Century Energies at any time before
the merger. However, after the approval of the merger by the shareholders of
Northern States Power and New Century Energies, no such action may alter or
change:
- the amount or kind of shares, rights or any of the proceedings of the
exchange and/or conversion with respect to the shares of common stock of
the combined company to be issued under the merger agreement, or
- any of the terms and conditions of the merger agreement that would
materially adversely affect the rights of the holders of NCE Common
Shares, except those which can otherwise be adopted without further
shareholder approval.
WAIVER
At any time before the merger, Northern States Power or New Century
Energies may:
- extend the time for the performance of any of the obligations or other
acts of the other company under the merger agreement,
- waive any inaccuracies in the representations and warranties of the other
company, and
- waive compliance with any of the agreements or conditions for its benefit
in the merger agreement.
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UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma combined condensed financial statements
give effect to the merger using the pooling of interests method of accounting.
Under this accounting method, Northern States Power's and New Century Energies'
balance sheets and income statements are treated as if they had always been
combined for accounting and financial reporting purposes. These unaudited pro
forma combined condensed financial statements should be read in conjunction with
the historical financial statements and related notes of Northern States Power
and New Century Energies which are incorporated by reference in this joint proxy
statement/prospectus. See "WHERE YOU CAN FIND MORE INFORMATION" on page 102.
The unaudited pro forma combined condensed balance sheet at December 31,
1998 assumes the merger had been completed on December 31, 1998. The unaudited
pro forma combined condensed statements of income for the three years ended
December 31, 1998 assume the merger had been completed on January 1, 1996, the
beginning of the earliest period presented.
The unaudited pro forma combined condensed financial statements do not
necessarily indicate what the combined company's financial position or operating
results would have been if the merger had been completed on the assumed
completion dates and they do not necessarily indicate future operating results
of the combined company.
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UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
REFLECTING COMPLETION OF THE MERGER
YEAR ENDED DECEMBER 31, 1998
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
NORTHERN NEW CENTURY REPORTING
STATES POWER ENERGIES ADJUSTMENTS PRO FORMA PRO FORMA
(AS REPORTED) (AS REPORTED) (NOTE 2) ADJUSTMENTS COMBINED
------------- ------------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES
Electric................................... $2,362,351 $2,697,486 $ (74,518) $ $4,985,319
Gas........................................ 456,823 841,276 (188,095) 1,110,004
Nonregulated and other revenues............ -- 72,143 444,843 516,986
Earnings from equity investments........... -- -- 115,985 115,985
---------- ---------- --------- ------- ----------
Total Operating Revenues............... 2,819,174 3,610,905 298,215 6,728,294
OPERATING EXPENSES
Electric fuel and purchased power.......... 689,275 1,357,198 (72,709) 1,973,764
Cost of gas sold and transported........... 267,050 562,583 (170,140) 659,493
Other operation and maintenance............ 794,332 637,743 (90,607) 1,341,468
Depreciation and amortization.............. 338,225 268,743 (8,055) 598,913
Taxes other than income taxes.............. 220,620 134,137 (2,175) 352,582
Income taxes -- utility.................... 145,383 -- (145,383) --
Nonregulated operating expenses............ -- -- 592,106 592,106
---------- ---------- --------- ------- ----------
Total Operating Expenses............... 2,454,885 2,960,404 103,037 5,518,326
OPERATING INCOME............................. 364,289 650,501 195,178 1,209,968
OTHER INCOME (EXPENSE)
Income from nonregulated businesses before
interest and taxes....................... 51,171 -- (51,171) --
Equity earnings from unconsolidated
subsidiaries............................. -- 36,101 (36,101) --
Other income (deductions) -- net........... 4,812 (4,250) 37,477 38,039
Income taxes on nonregulated and
nonoperating items -- benefit............ 40,588 -- (40,588) --
---------- ---------- --------- ------- ----------
Total Other Income (Expense)........... 96,571 31,851 (90,383) 38,039
FINANCING COSTS
Interest charges........................... 162,737 181,906 -- 344,643
Distributions on mandatorily redeemable
preferred securities of subsidiary
trusts................................... 15,750 17,561 -- 33,311
Dividends & redemption premiums on
preferred stock of subsidiaries.......... -- 5,332 -- 5,332
---------- ---------- --------- ------- ----------
Total Financing Costs.................. 178,487 204,799 -- 383,286
INCOME BEFORE INCOME TAXES................... 282,373 477,553 104,795 864,721
Income taxes................................. -- 135,596 104,795 240,391
---------- ---------- --------- ------- ----------
NET INCOME................................... 282,373 341,957 -- 624,330
Preferred dividends & redemption premiums of
NSP........................................ 5,548 -- -- 5,548
---------- ---------- --------- ------- ----------
EARNINGS AVAILABLE FOR COMMON SHAREHOLDERS... $ 276,825 $ 341,957 $ -- $ $ 618,782
========== ========== ========= ======= ==========
Average common shares outstanding (Note 1)... 150,502 111,859 61,522 323,883
Average common and potentially diluted shares
outstanding (Note 1)....................... 150,743 112,008 61,604 324,355
BASIC EARNINGS PER SHARE..................... $1.84 $3.06 $1.91
----- ----- -----
----- ----- -----
DILUTED EARNINGS PER SHARE................... $1.84 $3.05 $1.91
----- ----- -----
----- ----- -----
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements
80
<PAGE> 87
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
REFLECTING COMPLETION OF THE MERGER
YEAR ENDED DECEMBER 31, 1997
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
NORTHERN NEW CENTURY REPORTING
STATES POWER ENERGIES ADJUSTMENTS PRO FORMA PRO FORMA
(AS REPORTED) (AS REPORTED) (NOTE 2) ADJUSTMENTS COMBINED
------------- ------------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES
Electric...................................... $2,218,550 $2,473,359 $ (22,861) $ $4,669,048
Gas........................................... 515,196 816,596 (179,257) 1,152,535
Nonregulated and other revenues............... -- 52,570 425,689 478,259
Earnings from equity investments.............. -- -- 52,766 52,766
---------- ---------- --------- ------- ----------
Total Operating Revenues.................. 2,733,746 3,342,525 276,337 6,352,608
OPERATING EXPENSES
Electric fuel and purchased power............. 596,238 1,203,292 (21,938) 1,777,592
Cost of gas sold and transported.............. 331,296 543,291 (167,902) 706,685
Other operation and maintenance............... 745,828 594,359 (57,268) 1,282,919
Depreciation and amortization................. 325,880 243,078 (9,414) 559,544
Taxes other than income taxes................. 227,893 129,280 (2,007) 355,166
Income taxes -- utility....................... 144,855 -- (144,855) --
Nonregulated operating expenses............... -- -- 525,668 525,668
---------- ---------- --------- ------- ----------
Total Operating Expenses.................. 2,371,990 2,713,300 122,284 5,207,574
OPERATING INCOME................................ 361,756 629,225 154,053 1,145,034
OTHER INCOME (EXPENSE)
Income from nonregulated businesses before
interest and taxes.......................... 12,078 -- (12,078) --
Equity earnings from unconsolidated
subsidiaries................................ -- 34,166 (34,166) --
Merger costs.................................. (29,005) (34,088) -- (63,093)
Other income (deductions) -- net.............. 3,515 (27,267) 37,046 13,294
Income taxes on nonregulated and nonoperating
items -- benefit............................ 48,145 -- (48,145) --
---------- ---------- --------- ------- ----------
Total Other Income (Expense).............. 34,733 (27,189) (57,343) (49,799)
FINANCING COSTS
Interest charges.............................. 144,732 187,028 -- 331,760
Distributions on mandatorily redeemable
preferred securities of subsidiary trusts... 14,437 7,850 -- 22,287
Dividends on preferred stock of
subsidiaries................................ -- 11,752 -- 11,752
---------- ---------- --------- ------- ----------
Total Financing Costs..................... 159,169 206,630 -- 365,799
INCOME BEFORE INCOME TAXES AND EXTRAORDINARY
ITEM.......................................... 237,320 395,406 96,710 729,436
Income taxes.................................... -- 133,919 96,710 230,629
---------- ---------- --------- ------- ----------
INCOME BEFORE EXTRAORDINARY ITEM................ 237,320 261,487 -- 498,807
Extraordinary item -- UK Windfall Tax........... -- (110,565) -- (110,565)
---------- ---------- --------- ------- ----------
NET INCOME...................................... 237,320 150,922 -- 388,242
Preferred dividends & redemption premiums of
NSP........................................... 11,071 -- -- 11,071
---------- ---------- --------- ------- ----------
EARNINGS AVAILABLE FOR COMMON SHAREHOLDERS...... $ 226,249 $ 150,922 $ -- $ $ 377,171
========== ========== ========= ======= ==========
Average common shares outstanding (Note 1)...... 140,594 104,805 57,643 303,042
Average common and potentially diluted shares
outstanding (Note 1).......................... 140,870 104,872 57,680 303,422
EARNINGS PER SHARE -- BASIC AND DILUTED:
INCOME BEFORE EXTRAORDINARY ITEM.............. $ 1.61 $ 2.50 $ 1.61
EXTRAORDINARY ITEM............................ -- (1.06) (0.37)
------ ------- -----
TOTAL..................................... $ 1.61 $ 1.44 $ 1.24
------ ------- -----
------ ------- -----
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements
81
<PAGE> 88
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
REFLECTING COMPLETION OF THE MERGER
YEAR ENDED DECEMBER 31, 1996
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
NORTHERN NEW CENTURY REPORTING
STATES POWER ENERGIES ADJUSTMENTS PRO FORMA PRO FORMA
(AS REPORTED) (AS REPORTED) (NOTE 2) ADJUSTMENTS COMBINED
------------- ------------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES
Electric................................... $2,127,413 $2,416,539 $ (7,806) $ $4,536,146
Gas........................................ 526,793 640,497 (68,880) 1,098,410
Nonregulated and other revenues............ -- 39,998 380,589 420,587
Earnings from equity investments........... -- -- 31,057 31,057
---------- ---------- --------- ------- ----------
Total Operating Revenues............... 2,654,206 3,097,034 334,960 6,086,200
OPERATING EXPENSES
Electric fuel and purchased power.......... 544,763 1,145,862 (7,649) 1,682,976
Cost of gas sold and transported........... 335,453 393,163 (61,257) 667,359
Other operation and maintenance............ 707,280 568,581 (35,389) 1,240,472
Depreciation and amortization.............. 306,432 224,865 (7,561) 523,736
Taxes other than income taxes.............. 232,824 128,980 (1,429) 360,375
Income taxes -- utility.................... 161,410 -- (161,410) --
Nonregulated operating expenses............ -- -- 455,163 455,163
---------- ---------- --------- ------- ----------
Total Operating Expenses............... 2,288,162 2,461,451 180,468 4,930,081
OPERATING INCOME............................. 366,044 635,583 154,492 1,156,119
OTHER INCOME (EXPENSE)
Income from nonregulated businesses before
interest and taxes....................... 18,543 -- (18,543) --
Equity earnings from unconsolidated
subsidiaries............................. -- 389 (389) --
Merger costs............................... -- (21,107) -- (21,107)
Other income (deductions) -- net........... 6,051 (13,775) 25,850 18,126
Income taxes on nonregulated and
nonoperating items -- benefit............ 14,600 -- (14,600) --
---------- ---------- --------- ------- ----------
Total Other Income (Expense)........... 39,194 (34,493) (7,682) (2,981)
FINANCING COSTS
Interest charges........................... 130,699 161,601 -- 292,300
Distributions on mandatorily redeemable
preferred securities of subsidiary
trusts................................... -- 1,526 -- 1,526
Dividends on preferred stock of
subsidiaries............................. -- 11,969 -- 11,969
---------- ---------- --------- ------- ----------
Total Financing Costs.................. 130,699 175,096 -- 305,795
INCOME BEFORE INCOME TAXES................... 274,539 425,994 146,810 847,343
Income taxes................................. -- 153,653 146,810 300,463
---------- ---------- --------- ------- ----------
NET INCOME................................... 274,539 272,341 -- 546,880
Preferred dividends & redemption premiums of
NSP........................................ 12,245 -- -- 12,245
---------- ---------- --------- ------- ----------
EARNINGS AVAILABLE FOR COMMON SHAREHOLDERS... $ 262,294 $ 272,341 -- $ $ 534,635
========== ========== ========= ======= ==========
Average common shares outstanding (Note 1)... 137,121 103,059 56,682 296,862
Average common and potentially diluted shares
outstanding (Note 1)....................... 137,358 103,102 56,706 297,166
BASIC AND DILUTED EARNINGS PER SHARE......... $1.91 $2.64 $1.80
============= ========== ==========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements
82
<PAGE> 89
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
REFLECTING COMPLETION OF THE MERGER
DECEMBER 31, 1998
(In thousands)
<TABLE>
<CAPTION>
REPORTING
NSP NCE ADJUSTMENTS PRO FORMA PRO FORMA
(AS REPORTED) (AS REPORTED) (NOTE 3) ADJUSTMENTS COMBINED
------------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
PROPERTY, PLANT AND EQUIPMENT
Electric............................................. $7,199,843 $7,097,070 $(120,095) $ $14,176,818
Gas.................................................. 884,182 1,210,605 (10,537) 2,084,250
Other................................................ 365,101 926,007 535,601 1,826,709
---------- ---------- --------- ---------- -----------
Total Property, Plant and Equipment.............. 8,449,126 9,233,682 404,969 18,087,777
Accumulated provision for depreciation............... (4,155,641) (3,351,659) (122,445) (7,629,745)
Nuclear fuel -- net.................................. 101,749 -- -- 101,749
---------- ---------- --------- ---------- -----------
Net Property, Plant and Equipment................ 4,395,234 5,882,023 282,524 10,559,781
CURRENT ASSETS
Cash and cash equivalents............................ 42,364 56,667 99,031
Accounts receivable -- net........................... 354,215 319,145 673,360
Accrued unbilled utility revenues.................... 139,098 130,455 269,553
Fuel and gas inventories............................. 58,806 77,277 136,083
Material and supplies inventories.................... 110,267 69,298 179,565
Prepayments and other................................ 49,315 149,715 199,030
---------- ---------- --------- ---------- -----------
Total Current Assets............................. 754,065 802,557 1,556,622
OTHER ASSETS
Equity investments................................... 862,596 340,874 1,203,470
External decommissioning fund and other
investments........................................ 479,402 64,562 543,964
Regulatory assets.................................... 331,940 381,632 713,572
Non-regulated property -- net........................ 282,524 -- (282,524) --
Other................................................ 290,536 200,316 0 490,852
---------- ---------- --------- ---------- -----------
Total Other Assets............................... 2,246,998 987,384 (282,524) 2,951,858
---------- ---------- --------- ---------- -----------
TOTAL ASSETS......................................... $7,396,297 $7,671,964 $ $ $15,068,261
========== ========== ========= ========== ===========
LIABILITIES AND EQUITY
CAPITALIZATION
Common stock (Note 1)................................ $ 381,742 $ 114,491 $ $ 329,162 $ 825,395
Other stockholders' equity (Note 1).................. 2,099,504 2,500,336 (329,162) 4,270,678
---------- ---------- --------- ---------- -----------
Total Common Stockholders' Equity................ 2,481,246 2,614,827 5,096,073
Preferred stockholders' equity....................... 105,340 -- 105,340
Mandatorily redeemable preferred securities of
subsidiary trusts.................................. 200,000 294,000 494,000
Long-term debt....................................... 1,851,146 2,205,545 4,056,691
---------- ---------- --------- ---------- -----------
Total Capitalization............................. 4,637,732 5,114,372 9,752,104
CURRENT LIABILITIES
Current portion of long-term debt.................... 369,200 138,165 507,365
Short-term debt...................................... 239,830 524,394 764,224
Accounts payable..................................... 271,799 285,080 556,879
Taxes accrued........................................ 170,274 85,384 255,658
Other accrued liabilities............................ 181,159 291,800 472,959
---------- ---------- --------- ---------- -----------
Total Current Liabilities........................ 1,232,262 1,324,823 2,557,085
OTHER LIABILITIES
Deferred income taxes................................ 814,983 947,247 1,762,230
Deferred investment tax credits...................... 128,444 100,925 229,369
Regulatory liabilities............................... 372,239 -- 372,239
Other................................................ 210,637 184,597 395,234
---------- ---------- --------- ---------- -----------
Total Other Liabilities.......................... 1,526,303 1,232,769 2,759,072
---------- ---------- --------- ---------- -----------
TOTAL LIABILITIES AND EQUITY......................... $7,396,297 $7,671,964 $ $ $15,068,261
========== ========== ========= ========== ===========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements
83
<PAGE> 90
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
1. The unaudited pro forma combined condensed financial statements reflect the
conversion of each NCE Common Share into 1.55 shares of common stock of the
combined company and the continuation of each NSP Common Share outstanding as
one share of common stock of the combined company ($2.50 par value), as
provided in the merger agreement. The unaudited pro forma combined condensed
financial statements are presented as if the companies were combined during
all periods included therein.
2. The unaudited pro forma combined condensed income statements reflect certain
reclassifications to conform the presentation of operating results. These
reporting adjustments include: (a) separate presentation of nonregulated
revenues and equity earnings in Operating Revenues; (b) separate presentation
of all nonregulated expenses, including project write-downs, in Operating
Expenses; (c) presentation of nonregulated interest and other income,
including gains for project sales, in Other Income (Deductions) -- Net; and
(d) presentation of all income taxes (regulated and nonregulated) on a single
line before arriving at Net Income.
3. The unaudited pro forma combined condensed balance sheet reflects reporting
adjustments to conform the presentation of: (a) investments and deferred
charges (in Other Assets); (b) nonregulated property (in Property, Plant and
Equipment); and (c) construction work in progress (in Other Property, Plant
and Equipment).
4. The allocation of the estimated cost savings resulting from the merger to
Northern States Power, New Century Energies and their customers, net of the
costs incurred to achieve such savings, will be subject to regulatory review
and approval. At the time the merger agreement was signed, cost savings
resulting from the merger were estimated to be approximately $1.1 billion
over a ten-year period, net of transaction costs (including fees for
financial advisors, attorneys, accountants, filings and printing) and net of
costs to achieve the savings. None of the estimated cost savings, the costs
to achieve such savings, or the transaction costs have been reflected in the
unaudited pro forma combined financial statements. Nonrecurring costs
directly attributable to the merger are expected to be deferred and amortized
to expense in periods subsequent to the consummation of the merger consistent
with the anticipated recovery in rates. Accordingly, no pro forma adjustments
have been made to retained earnings.
5. Intercompany transactions (including purchased and exchanged power
transactions) between Northern States Power and New Century Energies during
the periods presented were not material and, accordingly, no pro forma
adjustments were made to eliminate such transactions.
84
<PAGE> 91
SECURITY OWNERSHIP OF MANAGEMENT
NEW CENTURY ENERGIES
The following table contains information on the beneficial ownership of NCE
Common Shares, as of January 29, 1999, by (1) each director and those executive
officers named in the Summary Compensation Table included in New Century
Energies' annual meeting proxy statement dated March 29, 1999, and (2) all
directors and executive officers as a group. Unless otherwise indicated, all NCE
Common Shares are owned of record by the individuals named and the beneficial
ownership consists of sole voting power and sole investment power. The number of
NCE Common Shares beneficially owned by each of the persons listed below
includes NCE Common Shares subject to options that are now or become exercisable
within 60 days from January 29, 1999.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
BENEFICIAL % OF
NAME OF BENEFICIAL OWNER OWNERSHIP(A)(B) CLASS(D)
------------------------ -------------------- --------
<S> <C> <C>
Wayne H. Brunetti(1)....................................... 372,343(c)
C. Coney Burgess(2)........................................ 3,003
Danny H. Conklin(3)........................................ 6,291
Giles M. Forbess........................................... 2,412
Gayle L. Greer............................................. 1,100
Bill D. Helton (4)......................................... 326,760(c)
R. R. Hemminghaus.......................................... 866
A. Barry Hirschfeld........................................ 4,820
J. Howard Mock............................................. 1,361
Albert F. Moreno........................................... 0
Will F. Nicholson, Jr.(5).................................. 4,022
J. Michael Powers.......................................... 6,012
Rodney E. Slifer........................................... 7,846
W. Thomas Stephens......................................... 5,383
Robert G. Tointon(6)....................................... 6,265
Richard C. Kelly(7)........................................ 110,556(c)
Paul J. Bonavia............................................ 88,400(c)
David M. Wilks(8).......................................... 100,027(c)
All the above and other executive officers as a group (23
persons)................................................. 1,241,297(c) 1.07%
</TABLE>
- -------------------------
(a) The NCE Common Shares represented above include those shares, if any, held
under the New Century Energies Employees Savings and Stock Ownership Plan.
(b) Excludes share equivalents held by Ms. Greer (973), Mr. Hemminghaus (2,194),
Mr. Mock (2,738), Mr. Powers (926), Mr. Slifer (1,853), Mr. Stephens (1,946)
and Mr. Tointon (587) pursuant to the New Century Energies Directors'
Voluntary Deferral Plan. These share equivalents have no voting or
investment powers.
(c) The number of shares includes those which the following have the right to
acquire as of January 29, 1999, through the exercise of options, currently
exercisable or exercisable within 60 days, granted under the New Century
Energies Omnibus Incentive Plan and the predecessor PSCo. Omnibus Incentive
Plan and the SPS 1989 Stock Incentive Plan: Mr. Helton, 296,000 shares; Mr.
Brunetti, 348,334 shares; Mr. Kelly, 100,000 shares; Mr. Bonavia, 88,000
shares; Mr. Wilks, 87,543 shares, and all executive officers as a group,
1,095,492 shares.
(d) As of January 29, 1999, the percentage of shares beneficially owned by any
director or named executive officer does not exceed 1% of the outstanding
NCE Common Shares.
(1) Includes 23,534 shares for which Mr. Brunetti and his wife share voting and
investment powers.
85
<PAGE> 92
(2) Includes 1,783 shares held by Herring Bancorp, Inc., of which Mr. Burgess is
the majority shareholder.
(3) Includes 100 shares owned by Mr. Conklin's wife, 443 shares held by Philcon
Development Co. Retirement Plan and Trust, and 475 shares held in a trust of
which Mr. Conklin is trustee and his sons are beneficiaries.
(4) Includes 716 shares held in trusts for the benefit of Mr. Helton's
grandchildren. Mr. Helton's wife retains the right to the corpus of the
trusts upon their termination. Mr. Helton disclaims beneficial ownership of
the shares held in the trusts. Includes 23,243 shares for which Mr. Helton
and his wife share voting and investment powers.
(5) Mr. Nicholson's wife owns 500 of these shares; Mr. Nicholson disclaims
beneficial ownership of those shares.
(6) Includes 5,000 shares for which Mr. Tointon shares voting and investment
power with Phelps-Tointon, Inc., of which Mr. Tointon is President and Chief
Executive Officer.
(7) Mr. Kelly's wife owns 263 of these shares; Mr. Kelly disclaims beneficial
ownership of those shares.
(8) Includes 9,294 shares for which Mr. Wilks shares voting and investment power
with his wife or mother.
NORTHERN STATES POWER
The following table contains information on the beneficial ownership of NSP
Common Shares, as of April 16, 1999, by (1) each director and those current
executive officers named in the Summary Compensation Table included in Northern
States Power's annual meeting proxy statement dated March 8, 1999, and (2) all
directors and executive officers as a group. Unless otherwise indicated, all NSP
Common Shares are owned of record by the individuals named and the beneficial
ownership consists of sole voting power and sole investment power. The number of
NSP Common Shares beneficially owned by each of the persons listed below
includes NSP Common Shares subject to options that are now or become exercisable
within 60 days from April 16, 1999.
<TABLE>
<CAPTION>
ACQUIRABLE
COMMON STOCK WITHIN RESTRICTED
NAME OF BENEFICIAL OWNER STOCK EQUIVALENTS(1) 60 DAYS(2) STOCK TOTAL
------------------------ ------- -------------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C>
H. Lyman Bretting................. 2,832 7,851 -- -- 10,683
David A. Christensen.............. 1,000 11,157 -- -- 12,157
W. John Driscoll.................. 4,000 11,157 -- -- 15,157
Giannantonio Ferrari.............. -- 3,163 -- -- 3,163
James J. Howard................... 73,908 -- 264,694 25,534 364,136
Douglas W. Leatherdale............ 600 9,499 -- -- 10,099
Margaret R. Preska................ 1,200 10,055 -- -- 11,255
A. Patricia Sampson............... 911 10,055 -- -- 10,966
Allan L. Schuman.................. 200 -- -- -- 200
Paul E. Anders.................... 2,062 -- 11,134 3,874 17,070
Edward J. McIntyre................ 25,041 -- 90,013 6,757 121,811
Loren L. Taylor................... 17,520 -- 59,783 5,168 82,471
------- ------ ------- ------ ---------
Directors and executive officers
as a group...................... 199,529 62,940 691,822 70,413 1,024,704
</TABLE>
- -------------------------
(1) Represents stock units awarded under the Northern States Power Stock
Equivalent Plan for Non-employee Directors as of April 16, 1999.
86
<PAGE> 93
(2) Represents exercisable options and performance units under the current
Northern States Power Long-Term Incentive Program as of April 16, 1999.
Options to purchase NSP Common Shares which are exercisable within the next
60 days are 260,700 option shares for Mr. Howard, 88,738 option shares for
Mr. McIntyre, 59,314 option shares for Mr. Taylor and 11,134 option shares
for Mr. Anders. The number of shares that would have been payable upon the
exercise of performance units on February 23, 1999 are: 3,994 for Mr.
Howard, 1,275 for Mr. McIntyre, 469 for Mr. Taylor and 0 for Mr. Anders.
DESCRIPTION OF NORTHERN STATES POWER COMMON SHARES
GENERAL
Northern States Power's charter (which will be the charter of the combined
company) provides for two classes of capital stock: NSP Common Shares
(350,000,000 shares authorized, of which shares were outstanding
as of , 1999); and NSP Preferred Shares (7,000,000 shares
authorized, of which the following series were outstanding as of
, 1999: $3.60 Series -- 275,000 shares; $4.08 Series -- 150,000
shares; $4.10 Series -- 175,000 shares; $4.11 Series -- 200,000 shares; $4.16
Series -- 100,000 shares; $4.56 Series -- 150,000 shares). The preferred stock
may be issued from time to time in such series and with such designations,
dividend rates and times of payment, redemption prices, and liquidation prices
or preferences as to assets in voluntary liquidation as we deem appropriate.
Cumulative dividends, redemption provisions and sinking fund requirements, to
the extent that some or all of these features are or may be present when the
preferred stock is issued, could have an adverse effect on the availability of
earnings for distribution to the holders of combined company common stock or for
other corporate purposes.
The statements below are summaries of certain provisions of the charter of
Northern States Power, which will be the charter of the combined company. These
summaries are not complete. Northern States Power has filed its charter with its
SEC filings. See "WHERE YOU CAN FIND MORE INFORMATION" on page 102. The rights
of holders of common stock of the combined company could also be impacted by
Northern States Power's bylaws, which will be the bylaws of the combined
company, and the Minnesota Business Corporation Act. For summaries of relevant
provisions of the bylaws and Minnesota law, see "COMPARATIVE RIGHTS OF NEW
CENTURY ENERGIES SHAREHOLDERS AND NORTHERN STATES POWER SHAREHOLDERS" and
"CERTAIN ANTI-TAKEOVER EFFECTS OF CERTAIN NORTHERN STATES POWER CHARTER AND
BYLAWS PROVISIONS."
DIVIDEND RIGHTS
Before any dividends may be paid on the common stock, the holders of the
preferred stock are entitled to receive their dividends at the rates provided
for the shares of their series. In addition, except in certain limited
circumstances, dividends on common stock may not be declared or paid if payment
of interest has been deferred on the Junior Subordinated Debentures that were
issued in connection with the Trust Originated Preferred Securities issued and
sold by Northern States Power's subsidiary trust, NSP Financing I.
LIMITATIONS ON PAYMENT OF DIVIDENDS ON AND ACQUISITIONS OF NORTHERN STATES
POWER'S COMMON SHARES
So long as any preferred stock is outstanding, dividends (other than
dividends payable in common stock), distributions or acquisitions of common
stock:
- may not exceed 50% of net income for a prior twelve-month period, after
deducting dividends on any preferred stock during the period, if the sum
of the capital represented by the common
87
<PAGE> 94
stock, premiums on capital stock (restricted to premiums on common stock only by
SEC orders), and surplus accounts is less than 20% of the sum of the total
capital, premiums on capital stock, surplus accounts and long-term debt,
- may not exceed 75% of net income for such twelve-month period, as
adjusted, if such capitalization ratio is 20% or more but less than 25%,
and
- if such capitalization ratio exceeds 25%, such dividends, distributions
or acquisitions may not reduce such ratio to less than 25% except to the
extent permitted by the provisions described in the above two bullet
points.
The Northern States Power's Trust Indenture dated February 1, 1937, as
supplemented, securing its First Mortgage Bonds, which will be the trust
indenture of New NSP Utility Sub (unless the restructuring of Northern States
Power's utility assets contemplated by the merger agreement is not effected),
requires that the sum of:
- all dividends and distributions on common stock after September 30, 1954
(other than in common stock), and
- the cost of all common stock acquired after that date
will not exceed the sum of (1) the earned surplus of Northern States Power and
certain of its former subsidiary companies, consolidated, at September 30, 1954,
and (2) net income earned after September 30, 1954, after adjusting for all
preferred stock dividends after that date and all proper charges and credits to
earned surplus made after that date. In calculating net income for this purpose,
if 15% of the consolidated gross operating revenues of such companies exceeds
the aggregate of the amounts expended for maintenance and provided for
depreciation, such excess amount will be deducted from net income. These
provisions are not expected to impair the combined company's ability to pay
dividends in the foreseeable future.
Northern States Power's Supplemental and Restated Trust Indenture dated May
1, 1988 amends and restates the Trust Indenture. The Restated Indenture, which
will be the restated indenture of New NSP Utility Sub (unless the restructuring
of Northern States Power's utility assets contemplated by the merger agreement
is not effected), will not become effective until all First Mortgage Bonds of
each series issued under the Trust Indenture prior to July 1989 have been
retired or, subject to certain limitations, until the holders of the requisite
principal amount of such First Mortgage Bonds have consented to the amendments
contained in the Restated Indenture (the "INDENTURE EFFECTIVE DATE"). The
Restated Indenture will replace the dividend restriction described in the
preceding paragraph with the requirement that:
- the sum of: (1) all dividends and distributions on common stock after the
Indenture Effective Date (other than in common stock) and (2) the net
payments for common stock after the Indenture Effective Date (i.e., the
amount, if any, by which the payments made for the purchase or other
acquisition of common stock after the Indenture Effective Date exceeds
the consideration received by it after the Indenture Effective Date from
the sale of common stock),
- may not exceed the sum of: (1) the retained earnings at the Indenture
Effective Date and (2) an amount equal to the net income earned after the
Indenture Effective Date, after deducting all preferred stock dividends
after the Indenture Effective Date.
In computing net income for the purpose of this amended covenant, the
amount, if any, by which the actual expenditures or charges for ordinary repairs
and maintenance and the charges for reserves, renewals, replacements,
retirements, depreciation and depletion since one year before the Indenture
Effective Date are less than 2.5% of completed depreciable property will be
deducted.
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VOTING RIGHTS
The holders of preferred stock of the $3.60 Series are entitled to three
votes for each share held, and the holders of common stock and preferred stock
of all other series are entitled to one vote for each share held on all matters
submitted to a vote of shareholders; provided that when dividends payable on the
preferred stock of any series outstanding are in default in an amount equivalent
to the amount payable thereon for the immediately preceding twelve-month period,
and until such default has been remedied, the holders of preferred stock, voting
as a class and without regard to series, are entitled to elect the smallest
number of directors necessary to constitute a majority of the Board and the
holders of common stock, voting as a class, are entitled to elect the remaining
directors.
The affirmative vote or consent of the holders of various specified
percentages of preferred stock is required to effect certain changes in capital
structure and certain other transactions that might affect their rights. Except
to the extent required by law, holders of common stock do not vote as a class in
case of any modification of their rights.
LIQUIDATION RIGHTS
In the event of liquidation, after the holders of all series of preferred
stock have received $100 per share in the case of involuntary liquidation, and
the then applicable redemption prices in the case of voluntary liquidation, plus
in either case an amount equal to all accumulated and unpaid dividends, the
holders of common stock are entitled to the remaining assets.
PREEMPTIVE AND SUBSCRIPTION RIGHTS
No shareholder has the preemptive right to purchase or subscribe for any
additional capital stock.
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COMPARATIVE RIGHTS OF NEW CENTURY ENERGIES SHAREHOLDERS
AND NORTHERN STATES POWER SHAREHOLDERS
When we complete the merger, New Century Energies shareholders will become
shareholders of the combined company and their rights will be governed by the
Northern States Power articles of incorporation, as amended in accordance with
the merger agreement, and the Northern States Power bylaws, which differ in
certain material respects from the New Century Energies certificate of
incorporation and the New Century Energies bylaws. As shareholders of the
combined company, the rights of former New Century Energies shareholders will
also be governed by the Minnesota Business Corporation Act (the "MINNESOTA ACT")
instead of the Delaware General Corporation Law (the "DELAWARE LAW"). Minnesota
is the jurisdiction of incorporation of Northern States Power (and will be the
jurisdiction of incorporation of the combined company), and Delaware is the
jurisdiction of incorporation of New Century Energies.
The following comparison of the Minnesota Act and (as it exists today) the
combined company charter and bylaws, on the one hand, and the Delaware Law and
New Century Energies' charter and bylaws, on the other hand, summarizes the
material differences but is not intended to list all differences.
BUSINESS COMBINATIONS
The Minnesota Act generally requires approval of a merger or sale of
substantially all the assets of a corporation that is not in the usual or
regular course of business by a majority of the voting power of all shares
entitled to vote. Under the Minnesota Act, the articles of incorporation may
provide for a greater vote. The combined company's charter will not contain such
a supermajority provision.
The Delaware Law provides that a merger or consolidation may be approved by
a majority vote of the shares entitled to vote thereon, unless a greater
percentage is required by the corporation's certificate of incorporation. Under
New Century Energies' charter, the vote of a majority of the New Century
Energies shareholders is sufficient to approve a merger or consolidation except
for specified business transactions with interested shareholders described
below.
New Century Energies' charter prohibits New Century Energies from entering
into specified business transactions with interested persons (defined as 10%
shareholders) unless at least two-thirds of the votes entitled to be cast by
shareholders, excluding shares held by the interested person, approve the
business transaction. These provisions apply to specified mergers or asset
sales, the issuance or reclassification of shares, specified loans or advances,
and the purchase of capital stock of New Century Energies and other specified
transactions involving New Century Energies and an interested person.
Shareholder approval is not required under these provisions if a majority of the
New Century Energies Board approved the business transaction before the person
first became an interested person or, if before the interested person first
became an interested person, a majority of the New Century Energies Board
approved the interested person becoming an interested person and subsequently a
majority of the New Century Energies Board not affiliated with the interested
person approves the business transaction.
STATE TAKEOVER LEGISLATION
MINNESOTA
Minnesota has enacted legislation aimed at regulating takeovers of certain
corporations and restricting specified business combinations with interested
shareholders. Under the Minnesota Act, if a publicly held corporation such as
Northern States Power has an interested shareholder (a beneficial holder of at
least 10% of the outstanding voting shares, including an affiliate or associate
of the
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corporation, who, within the preceding four years, was a 10% shareholder
regardless of such person's present shareholdings), the corporation may not
enter into specified business combinations (including mergers and sales of
substantially all assets) with or proposed by the interested shareholder (or
affiliated or associated persons) for at least four years after the interested
shareholder acquired its 10% stock interest. The four year restriction does not
apply, however, if a committee of the board of directors consisting of all of
its disinterested directors (excluding current officers and employees of the
corporation and persons who were officers or employees of the corporation within
the preceding five years) approved the acquisition of the 10% stock interest or
the business combination before the date on which the shareholder acquired its
10% stock interest.
The combined company will also be subject to the control share acquisition
provisions of the Minnesota Act. These provisions generally require the approval
of the holders of a majority of the corporation's voting shares held by
disinterested shareholders before a person purchasing one-fifth or more of the
corporation's voting shares can vote the shares in excess of the one-fifth
interest, unless the purchase is directly from the corporation or is made in an
approved tender offer for all voting shares. Similar shareholder approvals are
required at one-third and majority thresholds.
The Minnesota Act also contains "anti-greenmail" provisions. Absent
shareholder approval, these provisions restrict a publicly held corporation from
repurchasing shares for more than their market value from a person who has held
for less than two years 5% or more of the corporation's voting power, unless the
corporation makes an identical or better offer to all shareholders.
Finally, the Minnesota Act also contains a fair price provision, which
prohibits an offeror from acquiring shares of a publicly held Minnesota
corporation within two years following the offeror's last purchase of shares
pursuant to a takeover offer, unless the shareholders have a reasonable
opportunity to dispose of the shares to the offeror upon terms substantially
equivalent to those provided in the earlier takeover offer. Share acquisitions
covered by the fair price provision of the Minnesota Act include those made by
purchase, exchange, merger, consolidation, partial or complete liquidation,
redemption, reverse stock split, recapitalization, reorganization, or any other
similar transaction. The Minnesota Act's fair price provision does not apply if
the board's disinterested directors approve the proposed acquisition of shares
before the offeror purchases any shares in the takeover offer. Also, the fair
price provision does not apply to: (1) repurchase offers by the corporation,
unless made in response to a hostile takeover bid; (2) tender offers which, if
consummated, including the offeror's other share acquisitions within the
preceding twelve months, would not result in the acquisition of more than 2% of
a class of stock; and (3) offers for shares of certain regulated entities,
including insurance companies, financial institutions and public service
utilities.
Northern States Power has not opted out of any of the foregoing provisions,
to the extent such an "opt out" is permitted.
DELAWARE
Section 203 of the Delaware Law, in general, prohibits a shareholder who
acquires more than 15% of the outstanding voting shares of a corporation subject
to the statute, but less than 85% of such shares, from engaging in specified
"business combinations" with the corporation for three years after the date that
the stockholder became an interested stockholder. Section 203 does not apply if
(1) before the acquisition date the corporation's board of directors has
approved either the business combination or the transaction in which the
stockholder became an interested stockholder or (2) the corporation's board of
directors approves the business combination and at least two-thirds of the
outstanding voting stock of the corporation not owned by the interested
stockholder vote to authorize the business combination. The term "business
combination" encompasses a wide variety of transactions with or caused by an
interested stockholder in which the interested stockholder receives or could
receive a benefit on other than a pro rata basis with other shareholders,
including mergers,
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specified asset sales, specified issuances of additional shares to the
interested stockholder, transactions with the corporation that increase the
proportionate interest of the interested stockholder or transactions in which
the interested stockholder receives certain other benefits. New Century Energies
has not "opted out" of Section 203, as is permitted under the Delaware Law.
The Delaware Law does not contain control share acquisition, anti-greenmail
or fair price provisions similar to those in the Minnesota Act.
RIGHTS OF DISSENTING SHAREHOLDERS
See "RIGHTS OF DISSENTING NORTHERN STATES SHAREHOLDERS" on page 65 for a
discussion of dissenters' rights under the Minnesota Act.
Under the Delaware Law, dissenting shareholders have rights of appraisal in
connection with certain mergers or consolidations. Unless a corporation's
certificate of incorporation otherwise provides, the Delaware Law does not
provide appraisal rights (1) for shares listed on a national securities exchange
or designated as a national market systems security on an interdealer quotations
system by the National Association of Securities Dealers, Inc. or held of record
by more than 2,000 shareholders (as long as the shareholders receive in the
merger shares of the surviving corporation or of any other corporation the
shares of which are listed on a national securities exchange or designated as a
national market systems security on an interdealer quotations system by the
National Association of Securities Dealers, Inc. or held of record by more than
2,000 shareholders) or (2) if the corporation is the surviving corporation and
no vote of its shareholders is required for the merger. New Century Energies'
charter does not provide otherwise. The Delaware Law does not provide appraisal
rights to shareholders who dissent from the sale of all or substantially all of
a corporation's assets or an amendment to the corporation's certificate of
incorporation, unless the corporation's certificate of incorporation provides
for dissenters' rights in those cases. New Century Energies' charter does not so
provide.
AMENDMENTS TO CHARTERS
The Minnesota Act generally requires shareholder approval of amendments to
a corporation's articles of incorporation. To amend the articles of
incorporation, a resolution approved by the affirmative vote of a majority of
the directors present, or proposed by a shareholder or shareholders holding 3%
or more of the voting power of shares entitled to vote (and, in the event that
the corporation is publicly held, this provision does not conflict with federal
securities laws), that sets forth the proposed amendment shall be submitted to
the shareholders. The amendment generally is approved by the affirmative vote of
the holders of a majority of the voting power of the shares present and entitled
to vote, except that if the articles of incorporation or the Minnesota Act
provide for a greater number of votes to adopt such amendment, such greater
number shall be necessary to amend that provision. A proposed amendment that
would, among other things, change the rights or preferences of the shares of the
class or series or change the aggregate number of authorized shares of the class
or series requires a separate class or series vote. The combined company's
charter will provide that the charter may not be amended to increase the amount
of authorized shares of preferred stock, or to authorize additional series of
preferred stock that would be on a parity with the outstanding shares of
preferred stock as to assets or dividends, absent the vote of the holders of a
majority of the total number of shares of all series of preferred stock then
outstanding (without regard to class or series). The combined company's charter
further will provide that the vote of the holders of 66 2/3% of the total number
of shares of preferred stock then outstanding (without regard to series) will be
required to amend the combined company's charter to authorize any class of stock
that would be preferred as to assets or dividends over the outstanding preferred
shares or to change the
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express terms and provisions of the outstanding preferred stock in any manner
substantially prejudicial to the holders thereof.
The Delaware Law provides that the certificate of incorporation of a
corporation may be amended upon the affirmative vote of a majority of the
outstanding shares of each class entitled to vote thereon, unless the
corporation's charter requires a larger percentage. Although New Century
Energies' charter provides generally that amendments to the charter may be
approved by a majority vote of the New Century Energies' shareholders, an 80%
majority is required for amendments to the provisions authorizing the New
Century Energies Board to issue and fix the rights of preferred stock;
amendments to the provision limiting business transactions with interested
persons; amendments which make the business combination restrictions of Section
203 of the Delaware Law inapplicable to New Century Energies; amendments to the
provisions dividing the New Century Energies Board into classes or providing
that directors may be removed only for cause; amendments to the provisions
limiting who may call special shareholders meetings, and the ability of
shareholders to act without a meeting and providing time requirements for the
submission of shareholders' proposals, and amendments which modify these
supermajority voting requirements.
AMENDMENTS TO BYLAWS
Under the Minnesota Act, a corporation's shareholders retain the power to
amend the corporation's bylaws at any time, and the board of directors also has
the power to amend the bylaws except for provisions relating to quorums of
shareholders and certain matters relating to directors. The combined company's
charter will vest power to amend the combined company's bylaws in the board of
directors, subject to the power of the shareholders to change or repeal the
combined company's bylaws. However, the board of directors will not be vested
with the power to amend those provisions of the bylaws fixing the number,
qualifications, classifications, or terms of office of the directors.
Under the Delaware Law, holders of a majority of the voting power of a
corporation and, when provided in the certificate of incorporation, the
directors of the corporation, have the power to adopt, amend and repeal the
bylaws of a corporation. New Century Energies' charter grants the New Century
Energies Board such power. In addition, under New Century Energies' charter, any
proposal to amend the bylaws made by an interested person (defined as certain
10% shareholders) or a director who is not an independent director requires the
approval of two-thirds of the disinterested voting stock, unless before such
person became an interested person (1) a majority of the Board approved the
amendment or (2) a majority of the Board approved the person becoming an
interested person and, subsequently, a majority of the independent directors
approves the amendment.
SHAREHOLDER ACTION
The Minnesota Act provides that any action required or permitted to be
taken at any meeting of the shareholders may be taken without a meeting if all
shareholders entitled to vote on the matter consent to the action in writing.
The combined company's charter and bylaws will not elaborate on this provision.
The Delaware Law permits actions which could be taken at a shareholders'
meeting to be taken by written action of the shareholders unless the
corporation's charter or bylaws require that a meeting be held. New Century
Energies' charter requires shareholders to act at a meeting.
SHAREHOLDER PROPOSALS
The combined company's bylaws will provide generally that any shareholder
proposal brought before an annual or special meeting of shareholders must be
received by the combined company not less than 20 days nor more than 90 days
before the scheduled meeting or the shareholder must have complied with SEC Rule
14a-8. However, if the combined company gives less than 30 days notice or
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public disclosure of the meeting, a shareholder proposal will be timely
delivered if the combined company receives it within 10 days after it gives
notice or publicly discloses the date of the meeting. This requirement is
separate and apart from and in addition to the requirements that a shareholder
must meet to have a shareholder proposal included in the combined company's
proxy statement under SEC Rule 14a-8.
New Century Energies' charter provides that any shareholder proposal
brought before New Century Energies' annual meeting must be received by New
Century Energies not less than 60 days nor more than 90 days prior to the first
anniversary of the preceding year's annual meeting. If the date of the annual
meeting is advanced by more than 30 days or delayed by more than 60 days, notice
by the shareholder to be timely must be received not earlier than the ninetieth
day prior to such annual meeting and not later than the close of business on the
later of (1) the sixtieth day prior to such annual meeting or (2) the tenth day
following the date on which notice of the date of the annual meeting was given.
This requirement is separate and apart from and in addition to the requirements
that a shareholder must meet to have a shareholder proposal included in New
Century Energies' proxy statement under SEC Rule 14a-8. New Century Energies'
charter also provides that no business may be brought before a special meeting
by shareholders.
SPECIAL MEETINGS OF SHAREHOLDERS
Under the Minnesota Act, a special meeting of shareholders may be called by
the chief executive officer, the chief financial officer, two or more directors,
the person or persons authorized by the articles of incorporation or by-laws to
call a special meeting, or upon demand of a shareholder or shareholders holding
10% or more of the voting power of the shares entitled to vote, except that a
special meeting for the purpose of considering any action to directly or
indirectly facilitate or effect a business combination, including any action to
change or otherwise affect the composition of the board of directors for that
purpose, must be called upon demand of a shareholder or shareholders holding 25%
or more of the voting power of the shares entitled to vote. Such shareholders
must deliver to the chief executive officer or the chief financial officer one
or more written demands for the meeting, stating the purpose or purposes for
which it is to be held. The combined company's bylaws will state that a special
meeting of shareholders may be called and held as provided by the Minnesota Act.
The Delaware Law provides that special meetings of shareholders may be
called by a corporation's board of directors and other persons authorized by the
corporation's certificate of incorporation or bylaws. New Century Energies'
charter provides that special meetings of shareholders may be called only by the
chairman of the board or by a majority of the New Century Energies Board and may
not be called by shareholders.
CUMULATIVE VOTING
The Minnesota Act provides that unless the articles of incorporation
provide otherwise, the shareholders of a corporation can elect directors by
cumulative voting. Northern States Power's charter permits cumulative voting.
The merger agreement permits Northern States Power to amend its charter to
eliminate cumulative voting before the merger.
The Delaware Law permits a corporation's certificate of incorporation to
provide for cumulative voting in the election of directors. New Century
Energies' charter does not provide for cumulative voting.
NUMBER AND ELECTION OF DIRECTORS
The combined company's charter will provide that the board of directors
will include not less than three or more than 17 directors, with the exact
number of directors fixed from time to time by the bylaws. The bylaws will
provide that the board of directors will consist of not less than seven nor
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more than 15 directors. The combined company's bylaws will provide that the
number of directors will be determined by the board of directors or, if the
board should fail to make a determination, by the shareholders at an annual or
special meeting of shareholders. In the merger agreement, Northern States Power
and New Century Energies agreed that the number of directors on the combined
company's board of directors at the time of the merger will be an even number,
up to 14. The Minnesota Act permits a corporation to divide its directors into
classes as provided in its articles of incorporation and bylaws. The combined
company's bylaws will provide for three classes of directors elected to
staggered three-year terms.
Under the combined company's charter, when dividends payable on preferred
stock of any series outstanding are in default in an amount equivalent to the
amount payable thereon during the immediately preceding twelve-month period, and
until such default has been remedied, the holders of preferred stock, voting as
a class and without regard to series, will be entitled to elect the smallest
number of directors necessary to constitute a majority of the combined company's
board of directors and the holders of common stock, voting as a class, will be
entitled to elect the remaining directors.
New Century Energies' charter provides for a board of 14 directors divided
into three classes, with each class consisting, as nearly as possible, of
one-third of the total number of directors, and directors in each class being
elected for a term of three years. New Century Energies' charter and bylaws
provide that the New Century Energies Board may increase or decrease the number
of directors, with any change in the number of directors on or before February
1, 2002 requiring the vote of two-thirds of the directors then in office.
REMOVAL OF DIRECTORS
In general, under the Minnesota Act, any or all of the directors of a
corporation may be removed, with or without cause, by vote of the holders of the
proportion or number of voting power of the shares of the classes or series the
director represents sufficient to elect them (except that in a corporation such
as the combined company having cumulative voting, an individual director may not
be removed if the votes cast against removal would be sufficient to elect such
director, unless the entire board is removed), unless the articles of
incorporation or bylaws otherwise provide. The combined company's charter and
bylaws will not modify the statutory removal provisions.
The Delaware Law provides that unless a corporation's certificate of
incorporation otherwise provides, directors with staggered terms may be removed
only for cause and requires that the removal of directors be approved by a
majority vote of the shares then entitled to vote at an election of directors.
New Century Energies' charter provides that a member of the New Century Energies
Board may be removed only for cause and only at a special meeting of
shareholders called for that purpose. New Century Energies' charter further
provides that if the proposal to remove a director is made by an interested
person (defined as certain 10% shareholders), removal of a director requires the
affirmative vote of not less than a majority of the shares entitled to vote at
the meeting, excluding shares held by the interested person.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the Minnesota Act, unless the articles of incorporation or bylaws
otherwise provide, directors and officers will be indemnified against judgments,
penalties, fines, settlements and expenses (including attorneys' fees) incurred
in connection with legal proceedings to which they are made, or threatened to be
made, a party by reason of their present or former status as a director or
officer, if they have not been indemnified by another organization, they acted
in good faith, they received no improper personal benefit, in the case of any
criminal proceeding, they had no reasonable cause to believe their conduct was
unlawful, and, generally speaking, they reasonably believed their conduct to
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be in, or not opposed to, the corporation's best interests. The combined
company's bylaws will provide indemnification to directors and officers to the
full extent provided by the Minnesota Act.
The Delaware Law permits indemnification of officers and directors against
liabilities and expenses incurred in proceedings if the person acted in good
faith and in a manner he or she reasonably believed to be in or not opposed to
the best interests of the corporation and, with respect to any criminal action,
had no reasonable cause to believe such person's conduct was unlawful. In the
case of derivative actions, indemnification is limited to expenses and no
indemnification may be made in respect of any claim, issue or matter as to which
such person has been adjudged to be liable to the corporation unless
indemnification is otherwise authorized by a court. New Century Energies' bylaws
require New Century Energies to indemnify officers and directors to the full
extent permitted by law.
LIMITATION OF PERSONAL LIABILITY OF DIRECTORS
The Minnesota Act permits a corporation to eliminate or limit the liability
of a director to the corporation or to its shareholders for monetary damages for
breach of fiduciary duty as a director through a provision in the corporation's
articles of incorporation. However, liability may not be eliminated or limited
for breach of the director's duty of loyalty, acts or omissions not in good
faith or that involve intentional misconduct or a knowing violation of law,
payment of unlawful distributions or violations of the Minnesota securities
laws, any transaction from which the director received an improper personal
benefit, or any act or omission occurring prior to the adoption of the provision
in the articles of incorporation providing for limitation of liability. The
combined company's charter will provide for such limitation of liability.
The Delaware Law allows a Delaware corporation to include in its
certificate of incorporation, and New Century Energies' charter contains, a
provision eliminating the liability of a director for monetary damages for a
breach of such director's fiduciary duties as a director, except liability for
any breach of the director's duty of loyalty to the corporation's shareholders,
for acts or omissions not in good faith or that involve intentional misconduct
or knowing violation of law, under Section 174 of the Delaware Law (which deals
generally with unlawful payments of dividends, stock repurchases and
redemptions), and for any transaction from which the director derived an
improper personal benefit.
SHAREHOLDER RIGHTS PLANS
New Century Energies adopted a shareholder rights plan in 1997. New Century
Energies' rights plan would create substantial dilution to any third-party
bidder for New Century Energies who does not obtain the New Century Energies
Board's prior approval for an acquisition of 10% or more of the outstanding NCE
Common Shares.
Under the rights plan, one right is associated with each NCE Common Share.
A right entitles the registered holder to purchase one one-hundredth of a share
of Series A Junior Participating Preferred Stock of New Century Energies for a
specified exercise price. The rights are not exercisable and are not separately
transferable from the related NCE Common Shares until ten calendar days after
public announcement that a person or group has acquired, or obtained the right
to acquire, beneficial ownership of 10% or more of the outstanding NCE Common
Shares (an "ACQUIRING PERSON") or, if earlier, ten calendar days (or a later
date determined by the New Century Energies Board before any person or group
acquires a 10% interest) after any person commences a tender or exchange offer,
or announces an intention to do so, that would result in the person or group
acquiring, or obtaining the right to acquire, beneficial ownership of 10% or
more of the outstanding NCE Common Shares if the transaction were consummated.
After there is an Acquiring Person, a right entitles the holder (other than
the Acquiring Person and its affiliates) to purchase, for the exercise price,
NCE Common Shares (or other property in some cases) having twice the value of
the exercise price. If New Century Energies is acquired in a
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merger or other business combination transaction or 50% or more of New Century
Energies' assets or earning power is sold or transferred after there is an
Acquiring Person, a right entitles the holder (other than the Acquiring Person
and its affiliates) to purchase, for the exercise price, common stock of the
acquiring company having twice the value of the exercise price. If a person
becomes an Acquiring Person, New Century Energies may redeem the rights only
within ten calendar days thereafter. In some cases, a decision to redeem the
rights requires that there be independent directors (who generally include those
not affiliated with the Acquiring Person) in office and that a majority of the
independent directors concur in the decision.
Northern States Power has not adopted a shareholder rights plan.
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CERTAIN ANTITAKEOVER EFFECTS OF
CERTAIN CHARTER AND BYLAWS PROVISIONS
GENERAL
Northern States Power's charter (which will be the charter of the combined
company), including an amendment to increase the number of authorized shares of
common stock at the time of the merger, contains provisions that will make more
difficult the acquisition of control of the company by means of a tender offer,
open market purchases, a proxy fight or otherwise that are not approved by the
company's board of directors. Northern States Power's bylaws (which will be the
bylaws of the combined company) also contain provisions that could have an
antitakeover effect.
The purposes of such charter and bylaw provisions are to discourage certain
types of transactions, described below, which may involve an actual or
threatened change of control and to encourage persons seeking to acquire control
to negotiate the terms of any proposed business combination or offer with the
board of directors. The provisions are designed to reduce vulnerability to an
unsolicited proposal for a takeover that does not contemplate the acquisition of
all outstanding shares or is otherwise unfair to shareholders, or an unsolicited
proposal for the restructuring or sale of all or part of the company. We believe
that, as a general rule, such proposals would not be in the best interests of
shareholders. These provisions will help ensure that the board of directors, if
confronted by a surprise proposal from a third party which has acquired a block
of stock, will have sufficient time to review the proposal and appropriate
alternatives to the proposal and to act in what it believes to be the best
interests of shareholders.
We believe that the provisions discussed below may provide some measure of
protection for shareholders against certain potentially coercive takeover
tactics. Such takeover tactics include the accumulation of substantial stock
positions in public companies by third parties as a prelude to proposing a
takeover, a restructuring or a sale of all or part of the company or another
similar extraordinary corporate action. Such actions are often undertaken by a
third party without advance notice to, or consultation with, the management or
board of directors of a company. In many cases, the purchaser seeks
representation on a company's board of directors in order to increase the
likelihood that its proposal will be implemented by a company. If a company
resists the efforts of the purchaser to obtain representation on the company's
board, a purchaser may commence a proxy contest to have its nominees elected to
the board of directors in place of certain directors or in place of the entire
board of directors.
We believe that the imminent threat of removal of management or the board
of directors in such situations would severely curtail the ability of management
or the board of directors to negotiate effectively with such purchasers.
Management or the board of directors would be deprived of the time and
information necessary to evaluate the takeover proposal, to study alternative
proposals and to help ensure that the best price is obtained in any transaction
involving the company which may ultimately be undertaken.
These provisions, individually and collectively, will make difficult and
may discourage a merger, tender offer or proxy fight, even if such transaction
or occurrence may be favorable to the interests of shareholders, and may delay
or frustrate the assumption of control by a holder of a large block of common
stock and the removal of incumbent management, even if such removal might be
beneficial to shareholders. Furthermore, these provisions may deter or could be
used to frustrate a future takeover attempt which is not approved by the
incumbent board of directors, but which the holders of a majority of the shares
may deem to be in their best interests or in which shareholders may receive a
substantial premium for their stock over prevailing market prices of such stock.
By discouraging takeover attempts, these provisions might have the incidental
effect of inhibiting certain changes in management (some or all of the members
of which might be replaced in the course of a change of
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control) and also the temporary fluctuations in the market price of the stock
which often result from actual or rumored takeover attempts.
Set forth below is a description of the possible antitakeover effects of
such provisions.
CLASSIFIED BOARD OF DIRECTORS
Northern States Power's charter provides, and the combined company's
charter will provide, for its board to be divided into three classes serving
staggered terms. The classification of directors has the effect of making it
more difficult for shareholders to change the composition of the board in a
relatively short period of time. At least two annual meetings of shareholders,
instead of one, will generally be required to effect a change in a majority of
the board. Such a delay may help ensure that the board, if confronted by a proxy
contest or an extraordinary corporate transaction, will have sufficient time to
review the proposal and appropriate alternatives to the proposal and to act in
what the directors believe are the best interests of the shareholders. We also
believe that a classified board of directors helps to assure the continuity and
stability of the board and the company's business strategies and policies as
determined by the board, because generally a majority of the directors at any
given time will have had prior experience as directors.
The classified board provision could have the effect of discouraging a
third party from making a tender offer or otherwise attempting to obtain control
even though such an attempt might be beneficial to the company and its
shareholders. The classified board provision could thus increase the likelihood
that incumbent directors will retain their positions.
ADVANCE NOTICE PROVISIONS FOR SHAREHOLDER PROPOSALS
Northern States Power's bylaws establish, and the combined company's bylaws
will establish, an advance notice procedure with regard to certain matters to be
brought before a meeting of shareholders. For a description of these procedures,
see "COMPARATIVE RIGHTS OF NEW CENTURY ENERGIES SHAREHOLDERS AND NORTHERN STATES
POWER SHAREHOLDERS -- SHAREHOLDER PROPOSALS."
The purpose of the advance notice procedure is to provide a more orderly
procedure for conducting meetings of shareholders and, to the extent deemed
necessary or desirable by the board, to provide the board with a meaningful
opportunity to inform shareholders, prior to such meetings, of any business
proposed to be conducted at such meetings, together with any recommendation as
to the board's position or belief as to action to be taken with respect to such
business. By taking such steps, the board will enable shareholders better to
determine whether they desire to attend such meeting or grant a proxy to the
board as to the disposition of any such business. Although the bylaws do not
give the board any power to approve or disapprove of any business desired by a
shareholder to be conducted at a shareholder meeting, the bylaws may have the
effect of precluding the conducting of business at a particular shareholder
meeting if the proper procedures are not followed, and may discourage or deter a
third party from attempting to obtain control, even if the conduct of such
attempt might be beneficial to the company and its shareholders.
PREFERRED STOCK
Northern States Power's bylaws authorize, and the combined company's bylaws
will authorize, the board to establish series of preferred stock. The number of
authorized shares of preferred stock is 7,000,000. As of the date of this joint
proxy statement/prospectus, NSP Preferred Shares are outstanding.
We believe that the availability of such preferred stock will provide
increased flexibility in structuring possible future financings and
acquisitions, and in meeting other corporate needs which might arise. Having
such authorized shares available for issuance will allow the company to issue
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shares of preferred stock in certain cases without the expense and delay of a
special meeting of shareholders. Subject to the rights of holders of outstanding
shares of preferred stock to vote on such issuances, the authorized shares of
preferred stock, as well as shares of common stock, will be available for
issuance without further action by shareholders, unless such action is required
by applicable law or the rules of any stock exchange on which the securities may
be listed. Although there is no intention at the present time of doing so, the
board could authorize a series of preferred stock that could impede a business
combination through adoption of a shareholder rights plan. The board will make
any determination to issue such shares based on its judgment as to the best
interests of the company and its then existing shareholders. The board, in so
acting and upon obtaining any required regulatory approvals, could issue
preferred stock having terms which could discourage an acquisition attempt or
other transaction that some, or a majority, of the shareholders might believe to
be in their best interests or in which shareholders might receive a premium for
their stock over the then market price of such stock.
COMMON STOCK
Northern States Power's charter presently authorizes the issuance of 350
million NSP Common Shares. If the merger is completed, the combined company's
charter will authorize one billion shares of common stock, approximately 331
million of which would have been outstanding after the merger if it had occurred
on March 24, 1999.
The increased number of authorized common shares will provide the ability
to meet future capital needs and to provide shares for possible acquisitions and
stock dividends or stock splits. The board would have the ability, in the event
of a proposed merger, tender offer or other attempt to gain control of the
company that was not approved by the board, to issue additional common stock
that would dilute the stock ownership of the acquiror.
ANTITAKEOVER LEGISLATION
We have described certain antitakeover provisions of the Minnesota Act
under "COMPARATIVE RIGHTS OF NEW CENTURY ENERGIES SHAREHOLDERS AND NORTHERN
STATES POWER SHAREHOLDERS -- STATE TAKEOVER LEGISLATION."
The Minnesota Act provisions should encourage persons interested in
acquiring control to negotiate in advance with the board, since the restrictions
contained in the provisions regarding business combinations with interested
shareholders and the fair price provisions do not apply if the acquiror first
obtains disinterested director approval. As stated above, in the event of a
proposed acquisition of control, we believe that the interests of shareholders
will best be served by a transaction that results from negotiations based upon
careful consideration of the proposed terms, such as the price to be paid to
minority shareholders, the form of consideration paid and tax effects of the
transaction. The antitakeover provisions of the Minnesota Act should also tend
to discourage the accumulation of large blocks of stock by third parties, which
we believe can be disruptive to the stability of important relationships with
employees, customers and major lenders.
The antitakeover provisions of the Minnesota Act will not prevent a hostile
takeover. They may, however, make more difficult or discourage a takeover or the
acquisition of control by a principal shareholder and thus the removal of
incumbent management. Some shareholders may find this disadvantageous in that
they may not be afforded the opportunity to participate in takeovers which are
not approved by the board, but in which they might receive, for at least some of
their shares, a substantial premium above the market price at the time of a
tender offer or other acquisition transaction. The Minnesota antitakeover
provisions should not prevent or discourage transactions in which an acquiring
person is willing to negotiate in good faith with the board and is prepared to
pay the same price to all shareholders of each class of voting stock.
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LEGAL OPINIONS
The legality of the shares of the common stock of the combined company to
be issued in connection with the merger is being passed upon for Northern States
Power by Gary R. Johnson, Esq., Vice President and General Counsel of Northern
States Power. As of April 16, 1999, Mr. Johnson owned 14,135 NSP Common Shares
(including 5,143 restricted shares) and held options to purchase an additional
92,154 NSP Common Shares.
Certain of the tax consequences of the merger will be passed upon at the
effective time of the merger, as a condition to the merger, by Wachtell, Lipton,
Rosen & Katz on behalf of Northern States Power, and by LeBoeuf, Lamb, Greene &
MacRae LLP on behalf of New Century Energies. See "THE MERGER -- MATERIAL
FEDERAL INCOME TAX CONSEQUENCES."
EXPERTS
The consolidated financial statements incorporated in this joint proxy
statement/prospectus by reference from the Annual Report on Form 10-K of
Northern States Power for the year ended December 31, 1998, have been
incorporated herein in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of PricewaterhouseCoopers LLP as
experts in auditing and accounting.
The consolidated balance sheets of New Century Energies, Inc. and
subsidiaries as of December 31, 1998 and 1997, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the three
years in the period ended December 31, 1998, and schedule incorporated by
reference in this joint proxy statement/prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as set forth in their reports. The
financial statements and supporting schedule referred to above have been
included herein in reliance upon the authority of those firms as experts in
giving said reports.
SHAREHOLDER PROPOSALS FOR THE 2000 NORTHERN STATES POWER ANNUAL MEETING AND THE
2000 NEW CENTURY ENERGIES ANNUAL MEETING
Northern States Power will hold a 2000 annual meeting of shareholders
whether or not the merger is completed before the time of such meeting. That
meeting will be the annual meeting of the combined company if the merger is
completed before the time of the meeting. Any proposals of shareholders intended
to be presented at the 2000 annual meeting of shareholders must have been
received by the Secretary of Northern States Power on or before November 8, 1999
in order to be considered for inclusion in Northern States Power's 2000 proxy
materials.
New Century Energies will hold a 2000 annual meeting of shareholders only
if the merger is not completed before the time of such meeting. In the event
that such a meeting is held, any proposals of shareholders intended to be
presented at the 2000 annual meeting of shareholders must have been received by
the Secretary of New Century Energies on or before November 30, 1999 in order to
be considered for inclusion in New Century Energies' 2000 proxy materials.
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WHERE YOU CAN FIND MORE INFORMATION
Northern States Power and New Century Energies file annual, quarterly and
special reports, proxy statements and other information with the SEC. You may
read and copy any materials we file with the SEC at the SEC's Public Reference
Room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330 for further information on the Public Reference Room. Our SEC
filings are also available to the public from commercial document retrieval
services and at the Internet world wide web site maintained by the SEC at
http://www.sec.gov
Northern States Power filed a Registration Statement on Form S-4 (the
"REGISTRATION STATEMENT") to register with the SEC the shares to be issued to
New Century Energies shareholders in the merger. This joint proxy
statement/prospectus is a part of that Registration Statement and constitutes a
prospectus of Northern States Power, as well as being a proxy statement of
Northern States Power for its special meeting and a proxy statement of New
Century Energies for its special meeting.
As allowed by SEC rules, this joint proxy statement/prospectus does not
contain all the information you can find in the Registration Statement or the
exhibits to that Registration Statement.
The SEC allows us to "incorporate by reference" business and financial
information into this joint proxy statement/prospectus, which means that we can
disclose important information to you by referring you to another document filed
separately with the SEC. The information incorporated by reference is deemed to
be part of this joint proxy statement/prospectus. This joint proxy statement/
prospectus incorporates by reference the documents set forth below that we have
previously filed with the SEC. These documents contain important information
about our companies and their financial condition.
<TABLE>
<CAPTION>
NORTHERN STATES POWER SEC FILINGS (FILE
NO. 1-03034) PERIOD
- ------------------------------------------- -------------------------------------------
<S> <C>
Annual Report on Form 10-K................. For the Year Ended December 31, 1998
Current Reports on Form 8-K................ Filed on March 25, 1999, March 30, 1999,
April 8, 1999 and April 23, 1999
Proxy Statement............................ Filed on March 8, 1999
</TABLE>
<TABLE>
<CAPTION>
NEW CENTURY ENERGIES SEC FILINGS (FILE
NO. 1-12927) PERIOD
- ------------------------------------------- -------------------------------------------
<S> <C>
Annual Report on Form 10-K................. For the Year Ended December 31, 1998
Current Reports on Form 8-K................ Filed on February 23, 1999, March 25, 1999,
March 29, 1999
Proxy Statement............................ Filed on March 29, 1999
</TABLE>
Northern States Power and New Century Energies also incorporate by
reference into this joint proxy statement/prospectus additional documents that
may be filed with the SEC from the date of this joint proxy statement/prospectus
to the date of their special meetings. These include periodic reports, such as
Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports
on Form 8-K, as well as proxy statements.
Northern States Power has supplied all information contained or
incorporated by reference in this joint proxy statement/prospectus relating to
Northern States Power and New Century Energies has supplied all such information
relating to New Century Energies.
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If you are a shareholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through us, the SEC or
the SEC's Internet world wide web site as described above. Documents
incorporated by reference are available from us without charge, excluding all
exhibits unless we have specifically incorporated by reference an exhibit in
this joint proxy statement/prospectus. Shareholders may obtain documents
incorporated by reference in this joint proxy statement/prospectus by requesting
them in writing or by telephone from the appropriate company at the following
addresses:
<TABLE>
<S> <C>
Northern States Power Company New Century Energies, Inc.
414 Nicollet Mall 1225 17th Street
Minneapolis, MN 55401 Denver, CO 80202
Tel: (612) 330-7550 Tel: (303) 571-7511
Attn: Corporate Secretary's Department Attn: Corporate Secretary's Department
</TABLE>
If you would like to request documents from us, please do so by
, 1999 to receive them before your special meeting.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS JOINT PROXY STATEMENT/PROSPECTUS. WE HAVE NOT AUTHORIZED
ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED
IN THIS JOINT PROXY STATEMENT/PROSPECTUS. THIS JOINT PROXY STATEMENT/PROSPECTUS
IS DATED , 1999. YOU SHOULD NOT ASSUME THAT THE INFORMATION
CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS ACCURATE AS OF ANY DATE
OTHER THAN THAT DATE. NEITHER THE MAILING OF THIS JOINT PROXY
STATEMENT/PROSPECTUS TO NORTHERN STATES POWER AND NEW CENTURY ENERGIES
SHAREHOLDERS NOR THE ISSUANCE OF COMBINED COMPANY COMMON STOCK IN THE MERGER
CREATES ANY IMPLICATION TO THE CONTRARY.
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LIST OF DEFINED TERMS
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Acquiring Person.................. 96
Business Combination.............. 76
Delaware Law...................... 90
Dissenters' Notice................ 65
Dissenters' Rights................ 65
EBIT.............................. 47
EBITDA............................ 47
FERC.............................. 58
FTC............................... 59
Indenture Effective Date.......... 88
Internal Revenue Code............. 39
Merger Proposal................... 65
</TABLE>
<TABLE>
<CAPTION>
TERM PAGE
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<S> <C>
Minnesota Act..................... 90
NCE Common Shares................. 1
NRC............................... 59
NSP Common Shares................. 27
NSP -- Minnesota.................. 24
NSP Preferred Shares.............. 27
NSP -- Wisconsin.................. 24
PSCo. ............................ 23
Registration Statement............ 102
SPS............................... 23
Takeover Proposal................. 71
</TABLE>
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
NORTHERN STATES POWER COMPANY
AND
NEW CENTURY ENERGIES, INC.
DATED AS OF MARCH 24, 1999
<PAGE> 112
TABLE OF CONTENTS
<TABLE>
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<S> <C> <C> <C>
ARTICLE I
THE MERGER..................................................................... A-1
Section 1.1 The Merger.................................................. A-1
Section 1.2 Effective Time of the Merger................................ A-1
Section 1.3 Articles of Incorporation; Bylaws........................... A-2
ARTICLE II
TREATMENT OF SHARES............................................................ A-2
Section 2.1 Effect of Merger on Capital Stock........................... A-2
Section 2.2 Exchange of NCE Common Stock................................ A-2
ARTICLE III
THE CLOSING.................................................................... A-4
Section 3.1 Closing..................................................... A-4
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NSP.......................................... A-4
Section 4.1 Organization and Qualification.............................. A-4
Section 4.2 Subsidiaries................................................ A-5
Section 4.3 Capitalization.............................................. A-5
Section 4.4 Authority; Non-Contravention; Statutory Approvals; A-6
Compliance..................................................
Section 4.5 Reports and Financial Statements............................ A-7
Section 4.6 Absence of Certain Changes or Events........................ A-7
Section 4.7 Litigation.................................................. A-8
Section 4.8 Registration Statement and Proxy Statement.................. A-8
Section 4.9 Tax Matters................................................. A-8
Section 4.10 Employee Matters; ERISA..................................... A-9
Section 4.11 Environmental Protection.................................... A-12
Section 4.12 Regulation as a Utility..................................... A-14
Section 4.13 Vote Required............................................... A-14
Section 4.14 Accounting Matters.......................................... A-14
Section 4.15 Opinion of Financial Advisor................................ A-14
Section 4.16 Insurance................................................... A-14
Section 4.17 Ownership of NCE Common Stock............................... A-15
Section 4.18 Year 2000................................................... A-15
Section 4.19 Anti-Takeover Provisions.................................... A-15
Section 4.20 Nuclear Operations.......................................... A-15
Section 4.21 NRC Actions................................................. A-15
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF NCE.......................................... A-16
Section 5.1 Organization and Qualification.............................. A-16
Section 5.2 Subsidiaries................................................ A-16
Section 5.3 Capitalization.............................................. A-16
Section 5.4 Authority; Non-Contravention; Statutory Approvals; A-16
Compliance..................................................
Section 5.5 Reports and Financial Statements............................ A-17
Section 5.6 Absence of Certain Changes or Events........................ A-18
Section 5.7 Litigation.................................................. A-18
Section 5.8 Registration Statement and Proxy Statement.................. A-18
</TABLE>
A-i
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<TABLE>
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PAGE
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<S> <C> <C> <C>
Section 5.9 Tax Matters................................................. A-19
Section 5.10 Employee Matters; ERISA..................................... A-20
Section 5.11 Environmental Protection.................................... A-22
Section 5.12 Regulation as a Utility..................................... A-23
Section 5.13 Vote Required............................................... A-23
Section 5.14 Accounting Matters.......................................... A-24
Section 5.15 Opinion of Financial Advisor................................ A-24
Section 5.16 Insurance................................................... A-24
Section 5.17 Ownership of NSP Common Stock............................... A-24
Section 5.18 Year 2000................................................... A-24
Section 5.19 Anti-Takeover Provisions.................................... A-24
Section 5.20 NCE Rights Agreement........................................ A-24
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER......................................... A-25
Section 6.1 Ordinary Course of Business................................. A-25
Section 6.2 Dividends................................................... A-25
Section 6.3 Issuance of Securities...................................... A-25
Section 6.4 Charter Documents........................................... A-26
Section 6.5 Acquisitions................................................ A-26
Section 6.6 No Dispositions............................................. A-26
Section 6.7 Indebtedness................................................ A-27
Section 6.8 Capital Expenditures........................................ A-27
Section 6.9 Compensation, Benefits...................................... A-27
Section 6.10 1935 Act.................................................... A-27
Section 6.11 Accounting.................................................. A-27
Section 6.12 Pooling..................................................... A-28
Section 6.13 Tax-Free Status............................................. A-28
Section 6.14 Discharge of Liabilities.................................... A-28
Section 6.15 Cooperation, Notification................................... A-28
Section 6.16 Rate Matters................................................ A-28
Section 6.17 Third-Party Consents........................................ A-28
Section 6.18 No Breach, Etc. ............................................ A-28
Section 6.19 Tax-Exempt Status........................................... A-29
Section 6.20 Insurance................................................... A-29
Section 6.21 Permits..................................................... A-29
ARTICLE VII
ADDITIONAL AGREEMENTS.......................................................... A-29
Section 7.1 Access to Information....................................... A-29
Section 7.2 Joint Proxy Statement and Registration Statement............ A-29
Section 7.3 Regulatory Matters.......................................... A-30
Section 7.4 Shareholder Approvals....................................... A-31
Section 7.5 Directors' and Officers' Indemnification.................... A-31
Section 7.6 Disclosure Schedules........................................ A-33
Section 7.7 Public Announcements........................................ A-33
Section 7.8 Affiliates.................................................. A-33
Section 7.9 Certain Employee Agreements................................. A-33
Section 7.10 Incentive, Stock and Other Plans............................ A-35
Section 7.11 No Solicitations............................................ A-35
</TABLE>
A-ii
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<TABLE>
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PAGE
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<S> <C> <C> <C>
Section 7.12 NSP Board of Directors...................................... A-36
Section 7.13 NSP Officers................................................ A-37
Section 7.14 Corporate Offices........................................... A-37
Section 7.15 Expenses.................................................... A-37
Section 7.16 Name of NSP................................................. A-37
Section 7.17 Transfer of Assets.......................................... A-37
Section 7.18 Further Assurances.......................................... A-37
ARTICLE VIII
CONDITIONS..................................................................... A-38
Section 8.1 Conditions to Each Party's Obligation to Effect the A-38
Merger......................................................
Section 8.2 Conditions to Obligation of NCE to Effect the Merger........ A-38
Section 8.3 Conditions to Obligation of NSP to Effect the Merger........ A-39
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER.............................................. A-40
Section 9.1 Termination................................................. A-40
Section 9.2 Effect of Termination....................................... A-42
Section 9.3 Termination Fee; Expenses................................... A-42
Section 9.4 Amendment................................................... A-44
Section 9.5 Waiver...................................................... A-44
ARTICLE X
GENERAL PROVISIONS............................................................. A-44
Section 10.1 Non-Survival of Representations, Warranties, Covenants and A-44
Agreements..................................................
Section 10.2 Brokers..................................................... A-44
Section 10.3 Notices..................................................... A-45
Section 10.4 Miscellaneous............................................... A-46
Section 10.5 Interpretation.............................................. A-46
Section 10.6 Counterparts; Effect........................................ A-46
Section 10.7 Parties in Interest......................................... A-46
Section 10.8 Specific Performance........................................ A-46
Section 10.9 WAIVER OF JURY TRIAL........................................ A-46
EXHIBITS
Exhibit A Form of Plan of Merger
Exhibit B Form of Amendments to NSP Restated Articles of Incorporation
Exhibit C Form of NCE Affiliate Agreement
Exhibit D Form of NSP Affiliate Agreement
</TABLE>
A-iii
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of March 24, 1999 (this
"Agreement"), by and between NORTHERN STATES POWER COMPANY, a corporation
organized under the laws of the State of Minnesota ("NSP"), and NEW CENTURY
ENERGIES, INC., a corporation organized under the laws of the State of Delaware
("NCE").
WHEREAS, the respective Boards of Directors of NSP and NCE have approved
the merger of NCE into NSP on the terms and conditions set forth in this
Agreement (such transaction being referred to herein as the "Merger") with NSP
being the surviving corporation in the Merger;
WHEREAS, subject to Section 7.17 hereof, NSP will contribute certain of its
assets to a newly formed wholly-owned subsidiary prior to the Merger.
WHEREAS, for accounting purposes, it is intended that the Merger will be
accounted for as a pooling of interests in accordance with United States
generally accepted accounting principles ("GAAP") and applicable rules and
regulations of the Securities and Exchange Commission ("SEC");
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a transaction described in Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"), and that the shareholders of NCE
will not recognize any gain or loss as a result thereof, except with respect to
any cash received in lieu of fractional shares; and
NOW THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, the parties hereto,
intending to be legally bound, hereby agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Pursuant to the plan of merger, the form of which
is attached hereto as Exhibit A (the "Plan of Merger"), and upon the terms and
subject to the conditions of this Agreement, at the Effective Time (as defined
in Section 1.2), NCE shall be merged into NSP in accordance with the laws of the
State of Minnesota and the State of Delaware. NSP shall be the surviving
corporation in the Merger and shall continue its existence under the laws of the
State of Minnesota and the separate existence of NCE shall cease. The effects
and consequences of the Merger shall be as set forth in this Agreement and the
Plan of Merger, in Section 302A.641 of the Minnesota Business Corporation Act
(the "MBCA") and Section 259(a) of the Delaware General Corporation Law (the
"DGCL").
Section 1.2 Effective Time of the Merger. On the Closing Date (as defined
in Section 3.1), articles of merger with respect to the Merger, in form
acceptable to NSP and NCE ("Articles of Merger"), shall be executed and filed by
the parties hereto with the Secretary of State of the State of Minnesota
pursuant to Section 302A.615 of the MBCA and a certificate of merger, in form
acceptable to NSP and NCE (the "Certificate of Merger"), shall be executed and
filed by the parties hereto with the Secretary of State of the State of Delaware
pursuant to Section 252 of the DGCL. The Merger shall become effective upon the
later of the filing of such Articles of Merger and Certificate of Merger, or at
such later time that NSP and NCE shall agree as specified in the Articles of
Merger and Certificate of Merger (the time the Merger becomes effective being
hereinafter called the "Effective Time").
A-1
<PAGE> 116
Section 1.3 Articles of Incorporation; Bylaws. Unless otherwise agreed by
NCE and NSP prior to the Closing Date:
(a) At and after the Effective Time (until amended as provided by law and
such Restated Articles of Incorporation), the Restated Articles of Incorporation
of NSP shall be amended as provided in Exhibit B hereto.
(b) At and after the Effective Time (until amended as provided by law, the
Restated Articles of Incorporation of NSP and such Bylaws of NSP) the Bylaws of
NSP will continue unchanged.
ARTICLE II
TREATMENT OF SHARES
Section 2.1 Effect of Merger on Capital Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of any holder of any
capital stock of NSP or NCE:
(a) Cancellation of Certain NCE Common Stock. Each share of NCE common
stock, par value $1.00 per share ("NCE Common Stock"), together with any NCE
Rights (as defined in Section 5.20), that is owned by NSP or any of its
subsidiaries (as defined in Section 4.1) or held in the treasury of NCE shall be
cancelled and shall cease to exist, and no consideration shall be delivered in
exchange therefor.
(b) Conversion of Certain NCE Common Stock. Each share of NCE Common Stock
issued and outstanding immediately prior to the Effective Time (other than
shares cancelled pursuant to Section 2.1(a)), together with any NCE Rights,
shall be converted into the right to receive 1.55 shares (the "Conversion
Ratio") of duly authorized, validly issued, fully paid and nonassessable NSP
common stock, par value $2.50 per share ("NSP Common Stock"). Upon such
conversion, each holder of any shares of NCE Common Stock (whether held in book
entry or certificated form) shall cease to have any rights with respect thereto,
except the right to receive the shares of NSP Common Stock to be issued in
consideration therefor (and cash in lieu of fractional shares pursuant to
Section 2.2(d)) upon the surrender of such certificate or otherwise upon
compliance with Section 2.2.
(c) NSP Common Stock to Remain Outstanding. Each share of NSP Common Stock
and each share of preferred stock of NSP issued and outstanding immediately
prior to the Effective Time shall remain outstanding following the Effective
Time.
Section 2.2 Exchange of NCE Common Stock.
(a) Deposit with Exchange Agent. As soon as practicable after the Effective
Time, NSP shall deposit with a bank, trust company or other agent selected by
mutual agreement of the parties ("Exchange Agent") certificates representing
whole shares of NSP Common Stock to be issued in the Merger as provided in this
Article II.
(b) Exchange Procedures. As soon as practicable after the Effective Time,
the Exchange Agent shall mail to each holder of record of a certificate or
certificates ("Certificate") which immediately prior to the Effective Time
represented issued and outstanding shares of NCE Common Stock ("NCE Shares"),
(i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
actual delivery of the Certificates to the Exchange Agent) and (ii) instructions
for use in effecting the exchange of Certificates for certificates representing
shares of NSP Common Stock ("NSP Shares") or for effecting the exchange of
Certificates for NSP Shares to be held in book entry form. As soon as
practicable after the Effective Time, the Exchange Agent shall also mail to each
holder of record of NCE Shares held in book
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entry form ("Book Entry Shares") instructions for use in effecting the exchange
of said Book Entry Shares for NSP Shares. Upon delivery of a Certificate to the
Exchange Agent for exchange, together with a duly executed letter of transmittal
and such other documents as the Exchange Agent shall require, or, in the case of
Book Entry Shares, compliance with the instructions for the exchange thereof,
the holder of such Certificate or Book Entry Shares shall be entitled to receive
in exchange therefor that number of whole NSP Shares and the amount of cash in
lieu of fractional share interests (pursuant to Section 2.2(d)), if any, which
such holder has the right to receive pursuant to the provisions of this Article
II. In the event of a transfer of ownership of NCE Shares which is not
registered in the transfer records of NCE, the proper number of NSP Shares will
be issued to a transferee if, in addition to the other requirements for
exchange, the Exchange Agent receives all documents required to evidence and
effect such transfer and evidence satisfactory to the Exchange Agent that any
applicable stock transfer taxes have been paid. Until delivered as contemplated
by this Section 2.2, each Certificate, and until exchanged as contemplated by
this Section 2.2, all Book Entry Shares, shall be deemed at any time after the
Effective Time to represent only the right to receive whole NSP Shares and cash
in lieu of any fractional shares of NSP Common Stock as contemplated by this
Section 2.2.
(c) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions declared or made after the Effective Time with respect to NSP
Shares with a record date after the Effective Time shall be paid to the holder
of any undelivered Certificate or unexchanged Book Entry Shares with respect to
the NSP Shares represented thereby, and no cash payment in lieu of fractional
shares shall be paid to any such holder pursuant to Section 2.2(d), until the
holder of record of such Certificate or unexchanged Book Entry Shares (or a
transferee as described in Section 2.2(b)) shall have delivered such Certificate
or effected the exchange of such Book Entry Shares as contemplated in Section
2.2(b). Subject to the effect of unclaimed property, escheat and other
applicable laws, following delivery of any such Certificate or exchange of any
such Book Entry Shares, there shall be paid to the record holder (or transferee)
of the whole NSP Shares issued in exchange therefor, without interest, (i) at
the time of such delivery, the amount of any cash payable in lieu of a
fractional share of NSP Common Stock to which such holder (or transferee) is
entitled pursuant to Section 2.2(d) and the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole NSP Shares 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 delivery or exchange and a payment date subsequent
to delivery or exchange payable with respect to such whole NSP Shares, as the
case may be.
(d) No Fractional Shares. (i) No certificates or scrip representing
fractional shares of NSP Common Stock shall be issued upon the delivery of
Certificates or exchange of Book Entry Shares, and such fractional share
interests will not entitle the owner thereof to vote or to any rights of a
shareholder of NSP. All holders of NCE Common Stock who would otherwise be
entitled to receive a fractional share of NSP Common Stock shall receive, in
lieu thereof upon delivery or exchange of its NCE Shares, an amount of cash
determined by multiplying the fraction of a share of NSP Common Stock to which
such shareholder would otherwise be entitled by the closing sales price of NSP
Common Stock as reported under "NYSE Composite Transition Reports", in The Wall
Street Journal on the trading day immediately prior to the Effective Time. From
time to time, NSP shall, subject to Section 2.2(f) hereof, deliver to the
Exchange Agent cash in such amounts as shall be necessary to pay to the holders
of NCE Shares cash in lieu of fractional shares of NSP Common Stock.
(e) Closing of Transfer Books. From and after the Effective Time, the stock
transfer books of NCE with respect to shares of NCE Common Stock issued and
outstanding prior to the Effective Time shall be closed and no transfer of any
such shares shall thereafter be made. If, after the
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Effective Time, Certificates are presented to NSP, they shall be cancelled and
exchanged for certificates representing the appropriate number of whole NSP
Shares and cash in lieu of fractional shares of NSP Common Stock as provided in
this Section 2.2.
(f) Termination of Exchange Agent. Any certificates representing NSP Shares
deposited with the Exchange Agent pursuant to Section 2.2(a) and not exchanged
within six (6) months after the Effective Time pursuant to this Section 2.2
shall be returned by the Exchange Agent to NSP, which shall thereafter act as
Exchange Agent. All funds held by the Exchange Agent for payment to the holders
of undelivered Certificates or unexchanged Book Entry Shares and unclaimed at
the end of six (6) months from the Effective Time shall be remitted to NSP,
after which time any holder of undelivered Certificates or unexchanged Book
Entry Shares shall look as a general creditor only to NSP for payment of such
funds to which such holder may be due, subject to applicable law. NSP shall not
be liable to any person for such shares or funds delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(g) Adjustment of Conversion Ratio. In the event that, subsequent to the
date hereof but prior to the Effective Time, the outstanding shares of NCE
Common Stock or NSP Common Stock, respectively, shall have been changed into a
different number of shares or a different class as a result of a stock split,
reverse stock split, stock dividend, subdivision, reclassification, combination,
exchange, recapitalization or other similar transaction, the Conversion Ratio
shall be appropriately adjusted to provide the holders of NCE Shares the same
economic effect as contemplated by this Agreement prior to such event.
ARTICLE III
THE CLOSING
Section 3.1 Closing. The closing (the "Closing") of the Merger shall take
place at a place as may be mutually agreed upon by the parties hereto at 10:00
A.M., local time, on the second business day immediately following the date on
which the last of the conditions set forth in Article VIII is fulfilled or
waived, or at such other time and date as NCE and NSP shall mutually agree (the
"Closing Date").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NSP
Except as set forth in the corresponding sections or subsections of the
Disclosure Schedule, dated as of the date hereof, delivered by NSP to NCE (the
"NSP Disclosure Schedule"), NSP represents and warrants to NCE as follows:
Section 4.1 Organization and Qualification. NSP and each of its
subsidiaries is a corporation or other legal entity duly organized, validly
existing and in good standing under the laws of its jurisdiction of existence,
has all requisite power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted, and is
duly qualified and in good standing to do business in each jurisdiction in which
the nature of its business or the ownership or leasing of its assets and
properties makes such qualification necessary other than in such jurisdictions
where the failure to be so qualified and in good standing would not, when taken
together with all other such failures, have a material adverse effect on the
business, operations, properties, assets, condition (financial or otherwise),
prospects or results of operations of NSP and its subsidiaries taken as a whole
(any such material adverse effect being hereinafter referred to as a "NSP
Material
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Adverse Effect"). True, accurate and complete copies of the articles of
incorporation and bylaws of NSP, as in effect on the date hereof, have been
delivered to NCE. As used in this Agreement, the term "subsidiary" with respect
to any person shall mean any corporation or other entity (including partnerships
and other business associations) in which such person directly or indirectly
owns outstanding capital stock or other voting securities having the power,
under ordinary circumstances, to elect a majority of the directors or similar
members of the governing body of such corporation or other entity or otherwise
to direct the management and policies of such corporation or other entity.
Section 4.2 Subsidiaries. Section 4.2 of the NSP Disclosure Schedule
contains a description as of the date hereof of all subsidiaries and joint
ventures of NSP, including the name of each such entity, the state or
jurisdiction of its incorporation, a brief description of the principal line or
lines of business conducted by each such entity that is a "Significant
Subsidiary" within the meaning of Regulation S-X under the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and NSP's interest therein. None of
such entities is a "public utility company", a "holding company", a "subsidiary
company" or an "affiliate" of any public utility company within the meaning of
the Public Utility Holding Company Act of 1935, as amended ("1935 Act"). All the
issued and outstanding shares of capital stock of, or other equity interests in,
each NSP subsidiary have been duly authorized and validly issued and are fully
paid and nonassessable (subject to Section 180.0622(2)(b) of the Wisconsin
Business Corporation Law, as judicially interpreted, in the case of NSP-W (as
defined in Section 4.12)) and are owned directly or indirectly by NSP free and
clear of all pledges, claims, liens, charges, encumbrances, and security
interests of any kind or nature whatsoever (collectively "Liens"). There are no
outstanding subscriptions, options, calls, contracts, voting trusts, proxies or
other commitments, understandings, restrictions, arrangements, rights or
warrants, including any right of conversion or exchange under any outstanding
security, instrument or other agreement, obligating any such subsidiary to
issue, deliver or sell, or cause to be issued, delivered or sold, additional
shares of its capital stock or obligating it to grant, extend or enter into any
such agreement or commitment. As used in this Agreement, the term "joint
venture" with respect to any person shall mean any corporation or other entity
(including partnerships and other business associations and joint ventures) in
which such person or one or more of its subsidiaries owns an equity interest
that is less than a majority of any class of the outstanding voting securities
or equity, other than equity interests held for passive investment purposes that
are less than 5% of any class of the outstanding voting securities or equity,
provided that such person or one or more of its subsidiaries does not have the
power, under ordinary circumstances, to elect a majority of the directors or
similar members of the governing body of such corporation or entity or otherwise
to direct the management and policies of such corporation or entity.
Section 4.3 Capitalization. The authorized capital stock of NSP consists of
350,000,000 shares of NSP Common Stock and 7,000,000 shares of preferred stock,
par value $100 per share ("NSP Preferred Stock"). As of the close of business on
March 24, 1999, there were issued and outstanding 153,194,008 shares of NSP
Common Stock and 1,050,000 shares of NSP Preferred Stock, consisting of: 275,000
shares of $3.60 Series; 150,000 shares of $4.08 Series; 175,000 share of $4.10
Series; 200,000 shares of $4.11 Series; 100,000 shares of $4.16 Series; and
150,000 shares of $4.56 Series. All of the issued and outstanding shares of the
capital stock of NSP are validly issued, fully paid, nonassessable and free of
preemptive rights. As of the date hereof, there are no outstanding
subscriptions, options, calls, contracts, voting trusts, proxies or other
commitments, understandings, restrictions, arrangements, rights or warrants,
including any right of conversion or exchange under any outstanding security,
instrument or other agreement, obligating NSP or any of its subsidiaries or
joint ventures to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of the capital stock or other voting securities of NSP
or obligating NSP or any of its subsidiaries or joint ventures to grant, extend
or enter into any such agreement or commitment.
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Section 4.4 Authority; Non-Contravention; Statutory Approvals; Compliance.
(a) Authority. NSP has all requisite power and authority to enter into this
Agreement and the Plan of Merger and, subject to the NSP Shareholders' Approval
(as defined in Section 4.13) and the NSP Required Statutory Approvals (as
defined in Section 4.4(c)), to consummate the transactions contemplated hereby
and thereby. The Board of Directors of NSP has (i) determined that the Merger is
fair to and in the best interest of NSP and its shareholders, (ii) approved and
adopted this Agreement and the Plan of Merger, and (iii) resolved to recommend
to the holders of NSP Common Stock that they vote in favor of approving the
Merger and approving and adopting this Agreement and the Plan of Merger (the
"NSP Shareholders' Approval"). The execution and delivery of this Agreement and
the Plan of Merger and the consummation by NSP of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of NSP, subject to obtaining the NSP Shareholders' Approval. This
Agreement has been and the Plan of Merger will be duly and validly executed and
delivered by NSP and, assuming the due authorization, execution and delivery
hereof and thereof by NCE, this Agreement constitutes, and the Plan of Merger
will constitute, the legal, valid and binding obligation of NSP enforceable
against NSP in accordance with the terms hereof and thereof. Prior to the
Effective Time, the Board of Directors of NSP, or an appropriate committee of
non-employee directors thereof, will have adopted a resolution consistent with
the interpretive guidance of the SEC so that the acquisition by any officer or
director of NCE who may become a covered person of NSP for purposes of Section
16 of the Exchange Act and the rules and regulations thereunder ("Section 16")
of shares of NSP Common Stock or options to acquire NSP Common Stock pursuant to
this Agreement and the Merger shall be an exempt transaction for purposes of
Section 16.
(b) Non-Contravention. The execution and delivery of this Agreement by NSP
do not, and the execution and delivery by NSP of the Plan of Merger will not,
and the consummation of the transactions contemplated hereby and thereby,
including the contribution of assets contemplated by Section 7.17 hereof, will
not, violate, conflict with or result in a breach of any provision of, or
constitute a default (with or without notice or lapse of time or both) under, or
result in the termination of, or accelerate the performance required by, or
result in a right of termination, cancellation or acceleration of any material
obligation under or the loss of a material benefit under, or result in the
creation of any Lien upon any of the properties or assets (any such violation,
conflict, breach, default, right of termination, cancellation or acceleration,
loss or creation being hereinafter referred to as a "Violation") by NSP or any
of its subsidiaries or any of its joint ventures, under any provisions of (i)
subject to obtaining the approval of the SEC under the provisions of the 1935
Act and the NSP Shareholders' Approval, the articles of incorporation, bylaws or
similar governing documents of NSP or any of its subsidiaries or joint ventures,
(ii) subject to obtaining the NSP Required Statutory Approvals and the receipt
of the NSP Shareholders' Approval, any statute, law, ordinance, rule,
regulation, judgment, decree, order, injunction, writ, permit or license of any
court, governmental or regulatory body (including a stock exchange or other
self-regulatory body) or authority, domestic or foreign (each, a "Governmental
Authority"), applicable to NSP or any of its material subsidiaries or joint
ventures or any of their respective properties or assets, or (iii) subject to
obtaining the third-party consents or other approvals set forth in Section
4.4(b) of the NSP Disclosure Schedule (the "NSP Required Consents"), any note,
bond, mortgage, indenture, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument, obligation or agreement of any
kind to which NSP or any of its subsidiaries or joint ventures is now a party or
by which any of them or any of their respective properties or assets may be
bound or affected, excluding from the foregoing clauses (ii) and (iii) such
Violations as would not have, in the aggregate, a NSP Material Adverse Effect.
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(c) Statutory Approvals. No declaration, filing or registration with, or
notice to or authorization, consent, finding by or approval of, any Governmental
Authority is necessary for the execution and delivery of this Agreement or the
Plan of Merger by NSP or the consummation by NSP of the transactions
contemplated hereby or thereby, which, if not obtained, made or given, would
have, in the aggregate, a NSP Material Adverse Effect (the "NSP Required
Statutory Approvals"), it being understood that references in this Agreement to
"obtaining" such NSP Required Statutory Approvals shall mean making such
declarations, filings or registrations; giving such notice; obtaining such
consents or approvals; and having such waiting periods expire as are necessary
to avoid a violation of law.
(d) Compliance. Except as specifically disclosed in the NSP SEC Reports (as
defined in Section 4.5) filed prior to the date hereof, neither NSP nor any of
its subsidiaries or joint ventures is in violation of or under investigation
with respect to, or has been given notice or been charged with any violation of,
any law, statute, order, rule, regulation, ordinance or judgment (including,
without limitation, any Environmental Laws (as defined in Section 4.11(g)) of
any Governmental Authority, except for violations that would not, in the
aggregate, have and are not reasonably likely to have a NSP Material Adverse
Effect. NSP and its subsidiaries and joint ventures have all permits, licenses,
franchises and other governmental authorizations, consents and approvals
necessary to conduct their respective businesses as currently conducted
(collectively, "Permits"), except those Permits the failure to obtain which
would not have, in the aggregate, a NSP Material Adverse Effect.
Section 4.5 Reports and Financial Statements. The filings required to be
made by NSP and its subsidiaries since January 1, 1996 under the Securities Act
of 1933, as amended (the "Securities Act"), the Exchange Act, the Federal Power
Act, as amended, ("Power Act"), the Atomic Energy Act of 1954, as amended, (the
"Atomic Energy Act"), the 1935 Act, the Natural Gas Act, if any, the Natural Gas
Policy Act of 1978 (the "Gas Policy Act"), if any, and applicable state laws and
regulations have been filed with the SEC, Federal Energy Regulatory Commission
(the "FERC"), the Nuclear Regulatory Commission (the "NRC") or the applicable
state authorities with jurisdiction over public utilities, as the case may be,
including all forms, statements, reports, agreements (oral or written) and all
documents, exhibits, amendments and supplements appertaining thereto, and
complied in all material respects with all applicable requirements of the
appropriate act and the rules and regulations thereunder. NSP has made available
to NCE a true and complete copy of each report, schedule, registration statement
and definitive proxy statement filed by NSP with the SEC since January 1, 1996
and through the date hereof (as such documents have since the time of their
filing been amended, the "NSP SEC Reports"). The NSP SEC Reports, including
without limitation any financial statements or schedules included therein, at
the time filed, and any forms, reports or other documents filed by NSP with the
SEC after the date hereof, did not and will not, in each case as of their
respective dates, contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The audited consolidated financial statements and unaudited
interim financial statements of NSP included in the NSP SEC Reports
(collectively, the "NSP Financial Statements") have been prepared, and will be
prepared, in accordance with GAAP applied on a consistent basis throughout the
periods involved (except as may be indicated therein or in the notes thereto, or
with respect to unaudited statements, as permitted by Form 10-Q under the
Exchange Act) and fairly present in all material respects, the consolidated
financial position of NSP as of the respective dates thereof or the consolidated
results of operations and cash flows for the respective periods then ended, as
the case may be, subject, in the case of the unaudited interim financial
statements, to normal, recurring audit adjustments.
Section 4.6 Absence of Certain Changes or Events. Except as specifically
disclosed in the NSP SEC Reports filed prior to the date hereof, from December
31, 1998 through the date hereof, NSP
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and each of its subsidiaries and joint ventures have conducted their respective
businesses only in the ordinary course of business consistent with past practice
and no event has occurred which has had, and no fact or condition exists that
would have or is reasonably likely to have a NSP Material Adverse Effect.
Section 4.7 Litigation. Except as specifically disclosed in the NSP SEC
Reports filed prior to the date hereof, (a) there are no claims, suits, actions
or proceedings pending or, to the knowledge of NSP, threatened, nor are there
any investigations or reviews pending or, to the knowledge of NSP, threatened
against or affecting NSP or any of its subsidiaries or joint ventures, (b) there
have not been any developments since December 31, 1998 with respect to any such
disclosed claims, suits, actions, proceedings, investigations or reviews, and
(c) there are no judgments, decrees, injunctions, rules or orders of any court,
governmental department, commission, agency, instrumentality or authority or any
arbitrator applicable to NSP or any of its subsidiaries or joint ventures that,
in the aggregate, would have or are reasonably likely to have a NSP Material
Adverse Effect.
Section 4.8 Registration Statement and Proxy Statement. None of the
information supplied or to be supplied by or on behalf of NSP for inclusion or
incorporation by reference in (a) the registration statement on Form S-4 to be
filed with the SEC by NSP in connection with the issuance of shares of NSP
Common Stock in the Merger (the "Registration Statement") will, at the time the
Registration Statement becomes effective under the Securities Act, and as the
same may be amended, at the effective time of such amendment, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein not misleading, and
(b) the joint proxy statement in definitive form, relating to the meetings of
the shareholders of NCE and NSP to be held in connection with the Merger and the
prospectus relating to NSP Common Stock to be issued in the Merger (the "Joint
Proxy Statement/Prospectus") will, at the date such Joint Proxy
Statement/Prospectus is mailed to such shareholders, and, as the same may be
amended or supplemented, at the times of such meetings, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The Registration Statement and the Joint Proxy
Statement/Prospectus will comply as to form in all material respects with the
provisions of the Securities Act and the Exchange Act and the rules and
regulations thereunder.
Section 4.9 Tax Matters. "Taxes", as used in this Agreement, means any
federal, state, county, local or foreign taxes, levies, or other assessments,
including all net income, gross income, sales and use, ad valorem, transfer,
gains, profits, excise, franchise, real and personal property, gross receipts,
capital stock, production, business and occupation, disability, employment,
payroll, license, estimated, stamp, custom duties, severance or withholding
taxes or charges imposed by any governmental entity, and includes any interest
and penalties (civil or criminal) on or additions to any such taxes and any
expenses incurred in connection with the determination, settlement or litigation
of any tax liability. "Tax Return", as used in this Agreement, means a report,
return or other written information required to be supplied to a governmental
entity with respect to Taxes including, where permitted or required, combined or
consolidated returns for any group of entities that includes NSP or any of its
subsidiaries on the one hand, or NCE or any of its subsidiaries on the other
hand. Except in the case of the representations or warranties contained in
subsections (a), (b), (c), (d), (e), (f), (g), (h), (i), or (j) hereof, where
the failure thereof to be true and correct would not, in the aggregate, have a
NSP Material Adverse Effect:
(a) All Tax Returns in respect of Taxes required to be filed with respect
to NSP and each of its subsidiaries (including the consolidated federal income
Tax Return of NSP and any state Tax Return that includes NSP or any of its
subsidiaries on a consolidated or combined basis) have been timely filed.
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(b) All Taxes required to be shown on such Tax Returns or otherwise due
have been timely paid.
(c) All such Tax Returns are true, correct and complete in all respects.
(d) No adjustment relating to such Tax Returns (or that could result in
liability of NSP or any of its subsidiaries on the basis of joint and/or several
liability) has been proposed in writing by any Tax authority.
(e) There are no pending or threatened in writing actions or proceedings
for the assessment or collection of Taxes against NSP or any of its subsidiaries
(or that could result in a liability of NSP or any of its subsidiaries on the
basis of joint and/or several liability) or against any corporation that was
included in the filing of a return with NSP on a consolidated or combined basis.
(f) There are no Tax liens on any assets of NSP or any of its subsidiaries.
(g) NSP and each of its subsidiaries has been and continues to be a member
of the affiliated group (within the meaning of Section 1504(a)(1) of the Code)
for which NSP files a consolidated return as the common parent.
(h) There are no outstanding waivers or agreements extending the statute of
limitations for any period with respect to any Tax to which NSP or any of its
subsidiaries may be subject.
(i) Neither NSP nor any of its subsidiaries has any (i) income reportable
for a period ending after the Closing Date but attributable to a transaction
(e.g., an installment sale) occurring in or a change in accounting method made
from a period ending on or prior to the Closing Date which resulted in a
deferred reporting of income from such transaction or from such change in
accounting method (other than a deferred intercompany transaction), or (ii)
deferred gain or loss arising out of any deferred intercompany transaction.
(j) No power of attorney that is currently in force has been granted with
respect to any matter relating to Taxes that could affect NSP or any of its
subsidiaries.
(k) NSP has no knowledge of any fact, nor has NSP taken any action that
would, or would be reasonably likely to, adversely affect the qualification of
the Merger as a reorganization described in Section 368(a) of the Code.
Section 4.10 Employee Matters; ERISA.
(a) Each "employee benefit plan" (as defined in Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")), each
other bonus, deferred compensation, stock option, severance, change in control
or other written plan or policy relating to compensation, fringe benefits or
perquisites for current or former directors or employees of NSP or any of its
subsidiaries that is maintained or contributed to by NSP or any of its
subsidiaries, each employment, severance, change-in-control or similar agreement
that exists between NSP or any of its subsidiaries and any officer of NSP or any
of its subsidiaries that provides for base pay in excess of $150,000 per year,
and each other employment, severance, change in control or similar arrangement
that exists between NSP or any of its subsidiaries and any employee of NSP or
any of its subsidiaries that provides severance, change in control or other
similar payments or benefits which exceed three times the employee's annual
compensation (collectively, the "NSP Employee Benefit Plans"), and each current
or former employee or director eligible to participate in the NSP 1999 Senior
Executive Severance Policy is listed in Section 4.10(a) of the NSP Disclosure
Schedule. Except where the failure to be in material compliance or to be so
operated would not, in the aggregate, have a NSP Material Adverse Effect, each
NSP Employee Benefit Plan and each employee benefit plan and each
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bonus, deferred compensation, stock option, severance, change in control or
other written plan, agreement or policy relating to compensation, fringe
benefits or perquisites for current or former directors or employees of any of
NSP's joint ventures (collectively, the "NSP Joint Venture Plans"), is in
substantial compliance with applicable law, including, without limitation, ERISA
and the Code, and has been administered and operated in all material respects in
accordance with its terms. Each NSP Employee Benefit Plan and each NSP Joint
Venture Plan which is intended to be qualified within the meaning of Section
401(a) of the Code has received a favorable determination letter from the IRS
and, to the knowledge of NSP, no event has occurred and no condition exists
which could reasonably be expected to result in the revocation of any such
determination.
(b) NSP has provided complete and correct copies of all plan documents of
the NSP Employee Benefit Plans listed in Section 4.10(a) of the NSP Disclosure
Schedule, including but not limited to, plan amendments, trust agreements,
insurance contracts or other documents establishing funding arrangements,
service provider contracts, investment management and investment advisory
agreements, all advance determination letters from the IRS, summary
modifications thereto, the last five years' Form 5500s and the most recent
actuarial and financial statements.
(c) No NSP Employee Benefit Plan is or ever has been subject to Title IV of
ERISA or the funding requirements of Section 412 of the Code. Neither NSP, its
subsidiaries, nor any other entity under common control with NSP or any of its
subsidiaries (as determined under Code Sections 414(b) and (c)) (the "NSP
Control Group") has any liability under Title IV of ERISA or Section 412 of the
Code with respect to any employee benefit plan other than a NSP Employee Benefit
Plan, which liability has not been satisfied in full. No NSP Employee Benefit
Plan or NSP Joint Venture Plan subject to Title IV of ERISA has been terminated
or is, to the knowledge of NSP, currently the subject of termination proceedings
pursuant to Title IV of ERISA.
(d) No event which constitutes a "reportable event" (as defined in Section
4043(b) of ERISA) for which the 30-day notice requirement has not been waived by
the Pension Benefit Guarantee Corporation (the "PBGC") has occurred with respect
to any NSP Employee Benefit Plan or NSP Joint Venture Plan, except for
reportable events which would not, individually or in the aggregate, have a NSP
Material Adverse Effect.
(e) Except where the failure to pay any such amounts would not have a NSP
Material Adverse Effect, full payment has been made of all amounts which NSP or
any of its subsidiaries or joint ventures was required under the terms of NSP
Employee Benefit Plans and NSP Joint Venture Plans to have paid as contributions
to such plans on or prior to the Closing Date (excluding any amounts not yet
due) and no NSP Employee Benefit Plan or NSP Joint Venture Plan which is subject
to Part III of Subtitle B of Title I of ERISA has incurred any "accumulated
funding deficiency" within the meaning of Section 302 of ERISA or Section 412 of
the Code), whether or not waived.
(f) No liability, claim, action or litigation has been incurred, made,
commenced or, to the knowledge of NSP, threatened by or against NSP or any of
its subsidiaries or joint ventures with respect to any NSP Employee Benefit
Plans or NSP Joint Venture Plans including, without limitation, liability
incurred under Title IV of ERISA (other than for benefits payable in the
ordinary course and PBGC insurance premiums) or Section 412(f) or (n) of the
Code by any entity required to be aggregated with NSP or any of its subsidiaries
or joint ventures pursuant to Section 4001(b) of ERISA and/or Section 414(b) or
(c) of the Code (and the regulations promulgated thereunder) with respect to any
"employee pension benefit plan" (as defined in Section 3(2) of ERISA), except
for the liabilities, claims, actions or litigation which, individually or in the
aggregate, would not have a NSP Material Adverse Effect.
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(g) Neither NSP nor any of its subsidiaries or joint ventures nor, to the
knowledge of NSP, any other "disqualified person" or "party in interest" (as
defined in Section 4975(e)(2) of the Code and Section 3(14) of ERISA) has
engaged in any transaction in connection with any NSP Employee Benefit Plan or
NSP Joint Venture Plan that could reasonably be expected to result in the
imposition of a material penalty pursuant to Section 502(i) of ERISA, material
damages pursuant to Section 409 of ERISA or a material tax pursuant to Section
4975(a) of the Code. No NSP Employee Benefit Plan or NSP Joint Venture Plan or
related trust owns any securities in violation of Section 407 of ERISA, except
as would not have a NSP Material Adverse Effect.
(h) With respect to each NSP Employee Benefit Plan and each NSP Joint
Venture Plan which is subject to Title IV of ERISA, as of the most recent
actuarial valuation report prepared for each such plan and based upon
assumptions set forth therein, the aggregate present value of the accrued
liabilities thereof did not exceed the aggregate fair market value of the assets
allocable thereto.
(i) Each NSP Employee Benefit Plan and each NSP Joint Venture Plan which is
a "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) (a
"Multiemployer Plan") or a plan that has two or more contributing sponsors at
least two of whom are not under common control, within the meaning of Section
4063 of ERISA (a "Multiple Employer Plan") to which NSP or any of its
subsidiaries or joint ventures is obligated to contribute is identified as such
in Section 4.10(i) of the NSP Disclosure Schedule. All contributions required to
have been made by NSP or any of its subsidiaries or joint ventures to any
Multiemployer Plan have been made on a timely basis. No member of the NSP
Controlled Group has incurred any withdrawal liability that has not been
satisfied in full or at any time during the last six years has withdrawn from
any Multiemployer Plan or Multiple Employer Plan. With respect to each NSP
Employee Benefit Plan and each NSP Joint Venture Plan that is a Multiemployer
Plan: (i) if NSP or any of its subsidiaries or joint ventures or any of their
respective ERISA Affiliates, as applicable, were to experience a withdrawal or
partial withdrawal from such plan, no withdrawal liability would be incurred
except as would not have a NSP Material Adverse Effect; and (ii) neither NSP nor
any of its subsidiaries or joint ventures has received any notification, or has
any reason to believe, that any such plan is in reorganization, has been
terminated, is insolvent, or may reasonably be expected to be in reorganization,
to be insolvent, or to be terminated.
(j) Neither NSP nor any of its subsidiaries has maintained any plan (other
than a plan which is intended to be "qualified" within the meaning of Section
401(a) of the Code) which provides welfare benefits with respect to current or
former employees, current or former officers, or current or former directors,
following their termination of service with NSP or any of its subsidiaries
(other than as required by Section 601 of ERISA or other applicable law). Each
NSP Employee Benefit Plan or NSP Joint Venture Plan subject to the requirements
of Section 601 of ERISA has been operated in substantial compliance therewith,
except as would not have a NSP Material Adverse Effect. Neither NSP nor any of
its subsidiaries or joint ventures has contributed to a nonconforming group
health plan (as defined in Code Section 5000(c)) and no member of the NSP
Control Group has incurred a tax under Code Section 5000(a) that is or could be
a liability of NSP or any of its subsidiaries, except as would not have a NSP
Material Adverse Effect.
(k) No individual shall accrue or receive additional benefits, service or
accelerated vesting or rights to payment as a direct result of the transactions
contemplated by this Agreement and no payment or benefit accrued under any NSP
Employee Benefit Plan or NSP Joint Venture Plan or other agreement or
arrangement of NSP or any of its subsidiaries or joint ventures will be
nondeductible under Code Sections 162(m) or 280G.
(l) To the knowledge of NSP, as of the date hereof, there is no current
labor union representation question involving employees of NSP or any of its
subsidiaries or joint ventures, nor
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does NSP or any of its subsidiaries or joint ventures know of any activity or
proceeding of any labor organization (or representative thereof) or employee
group (or representative thereof) to organize any such employees. Further, (i)
neither NSP nor any of its subsidiaries or joint ventures is a party to any
collective bargaining agreement or other labor agreement with any union or labor
organization; (ii) there is no unfair labor practice charge or grievance arising
out of a collective bargaining agreement or other grievance procedure against
NSP or any of its subsidiaries or joint ventures pending, or to the knowledge of
NSP, threatened, that has had, or reasonably may be expected by NSP to have, a
NSP Material Adverse Effect; (iii) there is no complaint, lawsuit or proceeding
in any forum by or on behalf of any present or former employee, any applicant
for employment or classes of the foregoing alleging breach of any express or
implied contract of employment, any law or regulation governing employment or
the termination thereof or other discriminatory, wrongful or tortious conduct in
connection with the employment relationship against NSP or any of its
subsidiaries or joint ventures pending, or to the knowledge of NSP, threatened,
that has, or reasonably may be expected by NSP to have, a NSP Material Adverse
Effect; (iv) there is no strike, dispute, slowdown, work stoppage or lockout
pending, or to the knowledge of NSP, threatened, against or involving NSP or any
of its subsidiaries or joint ventures that has or, insofar as reasonably can be
foreseen, could have, a NSP Material Adverse Effect; (v) NSP and each of its
subsidiaries and joint ventures are in compliance with all applicable laws
respecting employment and employment practices, terms and conditions of
employment, wages, hours of work and occupational safety and health, except for
non-compliance that, in the aggregate, does not, and insofar as reasonably can
be foreseen, will not, have a NSP Material Adverse Effect; and (vi) there is no
proceeding, claim, suit, action or governmental investigation pending or, to the
knowledge of NSP, threatened in respect to which any director, officer, employee
or agent of NSP or any of its subsidiaries or joint ventures is or may be
entitled to claim indemnification from NSP or any of its subsidiaries or joint
ventures pursuant to their respective articles of incorporation or bylaws or as
provided in the indemnification agreements listed on Section 4.10(l) of the NSP
Disclosure Schedule.
Section 4.11 Environmental Protection. Except as specifically disclosed in
the NSP SEC Reports filed prior to the date hereof:
(a) Compliance. NSP and each of its subsidiaries and joint ventures is in
material compliance with all applicable Environmental Laws (as hereinafter
defined in Section 4.11(g)), except where the failure to be so in material
compliance would not in the aggregate have a NSP Material Adverse Effect.
Neither NSP nor any of its subsidiaries or joint ventures has received any
written notice from any person or Governmental Authority that alleges that NSP
or any of its subsidiaries or joint ventures is not in material compliance with
applicable Environmental Laws, except where the failure to be so in material
compliance would not, in the aggregate, have a NSP Material Adverse Effect.
(b) Environmental Permits. NSP and each of its subsidiaries or joint
ventures has obtained or has applied for all material environmental, health and
safety permits and authorizations (collectively, "Environmental Permits")
necessary for the construction of their facilities and the conduct of their
operations, and all such Environmental Permits are in good standing or, where
applicable, a renewal application has been timely filed and is pending agency
approval, and NSP and its subsidiaries or joint ventures are in material
compliance with all terms and conditions of all such Environmental Permits and
are not required to make any material expenditures in connection with any
renewal application pending agency approval, except where the failure to obtain
or be in such compliance and the requirement to make such expenditures would not
have, in the aggregate, a NSP Material Adverse Effect.
(c) Environmental Claims. There is no Environmental Claim (as hereinafter
defined in Section 4.11(g)) pending, or to the knowledge of NSP, threatened (i)
against NSP or any of its subsidiaries or joint ventures, (ii) against any
person or entity whose liability for any Environmental
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Claim NSP or any of its subsidiaries or joint ventures has or may have retained
or assumed either contractually or by operation of law or (iii) against any real
or personal property or operations that NSP or any of its subsidiaries or joint
ventures owns, leases or manages, in whole or in part, that, if adversely
determined, would have, in the aggregate, a NSP Material Adverse Effect.
(d) Releases. There has been no Release (as hereinafter defined in Section
4.11(g)) of any Hazardous Material (as hereinafter defined in Section 4.11(g))
that would be reasonably likely to form the basis of any Environmental Claim
against NSP or any subsidiary or joint venture of NSP, or against any person or
entity whose liability for any Environmental Claim NSP or any subsidiary or
joint venture of NSP has or may have retained or assumed either contractually or
by operation of law, except for Releases of Hazardous Materials the liability
for which would not have, in the aggregate, a NSP Material Adverse Effect.
(e) Predecessors. With respect to any predecessor of NSP or any subsidiary
or joint venture of NSP, there are no Environmental Claims pending or, to the
knowledge of NSP, threatened, or any Releases of Hazardous Materials that would
be reasonably likely to form the basis of any Environmental Claims that would
have, or that are reasonably likely to have, in the aggregate, a NSP Material
Adverse Effect.
(f) Disclosure. NSP has disclosed to NCE all material facts that NSP
reasonably believes form the basis of a NSP Material Adverse Effect arising from
(i) the cost of pollution control equipment currently required or known to be
required in the future, (ii) current investigatory, removal, remediation or
response costs or investigatory, removal, remediation or response costs known to
be required in the future, in each case, both on-site and off-site and (iii) any
other environmental matter affecting NSP or its subsidiaries or joint ventures
that would have, or that are reasonably likely to have, in the aggregate, a NSP
Material Adverse Effect.
(g) Definitions. As used in this Agreement:
(i) "Environmental Claim" means any and all administrative, regulatory
or judicial actions, suits, demands, demand letters, directives, claims,
liens, investigations, proceedings or notices of noncompliance or violation
by any person or entity (including, without limitation, any Governmental
Authority) alleging potential liability (including, without limitation,
potential liability for enforcement costs, investigatory costs, cleanup
costs, response costs, removal costs, remedial costs, natural resources
damages, property damages, personal injuries, fines or penalties) arising
out of, based on or resulting from (A) the presence, or Release or
threatened Release of any Hazardous Materials at any location, whether or
not owned, operated, leased or managed by NSP or any of its subsidiaries or
joint ventures (for purposes of this Section 4.11 only), or by NCE or any
of its subsidiaries or joint ventures (for purposes of Section 5.11 only),
(B) circumstances forming the basis of any violation, or alleged violation,
of any Environmental Law or (C) any and all claims by any third party
seeking damages, contribution, indemnification, cost recovery, compensation
or injunctive relief resulting from the presence or Release of any
Hazardous Materials.
(ii) "Environmental Laws" means all federal, state and local laws,
rules and regulations relating to pollution or protection of human health
or the environment (including, without limitation, ambient air, surface
water, groundwater, land surface or subsurface strata), including, without
limitation, laws and regulations relating to Releases or threatened
Releases of Hazardous Materials or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials.
(iii) "Hazardous Materials" means (A) any petroleum or petroleum
products or petroleum wastes (including crude oil or any fraction thereof),
radioactive materials, friable asbestos or
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friable asbestos-containing material, urea formaldehyde foam insulation,
and transformers or other equipment that contain dielectric fluid
containing polychlorinated biphenyls, (B) any chemicals, materials or
substances which are now defined as or included in the definition of
"hazardous substances", "hazardous wastes", "hazardous materials",
"extremely hazardous wastes", "restricted hazardous wastes", "toxic
substances", "toxic pollutants", or words of similar import, under any
Environmental Law and (C) any other chemical, material, substance or waste,
exposure to which is now prohibited, limited or regulated under any
Environmental Law in a jurisdiction in which NSP or any of its subsidiaries
or joint ventures operates or where any of such materials have treated,
stored or disposed (for purposes of this Section 4.11 only) or in which NCE
or any of its subsidiaries or joint ventures operates or where any of such
materials have treated, stored or disposed (for purposes of Section
5.11only).
(iv) "Release" means any release, spill, emission, leaking, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the
atmosphere, soil, surface water, groundwater or property (indoors or
outdoors).
Section 4.12 Regulation as a Utility. NSP is regulated as a public utility
in the States of Minnesota, North Dakota, South Dakota and Arizona and in no
other state. Northern States Power Company, a Wisconsin corporation ("NSP-W"),
is regulated as a public utility in the States of Wisconsin and Michigan and in
no other state. Neither NSP nor any subsidiary company or affiliate of NSP is
subject to regulation as a public utility or public service company (or similar
designation) by any other state in the United States, by the United States or
any agency or instrumentality of the United States or by any foreign country. As
used in this Section 4.12 and in Section 5.12, the terms "subsidiary company"
and "affiliate" shall have the respective meanings ascribed to them in the 1935
Act. NSP is a holding company exempt from all provisions of the 1935 Act except
Section 9(a)(2) pursuant to Section 3(a)(2) of the 1935 Act.
Section 4.13 Vote Required. The approval of the Merger and the approval and
adoption of this Agreement and the Plan of Merger (i) by a majority of all votes
entitled to be cast by the holders of NSP Common Stock and NSP Preferred Stock,
voting together as a single class, and (ii) by a majority of all votes entitled
to be cast by the holders of NSP Common Stock, voting as a separate class, at a
duly called meeting of such shareholders at which a quorum is present is the
only vote of the holders of any class or series of the capital stock of NSP
required to approve this Agreement and the Plan of Merger, the Merger and the
other transactions contemplated hereby.
Section 4.14 Accounting Matters. Neither NSP nor, to NSP's knowledge, any
affiliate (as defined in Section 7.8) of NSP has taken or agreed to take any
action that would prevent NSP from accounting for the business combination to be
effected by the Merger as a pooling-of-interests in accordance with GAAP and
applicable SEC regulations.
Section 4.15 Opinion of Financial Advisor. NSP has received the opinion of
The Blackstone Group, LP dated the date hereof, to the effect that, as of the
date hereof, the Conversion Ratio is fair to the holders of NSP Common Stock
from a financial point of view.
Section 4.16 Insurance. NSP and each of its subsidiaries and, to the
knowledge of NSP, each of its joint ventures is, and has been continuously since
January 1, 1996, insured in such amounts and against such risks and losses as
are customary for companies conducting the respective businesses conducted by
NSP and its subsidiaries and joint ventures during such time period. Neither NSP
nor any of its subsidiaries, nor, to the knowledge of NSP, any of NSP's joint
ventures has received any written notice of cancellation or termination with
respect to any material insurance policy. All material insurance policies of NSP
and its subsidiaries and, to the knowledge of NSP, its joint ventures are valid
and enforceable policies in all material respects.
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Section 4.17 Ownership of NCE Common Stock. NSP does not "beneficially own"
(as such term is defined in Rule 13d-3 under the Exchange Act) any shares of NCE
Common Stock.
Section 4.18 Year 2000. NSP has implemented a program which will result in
the computer hardware and software operated by NSP and its subsidiaries or which
is used in the conduct of its business being capable, prior to December 31,
1999, of providing, except where the failure to so provide would not, in the
aggregate, have a NSP Material Adverse Effect, uninterrupted millennium
functionality to record, store, process and present calendar dates on or after
January 1, 2000 in substantially the same manner and with the same functionality
as such hardware and software records, stores, processes and presents calendar
dates falling on or before December 31, 1999. NSP reasonably believes as of the
date hereof that the remaining costs of fully implementing such program will not
exceed the amounts reflected in the Definitive Proxy Statement filed by NSP for
its 1999 Annual Meeting of Shareholders.
Section 4.19 Anti-Takeover Provisions. None of the control share
acquisition provisions of Section 302A.671 of the MBCA, the business combination
provisions of Section 302A.673 and 302A.675 of the MBCA or any similar
provisions of the MBCA or the articles of incorporation or bylaws of NSP are
applicable to the transactions contemplated by this Agreement.
Section 4.20 Nuclear Operations. Except as disclosed in the NSP SEC Reports
filed prior to the date hereof, the operations of NSP's and its subsidiaries'
and joint ventures', nuclear generating stations are and have at all times been
conducted in material compliance with applicable health, safety, regulatory and
other legal requirements. NSP's and its subsidiaries' and joint ventures'
nuclear generating stations maintain emergency plans designed to respond to an
unplanned release therefrom of radioactive materials into the environment and
liability insurance to the extent required by law, and such further insurance
(other than liability insurance) as is consistent with NSP's view of the risks
inherent in the operation of a nuclear power facility. NSP's and its
subsidiaries' and joint ventures' plans for the decommissioning of each of its
nuclear generating stations and for the short-term storage of spent nuclear fuel
conform with applicable regulatory or other legal requirements, and such plans
have at all times been funded to the extent required by law, which is consistent
with NSP's reasonable budget projections for such plans. Neither NSP nor any of
its subsidiaries or joint ventures has incurred any liability as a result of
operating nuclear power facilities for third parties which liability, in the
aggregate, would have a NSP Material Adverse Effect.
Section 4.21 NRC Actions. Except as disclosed in the NSP SEC Reports filed
prior to the date hereof, neither NSP nor any of its subsidiaries or joint
ventures has been given notice of or been charged with actual or potential
violation of, or is the subject of any ongoing proceeding, inquiry, special
inspection, diagnostic evaluation or other NRC action (including rulemakings of
general application that may effect the conduct of NSP's business regarding
NSP's nuclear power facilities) of which NSP or any of its subsidiaries or joint
ventures has received notice under the Atomic Energy Act, any applicable
regulations thereunder or the terms and conditions of any license granted to NSP
or any of its subsidiaries or joint ventures regarding NSP's or any of its
subsidiaries' or joint ventures' nuclear power facilities operated by NSP or any
of its subsidiaries or joint ventures that would have, or is reasonably likely
to have, a NSP Material Adverse Effect.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF NCE
Except as set forth in the corresponding sections or subsections of the
Disclosure Schedule, dated as of the date hereof, delivered by NCE to NSP prior
to the execution of this Agreement (the "NCE Disclosure Schedule"), NCE
represents and warrants to NSP as follows:
Section 5.1 Organization and Qualification. NCE and each of its
subsidiaries is a corporation or other legal entity duly organized, validly
existing and in good standing under the laws of its jurisdiction of existence,
has all requisite power and authority to own, lease and operate its assets and
properties and to carry on its business as it is now being conducted, and is
duly qualified and in good standing to do business in each jurisdiction in which
the nature of its business or the ownership or leasing of its assets and
properties makes such qualification necessary other than in such jurisdictions
where the failure to be so qualified and in good standing would not, when taken
together with all other such failures, have a material adverse effect on the
business, operations, properties, assets, condition (financial or otherwise),
prospects or results of operations of NCE and its subsidiaries taken as a whole
(any such material adverse effect being hereinafter referred to as a "NCE
Material Adverse Effect"). True, accurate and complete copies of the certificate
of incorporation and bylaws of NCE, as in effect on the date hereof, have been
delivered to NSP.
Section 5.2 Subsidiaries. Section 5.2 of the NCE Disclosure Schedule
contains a description as of the date hereof of all subsidiaries and joint
ventures of NCE, including the name of each such entity, the state or
jurisdiction of its incorporation, a brief description of the principal line or
lines of business conducted by each such entity that is a Significant Subsidiary
and NCE's interest therein. None of such entities is a "public utility company",
a "holding company", a "subsidiary company" or an "affiliate" of any public
utility company within the meaning of the 1935 Act. All the issued and
outstanding shares of capital stock of, or other equity interests in, each NCE
subsidiary have been duly authorized and validly issued and are fully paid,
nonassessable and are owned directly or indirectly by NCE free and clear of any
Liens. There are no outstanding subscriptions, options, calls, contracts, voting
trusts, proxies or other commitments, understandings, restrictions,
arrangements, rights or warrants, including any right of conversion or exchange
under any outstanding security, instrument or other agreement, obligating any
such subsidiary to issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of its capital stock or obligating it to grant, extend
or enter into any such agreement or commitment.
Section 5.3 Capitalization. The authorized capital stock of NCE consists of
260,000,000 shares of NCE Common Stock and 20,000,000 shares of preferred stock.
As of the close of business on March 22, 1999, 114,924,982 shares of NCE Common
Stock and no shares of preferred stock were issued and outstanding. All of the
issued and outstanding shares of the capital stock of NCE are validly issued,
fully paid, and nonassessable and free of preemptive rights. As of the date
hereof, there are no outstanding subscriptions, options, calls, contracts,
voting trusts, proxies or other commitments, understandings, restrictions,
arrangements, rights or warrants, including any right of conversion or exchange
under any outstanding security, instrument or other agreement, obligating NCE or
any of its subsidiaries or joint ventures to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of the capital stock or other
voting securities of NCE or obligating NCE or any of its subsidiaries or joint
ventures to grant, extend or enter into any such agreement or commitment.
Section 5.4 Authority; Non-Contravention; Statutory Approvals; Compliance.
(a) Authority. NCE has all requisite power and authority to enter into this
Agreement and the Plan of Merger and, subject to the NCE Shareholders' Approval
(as defined in Section 5.13) and the NCE Required Statutory Approvals (as
defined in Section 5.4(c), to consummate the transactions
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contemplated hereby and thereby. The Board of Directors of NCE has (i)
determined that the Merger is fair to and in the best interest of NCE and its
shareholders, (ii) approved and adopted this Agreement and the Plan of Merger,
and (iii) resolved to recommend to the holders of NCE Common Stock that they
vote in favor of approving the Merger and approving and adopting this Agreement
and the Plan of Merger (the "NCE Shareholders' Approval"). The execution and
delivery of this Agreement and the Plan of Merger and the consummation by NCE of
the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of NCE, subject to obtaining the NCE
Shareholders' Approval. This Agreement has been and the Plan of Merger will be
duly and validly executed and delivered by NCE and, assuming the due
authorization, execution and delivery hereof and thereof by NSP, this Agreement
constitutes, and the Plan of Merger will constitute, the legal, valid and
binding obligation of NCE enforceable against NCE in accordance with the terms
hereof and thereof.
(b) Non-Contravention. The execution and delivery of this Agreement by NCE
do not, and the execution and delivery by NCE of the Plan of Merger will not,
and the consummation of the transactions contemplated hereby and thereby will
not result in any Violation by NCE or any of its subsidiaries or any of its
joint ventures under any provisions of (i) subject to obtaining the NCE
Shareholders' Approval, the certificate of incorporation, bylaws or similar
governing documents of NCE or any of its subsidiaries or joint ventures, (ii)
subject to obtaining the NCE Required Statutory Approvals and the receipt of the
NCE Shareholders' Approval, any statute, law, ordinance, rule, regulation,
judgment, decree, order, injunction, writ, permit or license of any Governmental
Authority applicable to NCE or any of its material subsidiaries or joint
ventures or any of their respective properties or assets, or (iii) subject to
obtaining the third-party consents or other approvals disclosed in Section
5.4(b) of the NCE Disclosure Schedule (the "NCE Required Consents"), any note,
bond, mortgage, indenture, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument, obligation or agreement of any
kind to which NCE or any of its subsidiaries or joint ventures is now a party or
by which any of them or any of their respective properties or assets may be
bound or affected, excluding from the foregoing clauses (ii) and (iii) such
Violations as would not have, in the aggregate, a NCE Material Adverse Effect.
(c) Statutory Approvals. No declaration, filing or registration with, or
notice to or authorization, consent, finding by or approval of, any Governmental
Authority, is necessary for the execution and delivery of this Agreement or the
Plan of Merger by NCE or the consummation by NCE of the transactions
contemplated hereby or thereby, which if not obtained, made or given, would
have, in the aggregate, a NCE Material Adverse Effect (the "NCE Required
Statutory Approvals"), it being understood that references in this Agreement to
"obtaining" such NCE Required Statutory Approvals shall mean making such
declarations, filings or registrations; giving such notice; obtaining such
consents or approvals; and having such waiting periods expire as are necessary
to avoid a violation of law.
(d) Compliance. Except as specifically disclosed in the NCE SEC Reports (as
defined in Section 5.5) filed prior to the date hereof, neither NCE nor any of
its subsidiaries or joint ventures is in violation of or under investigation
with respect to, or has been given notice or been charged with any violation of,
any law, statute, order, rule, regulation, ordinance or judgment (including,
without limitation, any Environmental Laws), of any Governmental Authority,
except for violations that would not, in the aggregate, have and are not
reasonably likely to have a NCE Material Adverse Effect. NCE and its
subsidiaries and joint ventures have all Permits, except those Permits the
failure to obtain which would not have, in the aggregate, a NCE Material Adverse
Effect.
Section 5.5 Reports and Financial Statements. The filings required to be
made by NCE and its subsidiaries since January 1, 1996 under the Securities Act,
the Exchange Act, the Power Act, the Natural Gas Act, if any, the Gas Policy
Act, if any, and applicable state laws and regulations have
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been filed with the SEC, the FERC, or the applicable state authorities with
jurisdiction over public utilities, as the case may be, including all forms,
statements, reports, agreements (oral or written) and all documents, exhibits,
amendments and supplements appertaining thereto, and complied in all material
respects with all applicable requirements of the appropriate act and the rules
and regulations thereunder. NCE has made available to NSP a true and complete
copy of each report, schedule, registration statement and definitive proxy
statement filed by NCE with the SEC since January 1, 1996 and through the date
hereof (as such documents have since the time of their filing been amended, the
"NCE SEC Reports"). The NCE SEC Reports, including without limitation any
financial statements or schedules included therein, at the time filed, and any
forms, reports or other documents filed by NCE with the SEC after the date
hereof, did not and will not, in each case as of their respective dates, contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
audited consolidated financial statements and unaudited interim financial
statements of NCE included in the NCE SEC Reports (collectively, the "NCE
Financial Statements") have been prepared, and will be prepared in accordance
with GAAP applied on a consistent basis throughout the periods involved (except
as may be indicated therein or in the notes thereto or with respect to unaudited
statements, as permitted by Form 10-Q under the Exchange Act) and fairly present
in all material respects the consolidated financial position of NCE as of the
respective dates thereof or the consolidated results of operations and cash
flows for the respective periods then ended, as the case may be, subject, in the
case of the unaudited interim financial statements, to normal, recurring audit
adjustments.
Section 5.6 Absence of Certain Changes or Events. Except as specifically
disclosed in the NCE SEC Reports filed prior to the date hereof, from December
31, 1998 through the date hereof, NCE and each of its subsidiaries and joint
ventures have conducted their respective businesses only in the ordinary course
of business consistent with past practice and no event has occurred which has
had, and no fact or condition exists that would have or is reasonably likely to
have a NCE Material Adverse Effect.
Section 5.7 Litigation. Except as specifically disclosed in the NCE SEC
Reports filed prior to the date hereof, (a) there are no claims, suits, actions
or proceedings pending or, to the knowledge of NCE, threatened, nor are there
any investigations or reviews pending or, to the knowledge of NCE, threatened
against or affecting NCE or any of its subsidiaries or joint ventures (b) there
have not been any developments since December 31, 1998 with respect to any such
disclosed claims, suits, actions, proceedings, investigations or reviews, and
(c) there are no judgments, decrees, injunctions, rules or orders of any court,
governmental department, commission, agency, instrumentality or authority or any
arbitrator applicable to NCE or any of its subsidiaries or joint ventures that,
in the aggregate, would have or are reasonably likely to have, a NCE Material
Adverse Effect.
Section 5.8 Registration Statement and Proxy Statement. None of the
information supplied or to be supplied by or on behalf of NCE for inclusion or
incorporation by reference in (a) the Registration Statement will at the time
the Registration Statement becomes effective under the Securities Act, and, as
the same may be amended, at the effective time of such amendment, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading,
and (b) the Joint Proxy Statement/Prospectus will, at the date such Joint Proxy
Statement/Prospectus is mailed to the shareholders of NCE and NSP, and, as the
same may be amended or supplemented, at the times of the meetings 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 necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading. The Registration Statement and the Joint Proxy
Statement/Prospectus will comply as to form in all
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material respects with the provisions of the Securities Act and the Exchange Act
and the rules and regulations thereunder.
Section 5.9 Tax Matters. Except in the case of the representations or
warranties contained in subsections (a), (b), (c), (d), (e), (f), (g), (i), (j),
or (k), where the failure thereof to be true and correct would not, in the
aggregate, have a NCE Material Adverse Effect:
(a) All Tax Returns in respect of Taxes required to be filed with respect
to NCE and each of its subsidiaries (including the consolidated federal income
Tax Return of NCE and any state Tax Return that includes NCE or any of its
subsidiaries on a consolidated or combined basis) have been timely filed.
(b) All Taxes required to be shown on such Tax Returns or otherwise due
have been timely paid.
(c) All such Tax Returns are true, correct and complete in all respects.
(d) No adjustment relating to such Tax Returns (or that could result in
liability of NCE or any of its subsidiaries on the basis of joint and/or several
liability) has been proposed in writing by any Tax authority.
(e) There are no pending or threatened in writing actions or proceedings
for the assessment or collection of Taxes against NCE or any of its subsidiaries
(or that could result in a liability of NCE or any of its subsidiaries on the
basis of joint and/or several liability) or against any corporation that was
included in the filing of a return with NCE on a consolidated or combined basis.
(f) There are no Tax liens on any assets of NCE or any of its subsidiaries.
(g) NCE and each of its subsidiaries has been and continues to be a member
of the affiliated group (within the meaning of Section 1504(a)(1) of the Code)
for which NCE files a consolidated return as the common parent.
(h) No foreign person owns or has owned beneficially more than five percent
(5%) of the total fair market value of NCE Common Stock during the applicable
period specified in Section 897(c)(1)(A)(ii) of the Code, and, at all times
during the applicable period specified in Section 897(c)(1)(A)(ii) of the Code,
NCE Common Stock has been regularly traded in an established securities market
within the meaning of Treas. Reg. Section 1.897-1(m).
(i) There are no outstanding waivers or agreements extending the statute of
limitations for any period with respect to any Tax to which NCE or any of its
subsidiaries may be subject.
(j) Neither NCE nor any of its subsidiaries has any (i) income reportable
for a period ending after the Closing Date but attributable to a transaction
(e.g., an installment sale) occurring in or a change in accounting method made
from a period ending on or prior to the Closing Date which resulted in a
deferred reporting of income from such transaction or from such change in
accounting method (other than a deferred intercompany transaction), or (ii)
deferred gain or loss arising out of any deferred intercompany transaction.
(k) No power of attorney that is currently in force has been granted with
respect to any matter relating to Taxes that could affect NCE or any of its
subsidiaries.
(l) NCE has no knowledge of any fact, nor has NCE taken any action that
would, or would be reasonably likely to, adversely affect the qualification of
the Merger as a reorganization described in Section 368(a) of the Code.
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(m) For purposes of Code Section 357(c), the sum of the amount of
liabilities of NCE plus the amount of liabilities to which the property of NCE
is subject, does not exceed the total of the adjusted basis of the property of
NCE.
Section 5.10 Employee Matters; ERISA.
(a) Each "employee benefit plan" (as defined in Section 3(3) of ERISA, each
other bonus, deferred compensation, stock option, severance, change in control
or other written plan or policy relating to compensation, fringe benefits or
perquisites for current or former directors or employees of NCE or any of its
subsidiaries that is maintained or contributed to by NCE or any of its
subsidiaries, each employment, severance, change-in-control or similar agreement
that exists between NCE or any of its subsidiaries and any officer of NCE or any
of its subsidiaries that provides for base pay in excess of $150,000 per year,
and each other employment, severance, change in control or similar arrangement
that exists between NCE or any of its subsidiaries and any employee of NCE or
any of its subsidiaries that provides severance, change in control or other
similar payments or benefits which exceed three times the employee's annual
compensation (collectively, the "NCE Employee Benefit Plans"), and each current
or former employee or director eligible to participate in the NCE 1999 Senior
Executive Severance Policy is listed in Section 5.10(a) of the NCE Disclosure
Schedule. Except where the failure to be in material compliance or to be so
operated would not, in the aggregate, have a NCE Material Adverse Effect, each
NCE Employee Benefit Plan and each employee benefit plan and each bonus,
deferred compensation, stock option, severance, change in control or other
written plan, agreement or policy relating to compensation, fringe benefits or
perquisites for current or former directors or employees of any of NCE's joint
ventures (collectively, the "NCE Joint Venture Plans"), is in substantial
compliance with applicable law, including, without limitation, ERISA and the
Code, and has been administered and operated in all material respects in
accordance with its terms. Each NCE Employee Benefit Plan and each NCE Joint
Venture Plan which is intended to be qualified within the meaning of Section
401(a) of the Code has received a favorable determination letter from the IRS
and, to the knowledge of NCE, no event has occurred and no condition exists
which could reasonably be expected to result in the revocation of any such
determination.
(b) NCE has provided complete and correct copies of all plan documents of
the NCE Employee Benefit Plans listed in Section 4.10(a) of the NCE Disclosure
Schedule, including but not limited to, plan amendments, trust agreements,
insurance contracts or other documents establishing funding arrangements,
service provider contracts, investment management and investment advisory
agreements, all advance determination letters from the IRS, summary
modifications thereto, the last five years' Form 5500s and the most recent
actuarial and financial statements.
(c) No NCE Employee Benefit Plan is or ever has been subject to Title IV of
ERISA or the funding requirements of Section 412 of the Code. Neither NCE, its
subsidiaries, nor any other entity under common control with NCE or any of its
subsidiaries (as determined under Code Sections 414(b) and (c)) (the "NCE
Control Group") has any liability under Title IV of ERISA or Section 412 of the
Code with respect to any employee benefit plan other than a NCE Employee Benefit
Plan, which liability has not been satisfied in full. No NCE Employee Benefit
Plan or NCE Joint Venture Plan subject to Title IV of ERISA has been terminated
or is, to the knowledge of NCE, currently the subject of termination proceedings
pursuant to Title IV of ERISA.
(d) No event which constitutes a "reportable event" (as defined in Section
4043(b) of ERISA) for which the 30-day notice requirement has not been waived by
the PBGC has occurred with respect to any NCE Employee Benefit Plan or NCE Joint
Venture Plan, except for reportable events which would not, individually or in
the aggregate, have a NCE Material Adverse Effect.
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(e) Except where the failure to pay any such amounts would not have a NCE
Material Adverse Effect, full payment has been made of all amounts which NCE or
any of its subsidiaries or joint ventures was required under the terms of NCE
Employee Benefit Plans and NCE Joint Venture Plans to have paid as contributions
to such plans on or prior to the Closing Date (excluding any amounts not yet
due) and no NCE Employee Benefit Plan or NCE Joint Venture Plan which is subject
to Part III of Subtitle B of Title I of ERISA has incurred any "accumulated
funding deficiency" within the meaning of Section 302 of ERISA or Section 412 of
the Code), whether or not waived.
(f) No liability, claim, action or litigation has been incurred, made,
commenced or, to the knowledge of NCE, threatened by or against NCE or any of
its subsidiaries or joint ventures with respect to any NCE Employee Benefit
Plans or NCE Joint Venture Plans including, without limitation, liability
incurred under Title IV of ERISA (other than for benefits payable in the
ordinary course and PBGC insurance premiums) or Section 412(f) or (n) of the
Code by any entity required to be aggregated with NCE or any of its subsidiaries
or joint ventures pursuant to Section 4001(b) of ERISA and/or Section 414(b) or
(c) of the Code (and the regulations promulgated thereunder) with respect to any
"employee pension benefit plan" (as defined in Section 3(2) of ERISA), except
for the liabilities, claims, actions or litigation which, individually or in the
aggregate, would not have a NCE Material Adverse Effect.
(g) Neither NCE nor any of its subsidiaries or joint ventures nor, to the
knowledge of NCE, any other "disqualified person" or "party in interest" (as
defined in Section 4975(e)(2) of the Code and Section 3(14) of ERISA) has
engaged in any transaction in connection with any NCE Employee Benefit Plan or
NCE Joint Venture Plan that could reasonably be expected to result in the
imposition of a material penalty pursuant to Section 502(i) of ERISA, material
damages pursuant to Section 409 of ERISA or a material tax pursuant to Section
4975(a) of the Code. No NCE Employee Benefit Plan or NCE Joint Venture Plan or
related trust owns any securities in violation of Section 407 of ERISA except as
would not have a NCE Material Adverse Effect.
(h) With respect to each NCE Employee Benefit Plan and each NCE Joint
Venture Plan which is subject to Title IV of ERISA, as of the most recent
actuarial valuation report prepared for each such plan and based upon
assumptions set forth therein, the aggregate present value of the accrued
liabilities thereof did not exceed the aggregate fair market value of the assets
allocable thereto.
(i) Each NCE Employee Benefit Plan and each NCE Joint Venture Plan which is
a Multiemployer Plan or a Multiple Employer Plan to which NCE or any of its
subsidiaries or joint ventures is obligated to contribute is identified as such
in Section 4.10(i) of the NCE Disclosure Schedule. All contributions required to
have been made by NCE or any of its subsidiaries or joint ventures to any
Multiemployer Plan have been made on a timely basis. No member of the NCE
Controlled Group has incurred any withdrawal liability that has not been
satisfied in full or at any time during the last six years has withdrawn from
any Multiemployer Plan or Multiple Employer Plan. With respect to each NCE
Employee Benefit Plan and each NCE Joint Venture Plan that is a Multiemployer
Plan: (i) if NCE or any of its subsidiaries or joint ventures or any of their
respective ERISA Affiliates, as applicable, were to experience a withdrawal or
partial withdrawal from such plan, no withdrawal liability would be incurred
except as would not have a NCE Material Adverse Effect; and (ii) neither NCE nor
any of its subsidiaries or joint ventures has received any notification, or has
any reason to believe, that any such plan is in reorganization, has been
terminated, is insolvent, or may reasonably be expected to be in reorganization,
to be insolvent, or to be terminated.
(j) Neither NCE nor any of its subsidiaries has maintained any plan (other
than a plan which is intended to be "qualified" within the meaning of Section
401(a) of the Code) which provides welfare
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benefits with respect to current or former employees, current or former
officers, or current or former directors, following their termination of service
with NCE or any of its subsidiaries (other than as required by Section 601 of
ERISA or other applicable law). Each NCE Employee Benefit Plan or NCE Joint
Venture Plan subject to the requirements of Section 601 of ERISA has been
operated in substantial compliance therewith, except as would not have a NCE
Material Adverse Effect. Neither NCE nor any of its subsidiaries or joint
ventures has contributed to a nonconforming group health plan (as defined in
Code Section 5000(c)) and no member of the NCE Control Group has incurred a tax
under Code Section 5000(a) that is or could be a liability of NCE or any of its
subsidiaries, except as would not have a NCE Material Adverse Effect.
(k) No individual shall accrue or receive additional benefits, service or
accelerated vesting or rights to payment as a direct result of the transactions
contemplated by this Agreement and no payment or benefit accrued under any NCE
Employee Benefit Plan or NCE Joint Venture Plan or other agreement or
arrangement of NCE or any of its subsidiaries or joint ventures will be
nondeductible under Code Sections 162(m) or 280G.
(l) To the knowledge of NCE, as of the date hereof, there is no current
labor union representation question involving employees of NCE or any of its
subsidiaries or joint ventures, nor does NCE or any of its subsidiaries or joint
ventures know of any activity or proceeding of any labor organization (or
representative thereof) or employee group (or representative thereof) to
organize any such employees. Further, (i) neither NCE nor any of its
subsidiaries or joint ventures is a party to any collective bargaining agreement
or other labor agreement with any union or labor organization; (ii) there is no
unfair labor practice charge or grievance arising out of a collective bargaining
agreement or other grievance procedure against NCE or any of its subsidiaries or
joint ventures pending, or to the knowledge of NCE, threatened, that has had, or
reasonably may be expected by NCE to have, a NCE Material Adverse Effect; (iii)
there is no complaint, lawsuit or proceeding in any forum by or on behalf of any
present or former employee, any applicant for employment or classes of the
foregoing alleging breach of any express or implied contract of employment, any
law or regulation governing employment or the termination thereof or other
discriminatory, wrongful or tortious conduct in connection with the employment
relationship against NCE or any of its subsidiaries or joint ventures pending,
or to the knowledge of NCE, threatened, that has, or reasonably may be expected
by NCE to have, a NCE Material Adverse Effect; (iv) there is no strike, dispute,
slowdown, work stoppage or lockout pending, or to the knowledge of NCE,
threatened, against or involving NCE or any of its subsidiaries or joint
ventures that has or, insofar as reasonably can be foreseen, could have, a NCE
Material Adverse Effect; (v) NCE and each of its subsidiaries and joint ventures
are in compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment, wages, hours of work and
occupational safety and health, except for non-compliance that, in the
aggregate, does not, and insofar as reasonably can be foreseen, will not, have a
NCE Material Adverse Effect; and (vi) there is no proceeding, claim, suit,
action or governmental investigation pending or, to the knowledge of NCE,
threatened in respect to which any director, officer, employee or agent of NCE
or any of its subsidiaries or joint ventures is or may be entitled to claim
indemnification from NCE or any of its subsidiaries or joint ventures pursuant
to their respective articles of incorporation or bylaws or as provided in the
indemnification agreements listed on Section 4.10(l) of the NCE Disclosure
Schedule.
Section 5.11 Environmental Protection. Except as specifically disclosed in
the NCE SEC Reports filed prior to the date hereof:
(a) Compliance. NCE and each of its subsidiaries and joint ventures is in
material compliance with all applicable Environmental Laws, except where the
failure to be so in material compliance would not in the aggregate have a NCE
Material Adverse Effect. Neither NCE nor any of its subsidiaries or joint
ventures has received any written notice from any person or Governmental
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Authority that alleges that NCE or any of its subsidiaries or joint ventures is
not in material compliance with applicable Environmental Laws, except where the
failure to be so in material compliance would not have, in the aggregate, a NCE
Material Adverse Effect.
(b) Environmental Permits. NCE and each of its subsidiaries and joint
ventures has obtained or has applied for all material Environmental Permits
necessary for the construction of their facilities and the conduct of their
operations, and all such Environmental Permits are in good standing or, where
applicable, a renewal application has been timely filed and is pending agency
approval, and NCE and its subsidiaries or joint ventures are in material
compliance with all terms and conditions of all such Environmental Permits and
are not required to make any material expenditures in connection with any
renewal application pending agency approval, except where the failure to obtain
or be in such compliance and the requirement to make such expenditures would not
have, in the aggregate, a NCE Material Adverse Effect.
(c) Environmental Claims. There is no Environmental Claim pending, or to
the knowledge of NCE, threatened (i) against NCE or any of its subsidiaries or
joint ventures, (ii) against any person or entity whose liability for any
Environmental Claim NCE or any of its subsidiaries or joint ventures has or may
have retained or assumed either contractually or by operation of law or (iii)
against any real or personal property or operations that NCE or any of its
subsidiaries or joint ventures owns, leases or manages, in whole or in part,
that, if adversely determined, would have, in the aggregate, a NCE Material
Adverse Effect.
(d) Releases. There has been no Release of any Hazardous Material that
would be reasonably likely to form the basis of any Environmental Claim against
NCE or any subsidiary or joint venture of NCE, or against any person or entity
whose liability for any Environmental Claim NCE or any subsidiary or joint
venture of NCE has or may have retained or assumed either contractually or by
operation of law, except for Releases of Hazardous Materials the liability for
which would not have, in the aggregate, a NCE Material Adverse Effect.
(e) Predecessors. With respect to any predecessor of NCE or any subsidiary
or joint venture of NCE, there are no Environmental Claims pending or, to the
knowledge of NCE, threatened, or any Releases of Hazardous Materials that would
be reasonably likely to form the basis of any Environmental Claims that would
have, or that are reasonably likely to have, in the aggregate, a NCE Material
Adverse Effect.
(f) Disclosure. NCE has disclosed to NSP all material facts that NCE
reasonably believes form the basis of a NCE Material Adverse Effect arising from
(i) the cost of pollution control equipment currently required or known to be
required in the future, (ii) current investigatory, removal, remediation or
response costs or investigatory, removal, remediation or response costs known to
be required in the future, in each case, both on-site and offsite and (iii) any
other environmental matter affecting NCE or its subsidiaries that would have, or
that are reasonably likely to have, in the aggregate, a NCE Material Adverse
Effect.
Section 5.12 Regulation as a Utility. Subsidiaries of NCE are regulated as
public utilities in the States of Colorado, Kansas, New Mexico, Oklahoma, Texas
and Wyoming and in no other state. Neither NCE nor any subsidiary company or
affiliate of NCE is subject to regulation as a public utility or public service
company (or similar designation) by any other state in the United States, by the
United States or any agency or instrumentality of the United States or by any
foreign country. NCE is a registered holding company under the 1935 Act.
Section 5.13 Vote Required. (a) The approval of the Merger and the approval
and adoption of this Agreement and the Plan of Merger by a majority of all votes
entitled to be cast by the holders of NCE Common Stock at a duly called meeting
of such shareholders at which a quorum is present is
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the only vote of the holders of any class or series of the capital stock of NCE
required to approve this Agreement and the Plan of Merger, the Merger and the
other transactions contemplated hereby.
(b) None of the shareholders of NCE are entitled to exercise any appraisal
rights in connection with the NCE Shareholders' Approval.
Section 5.14 Accounting Matters. Neither NCE nor, to NCE's knowledge, any
affiliate (as defined in Section 7.8) of NCE, has taken or agreed to take any
action that would prevent NSP from accounting for the business combination to be
effected by the Merger as a pooling-of-interests in accordance with GAAP and
applicable SEC regulations.
Section 5.15 Opinion of Financial Advisor. NCE has received the opinion of
SG Barr Devlin (a division of SG Cowen Securities Corporation), dated the date
hereof, to the effect that, as of the date hereof, the Conversion Ratio is fair
to the holders of NCE Common Stock from a financial point of view.
Section 5.16 Insurance. NCE and each of its subsidiaries and, to the
knowledge of NCE, each of its joint ventures is, and has been continuously since
January 1, 1996, insured in such amounts and against such risks and losses as
are customary for companies conducting the respective businesses conducted by
NCE and its subsidiaries and joint ventures during such time period. Neither NCE
nor any of its subsidiaries, nor, to the knowledge of NCE, any of NCE's joint
ventures has received any written notice of cancellation or termination with
respect to any material insurance policy. All material insurance policies of NCE
and its subsidiaries and, to the knowledge of NCE, its joint ventures are valid
and enforceable policies in all material respects.
Section 5.17 Ownership of NSP Common Stock. NCE does not "beneficially own"
(as such term is defined in Rule 13d-3 under the Exchange Act) any shares of NSP
Common Stock.
Section 5.18 Year 2000. NCE has implemented a program which will result in
the computer hardware and software operated by NCE and its subsidiaries or which
is used in the conduct of its business being capable, prior to December 31,
1999, of providing, except where the failure to so provide would not, in the
aggregate, have a NCE Material Adverse Effect, uninterrupted millennium
functionality to record, store, process and present calendar dates on or after
January 1, 2000 in substantially the same manner and with the same functionality
as such hardware and software records, stores, processes and presents calendar
dates falling on or before December 31, 1999. NCE reasonably believes as of the
date hereof that the remaining costs of fully implementing such program will not
exceed the amounts reflected in the Form 8-K, dated February 23, 1999, filed by
NCE.
Section 5.19 Anti-Takeover Provisions. None of the business combination
provisions of Section 203 of the DGCL or the certificate of incorporation or
bylaws of NCE are applicable to the transactions contemplated by this Agreement.
Section 5.20 NCE Rights Agreement. NCE has taken such action with respect
to all of the outstanding rights to purchase preferred stock (or, in certain
circumstances, common stock and/or other securities) of NCE (the "NCE Rights")
issued pursuant to the Rights Agreement, dated as of August 1, 1997, between NCE
and The Bank of New York, as Rights Agent (the "NCE Rights Agreement"), so that
(a) as a result of the execution, delivery or performance of this Agreement and
the consummation of the Merger or any other transaction contemplated hereby (i)
so long as this Agreement has not been terminated pursuant to Section 9.1, a
Distribution Date (as such term is defined in the NCE Rights Agreement) shall
not occur or be deemed to occur and (ii) the NCE Rights shall not separate (to
the extent that the NCE Rights Agreement otherwise provides for such separation)
or become exercisable, and NSP shall not become an Acquiring Person (as such
term is defined in the NCE Rights Agreement) and (b) the NCE Rights shall expire
immediately prior to the Effective Time.
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ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
After the date hereof and prior to the Effective Time or earlier
termination of this Agreement, each of NSP and NCE agrees as to itself and its
subsidiaries, except as expressly contemplated or permitted in this Agreement,
or to the extent the other party shall otherwise consent in writing, as follows:
Section 6.1 Ordinary Course of Business. Each of NSP and NCE shall, and
each shall cause its respective subsidiaries to, carry on their respective
businesses in the usual, regular and ordinary course consistent with past
practice and use all commercially reasonable efforts to preserve intact their
present business organizations and goodwill, preserve the goodwill and
relationships with customers, suppliers and others having business dealings with
them and, subject to prudent management of workforce needs and ongoing or
planned programs relating to downsizing, re-engineering and similar matters, use
reasonable best efforts to keep available the services of their present officers
and employees, to the end that their goodwill and ongoing businesses shall not
be impaired in any material respect at the Effective Time.
Section 6.2 Dividends. Neither NSP nor NCE shall, nor shall either permit
any of its subsidiaries to: (a) declare or pay any dividends on or make other
distributions in respect of any of their capital stock other than (i) to such
party or its wholly-owned subsidiaries, (ii) stated dividends on the preferred
stock of any subsidiary of NCE, stated dividends on NSP Preferred Stock and the
special cash dividend in connection with the amendments to the Restated Articles
of Incorporation of NSP to be considered at NSP's 1999 Annual Meeting of
Shareholders (the "NSP Articles Amendments"), (iii) regular quarterly dividends
on NSP Common Stock with usual record and payment dates not in excess of an
annual rate of $1.50, (iv) regular quarterly dividends on NCE Common Stock with
usual record and payment dates not in excess of an annual rate of $2.32 per
share and (v) dividends by subsidiaries that are not Significant Subsidiaries;
(b) split, combine or reclassify any of their 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 (c) redeem,
repurchase or otherwise acquire any shares of their capital stock other than
(but in all cases subject to Section 6.12) (i) redemptions, repurchases and
other acquisitions of shares of capital stock in the ordinary course of business
consistent with past practice including, without limitation, repurchases,
redemptions and other acquisitions in connection with the administration of
employee benefit and dividend reinvestment plans as in effect on the date hereof
in the ordinary course of the operation of such plans, (ii) redemptions,
purchases or acquisitions required by the respective terms of any series of NSP
Preferred Stock, (iii) repurchases of NSP Preferred Stock necessary in
connection with the exercise of dissenters' rights by holders of NSP Preferred
Stock in connection with the NSP Articles Amendments, (iv) in connection with
refunding of NSP Preferred Stock at a lower cost of funds as permitted pursuant
to Section 6.7, (v) intercompany acquisitions of capital stock, and (vi) the
redemption, if required, of the NCE Rights pursuant to the NCE Rights Agreement.
The last record date of each of NCE and NSP on or prior to the Effective Time
which relates to a regular quarterly dividend on NCE Common Stock or NSP Common
Stock, as the case may be, shall be the same date and shall be prior to the
Effective Time.
Section 6.3 Issuance of Securities. Neither NSP nor NCE shall, nor shall
either permit any of its subsidiaries to, issue, deliver or sell, or authorize
or propose the issuance, delivery or sale of, any shares of their capital stock
of any class or any securities convertible into or exchangeable for, or any
rights, warrants or options to acquire, any such shares or convertible or
exchangeable securities, other than (a) the issuance of common stock pursuant to
(i) the existing Dividend Reinvestment and Stock Purchase Plan of NSP, or (ii)
the existing NCE Dividend Reinvestment and Cash Payment
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Plan, as applicable, in each case consistent in kind and amount with past
practice and in the ordinary course of business under such plans substantially
in accordance with their present terms, (b) pursuant to the terms of stock
options, stock appreciation rights, and other equity-based awards granted
pursuant to (i) the NSP Executive Long Term Incentive Award Stock Plan, Stock
Equivalent Plan for Non-Employee Directors of NSP and NSP Employer Stock
Ownership Plan (the "NSP Equity Plans") or (ii) New Century Energies, Inc.
Employees Savings and Stock Ownership Plan for Non-Bargaining Unit Employees,
New Century Energies, Inc. Employees Savings and Stock Ownership Plan for
Bargaining Unit Employees and Former Non-Bargaining Unit Employees, New Century
Energies, Inc. Employee Investment Plan for Bargaining Unit Employees and Former
Non-Bargaining Unit Employees, PSCo Stock Option Plan, SPS 1989 Stock Option
Plan, Outside Directors Compensation Plan, and New Century Energies, Inc.
Omnibus Incentive Plan (the "NCE Equity Plans") (such awards, collectively,
"Equity Grants"), in each case that are outstanding as of the date of this
Agreement, (c) the issuance of up to 33,000,000 shares of NSP Common Stock for
general corporate purposes, including (i) issuances in connection with
acquisitions, financing and maintenance of financial flexibility, (ii) issuances
as required by the above-named employee stock ownership plans, and (iii) the
granting of, and issuance of shares of common stock pursuant to, new Equity
Grants under the NSP Equity Plans, and (d) the issuance of up to 21,400,000
shares of NCE Common Stock for general corporate purposes, including (i)
issuances in connection with acquisitions, financing and maintenance of
financial flexibility, (ii) issuances as required by the above-named employee
stock ownership plans, and (iii) the granting of, and issuance of shares of
common stock pursuant to, new Equity Grants under the NCE Equity Plans, (e) the
issuance by a wholly-owned subsidiary of shares of its capital stock to its
parent, and (f) the issuance or sale of treasury stock to satisfy the
requirements to use the pooling of interests method of accounting for the
transaction.
Section 6.4 Charter Documents. Except (a) as disclosed in Section 6.4 of
the NSP Disclosure Schedule or the NCE Disclosure Schedule and (b) in connection
with the NSP Articles Amendment, neither NSP nor NCE shall amend or propose to
amend its articles of incorporation or certificate of incorporation or by-laws,
except as contemplated herein. Notwithstanding the foregoing, NSP may amend its
articles of incorporation to eliminate cumulative voting.
Section 6.5 Acquisitions. Except as disclosed in Section 6.5 of the NSP
Disclosure Schedule or the NCE Disclosure Schedule, neither NSP nor NCE shall,
nor shall either permit any of its subsidiaries to, acquire or agree to acquire,
by merging or consolidating with, or by purchasing a substantial equity interest
in or a substantial portion of the assets of, or by any other manner, any
business or any corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree to acquire any
assets (a) which would, in the case of either NSP and its subsidiaries or NCE
and its subsidiaries, require a vote of the shareholders of NSP or NCE, as the
case may be, or (b) which would exceed $100 million of equity investment
individually or $250 million of equity investment in the aggregate. In the event
that an acquisition permitted pursuant to this Section 6.5 is subsequently
disposed of in whole or in part prior to the Effective Time, the net proceeds
from the disposition shall not be counted against the $250 million of aggregate
equity investments permitted pursuant to the preceding clause (b).
Notwithstanding the foregoing, neither party shall acquire any additional
nuclear generating facilities without the prior written consent of the other
party.
Section 6.6 No Dispositions. Except as disclosed in Section 6.6 of the NSP
Disclosure Schedule or the NCE Disclosure Schedule, and other than (a)
dispositions not exceeding $100 million individually or $250 million in the
aggregate, (b) as may be required by law to consummate the transactions
contemplated hereby, (c) in the ordinary course of business consistent with past
practices or (d) dispositions of assets as contemplated by the second sentence
of Section 6.5, neither NSP nor
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NCE shall, nor shall either permit any of its subsidiaries to, sell, lease,
license, encumber or otherwise dispose of, any of its assets that are material,
individually or in the aggregate, to such party and its subsidiaries taken as a
whole.
Section 6.7 Indebtedness. Except as disclosed in Section 6.7 of the NSP
Disclosure Schedule or the NCE Disclosure Schedule, neither NSP nor NCE shall,
nor shall either permit any of its subsidiaries to, incur or guarantee any
indebtedness (including any debt borrowed or guaranteed or otherwise assumed,
including, without limitation, the issuance of debt securities or warrants or
rights to acquire debt) other than (a) short-term indebtedness in the ordinary
course of business consistent with past practice, (b) long-term indebtedness in
connection with the refinancing of existing indebtedness either at its stated
maturity or at a lower cost of funds and (c) long-term indebtedness in
connection with the refunding of NSP Preferred Stock at a lower cost of funds.
Section 6.8 Capital Expenditures. Except as disclosed in Section 6.8 of the
NSP Disclosure Schedule or the NCE Disclosure Schedule or as required by law,
neither NSP nor NCE shall, nor shall either permit any of its subsidiaries to,
make any capital expenditures, other than capital expenditures to repair or
replace facilities destroyed or damaged due to casualty or accident (whether or
not covered by insurance).
Section 6.9 Compensation, Benefits. Except as disclosed in Section 6.9 of
the NSP Disclosure Schedule or in Section 6.9 of the NCE Disclosure Schedule, as
the case may be, neither NSP nor NCE shall nor shall it permit any of its
subsidiaries to, (a) enter into, adopt or amend (except as may be required by
applicable law), or increase the amount or accelerate the payment or vesting of
any benefit or amount payable under, any employee benefit plan or other
contract, agreement, commitment, arrangement, plan or policy maintained by,
contributed to or entered into by such party or any of its subsidiaries, or
increase, or enter into any contract, agreement, commitment or arrangement to
increase in any manner, the compensation or fringe benefits, or otherwise to
extend, expand or enhance the engagement, employment or any related rights, of
any director, officer or other employee of such party or any of its
subsidiaries, except (i) pursuant to binding legal commitments existing as of
the date hereof, and (ii) normal (including incentive) increases, extensions,
expansions, enhancements, amendments or adoptions 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 such party and its
subsidiaries taken as a whole or (b) enter into or amend any employment,
severance, special pay arrangement with respect to termination of employment or
other similar contract, agreement or arrangement with any director or officer,
provided, that the foregoing shall not preclude the implementation of incentive
pay arrangements in the ordinary course of business consistent with past
practice as described in the NCE SEC Reports or the NSP SEC Reports, as
applicable, filed by NCE or NSP, as applicable, prior to the date of this
Agreement.
Section 6.10 1935 Act. None of the parties hereto shall, nor shall any such
party permit any of its subsidiaries to, except (i) as required or contemplated
by this Agreement, or (ii) in the ordinary course of business consistent with
past practice and which will have no material adverse effect on the ability of
the parties to obtain any NSP Required Statutory Approvals or NCE Required
Statutory Approvals, engage in any activities or take or fail to take any
actions that would cause a change in its status, or that of its subsidiaries,
under the 1935 Act other than the application to the SEC under the 1935 Act
contemplated by this Agreement for approval, to the extent required, of the
transactions contemplated hereby, including, without limitation, the
registration of NSP pursuant to the 1935 Act.
Section 6.11 Accounting. Neither NSP nor NCE shall, nor shall either permit
any of its subsidiaries to, make any changes in their accounting methods, except
as required by law, rule, regulation or GAAP.
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Section 6.12 Pooling. Neither NSP nor NCE shall, nor shall either permit
any of its subsidiaries to, take any actions that would, or would be reasonably
likely to, prevent the parties from accounting for the Merger as a pooling of
interests in accordance with GAAP and applicable SEC regulations.
Section 6.13 Tax-Free Status. Neither NSP nor NCE shall, nor shall either
permit any of its subsidiaries to, take any actions that would, or would be
reasonably likely to, adversely affect the qualification of the Merger as a
reorganization described in Section 368(a) of the Code.
Section 6.14 Discharge of Liabilities. Neither NSP nor NCE shall pay,
discharge or satisfy any material claims, liabilities or obligations (absolute,
accrued, asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction, in the ordinary course of business
consistent with past practice (which includes the payment of judgments and
settlements and the refinancing of existing indebtedness for borrowed money
either at its stated maturity or at a lower cost of funds) or in accordance with
their terms, of liabilities reflected or reserved against in, or contemplated
by, the most recent consolidated financial statements (or the notes thereto) of
such party included in such party's reports filed with the SEC, or incurred in
the ordinary course of business consistent with past practice or as disclosed in
Section 6.7 of the NSP Disclosure Schedule or the NCE Disclosure Schedule.
Section 6.15 Cooperation, Notification. Each of NSP and NCE shall: (a)
confer on a regular and frequent basis with one or more representatives of the
other to discuss the general status of its ongoing operations; (b) promptly
notify the other of any significant changes in its business, operations,
properties, assets, condition (financial or other), prospects or results of
operations; (c) advise the other of any change or event that has had or, insofar
as reasonably can be foreseen, is reasonably likely to result in, a NSP Material
Adverse Effect or a NCE Material Adverse Effect, as the case may be; and (d)
promptly provide the other with copies of all filings made by it or any of its
subsidiaries with any state or federal court, administrative agency, commission
or other Governmental Authority in connection with this Agreement and the
transactions contemplated hereby.
Section 6.16 Rate Matters. Other than currently pending rate filings, each
of NSP and NCE shall cause its subsidiaries to, discuss with the other any
changes in its or its subsidiaries' regulated rates or charges (other than fuel
and gas rates or charges), standards of service or accounting from those in
effect on the date hereof and consult with the other prior to making any filing
(or any amendment thereto), or effecting any agreement, commitment, arrangement
or consent, whether written or oral, formal or informal, with respect thereto,
and neither NSP nor NCE shall make any filing to change its rates on file with
any state regulatory authority or the FERC that would have a material adverse
effect on the benefits associated with the Merger.
Section 6.17 Third-Party Consents. NSP shall, and shall cause its
subsidiaries to, use all commercially reasonable efforts to obtain all NSP
Required Consents. NSP shall promptly notify NCE of any failure or anticipated
failure to obtain any such consents and, if requested by NCE, shall provide
copies of all NSP Required Consents obtained by NSP to NCE. NCE shall, and shall
cause its subsidiaries to, use all commercially reasonable efforts to obtain all
NCE Required Consents. NCE shall promptly notify NSP of any failure or
anticipated failure to obtain any such consents and, if requested by NSP, shall
provide copies of all NCE Required Consents obtained by NCE to NSP.
Section 6.18 No Breach, Etc. No party shall, nor shall any party permit any
of its subsidiaries to, take any action that would or is reasonably likely to
result in a material breach of any provision of this Agreement or in any of its
representations and warranties set forth in this Agreement being untrue on and
as of the Closing Date (except with respect to any representation or warranty
that is made as of a specified date).
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Section 6.19 Tax-Exempt Status. No party hereto shall, nor shall any party
permit any subsidiary to, take any action that would be reasonably likely to
jeopardize the qualification of the outstanding revenue bonds issued for the
benefit of NSP (or any subsidiary thereof) or for the benefit of NCE (or any
subsidiary thereof) that qualify on the date hereof under Section 142(a) of the
Code as "exempt facility bonds" or as tax-exempt industrial development bonds
under Section 103(b)(4) of the Internal Revenue Code of 1954, as amended prior
to the Tax Reform Act of 1986.
Section 6.20 Insurance. Each of NSP and NCE shall, and shall cause its
subsidiaries to, maintain with financially responsible insurance companies
insurance in such amounts and against such risks and losses as are customary for
companies engaged in their respective industries (in each case, employing
methods of generating electric power and fuel sources similar to those methods
employed and fuels used by such party or its subsidiaries).
Section 6.21 Permits. Each party shall, and shall cause its subsidiaries
to, use reasonable efforts to maintain in effect all existing Permits pursuant
to which such party or such party's subsidiaries operate.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access to Information. Upon reasonable notice, each party
shall, and shall cause its subsidiaries to, afford to the officers, directors,
employees, accountants, counsel, investment banker, financial advisor and other
representatives of the other (collectively, "Representatives") reasonable
access, during normal business hours throughout the period prior to the
Effective Time, to all of its properties, books, contracts, commitments and
records (including, but not limited to, Tax Returns) and, during such period,
each party shall, and shall cause its subsidiaries to, furnish promptly to the
other (a) access to each reasonably available report, schedule and other
document filed or received by it or any of its subsidiaries pursuant to the
requirements of federal or state securities laws or filed with the SEC, the
FERC, the NRC, the Department of Justice, the Federal Trade Commission, any
state authority with jurisdiction over public utilities or any other federal or
any state regulatory agency or commission, and (b) all information concerning
themselves, their subsidiaries, directors, officers and shareholders and such
matters as may be reasonably requested by the other party in connection with any
filings, applications or approvals required or contemplated by this Agreement.
All documents and information furnished pursuant to this Section 7.1 shall be
subject to the Confidentiality Agreement, dated September 24, 1998, between the
NSP and NCE (the "Confidentiality Agreement"). The party requesting copies of
any documents from any other party hereto shall be responsible for all
out-of-pocket expenses incurred by the party to whom such request is made in
complying with such request, including any cost of reproducing and delivering
any required information.
Section 7.2 Joint Proxy Statement and Registration Statement.
(a) Preparation and Filing. As promptly as reasonably practicable after the
date hereof, the parties will prepare and file with the SEC the Registration
Statement and the Joint Proxy Statement/ Prospectus (together the "Joint
Proxy/Registration Statement"). The parties shall take such actions as may be
reasonably required to cause the Registration Statement to be declared effective
under the Securities Act as promptly as practicable after such filing. The
parties shall also take such action as may be reasonably required to cause the
shares of NSP Common Stock issuable in connection with the Merger to be
registered or to obtain an exemption from registration under applicable state
"blue sky" or securities laws. Each of the parties shall furnish all information
concerning itself that is
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required or customary for inclusion in the Joint Proxy/Registration Statement.
No representation, covenant or agreement contained in this Agreement is made by
any party hereto with respect to information supplied by any other party hereto
for inclusion in the Joint Proxy/Registration Statement. The Joint
Proxy/Registration Statement shall comply as to form in all material respects
with the Securities Act and the rules and regulations thereunder. The parties
shall take such action as may be reasonably required to cause the shares of NSP
Common Stock to be issued in the Merger to be approved for listing on the NYSE,
the Pacific Stock Exchange, the Chicago Stock Exchange and any other stock
exchanges agreed to by the parties, each upon official notice of issuance.
(b) Letter of NSP's Accountants. Following receipt by
PricewaterhouseCoopers LLP, NSP's independent accountants, of an appropriate
request from NCE pursuant to Statement on Auditing Standards No. 72 ("SAS 72"),
NSP shall use its reasonable best efforts to cause to be delivered to NSP and
NCE two (2) letters of PricewaterhouseCoopers LLP, one dated a date within two
(2) business days before the effective date of the Registration Statement and
one dated the Closing Date, and addressed to NSP and NCE, in form and substance
reasonably satisfactory to NSP and NCE and customary in scope and substance for
"cold comfort" letters delivered by independent accountants in connection with
registration statements and proxy statements similar to the Joint Proxy
Statement/Prospectus. NSP shall use its reasonable best efforts to cause to be
delivered to NCE a letter from NSP's independent accountants addressed to NSP,
dated as of the Closing Date, stating that, as of the date of their report,
accounting for the Merger as a pooling of interests under Opinion 16 of the
Accounting Principles Board and applicable SEC rules and regulations is
appropriate if the Merger is consummated as contemplated by this Agreement.
(c) Letter of NCE's Accountants. Following receipt by Arthur Andersen, LLP,
NCE's independent accountants, of an appropriate request from NSP pursuant to
SAS 72, NCE shall use its reasonable best efforts to cause to be delivered to
NCE and NSP two (2) letters of Arthur Andersen, LLP, one dated a date within two
(2) business days before the effective date of the Registration Statement and
one dated the Closing Date, and addressed to NCE and NSP, in form and substance
satisfactory to NCE and NSP and customary in scope and substance for "cold
comfort" letters delivered by independent accountants in connection with
registration statements and proxy statements similar to the Joint Proxy
Statement/Prospectus. NCE shall use its reasonable best efforts to cause to be
delivered to NSP and NSP's independent accountants a letter from NCE's
independent accountants addressed to NCE, dated as of the Closing Date, stating
that, as of the date of their report, no conditions exist that would preclude
NCE's ability to be a party in a business combination to be accounted for as a
pooling of interests.
Section 7.3 Regulatory Matters.
(a) HSR Filings. Each party hereto shall file or cause to be filed with the
United States Federal Trade Commission and the Antitrust Division of the United
States Department of Justice any notifications required to be filed by their
respective "ultimate parent" companies under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and the rules and
regulations promulgated thereunder with respect to the Merger. Such parties will
use all commercially reasonable efforts to make such filings promptly and shall
respond promptly to any requests for additional information made by either of
such agencies.
(b) Other Regulatory Approvals. Each party hereto shall cooperate and use
its reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all necessary applications, notices, petitions, filings
and other documents, and to use all commercially reasonable efforts to obtain
all necessary permits, consents, approvals and authorizations of all
Governmental Authorities and all other persons necessary or advisable to
consummate the transactions contemplated by this Agreement, including, without
limitation, the NSP Required Statutory Approvals and the NCE
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Required Statutory Approvals. NCE shall have the right to review and approve in
advance all characterizations of the information relating to NCE, on the one
hand, and NSP shall have the right to review and approve in advance all
characterizations of the information relating to NSP, on the other hand, in
either case, which appear in any filing made in connection with the transactions
contemplated by this Agreement, or the Merger, such approvals not to be
unreasonably withheld. NSP and NCE shall each consult with the other with
respect to the obtaining of all such necessary or advisable permits, consents,
approvals and authorizations of Governmental Authorities and shall keep each
other informed of the status thereof.
Section 7.4 Shareholder Approvals.
(a) Approval of NCE Shareholders. NCE shall, as promptly as reasonably
practicable after the date hereof (i) take all steps reasonably necessary to
call, give notice of, convene and hold a special meeting of its shareholders
(the "NCE Special Meeting") for the purpose of securing the NCE Shareholders'
Approval, (ii) distribute to its shareholders the Joint Proxy
Statement/Prospectus in accordance with applicable federal and state law and
with its certificate of incorporation and bylaws, (iii) recommend to its
shareholders that they give the NCE Shareholders' Approval (provided that
nothing contained in this Section 7.4 shall require the Board of Directors of
NCE to take any action or refrain from taking any action that such Board
determines in good faith, based upon the advice of counsel and such other
matters as such Board deems to be relevant, would result in a breach of its
fiduciary duties), and (iv) cooperate and consult with NSP with respect to each
of the foregoing matters.
(b) Approval of NSP Shareholders. NSP shall, as promptly as reasonably
practicable after the date hereof (i) take all steps reasonably necessary to
call, give notice of, convene and hold a special meeting of its shareholders
(the "NSP Special Meeting") for the purpose of securing the NSP Shareholders'
Approval, (ii) distribute to its shareholders the Joint Proxy
Statement/Prospectus in accordance with applicable federal and state law and its
articles of incorporation and bylaws, (iii) recommend to its shareholders that
they give the NSP Shareholders' Approval (provided that nothing contained in
this Section 7.4 shall require the Board of Directors of NSP to take any action
or refrain from taking any action that such Board determines in good faith,
based upon the advice of counsel and such other matters as such Board deems to
be relevant, would result in a breach of its fiduciary duties), and (iv)
cooperate and consult with NCE with respect to each of the foregoing matters.
(c) Meeting Date. The NSP Special Meeting and the NCE Special Meeting shall
be held on the same day unless otherwise agreed by NSP and NCE.
Section 7.5 Directors' and Officers' Indemnification.
(a) Indemnification. To the extent, if any, not provided by an existing
right of indemnification or other agreement or policy, from and after the
Effective Time, NSP shall, to the fullest extent not prohibited by applicable
law, indemnify, defend and hold harmless the present and former directors,
officers and management employees of NCE and NSP and their respective
subsidiaries (each an "Indemnified Party" and, collectively, the "Indemnified
Parties") against (i) all losses, expenses (including reasonable attorneys' fees
and expenses), claims, damages, costs, liabilities, judgments or (subject to the
proviso of the next succeeding sentence) amounts that are paid in settlement of
or in connection with any claim, action, suit, proceeding or investigation based
in whole or in part on or arising in whole or in part out of the fact that such
person is or was a director, officer or management employee of such party or any
subsidiary thereof, whether pertaining to any matter existing or occurring at or
prior to or after the Effective Time and whether asserted or claimed prior to,
at or after the Effective Time and (ii) all liabilities based in whole or in
part on, or arising in whole or in
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part out of, or pertaining to this Agreement, or the transactions contemplated
hereby. In the event of any such loss, expense, claim, damage, cost, liability,
judgment or settlement (whether or not arising before the Effective Time), (A)
NSP shall pay the reasonable fees and expenses of counsel selected by the
Indemnified Parties, which counsel shall be reasonably satisfactory to NSP,
promptly after statements therefor are received, and otherwise advance to the
Indemnified Parties upon request reimbursement of documented expenses reasonably
incurred, in either case to the extent not prohibited by the laws of the State
of Minnesota, (B) NSP shall cooperate in the defense of any such matter and (C)
any determination required to be made with respect to whether an Indemnified
Party's conduct complies with the standards under applicable law or as set forth
in NSP's certificate of incorporation or bylaws shall be made by independent
counsel mutually acceptable to NSP and the Indemnified Party; provided, however,
that NSP shall not be liable for any settlement effected without its written
consent (which consent shall not be unreasonably withheld or delayed). The
Indemnified Parties as a group may retain only one law firm (other than local
counsel) with respect to each related matter except to the extent there is, in
the sole opinion of counsel to an Indemnified Party, under applicable standards
of professional conduct, a conflict on any significant issue between positions
of any two or more Indemnified Parties, in which case each Indemnified Party
with a conflicting position on a significant issue shall be entitled to separate
counsel. In the event any Indemnified Party is required to bring any action to
enforce rights or to collect moneys due under this Agreement and is successful
in such action, NSP shall reimburse such Indemnified Party for all of its
expenses in bringing and pursuing such action. Subject to any limitations under
applicable law, each Indemnified Party shall be entitled to the advancement of
expenses to the full extent contemplated in this Section 7.5(a) in connection
with any such action.
(b) Insurance. For a period of six (6) years after the Effective Time, NSP
shall cause to be maintained in effect the policies of directors' and officers'
liability insurance maintained by NCE and NSP; provided that NSP may substitute
therefor policies of at least the same coverage containing terms that are no
less advantageous with respect to matters occurring at or prior to the Effective
Time to the extent such liability insurance can be maintained annually at a cost
to NSP not greater than 200% of the current annual premiums for the policies
currently maintained by NCE and NSP for their respective directors' and
officers' liability insurance; provided further, that if such insurance cannot
be so maintained or obtained at such cost, NSP shall maintain or obtain as much
of such insurance as can be so maintained or obtained at a cost equal to 200% of
the current annual premiums of NCE and NSP for their respective directors' and
officers' liability insurance.
(c) Successors. In the event NSP or any of its successors or assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) transfers all or substantially all of its properties and assets to any
person, then and in either such case, proper provision shall be made so that the
successors and assigns of NSP shall assume the obligations set forth in this
Section 7.5.
(d) Survival of Indemnification. To the fullest extent not prohibited by
law, from and after the Effective Time, all rights to indemnification now
existing in favor of the employees, agents, directors or officers of NSP and NCE
and their respective subsidiaries with respect to their activities as such prior
to or at the Effective Time, as provided in their respective articles of
incorporation or bylaws or indemnification agreements in effect on the date of
such activities or otherwise in effect on the date hereof, shall survive the
Merger and shall continue in full force and effect for a period of not less than
six years from the Effective Time.
(e) Benefit. The provisions of this Section 7.5 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and his or her representatives.
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Section 7.6 Disclosure Schedules. On or before the date of this Agreement,
(a) NCE has delivered to NSP the NCE Disclosure Schedule accompanied by a
certificate signed by the chief financial officer of NCE stating that the NCE
Disclosure Schedule is being delivered pursuant to this Section 7.6(a) and (b)
NSP has delivered to NCE the NSP Disclosure Schedule accompanied by a
certificate signed by the chief financial officer of NSP stating that the NSP
Disclosure Schedule is being delivered pursuant to this Section 7.6(b). The NCE
Disclosure Schedule and the NSP Disclosure Schedule are collectively referred to
herein as the "Disclosure Schedules". The Disclosure Schedules constitute an
integral part of this Agreement and modify the respective representations,
warranties, covenants or agreements of the parties hereto contained herein to
the extent that such representations, warranties, covenants or agreements
expressly refer to the Disclosure Schedules. Any and all statements,
representations, warranties or disclosures set forth in the Disclosure Schedules
shall be deemed to have been made on and as of the date of this Agreement.
Section 7.7 Public Announcements. NSP and NCE shall cooperate with each
other in the development and distribution of all news releases and other public
information disclosures with respect to this Agreement, or any of the
transactions contemplated hereby and, subject to each party's disclosure
obligations imposed by law or any applicable national securities exchange, shall
not issue any public announcement or statement relating thereto prior to
consultation with the other party.
Section 7.8 Affiliates. (a) Prior to the Closing Date, NCE shall identify
in a letter to NSP all persons who, in the opinion of NCE, may be deemed at the
time this Agreement is submitted for the NCE Shareholders' Approval,
"affiliates" of NCE, as such term is used in Rule 145 under the Securities Act
or for purposes of qualifying the Merger for pooling of interests accounting
treatment under Opinion 16 of the Accounting Principles Board and applicable SEC
rules and regulations. NCE shall deliver such letter to NSP sufficiently in
advance of the thirtieth day preceding the Closing Date to allow NSP a
reasonable opportunity to review and comment on such letter. NCE shall use its
reasonable best efforts to cause each person so identified to deliver to NSP not
less than thirty (30) days prior to the Closing Date a written agreement
substantially in the form attached as Exhibit C (each, a "NCE Affiliate
Agreement").
(b) Prior to the Closing Date, NSP shall identify in a letter to NCE all
persons who, in the opinion of NCE, may be deemed to be "affiliates" of NSP for
purposes of qualifying the Merger for pooling of interests accounting treatment
under Opinion 16 of the Accounting Principles Board and applicable SEC rules and
regulations. NSP shall deliver such letter to NCE sufficiently in advance of the
thirtieth day preceding the Closing Date to allow NCE a reasonable opportunity
to review and comment on such letter. NSP shall use its reasonable best efforts
to cause each person so identified to deliver to NCE on or prior to the Closing
Date, a written agreement substantially in the form attached as Exhibit D (each,
a "NSP Affiliate Agreement").
(c) NSP shall use its reasonable best efforts to publish no later than 30
days after the end of the first month after the Effective Time in which there
are at least 30 days of post-Merger combined operations (which month may be the
month in which the Effective Time occurs), combined sales and net income figures
as contemplated by and in accordance with the terms of the SEC Accounting Series
Release No. 135.
Section 7.9 Certain Employee Agreements.
(a) Subject to Section 7.10, NSP and its subsidiaries shall honor, without
modification, all contracts, agreements, collective bargaining agreements and
commitments of the parties that apply to any current or former employees or
current or former directors of the parties; provided, however, that this
undertaking is not intended to prevent NSP from enforcing such contracts,
agreements, collective bargaining agreements and commitments in accordance with
their terms, or from enforcing any right
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to amend, modify, suspend, revoke or terminate any such contract, agreement,
collective bargaining agreement or commitment.
(b) For all purposes under the employee benefit plans providing benefits
after the Effective Time to any individuals who are employed by NSP or NCE or
any of their respective subsidiaries, as the case may be, immediately prior to
the Effective Time and who continue in the employment of NSP or any of its
subsidiaries after the Effective Time (a "Continuing Employee"), such employee
shall be credited in accordance with the terms of the applicable plan with his
or her years of service before the Effective Time, to the same extent as such
employee was entitled, before the Effective Time, to credit for such service
under any similar NSP Employee Benefit Plan or NCE Employee Benefit Plan, as
applicable, except to the extent such credit would result in a duplication of
benefits. In addition, and without limiting the generality of the foregoing: (i)
each Continuing Employee shall be immediately eligible to participate, without
any waiting time, in any and all NCE Employee Benefit Plans or NSP Employee
Benefit Plans, respectively, or any other employee benefit plans sponsored by
NSP and its subsidiaries after the Effective Time (such plans, collectively the
"New Plans") to the extent coverage under such plan replaces coverage under a
comparable NSP Employee Benefit Plan or NCE Employee Benefit Plan, respectively,
in which such employee participates immediately before or at any time following
the Effective Time (such plans, collectively, the "Old Plans"); and (ii) for
purposes of each New Plan providing medical, dental, pharmaceutical and/or
vision benefits to any Continuing Employee, NSP shall cause all pre-existing
condition exclusions and actively-at-work requirements of such New Plan to be
waived for such employee and his or her covered dependents, except to the extent
such exclusions and/or requirements were applicable to such employee and/or his
or her dependents under the applicable Old Plan and NSP shall cause any eligible
expenses incurred by such employee and his or her covered dependents during the
portion of the plan year of the Old Plan ending on the date such employee's
participation in the corresponding New Plan begins to be taken into account
under such New Plan for purposes of satisfying all deductible, coinsurance and
maximum out-of-pocket requirements applicable to such employee and his or her
covered dependents for the applicable plan year as if such amounts had been paid
in accordance with such New Plan.
(c) Subject to applicable collective bargaining agreements, for a period of
two (2) years following the Effective Time, any reductions in workforce in
respect of employees of NSP and its subsidiaries shall be made on a fair and
equitable basis, in light of the circumstances and the objectives to be
achieved, and without regard to whether such employees were employed before the
Effective Time by NSP or its subsidiaries or NCE or its subsidiaries, and any
employees whose employment is terminated or jobs are eliminated by NSP or any of
its subsidiaries during such period shall be entitled to participate on a fair
and equitable basis in the job opportunity and employment placement programs
offered by NSP or any of its subsidiaries. Any workforce reductions carried out
following the Effective Time by NSP and its subsidiaries shall comply with all
applicable collective bargaining agreements, laws and regulations, including,
without limitation, the Worker Adjustment and Retraining Notification Act and
regulations promulgated thereunder and any comparable state or local law.
However, no provision contained in this Section 7.9 shall be deemed to
constitute an employment contract between NSP and any individual, or a waiver of
NSP's right to discharge any employee at any time, with or without cause.
(d) For a period of not less than one year following the Effective Time,
the compensation and employee benefits provided to the individuals who are
employed by NSP and its subsidiaries immediately before the Effective Time who
continue in employment with NSP and its subsidiaries after the Effective Time
(the "NSP Continuing Employees") and the individuals who are employed by NCE and
its subsidiaries immediately before the Effective Time who continue in
employment with NSP and its subsidiaries after the Effective Time (the "NCE
Continuing Employees") shall be
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no less favorable, in the aggregate, than the compensation and employee benefits
provided to such individuals immediately before the Effective Time. Without
limiting the generality of the foregoing, the NSP Severance Pay Plan shall
continue in effect for the NSP Continuing Employees without amendment adverse to
any participant therein for at least one year following the Effective Time.
Section 7.10 Incentive, Stock and Other Plans. With respect to each of
NCE's Equity Plans and the NCE Dividend Reinvestment and Cash Payment Plan (each
a "Stock Plan")"
(a) NSP and NCE shall take such action as may be necessary so that, after
the Effective Time, such Stock Plan shall provide for the issuance only of NSP
Common Stock with appropriate adjustments to reflect the Conversion Ratio,
provided that with respect to each Stock Plan pursuant to which options to
purchase NCE Common Stock ("NCE Options") are outstanding immediately prior to
the Effective Time, each NCE Option shall entitle the holder to purchase the
number of NSP Shares that is equal to the product of (i) the number of NCE
Shares subject to such option immediately prior to the Effective Time and (ii)
the Conversion Ratio; and the exercise price per NSP Share subject to such
option shall be equal to (i) the exercise price per NCE Share immediately prior
to the Effective Time divided by (ii) the Conversion Ratio. Notwithstanding the
foregoing, the number of shares of NSP Common Stock deliverable upon exercise of
a NCE Option at and after the Effective Time as contemplated by the foregoing
paragraph shall be rounded, if necessary, to the nearest whole share, and the
exercise price with respect thereto shall be rounded, if necessary, to the
nearest one one-hundredth of a cent. Other than as provided in the following
paragraph and in the prior sentence of this paragraph, as of and after the
Effective Time, each NCE Option shall be subject to the same terms and
conditions as in effect immediately prior to the Effective Time, but giving
effect to the Merger.
(b) NSP shall (i) take all corporate action necessary or appropriate to
obtain shareholder approval with respect to such Stock Plan to the extent such
approval is required for purposes of the Code or otherwise required under
applicable law, or, to the extent NSP deems it desirable, to enable such Stock
Plan to provide appropriate exemptions under Rule 16b-3 promulgated under the
Exchange Act, (ii) reserve for issuance under such Stock Plan or otherwise
provide a sufficient number of shares of NSP Common Stock for delivery upon
payment of benefits, grants of awards or exercise of options under such Stock
Plan and (iii) as soon as practicable after the Effective Time, file one or more
registration statements under the Securities Act with respect to the shares of
NSP Common Stock subject to such Stock Plan to the extent such filing is
required under applicable law and use its reasonable best efforts to maintain
the effectiveness of such registration statement(s) (and the current status of
the prospectuses contained therein or related thereto) so long as such benefits,
grants or awards remain payable or such options remain outstanding, as the case
may be. With respect to those individuals who subsequent to the Merger will be
subject to the reporting requirements under Section 16(a) of the Exchange Act,
NSP shall administer the Stock Plans, where applicable, in a manner that
complies with Rule 16b-3 under the Exchange Act.
Section 7.11 No Solicitations. Subject to the fourth sentence of this
Section 7.11, neither party hereto shall, nor shall each such party permit its
subsidiaries or any of its Representatives to, (a) directly or indirectly,
initiate, solicit or encourage, or take any action to facilitate the making of
any offer or proposal that constitutes or is reasonably likely to lead to any
Takeover Proposal (as defined below), or (b) directly or indirectly, engage in
negotiations or provide any confidential information or data to any person
relating to any Takeover Proposal. Each party shall notify the other orally and
in writing of any such inquiries, offers or proposals (including, without
limitation, the terms and conditions of any such proposal and the identity of
the person making it) within 24 hours of the receipt thereof and shall give the
other five (5) days' advance notice of any agreement to be entered into with or
any information to be supplied to any person making such inquiry, offer or
proposal. Each party hereto shall immediately cease and cause to be terminated
all existing discussions and
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negotiations, if any, with any other persons conducted heretofore with respect
to any Takeover Proposal. Notwithstanding anything in this Section 7.11 to the
contrary, in response to an unsolicited Takeover Proposal for the acquisition,
directly or indirectly, of 50% or more of the combined voting power of the
shares of NCE Common Stock or NSP Common Stock, as the case may be, or all or
substantially all of the assets of such party and its subsidiaries, taken as a
whole, and which did not result from a breach of this Section 7.11, unless the
NSP Shareholders' Approval and the NCE Shareholders' Approval have both been
obtained, NSP or NCE may (i) participate in discussions or negotiations
regarding the Takeover Proposal, and (ii) furnish information to, and afford
access to the properties, books and records of such party and its subsidiaries
to the person making the Takeover Proposal with respect to such party by such
person, if but only to the extent that (A) the Board of Directors of such party
has reasonably concluded in good faith (after consultation with its financial
advisors) that the person or group making the Takeover Proposal will have
adequate sources of financing to consummate the Takeover Proposal and that the
Takeover Proposal is more favorable to such party's shareholders than the
Merger, (B) the Board of Directors of such party shall have determined in good
faith, based on advice of outside counsel with respect to such Board's fiduciary
duties under applicable law with respect to the proposed Takeover Proposal and
such other matters as such Board deems relevant, that it is necessary to do so
in order to act in a manner consistent with its fiduciary duties to its
shareholders, and (C) such party has entered into a confidentiality agreement
with the person or group making the Takeover Proposal containing terms and
conditions no less favorable to such party than the Confidentiality Agreement,
it being understood that nothing herein to the contrary shall restrict the Board
of Directors of NSP or the Board of Directors of NCE, as the case may be, from
exercising its authority under any such confidentiality agreement as it may deem
appropriate. As used in this Section 7.11, "Takeover Proposal" shall mean with
respect to NCE or NSP means any inquiry, proposal or offer from any person
relating to any direct or indirect acquisition or purchase of a business that
constitutes 15% or more of the net revenues, net income or the assets of NCE and
its subsidiaries, taken as a whole, or NSP and it subsidiaries, taken as a
whole, as applicable, or 15% or more of any class of equity securities of NCE or
any of its Significant Subsidiaries or NSP or any of its Significant
Subsidiaries, as applicable, or any merger, consolidation, business combination,
recapitalization, liquidation, dissolution or similar transaction involving NCE
or any of its Significant Subsidiaries or NSP or any of its Significant
Subsidiaries, as applicable, other than the transactions contemplated by this
Agreement.
Section 7.12 NSP Board of Directors. NSP's Board of Directors will take
such action as may be necessary (a) to cause the number of directors comprising
the full Board of Directors of NSP at the Effective Time to be an even number of
up to 14 persons, half of whom shall be designated by NSP prior to the Effective
Time from its then existing Board of Directors (each, a "NSP Designee") and half
of whom shall be designated by NCE prior to the Effective Time from its then
existing Board of Directors (each a "NCE Designee"); provided, however, that if
prior to the date that is three years after the Effective Time, any of the NSP
Designees or NCE Designees shall decline or be unable to serve, the remaining
NSP Designees or NCE Designees, respectively, shall designate or nominate for
any election by the shareholders another person to serve in that person's place
and NSP shall use its best efforts to the fullest extent permitted by law to
cause the election of such nominated person as a director of NSP by the
shareholders of NSP (such nominated person also being referred to as a NSP
Designee or NCE Designee, as the case may be); and (b) to cause James J. Howard
to remain Chairman of the NSP Board of Directors until the first anniversary of
the Closing Date, and thereafter, to cause Wayne H. Brunetti to become Chairman
of the NSP Board of Directors. The initial designation of such directors among
the three classes of the Directors of NSP shall be accomplished in such a manner
so that, to the extent possible, there are an equal number of NSP Designees and
NCE Designees in each class. At the Effective Time, the committees of the Board
of Directors of NSP shall be as follows: (i) audit, (ii) compensation and
nominating, (iii) finance, and (iv) operations and nuclear.
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Section 7.13 NSP Officers. NSP will take such action as may be necessary to
cause Wayne H. Brunetti to become the President and Chief Executive Officer of
NSP at the Effective Time. If prior to the date that is three years after the
Effective Time, Wayne H. Brunetti shall decline or be unable to serve as
President and Chief Executive Officer of NSP, the election of a successor Chief
Executive Officer shall require the affirmative vote of two-thirds of the
post-Effective Time directors of NSP then serving on the NSP Board of Directors.
Section 7.14 Corporate Offices. Following the Effective Time, NSP shall
maintain its corporate headquarters in Minneapolis, Minnesota but shall have
significant operating offices in Denver, Colorado and Amarillo, Texas. Any
decision to relocate the corporate headquarters of NSP prior to the third
anniversary of the Effective Time shall require the affirmative vote of
two-thirds of the post-Effective Time directors of NSP then serving on the NSP
Board of Directors.
Section 7.15 Expenses. Subject to Section 7.1 and Section 9.3, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses, except
that those expenses incurred in connection with printing the Joint Proxy
Statement/Prospectus, as well as the filing fee relating thereto, shall be
shared equally by NSP, on the one hand, and NCE, on the other hand.
Section 7.16 Name of NSP. Immediately after the Effective Time, NSP shall
file an amendment to its articles of incorporation to change its name to a name
mutually agreed upon by NSP and NCE.
Section 7.17 Transfer of Assets. Except as otherwise provided in this
Section 7.17, at or prior to the Effective Time, NSP will take such actions as
may be necessary in order, (a) to contribute, transfer, assign, convey and
deliver to a newly formed wholly-owned subsidiary of NSP ("NSP Utility Sub"), as
a capital contribution or in exchange for shares of NSP Utility Sub capital
stock, all of NSP's assets other than the stock of its subsidiaries (the
"Contributed Assets") and (b) to cause NSP Utility Sub to assume all of NSP's
liabilities and obligations in respect of the Contributed Assets as the same
shall exist at the Effective Time (collectively, the "NSP Restructuring").
Notwithstanding the foregoing, (i) NSP shall not be obligated to undertake the
NSP Restructuring if the NSP Restructuring would cause a NSP Material Adverse
Effect, and (ii) if the NSP Restructuring would cause a NSP Material Adverse
Effect, the parties shall negotiate the adoption of an alternative to the NSP
Restructuring in good faith.
Section 7.18 Further Assurances.
(a) Each of NCE and NSP shall, and shall cause its subsidiaries to, execute
such further documents and instruments and take such further actions as may
reasonably be requested by the other in order to consummate the Merger and other
transactions contemplated by this Agreement and to use its reasonable best
efforts to take or cause to be taken all actions, 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 Merger and the other transactions
contemplated hereby (subject to the votes of its shareholders described in
Sections 4.13 and 5.13, respectively), including fully cooperating with the
other in obtaining the NCE Required Statutory Approvals, the NSP Required
Statutory Approvals and all other approvals and authorizations of any
Governmental Authorities necessary or advisable to consummate the transactions
contemplated hereby.
(b) NCE and NSP shall be responsible for the taking of any action necessary
or advisable to obtain the NCE Required Statutory Approvals and to obtain the
NSP Required Statutory Approvals, respectively. NCE and NSP agree to cooperate
in obtaining the necessary approvals from the NRC, the FERC and the SEC under
the 1935 Act, the Securities Act and the Exchange Act and from the applicable
state authorities with jurisdiction over public utilities and under state "blue
sky" or
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securities laws. NCE and NSP shall each provide the other with copies of any
filings made with any Governmental Authorities in connection with the foregoing.
ARTICLE VIII
CONDITIONS
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of NCE and NSP to effect the Merger shall be subject to
the satisfaction on or prior to the Closing Date of the following conditions,
except, to the extent permitted by applicable law, that such conditions may be
waived in writing pursuant to Section 9.5:
(a) Shareholder Approvals. The NCE Shareholders' Approval and the NSP
Shareholders' Approval shall have been obtained.
(b) No Injunction. No temporary restraining order or preliminary or
permanent injunction or other order by any federal or state court preventing
consummation of the Merger shall have been issued and continuing in effect, and
the Merger and the other transactions contemplated hereby shall not have been
prohibited under any applicable federal or state law or regulation.
(c) Registration Statement. The Registration Statement shall have become
effective in accordance with the provisions of the Securities Act, and no stop
order suspending such effectiveness shall have been issued and remain in effect.
(d) Listing of Shares. The shares of NSP Common Stock issuable in the
Merger pursuant to Article II shall have been approved for listing on the NYSE
upon official notice of issuance.
(e) Pooling. Each of NSP and NCE shall have received the letter of its
independent public accountants, dated the Closing Date, in form and substance
reasonably satisfactory to NCE and NSP, respectively, to the effect set forth in
the last sentence of Section 7.2(b) and the last sentence of Section 7.2(c),
respectively.
(f) Statutory Approvals. The NSP Required Statutory Approvals and the NCE
Required Statutory Approvals shall have been obtained at or prior to the
Effective Time, such approvals shall have become Final Orders (as hereinafter
defined), and no Final Order shall impose terms or conditions that would have,
or would be reasonably likely to have, a NSP Material Adverse Effect or a NCE
Material Adverse Effect. A "Final Order" means action by the relevant regulatory
authority that has not been reversed, stayed, enjoined, set aside, annulled or
suspended, with respect to which any waiting period prescribed by law before the
transactions contemplated hereby may be consummated has expired, and as to which
all conditions to the consummation of such transactions prescribed by law,
regulation or order have been satisfied.
Section 8.2 Conditions to Obligation of NCE to Effect the Merger. The
obligation of NCE to effect the Merger shall be further subject to the
satisfaction, on or prior to the Closing Date, of the following conditions,
except as may be waived by NCE in writing pursuant to Section 9.5:
(a) Performance of Obligations of NSP. NSP shall have performed in all
material respects (and in the case of Section 6.2, in all respects) its
agreements and covenants contained in or contemplated by this Agreement required
to be performed by it at or prior to the Effective Time.
(b) Representations and Warranties. The representations and warranties of
NSP set forth in this Agreement shall be true and correct on and as of the
Closing Date with the same force and effect as if made on and as of such date
(except for representations and warranties that expressly speak only as
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of an earlier date, in which case, such representations and warranties shall be
true and correct as of such earlier date), except for such failures of
representations and warranties to be true and correct (without giving effect to
any materiality qualification or standard contained in any such representations
and warranties) which, in the aggregate, would not be reasonably expected to
have a NSP Material Adverse Effect.
(c) Closing Certificates. NCE shall have received a certificate signed by
the Chief Executive Officer and Chief Financial Officer of NSP, dated the
Closing Date, to the effect that, to the best of each such officer's knowledge,
the conditions set forth in Section 8.2(a) and Section 8.2(b) have been
satisfied.
(d) No NSP Material Adverse Effect. No NSP Material Adverse Effect shall
have occurred and there shall exist no fact or circumstance that would have, or
would be reasonably likely to have, a NSP Material Adverse Effect.
(e) Tax Opinion. NCE shall have received an opinion of counsel, in form and
substance reasonably satisfactory to NCE, dated the Closing Date, which opinion
may be based on appropriate representations of NSP and NCE that are in form and
substance reasonably satisfactory to such counsel, to the effect that the Merger
will be treated as a transaction described in Section 368(a) of the Code and
that no gain or loss will be recognized by the stockholders of NCE who are
United States persons and who exchange NCE Common Stock solely for NSP Common
Stock pursuant to the Merger (except with respect to cash received in lieu of
fractional shares).
(f) NSP Required Consents. The NSP Required Consents, the failure of which
to be obtained would have a NSP Material Adverse Effect, shall have been
obtained.
Section 8.3 Conditions to Obligation of NSP to Effect the Merger. The
obligation of NSP to effect the Merger shall be further subject to the
satisfaction, on or prior to the Closing Date, of the following conditions,
except as may be waived by NSP in writing pursuant to Section 9.5:
(a) Performance of Obligations of NCE. NCE shall have performed in all
material respects (and in the case of Section 6.2, in all respects) its
agreements and covenants contained in or contemplated by this Agreement required
to be performed by it at or prior to the Effective Time.
(b) Representations and Warranties. The representations and warranties of
NCE set forth in this Agreement shall be true and correct on and as of the
Closing Date with the same force and effect as if made on and as of such date
(except for representations and warranties that expressly speak only as of an
earlier date, in which case, such representations and warranties shall be true
and correct as of such earlier date), except for such failures of
representations and warranties to be true and correct (without giving effect to
any materiality qualification or standard contained in any such representations
and warranties) which, in the aggregate, would not be reasonably expected to
have a NCE Material Adverse Effect.
(c) Closing Certificates. NSP shall have received a certificate signed by
the Chief Executive Officer and Chief Financial Officer of NCE, dated the
Closing Date, to the effect that, to the best of each such officer's knowledge,
the conditions set forth in Section 8.3(a) and Section 8.3(b) have been
satisfied.
(d) No NCE Material Adverse Effect. No NCE Material Adverse Effect shall
have occurred and there shall exist no fact or circumstance that would have, or
would be reasonably likely to have, a NCE Material Adverse Effect.
(e) Tax Opinion. NSP shall have received an opinion of counsel, in form and
substance reasonably satisfactory to NSP, dated the Closing Date, which opinion
may be based on appropriate
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representations of NSP and NCE that are in form and substance reasonably
satisfactory to such counsel, to the effect that the Merger will be treated as a
transaction described in Section 368(a) of the Code.
(f) NCE Required Consents. The NCE Required Consents, the failure of which
to be obtained would have a NCE Material Adverse Effect, shall have been
obtained.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination. This Agreement may be terminated at any time prior
to the Closing Date, whether before or after approval by the shareholders of the
respective parties hereto contemplated by this Agreement:
(a) by mutual written consent of the Boards of Directors of NSP and NCE;
(b) by NSP or NCE, by written notice to the other, if the Effective Time
shall not have occurred on or before March 24, 2000; provided, however, that
such date shall automatically be extended to December 24, 2000 if, on March 24,
2000, (i) the condition set forth in Section 8.1(f) has not been satisfied or
waived; (ii) the other conditions to the consummation of the transactions
contemplated hereby are then capable of being satisfied; and (iii) any approvals
required by Section 8.1(f) that have not yet been obtained are being pursued
with diligence; provided further, that the right to terminate this Agreement
under this Section 9.1(b) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or resulted
in, the failure of the Effective Time to occur on or before the termination
date;
(c) by NSP or NCE, by written notice to the other, if (i) the NSP
Shareholders' Approval shall not have been obtained at a duly held NSP Special
Meeting, including any adjournments thereof, or (ii) the NCE Shareholders'
Approval shall not have been obtained at a duly held NCE Special Meeting,
including any adjournments thereof;
(d) by NSP or NCE, by written notice to the other, if (i) any state or
federal law, order, rule or regulation is adopted or issued, that has the
effect, as supported by the written, reasoned opinion of outside counsel for
such party, of prohibiting the Merger or causing a NSP Material Adverse Effect
or NCE Material Adverse Effect, or if (ii) any court of competent jurisdiction
in the United States or any State shall have issued an order, judgment or decree
permanently restraining, enjoining or otherwise prohibiting the Merger or
causing a NSP Material Adverse Effect or NCE Material Adverse Effect, and such
order, judgment or decree shall have become final and nonappealable;
(e) prior to the NCE Shareholders' Approval, by NCE, upon two (2) days'
prior written notice to NSP, if, as a result of a tender offer by a party other
than NSP or any of its affiliates or any written offer or proposal to acquire,
directly or indirectly, 50% or more of the combined voting power of the shares
of NCE Common Stock or all or substantially all of the assets of NCE and its
subsidiaries, taken as a whole (each, a "NCE Business Combination"), the Board
of Directors of NCE determines that such tender offer or other written offer or
proposal be accepted; provided, however, that (i) (A) the Board of Directors of
NCE has reasonably concluded in good faith (after consultation with its
financial advisors) that the person or group proposing the NCE Business
Combination will have adequate sources of financing to consummate the NCE
Business Combination and that the Business Combination is more favorable to
NCE's shareholders than the Merger and (B) the Board of Directors of NCE shall
have determined in good faith, based on advice of outside counsel with respect
to such Board's fiduciary duties under applicable law with respect to the
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proposed NCE Business Combination and such other matters as the Board of
Directors deem to be relevant, that, notwithstanding a binding commitment to
consummate an agreement of the nature of this Agreement entered into in the
proper exercise of their applicable fiduciary duties, and notwithstanding all
concessions that may be offered by NSP in negotiations entered into pursuant to
clause (ii) below, such fiduciary duties would also require the directors to
reconsider such commitment as a result of such tender offer or such written
offer or proposal and (ii) prior to any such termination, NCE shall, and shall
cause its respective financial and legal advisors to, negotiate with NSP to make
such adjustments in the terms and conditions of this Agreement as would enable
NCE to proceed with the transactions contemplated herein; provided further, that
NSP and NCE acknowledge and affirm that, notwithstanding anything in this
Section 9.1(e) to the contrary, NSP and NCE intend this Agreement to be an
exclusive agreement and, accordingly, nothing in this Agreement is intended to
constitute a solicitation of an offer or proposal for a NCE Business
Combination, it being acknowledged and agreed that any such offer or proposal
would interfere with the strategic advantages and benefits that NSP and NCE
expect to derive from the Merger and other transactions contemplated hereby;
(f) prior to the NSP Shareholders' Approval, by NSP, upon two (2) days'
prior written notice to NCE, if, as a result of a tender offer by a party other
than NCE or any of its affiliates or any written offer or proposal to acquire,
directly or indirectly, 50% or more of the combined voting power of the NSP
Common Stock or all or substantially all of the assets of NSP and its
subsidiaries, taken as a whole (each a "NSP Business Combination"), the Board of
Directors of NSP determines that such tender offer or other written offer or
proposal be accepted; provided, however, that (i) (A) the Board of Directors of
such party has reasonably concluded in good faith (after consultation with its
financial advisors) that the person or group making the proposing the NSP
Business Combination will have adequate sources of financing to consummate the
NSP Business Combination and that the NSP Business Combination is more favorable
to NSP's shareholders than the Merger and (B) the Board of Directors of NSP
shall have determined in good faith, based on advice of outside counsel with
respect to such Board's fiduciary duties under applicable law with respect to
the proposed NSP Business Combination and such other matters as the Board of
Directors deem to be relevant, that, notwithstanding a binding commitment to
consummate an agreement of the nature of this Agreement entered into in the
proper exercise of their applicable fiduciary duties, and notwithstanding all
concessions that may be offered by NCE in negotiations entered into pursuant to
clause (ii) below, such fiduciary duties would also require the directors to
reconsider such commitment as a result of such tender offer or such written
offer or proposal and (ii) prior to any such termination, NSP shall, and shall
cause its respective financial and legal advisors to, negotiate with NCE to make
such adjustments in the terms and conditions of this Agreement as would enable
NSP to proceed with the transactions contemplated herein; provided further, that
NSP and NCE acknowledge and affirm that, notwithstanding anything in this
Section 9.1(f) to the contrary, NSP and NCE intend this Agreement to be an
exclusive agreement and, accordingly, nothing in this Agreement is intended to
constitute a solicitation of an offer or proposal for a NSP Business
Combination, it being acknowledged and agreed that any such offer or proposal
would interfere with the strategic advantages and benefits that NSP and NCE
expect to derive from the Merger and other transactions contemplated hereby;
(g) by NCE, by written notice to NSP, if (i) there exist breaches of the
representations and warranties of NSP made herein as of the date hereof which
breaches, individually or in the aggregate, would or would be reasonably likely
to result in a NSP Material Adverse Effect, and such breaches shall not have
been remedied within twenty (20) days after receipt by NSP of notice in writing
from NCE, specifying the nature of such breaches and requesting that they be
remedied, (ii) NSP (and/or its appropriate subsidiaries) shall not have
performed and complied with its agreements and covenants contained in Section
6.2 (Dividends), and in all material respects with its agreements and covenants
contained in Section 6.3 (Issuance of Securities) and Section 6.7 (Indebtedness)
or shall
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have failed to perform and comply with, in all material respects, its other
agreements and covenants hereunder and such failure to perform or comply shall
not have been remedied within twenty (20) days after receipt by NSP of a notice
in writing from NCE, specifying the nature of such failure and requesting that
it be remedied; (iii) the Board of Directors of NSP or any committee thereof (A)
shall withdraw or modify in any manner adverse to NCE its approval or
recommendation of this Agreement or the Merger, (B) shall fail to reaffirm such
approval or recommendation within fifteen (15) days of NCE's request, (C) shall
approve or recommend any Takeover Proposal, in each case, by a party other than
NCE or any of its affiliates or (D) shall resolve to take any of the actions
specified in clause (A), (B) or (C).
(h) by NSP, by written notice to NCE, if (i) there exist breaches of the
representations and warranties of NCE made herein as of the date hereof which
breaches, individually or in the aggregate, would or would be reasonably likely
to result in a NCE Material Adverse Effect, and such breaches shall not have
been remedied within twenty (20) days after receipt by NSP of notice in writing
from NSP, specifying the nature of such breaches and requesting that they be
remedied, (ii) NCE (and/or its appropriate subsidiaries) shall not have
performed and complied with its agreements and covenants contained in Section
6.2 (Dividends), and in all material respects with its agreements and covenants
contained in Section 6.3 (Issuance of Securities) and Section 6.7 (Indebtedness)
or shall have failed to perform and comply with, in all material respects, its
other agreements and covenants hereunder and such failure to perform or comply
shall not have been remedied within twenty (20) days after receipt by NCE of a
notice in writing from NSP, specifying the nature of such failure and requesting
that it be remedied; or (iii) the Board of Directors of NCE or any committee
thereof (A) shall withdraw or modify in any manner adverse to NSP its approval
or recommendation of this Agreement or the Merger, (B) shall fail to reaffirm
such approval or recommendation within fifteen (15) days of NSP's request, (C)
shall approve or recommend any Takeover Proposal, in each case, by a party other
than NSP or any of its affiliates or (D) shall resolve to take any of the
actions specified in clause (A), (B) or (C).
(i) by NSP, by written notice to NCE, if, except as contemplated by Section
5.20, NCE (i) redeems the NCE Rights or amends the NCE Rights Agreement so that
NCE Rights expire prior to the Effective Time, or (ii) prior to the termination
of this Agreement, amends the NCE Rights Agreement in a manner which amends or
alters the circumstances under which, or the time at which, any person shall
become an "acquiring person" (as defined in the NCE Rights Agreement) or which
alters in any material respect the rights of the holders of the NCE Rights on
the occurrence of any such event.
Section 9.2 Effect of Termination. In the event of termination of this
Agreement by either NSP or NCE pursuant to Section 9.1, there shall be no
liability on the part of either NSP or NCE or their respective officers or
directors hereunder, except that Section 7.17, Section 9.3 and Section 10.9 and
the agreement contained in the second to the last sentence of Section 7.1 shall
survive any such termination.
Section 9.3 Termination Fee; Expenses.
(a) Expenses Payable upon Breach. If this Agreement is terminated pursuant
to one (but not both) of (1) Section 9.1(g)(i) or (ii) or (2) Section 9.1(h)(i)
or (ii), then the breaching party (the "Nonterminating Party") shall promptly
(but not later than five (5) business days after receipt of notice of the amount
due from the other party) pay to the terminating party an amount equal to all
documented out-of-pocket expenses and fees incurred by such terminating party
(including, without limitation, fees and expenses payable to all legal,
accounting, financial, public relations and other professional advisors arising
out of, in connection with or related to the Merger or the transactions
contemplated by this Agreement) not to exceed $25,000,000 in the aggregate
("Out-of-Pocket
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Expenses"); provided, however, that, if this Agreement is terminated under the
circumstances described above by a party as a result of a willful breach or
failure to perform or comply with agreements and covenants by the Nonterminating
Party, the terminating party may pursue any remedies available to it at law or
in equity and such party's Out-of-Pocket Expenses shall not be limited to
$25,000,000.
(b) Termination Fee Payable upon Acceptance of a Proposal. If NCE
terminates this Agreement pursuant to Section 9.1(e), simultaneously with such
termination it shall pay to NSP a fee equal to $150,000,000 plus Out-of-Pocket
Expenses. If NSP terminates this Agreement pursuant to Section 9.1(f),
simultaneously with such termination it shall pay to NCE a fee equal to
$150,000,000 plus Out-of-Pocket Expenses.
(c) Termination Fee In Certain Other Events. (i) If this Agreement is
terminated by NCE pursuant to Section 9.1(g)(iii), then NSP shall pay to NCE a
termination fee equal to $150,000,000 plus Out-of-Pocket Expenses. If this
Agreement is terminated by NSP pursuant to Section 9.1(h)(iii) or 9.1(i), then
NCE shall pay to NSP a termination fee equal to $150,000,000 plus Out-of-Pocket
Expenses. Notwithstanding the foregoing, no such amounts shall be payable if and
to the extent the party to make such payment shall have paid such amounts
pursuant to Section 9.3(a), Section 9.3(b), Section 9.3(c)(ii) or Section
9.3(c)(iii).
(ii) If this Agreement is terminated (A) pursuant to Section 9.1(b), (B)
pursuant to Section 9.1(c) following a failure of the shareholders of NSP to
grant the necessary approvals described in Section 4.13 (a "NSP Shareholder
Disapproval"), or (C) as a result of a material breach by NSP of Section 7.4,
and (1) at the time of such termination (or, in the case of any termination
following a NSP Shareholder Disapproval, at the time of the shareholder meeting
at which such NSP Shareholder Disapproval occurred), there shall have been a
Takeover Proposal involving NSP which, at the time of such termination (or of
the meeting of NSP's shareholders) shall not have been (y) rejected by NSP and
its Board of Directors and (z) withdrawn by the third party, and (2) within
eighteen months of such termination NSP shall have entered into a definitive
agreement with respect to a NSP Business Combination, then promptly (but not
later than five (5) business days after receipt of notice of the amount due from
NCE) NSP shall pay to NCE a termination fee equal to $150,000,000 plus
Out-of-Pocket Expenses; provided, however, that no such amounts shall be payable
if and to the extent NSP shall have paid such amounts pursuant to Section
9.3(a), Section 9.3(b) or Section 9.1(c)(i).
(iii) If this Agreement is terminated (A) pursuant to Section 9.1(b), (B)
pursuant to Section 9.1(c) following a failure of the shareholders of NCE to
grant the necessary approvals described in Section 5.13 (a "NCE Shareholder
Disapproval"), or (C) as a result of a material breach by NCE of Section 7.4,
and (1) at the time of such termination (or, in the case of any termination
following a NCE Shareholder Disapproval, at the time of the shareholder meeting
at which such NCE Shareholder Disapproval occurred), there shall have been a
Takeover Proposal involving NCE which, at the time of such termination (or of
the meeting of NCE's shareholders) shall not have been (y) rejected by NCE and
its Board of Directors and (z) withdrawn by the third party, and (2) within
eighteen months of such termination NCE shall have entered into a definitive
agreement with respect to a NCE Business Combination, then promptly (but not
later than five (5) business days after receipt of notice of the amount due from
NSP) NCE shall pay to NSP a termination fee equal to $150,000,000 plus
Out-of-Pocket Expenses; provided, however, that no such amounts shall be payable
if and to the extent NCE shall have paid such amounts pursuant to Section
9.3(a), Section 9.3(b), or Section 9.1(c)(i).
(d) Expenses. The parties agree that the agreements contained in this
Section 9.3 are an integral part of the transactions contemplated by this
Agreement and constitute liquidated damages
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and not a penalty. If one party fails to promptly pay to the other any fees due
hereunder, such defaulting party shall pay the costs and expenses (including
legal fees and expenses) in connection with any action, including the filing of
any lawsuit or other legal action, taken to collect payment, together with
interest on the amount of any unpaid fee at the publicly announced prime rate of
Citigroup, N.A. in effect from time to time from the date such fee was required
to be paid.
Section 9.4 Amendment. This Agreement may be amended by the parties hereto
pursuant to action of the respective Boards of Directors of each of NSP and NCE,
at any time before or after approval hereof by the shareholders of NSP and NCE
and prior to the Effective Time, but after such approvals, no such amendment
shall (a) alter or change the amount or kind of shares, rights or any of the
proceedings of the Merger under Article II, or (b) alter or change any of the
terms and conditions of this Agreement if any of the alterations or changes,
alone or in the aggregate, would materially and adversely affect the rights of
holders of NSP Common Stock or NCE Common Stock, except for alterations or
changes that could otherwise be adopted by the Board of Directors of NSP and/or
NCE, without the further approval of such shareholders, as applicable. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
Section 9.5 Waiver. At any time prior to the Effective Time, any party may
(a) extend the time for the performance of any of the obligations or other acts
of the other party hereto, (b) waive any inaccuracies in the representations and
warranties of the other party contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions for such party's benefit contained herein. Any agreement to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed by a duly authorized officer of the party to be bound thereby.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Non-Survival of Representations, Warranties, Covenants and
Agreements. None of the representations, warranties, covenants and agreements in
this Agreement shall survive the Merger, except the covenants and agreements
contained in this Section 10.1 and in Article II (Treatment of Shares), the
second to the last sentence of Section 7.1 (Certain Access to Information),
Section 7.5 (Directors' and Officers' Indemnification), Section 7.9 (Employee
Agreements and Workforce Matters), Section 7.10 (Incentive, Stock and Other
Plans), Section 7.12 (NSP Board of Directors), Section 7.13 (NSP Officers),
Section 7.14 (Corporate Offices), and Section 10.7 (Parties in Interest), each
of which shall survive in accordance with its terms. The Board of Directors of
NSP shall delegate to a majority of the NCE Designees then serving on the NSP
Board of Directors authority to enforce Section 7.15 hereof and to a majority of
the NSP Designees then serving on the NSP Board of Directors authority to
enforce Section 7.14 hereof, in each case from and after the Effective Time.
Section 10.2 Brokers. NSP represents and warrants that, except for The
Blackstone Group, LP, its investment banking firm, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the Merger or the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of NSP. NCE
represents and warrants that, except for S G Barr Devlin, its investment banking
firm, no broker, finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the Merger or the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of NCE.
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Section 10.3 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given (a) if delivered personally, or (b) if
sent by overnight courier service (receipt confirmed in writing), or (c) if
delivered by facsimile transmission (with receipt confirmed), or (d) five (5)
days after being mailed by registered or certified mail (return receipt
requested) to the parties, in each case to the following addresses (or at such
other address for a party as shall be specified by like notice):
(i) If to NCE, to:
New Century Energies, Inc.
1225 17th Street
Denver, Colorado 80202
Facsimile: (303) 294-8815
Attention: Paul Bonavia
with a copy to:
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, New York 10019-5389
Facsimile: (212) 424-8500
Attention: Steven H. Davis, Esq.
and
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
633 Seventeenth Street, Suite 2000
Denver, Colorado 80202
Facsimile: (303) 297-0422
Attention: Thomas J. Moore, Esq.
(ii) If to NSP, to:
Northern States Power Company
414 Nicollet Mall
4th Floor
Minneapolis, Minnesota 55401
Facsimile: (612) 330-6222
Attention: Gary R. Johnson
with a copy to:
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street
31st Floor
Chicago, Illinois 60610-4795
Facsimile: (312) 644-3381
Attention: Peter Clarke, Esq.
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Facsimile: (212) 403-2000
Attention: Seth A. Kaplan, Esq.
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<PAGE> 160
Section 10.4 Miscellaneous. This Agreement (including the documents and
instruments referred to herein): (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof
other than the Confidentiality Agreement; and (b) shall not be assigned by
operation of law or otherwise. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware applicable to contracts
executed in and to be fully performed in such State, without giving effect to
its conflicts of laws statutes, rules or principles. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which shall
remain in full force and effect. The parties hereto shall negotiate in good
faith to replace any provision of this Agreement so held invalid or
unenforceable with a valid provision that is as similar as possible in substance
to the invalid or unenforceable provision.
Section 10.5 Interpretation. When reference is made in this Agreement to
Articles, Sections or Exhibits, such reference shall be to an Article, Section
or Exhibit of this Agreement, as the case may be, unless otherwise indicated.
The table of contents and headings contained in this Agreement are for reference
purposes and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes", or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." Whenever "or" is used in this Agreement it shall be construed in
the nonexclusive sense.
Section 10.6 Counterparts; Effect. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original, but all of
which together shall constitute one and the same agreement.
Section 10.7 Parties in Interest. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and, except for rights of
Indemnified Parties as set forth in Section 7.5 (Directors' and Officers'
Indemnification), nothing in this Agreement, express or implied, is intended to
confer upon any person any rights or remedies of any nature whatsoever under or
by reason of this Agreement.
Section 10.8 Specific Performance. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties hereto shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States located in the State of Delaware or any state having jurisdiction,
this being in addition to any other remedy to which they are entitled at law or
in equity. In addition, each of the parties hereto (a) consents to submit itself
to the personal jurisdiction of any federal court located in the State of
Delaware or any Delaware state court in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement, (b) agrees
that it will not attempt to deny such personal jurisdiction by motion or other
request for leave from any such court and (c) agrees that it will not bring any
action relating to this Agreement or any of the transactions contemplated by
this Agreement in any court other than a federal or state court sitting in the
State of Delaware.
Section 10.9 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY
JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING
TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER BASED ON
CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES THAT NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRE-
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SENTED EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
IN WITNESS WHEREOF, NSP and NCE have caused this Agreement to be signed by
their respective officers thereunto duly authorized as of the date first above
written.
NORTHERN STATES POWER COMPANY
By: /s/ JAMES J. HOWARD
------------------------------------
Name: James J. Howard
Title: Chairman, President and
Chief Executive Officer
NEW CENTURY ENERGIES, INC.
By: /s/ BILL D. HELTON
------------------------------------
Name: Bill D. Helton
Title: Chief Executive Officer
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INDEX OF DEFINED TERMS
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
1935 Act.................................................... A-5
Agreement................................................... A-1
Articles of Merger.......................................... A-1
Atomic Energy Act........................................... A-7
Book Entry Shares........................................... A-3
Certificate................................................. A-2
Certificate of Merger....................................... A-1
Closing..................................................... A-4
Closing Date................................................ A-4
Code........................................................ A-1
Confidentiality Agreement................................... A-29
Continuing Employee......................................... A-34
Contributed Assets.......................................... A-37
Conversion Ratio............................................ A-2
DGCL........................................................ A-1
Disclosure Schedules........................................ A-33
Effective Time.............................................. A-1
Environmental Claim......................................... A-13
Environmental Laws.......................................... A-13
Environmental Permits....................................... A-12
ERISA....................................................... A-9
Exchange Act................................................ A-5
Exchange Agent.............................................. A-2
FERC........................................................ A-7
Final Order................................................. A-38
GAAP........................................................ A-1
Gas Policy Act.............................................. A-7
Governmental Authority...................................... A-6
Hazardous Materials......................................... A-13
HSR Act..................................................... A-30
Indemnified Party........................................... A-31
Joint Proxy Statement/Prospectus............................ A-8
Joint Proxy/Registration Statement.......................... A-29
Joint venture............................................... A-5
Liens....................................................... A-5
MBCA........................................................ A-1
Merger...................................................... A-1
Multiemployer Plan.......................................... A-11
NCE......................................................... A-1
NCE Affiliate Agreement..................................... A-33
NCE Business Combination.................................... A-40
NCE Common Stock............................................ A-2
NCE Control Group........................................... A-20
NCE Designee................................................ A-36
NCE Disclosure Schedule..................................... A-16
NCE Employee Benefit Plans.................................. A-20
NCE Financial Statements.................................... A-18
</TABLE>
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<PAGE> 163
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
NCE Joint Venture Plans..................................... A-20
NCE Material Adverse Effect................................. A-16
NCE Options................................................. A-35
NCE Required Consents....................................... A-17
NCE Required Statutory Approvals............................ A-17
NCE Rights.................................................. A-24
NCE Rights Agreement........................................ A-24
NCE SEC Reports............................................. A-18
NCE Shareholder Disapproval................................. A-43
NCE Shareholders' Approval.................................. A-17
NCE Shares.................................................. A-2
NCE Special Meeting......................................... A-31
New Plans................................................... A-34
Nonterminating Party........................................ A-42
NRC......................................................... A-7
NSP......................................................... A-1
NSP Affiliate Agreement..................................... A-33
NSP Articles Amendments..................................... A-25
NSP Business Combination.................................... A-41
NSP Common Stock............................................ A-2
NSP Control Group........................................... A-10
NSP Designee................................................ A-36
NSP Disclosure Schedule..................................... A-4
NSP Employee Benefit Plans.................................. A-9
NSP Financial Statements.................................... A-7
NSP Joint Venture Plans..................................... A-10
NSP Material Adverse Effect................................. A-4
NSP Preferred Stock......................................... A-5
NSP Required Consents....................................... A-6
NSP Required Statutory Approvals............................ A-7
NSP Restructuring........................................... A-37
NSP SEC Reports............................................. A-7
NSP Shareholder Disapproval................................. A-43
NSP Shareholders' Approval.................................. A-6
NSP Shares.................................................. A-2
NSP Special Meeting......................................... A-31
NSP Utility Sub............................................. A-37
NSP-W....................................................... A-14
NYSE Composite Transition Reports........................... A-3
Old Plans................................................... A-34
Out-of-Pocket Expenses...................................... A-42
PBGC........................................................ A-10
Permits..................................................... A-7
Plan of Merger.............................................. A-1
Power Act................................................... A-7
Registration Statement...................................... A-8
Release..................................................... A-14
Representatives............................................. A-29
SAS 72...................................................... A-30
</TABLE>
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<PAGE> 164
<TABLE>
<CAPTION>
TERM PAGE
---- ----
<S> <C>
SEC......................................................... A-1
Section 16.................................................. A-6
Securities Act.............................................. A-7
Significant Subsidiary...................................... A-5
Stock Plan.................................................. A-35
Subsidiary.................................................. A-5
Takeover Proposal........................................... A-36
Tax Return.................................................. A-8
Taxes....................................................... A-8
Violation................................................... A-6
</TABLE>
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<PAGE> 165
EXHIBIT A
PLAN OF MERGER
PLAN OF MERGER (the "Plan of Merger"), dated as of , 200 , by and
between Northern States Power Company, a Minnesota corporation ("NSP"), and New
Centuries Energies, Inc., a Delaware corporation ("NCE"). The parties to this
Plan of Merger are hereinafter sometimes collectively referred to as the
"Constituent Corporations".
WHEREAS, NCE is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. As of the date hereof, the
authorized capital of NCE consists solely of 260,000,000 shares of common stock,
par value $1.00 per share ("NCE Common Stock"), of which shares were
outstanding on , 200 , and 20,000,000 shares of preferred stock, par
value $1.00 per share, of which there were no shares outstanding on ,
200 ;
WHEREAS, NSP is a corporation duly organized, validly existing and in good
standing under the laws of the State of Minnesota. As of the date hereof, the
authorized capital of NSP consists solely of 350,000,000 shares of common stock,
par value $2.50 per share ("NSP Common Stock"), of which shares were
outstanding on , 200 , and 7,000,000 shares of preferred stock, par
value $100 per share ("NSP Preferred Stock"), of which shares were
outstanding on , 200 , consisting of: shares of $3.60 Series,
shares of $4.08 Series, shares of $4.10 Series, shares of $4.11
Series, shares of $4.16 Series, and shares of $4.56 Series;
WHEREAS, NSP and NCE have entered into an Agreement and Plan of Merger,
dated as of March 24, 1999, setting forth representations, warranties,
covenants, conditions and other terms in connection with the merger and other
transactions contemplated thereby and hereby (the "Merger Agreement"); and
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements herein contained, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Pursuant to this Plan of Merger and upon the terms
and subject to the conditions of the Merger Agreement, at the Effective Time (as
defined in Section 1.2), NCE shall be merged into NSP (the "Merger") in
accordance with the laws of the State of Minnesota and the State of Delaware.
NSP shall be the surviving corporation in the Merger (sometimes hereinafter
referred to as the "Surviving Corporation") and shall continue its existence
under the laws of the State of Minnesota and the separate existence of NCE shall
cease. The effects and consequences of the Merger shall be as set forth in the
Merger Agreement, in Section 302A.641 of the Minnesota Business Corporation Act
(the "MBCA") and Section 259(a) of the Delaware General Corporation Law (the
"DGCL"). In furtherance of and not in limitation of the foregoing, at the
Effective Time, the Surviving Corporation shall have all the rights, privileges,
immunities and powers and shall be subject to all the duties and liabilities of
a corporation organized under the MBCA; the Surviving Corporation shall then and
thereafter possess all the rights, privileges, immunities, and franchises, of a
public as well as of a private nature, of each of NCE and NSP; and all property,
real, personal, and mixed and all debts due on whatever account and all other
choses in action, and every other interest belonging to or due to each of NCE
and NSP so merged shall be vested in the Surviving Corporation
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<PAGE> 166
without further act or deed; the Surviving Corporation shall then be liable for
all the liabilities and obligations of each of NCE and NSP so merged.
Section 1.2 Effective Time of the Merger. The Merger shall become effective
upon the later of the filing of Articles of Merger with respect to the Merger
with the Secretary of State of the State of Minnesota pursuant to Section
302A.615 of the MBCA and a Certificate of Merger with the Secretary of State of
the State of Delaware pursuant to Section 252 of the DGCL, or at such later time
that NSP and NCE shall agree as specified in such Articles of Merger and
Certificate of Merger (the time the Merger becomes effective being hereinafter
called the "Effective Time"). If the Merger Agreement and this Plan of Merger
are duly approved by the shareholders of each of the Constituent Corporations,
the other conditions precedent set forth in Article VIII of the Merger Agreement
are satisfied or (where permissible) waived, and this Plan of Merger is not
terminated under Section 3.1 hereof, such Articles of Merger and Certificate of
Merger will be filed with the Secretaries of State of the States of Minnesota
and Delaware, respectively, as described above.
Section 1.3 Articles of Incorporation and Bylaws. At and after the
Effective Time, (a) the Restated Articles of Incorporation of NSP will be
amended as provided in Annex I hereto and, as so amended, will be the Articles
of Incorporation of the Surviving Corporation, and (b) the Bylaws of NSP
immediately prior to the Effective Time will continue unchanged and will be the
Bylaws of the Surviving Corporation.
ARTICLE II
CONVERSION OF SHARES
Section 2.1 Effect of Merger on Capital Stock. At the Effective Time, by
virtue of the Merger and without any action on the part of any holder of any
capital stock of NSP or NCE:
(a) Cancellation of Certain NCE Common Stock. Each share of NCE Common
Stock, together with any rights to purchase preferred stock (or, in certain
circumstances common stock and/or other securities of NCE (the "NCE Rights"))
that is owned by NSP or any of its subsidiaries or held in the treasury of NCE
shall be cancelled and shall cease to exist, and no consideration shall be
delivered in exchange therefor.
(b) Conversion of Certain NCE Common Stock. Each share of NCE Common Stock
issued and outstanding immediately prior to the Effective Time (other than
shares cancelled pursuant to Section 2.1(a)), together with any NCE Rights,
shall be converted into the right to receive 1.55 shares (the "Conversion
Ratio") of duly authorized, validly issued, fully paid and nonassessable NSP
Common Stock. Upon such conversion, each holder of any shares of NCE Common
Stock (whether held in book entry or certificated form) shall cease to have any
rights with respect thereto, except the right to receive the shares of NSP
Common Stock to be issued in consideration therefor (and cash in lieu of
fractional shares pursuant to Section 2.2(d)) upon the surrender of such
certificate or otherwise upon compliance with Section 2.2.
(c) NSP Common Stock to Remain Outstanding. Each share of NSP Common Stock
and each share of NSP Preferred Stock issued and outstanding immediately prior
to the Effective Time shall remain outstanding following the Effective Time.
Section 2.2 Exchange of NCE Common Stock.
(a) Deposit with Exchange Agent. As soon as practicable after the Effective
Time, NSP shall deposit with a bank, trust company or other agent selected by
mutual agreement of the parties
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<PAGE> 167
("Exchange Agent") certificates representing whole shares of NSP Common Stock to
be issued in the Merger as provided in this Article II.
(b) Exchange Procedures. As soon as practicable after the Effective Time,
the Exchange Agent shall mail to each holder of record of a certificate or
certificates ("Certificate") which immediately prior to the Effective Time
represented issued and outstanding shares of NCE Common Stock ("NCE Shares"),
(i) a letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
actual delivery of the Certificates to the Exchange Agent) and (ii) instructions
for use in effecting the exchange of Certificates for certificates representing
shares of NSP Common Stock ("NSP Shares") or for effecting the exchange of
Certificates for NSP Shares to be held in book entry form. As soon as
practicable after the Effective Time, the Exchange Agent shall also mail to each
holder of record of NCE Shares held in book entry form ("Book Entry Shares")
instructions for use in effecting the exchange of said Book Entry Shares for NSP
Shares. Upon delivery of a Certificate to the Exchange Agent for exchange,
together with a duly executed letter of transmittal and such other documents as
the Exchange Agent shall require, or, in the case of Book Entry Shares,
compliance with the instructions for the exchange thereof, the holder of such
Certificate or Book Entry Shares shall be entitled to receive in exchange
therefor that number of whole NSP Shares and the amount of cash in lieu of
fractional share interests (pursuant to Section 2.2(d)), if any, which such
holder has the right to receive pursuant to the provisions of this Article II.
In the event of a transfer of ownership of NCE Shares which is not registered in
the transfer records of NCE, the proper number of NSP Shares will be issued to a
transferee if, in addition to the other requirements for exchange, the Exchange
Agent receives all documents required to evidence and effect such transfer and
evidence satisfactory to the Exchange Agent that any applicable stock transfer
taxes have been paid. Until delivered as contemplated by this Section 2.2, each
Certificate, and until exchanged as contemplated by this Section 2.2, all Book
Entry Shares, shall be deemed at any time after the Effective Time to represent
only the right to receive whole NSP Shares and cash in lieu of any fractional
shares of NSP Common Stock as contemplated by this Section 2.2.
(c) Distributions with Respect to Unexchanged Shares. No dividends or other
distributions declared or made after the Effective Time with respect to NSP
Shares with a record date after the Effective Time shall be paid to the holder
of any undelivered Certificate or unexchanged Book Entry Shares with respect to
the NSP Shares represented thereby, and no cash payment in lieu of fractional
shares shall be paid to any such holder pursuant to Section 2.2(d), until the
holder of record of such Certificate or unexchanged Book Entry Shares (or a
transferee as described in Section 2.2(b)) shall have delivered such Certificate
or effected the exchange of such Book Entry Shares as contemplated in Section
2.2(b). Subject to the effect of unclaimed property, escheat and other
applicable laws, following delivery of any such Certificate or exchange of any
such Book Entry Shares, there shall be paid to the record holder (or transferee)
of the whole NSP Shares issued in exchange therefor, without interest, (i) at
the time of such delivery, the amount of any cash payable in lieu of a
fractional share of NSP Common Stock to which such holder (or transferee) is
entitled pursuant to Section 2.2(d) and the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid with
respect to such whole NSP Shares 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 delivery or exchange and a payment date subsequent
to delivery or exchange payable with respect to such whole NSP Shares, as the
case may be.
(d) No Fractional Shares. (i) No certificates or scrip representing
fractional shares of NSP Common Stock shall be issued upon the delivery of
Certificates or exchange of Book Entry Shares, and such fractional share
interests will not entitle the owner thereof to vote or to any rights of a
shareholder of NSP. All holders of NCE Common Stock who would otherwise be
entitled to receive
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a fractional share of NSP Common Stock shall receive, in lieu thereof upon
delivery or exchange of its NCE Shares, an amount of cash determined by
multiplying the fraction of a share of NSP Common Stock to which such
shareholder would otherwise be entitled by the closing sales price of NSP Common
Stock as reported under "NYSE Composite Transition Reports", in The Wall Street
Journal on the trading day immediately prior to the Effective Time. From time to
time, NSP shall, subject to Section 2.2(f) hereof, deliver to the Exchange Agent
cash in such amounts as shall be necessary to pay to the holders of NCE Shares
cash in lieu of fractional shares of NSP Common Stock.
(e) Closing of Transfer Books. From and after the Effective Time, the stock
transfer books of NCE with respect to shares of NCE Common Stock issued and
outstanding prior to the Effective Time shall be closed and no transfer of any
such shares shall thereafter be made. If, after the Effective Time, Certificates
are presented to NSP, they shall be cancelled and exchanged for certificates
representing the appropriate number of whole NSP Shares and cash in lieu of
fractional shares of NSP Common Stock as provided in this Section 2.2.
(f) Termination of Exchange Agent. Any certificates representing NSP Shares
deposited with the Exchange Agent pursuant to Section 2.2(a) and not exchanged
within six (6) months after the Effective Time pursuant to this Section 2.2
shall be returned by the Exchange Agent to NSP, which shall thereafter act as
Exchange Agent. All funds held by the Exchange Agent for payment to the holders
of undelivered Certificates or unexchanged Book Entry Shares and unclaimed at
the end of six (6) months from the Effective Time shall be remitted to NSP,
after which time any holder of undelivered Certificates or unexchanged Book
Entry Shares shall look as a general creditor only to NSP for payment of such
funds to which such holder may be due, subject to applicable law. NSP shall not
be liable to any person for such shares or funds delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
(g) Adjustment of Conversion Ratio. In the event that, subsequent to the
date hereof but prior to the Effective Time, the outstanding shares of NCE
Common Stock or NSP Common Stock, respectively, shall have been changed into a
different number of shares or a different class as a result of a stock split,
reverse stock split, stock dividend, subdivision, reclassification, combination,
exchange, recapitalization or other similar transaction, the Conversion Ratio
shall be appropriately adjusted to provide the holders of NCE Shares the same
economic effect as contemplated by Merger Agreement and this Plan of Merger
prior to such event.
ARTICLE III
TERMINATION AND AMENDMENT
Section 3.1 Termination. Notwithstanding the approval and adoption of this
Plan of Merger by the shareholders of NSP and NCE, this Plan of Merger shall
terminate forthwith in the event that the Merger Agreement shall be terminated
as therein provided and may be terminated as otherwise provided in the Merger
Agreement. In the event of the termination of this Plan of Merger as provided
above, this Plan of Merger shall forthwith become void and there shall be no
liability on the part of any of the parties hereto except as otherwise provided
in the Merger Agreement.
Section 3.2 Amendment. This Plan of Merger shall not be amended except in
accordance with the provisions of Section 9.4 of the Merger Agreement.
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ARTICLE IV
MISCELLANEOUS
Section 4.1 Governing Law. This Plan of Merger shall be governed by the
laws of the State of Delaware.
Section 4.2 Counterparts. This Plan of Merger may be executed in two or
more counterparts, each of which shall be deemed to be an original, but all of
which shall constitute one and the same agreement.
Section 4.3 Authorized Officers. The chairman of the board, president, vice
president, secretary and assistant secretary of each of the Constituent
Corporations are each authorized by it in its name to execute and deliver or
cause to be executed and delivered any articles of merger, certificate of
merger, agreements, certificates, appointments, or other instruments, and to do
anything else that he or they deem to be necessary or desirable in connection
with the Merger.
IN WITNESS WHEREOF, the parties hereto have caused this Plan of Merger to
be signed by their respective officers thereunto duly authorized as of the date
first written above.
NORTHERN STATES POWER COMPANY
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
NEW CENTURY ENERGIES, INC.
By:
--------------------------------------
Name:
--------------------------------------
Title:
--------------------------------------
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ANNEX I
AMENDMENTS
TO
NSP RESTATED ARTICLES OF INCORPORATION
TO BE EFFECTIVE AS OF THE EFFECTIVE TIME
1. The first sentence of Article I of the Restated Articles of
Incorporation of Northern States Power Company (the "NSP Charter") shall be
amended to read in its entirety as follows: "The name of this corporation shall
be ."
2. The first paragraph of Article V of the NSP Charter shall be amended to
read in its entirety as follows:
"The total authorized number of shares that may be issued by the
Corporation and that the Corporation will henceforth be authorized to have
is one billion (1,000,000,000) of the par value per share hereinafter set
forth."
3. Subparagraph 1 of Article V of the NSP Charter shall be amended to read
in its entirety as follows:
"1. Authorized Number and Classes of Shares
Such shares shall be divided into two classes to be designated,
respectively, Preferred Stock and Common Stock. The total authorized number
of shares of Preferred Stock is seven million (7,000,000) having a par
value of one hundred dollars ($100.00) per share, and the total authorized
number of shares of Common Stock is one billion (1,000,000,000) having a
par value of two dollars and fifty cents ($2.50) per share."
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[SG BARR DEVLIN LOGO] APPENDIX B
March 24, 1999
The Board of Directors
New Century Energies, Inc.
1225 17th Street
Denver, CO 80202
Dear Members of the Board:
We understand that New Century Energies, Inc., a Delaware corporation
("NCE"), and Northern States Power Company, a Minnesota corporation ("NSP"),
have determined to engage in a business combination as peer firms in a merger of
equals transaction, the terms and conditions of which are set forth in the
Agreement and Plan of Merger dated March 24, 1999 (the "Agreement") by and
between NCE and NSP. The Agreement provides for, among other things, the merger
of NCE into NSP (the "Merger") whereby each issued and outstanding share of NCE
common stock, par value $1.00 per share ("NCE Common Stock") (other than shares
cancelled pursuant to Section 2.1(a) of the Agreement), shall be converted into
the right to receive 1.55 shares (the "Conversion Ratio") of duly authorized,
validly issued, fully-paid and nonassessable NSP common stock, par value $2.50
per share ("NSP Common Stock"). Each share of NSP Common Stock issued and
outstanding immediately prior to the Effective Time shall remain outstanding
following the Effective Time. The terms and conditions of the Merger are set
forth in more detail in the Agreement. Capitalized terms used herein without
definition have the respective meanings assigned to such terms in the Agreement.
We have been requested by NCE to render our opinion with respect to the
fairness, from a financial point of view, to holders of NCE Common Stock of the
Conversion Ratio to be offered in the Merger.
In arriving at our opinion, we have, among other things:
(1) Reviewed the Annual Reports, Forms 10-K and the related financial
information for the three-year period ended December 31, 1997, and the
Forms 10-Q and the related unaudited financial information for the
quarterly periods ended March 31, 1998, June 30, 1998 and September 30,
1998 for NCE, Public Service Company of Colorado ("PSC") and
Southwestern Public Service Company ("SPS");
(2) Reviewed the Annual Reports, Forms 10-K and the related financial
information for the three-year period ended December 31, 1997, and the
Forms 10-Q and the related unaudited financial information for the
quarterly periods ended March 31, 1998, June 30, 1998 and September 30,
1998 for NSP, Northern States Power Company, a Wisconsin corporation
("NSP-WI") and NRG Energy, Inc. ("NRG");
(3) Reviewed certain other filings with the Securities and Exchange
Commission and other regulatory authorities made by NCE, PSC, SPS, NSP,
NSP-WI and NRG during the last three years, including proxy statements,
FERC Forms 1 and 2, Forms 8-K and registration statements;
450 Park Avenue New York New York 10022 (212) 308-2700 FAX (212) 308-2706
Societe Generale
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The Board of Directors, New Century Energies, Inc.
March 24, 1999
Page 2
(4) Reviewed certain internal information, including financial forecasts,
relating to the business, earnings, capital expenditures, cash flow,
assets and prospects of NCE and NSP furnished to us by NCE and NSP;
(5) Conducted discussions with members of senior management of NCE and NSP
concerning their respective businesses, regulatory environments,
prospects, strategic objectives and possible operating and
administrative synergies and other benefits which might be realized for
the benefit of the combined company following the Merger;
(6) Reviewed the historical market prices and trading activity for shares
of NCE Common Stock and NSP Common Stock, and compared them with those
of certain publicly traded companies which we deemed to be relevant;
(7) Compared the results of operations of NCE and NSP with those of certain
companies which we deemed to be relevant;
(8) Compared the proposed financial terms of the Merger with the financial
terms of certain utility industry business combinations which we deemed
to be relevant;
(9) Analyzed the respective contributions of NCE and NSP to the combined
company in terms of assets, earnings and cash flow;
(10) Analyzed the valuation of shares of NCE Common Stock and NSP Common
Stock using various valuation methodologies which we deemed to be
appropriate;
(11) Considered the pro forma capitalization, earnings and cash flow of the
combined company;
(12) Compared the pro forma capitalization ratios, earnings per share,
dividends per share and payout ratio of the combined company with each
of the corresponding current and projected values for NCE and NSP on a
stand-alone basis;
(13) Reviewed the Agreement; and
(14) Reviewed such other studies, conducted such other analyses, considered
such other financial, economic and market criteria, performed such
other investigations and taken into account such other matters as we
deemed necessary or appropriate for purposes of preparing this
opinion.
In rendering our opinion, we have relied, without independent verification,
upon the accuracy and completeness of all financial and other information
publicly available or otherwise furnished or made available to us by NCE and NSP
and have further relied upon the assurances of management of NCE and NSP that
they are not aware of any facts that would make such information inaccurate or
misleading. With respect to the financial projections of NCE and NSP, we have
relied upon the assurances of management of NCE and NSP that such projections
have been reasonably prepared and reflect the best currently available estimates
and judgments of the respective managements of NCE and NSP as to the future
financial performance of NCE and NSP, as the case may be, and as
450 Park Avenue New York New York 10022 (212) 308-2700 FAX (212) 308-2706
Societe Generale
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The Board of Directors, New Century Energies, Inc.
March 24, 1999
Page 3
to the projected outcomes of legal, regulatory and other contingencies. We also
assumed that estimates of cost savings and operating synergies expected to
result from the Merger were reasonably prepared on bases reflecting the best
currently available estimates and judgments of the managements of NCE and NSP.
In arriving at our opinion, we have not made or been provided with an
independent evaluation or appraisal of the assets or liabilities (contingent or
otherwise) of NCE or NSP, nor have we made any physical inspection of the
properties or assets of NCE or NSP. We have assumed that the Merger will be a
transaction as described in Section 368(a) of the Internal Revenue Code of 1986,
as amended, and that the holders of NCE Common Stock who exchange their shares
solely for NSP Common Stock will not recognize any gain or loss for federal
income tax purposes as a result thereof. We have also assumed that the Merger
will qualify as a pooling-of-interests for financial accounting purposes. You
have not authorized us to solicit, and we have not solicited, any indications of
interest from any third party with respect to the purchase of all or a part of
NCE. Our opinion herein is necessarily based upon financial, stock market and
other conditions and circumstances existing and disclosed to us as of the date
hereof.
We have acted as financial advisor to NCE in connection with the Merger and
will receive certain fees for our services. In addition, we have in the past
rendered certain investment banking and financial advisory services to NCE for
which we received customary compensation.
Our advisory services and the opinion expressed herein are for the
information of NCE's Board of Directors in evaluating the Merger and are not
provided on behalf of, or intended to confer rights or remedies upon, any
stockholder of NCE, NSP or any person other than NCE's Board of Directors.
Except for its publication in the Joint Proxy/Registration Statement which will
be distributed to holders of NCE Common Stock and NSP Common Stock in connection
with approval of the Merger, our opinion may not be published or otherwise used
or referred to without our prior written consent. This opinion is not intended
to be, and does not constitute, a recommendation to any stockholder as to how
such stockholder should act with respect to the Merger.
Based upon and subject to the foregoing, our experience as investment
bankers and other factors we deem relevant, we are of the opinion that, as of
the date hereof, the Conversion Ratio to be offered in connection with the
Merger is fair, from a financial point of view, to the holders of NCE Common
Stock.
Very truly yours,
/s/ SG BARR DEVLIN
SG BARR DEVLIN
A division of SG Cowen Securities
Corporation
450 Park Avenue New York New York 10022 (212) 308-2700 FAX (212) 308-2706
Societe Generale
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[THE BLACKSTONE GROUP LOGO] APPENDIX C
March 24, 1999
Board of Directors
Northern States Power Company
414 Nicollet Mall
Minneapolis, Minnesota 55401
Gentlemen and Mesdames:
We understand that Northern States Power Company ("NSP") and New Century
Energies, Inc. ("NCE") have entered into an Agreement and Plan of Merger (the
"Merger Agreement") dated as of March 24, 1999, which provides for, among other
things, the merger of NCE with and into NSP (the "Merger"). Pursuant to the
Merger Agreement, NSP will be the surviving corporation and each issued and
outstanding share of common stock, par value $1.00 per share, of NCE ("NCE
Common Stock"), other than those shares held in treasury, by subsidiaries of
NCE, by NSP or by subsidiaries of NSP, will be converted into the right to
receive 1.55 shares (the "Conversion Ratio") of the common stock, par value
$2.50 per share, of NSP ("NSP Common Stock"). The terms and conditions of the
Merger are fully set forth in the Merger Agreement.
You have asked us whether, in our opinion, the Conversion Ratio is fair to the
holders of NSP Common Stock from a financial point of view.
In arriving at the opinion set forth below we have (i) reviewed, among other
things, certain publicly available information concerning the business,
financial condition and operations of NSP and NCE which we believe to be
relevant to our inquiry, certain internal financial analyses, estimates and
forecasts relating to NSP and NCE prepared by, and furnished to us by, the
respective managements of NSP and NCE, and estimates of certain operating
efficiencies and synergies expected to be achieved as a result of the Merger
that were prepared by the managements of NSP and NCE with the assistance of a
third party consultant, and furnished to us by the management of NSP; (ii) held
discussions with members of management of NSP and NCE concerning their
respective businesses, operating environments, financial condition, prospects
and strategic objectives; (iii) reviewed the historical market prices and
trading activity for NSP Common Stock and NCE Common Stock; (iv) compared
certain financial and stock market information for NSP and NCE with similar
information for certain other companies the securities of which are publicly
traded; (v) reviewed the financial terms of certain recent business combinations
in the electric utility industry; (vi) considered the pro forma financial effect
of the Merger on NSP; (vii) participated in discussions among representatives of
NSP and NCE and their respective financial and legal advisors; (viii) reviewed
the
THE BLACKSTONE GROUP L.P.
345 Park Avenue
New York NY 10154
212 935 2626
Blackstone Financial Services(tm)
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Merger Agreement; and (ix) performed such other studies and analyses, and took
into account such other matters, as we deemed appropriate.
In arriving at our opinion, we have relied without independent verification upon
the accuracy and completeness of all of the financial and other information
reviewed by us that was publicly available, that was supplied or otherwise made
available to us by NSP and NCE or that was otherwise reviewed by us. Without
limiting the generality of the foregoing, we have assumed that the financial
forecasts and the estimates prepared by NSP and NCE and provided to us, and the
estimates of operating efficiencies and synergies that would result from the
combination of NSP and NCE and provided to us, have been reasonably determined
on a basis reflecting the best currently available judgments and estimates of
NSP and NCE, and that such forecasts and such estimates will be realized in the
amounts and at the times contemplated thereby. We have further relied upon the
assurances of management of NSP and NCE that they are not aware of any facts
that would make such information inaccurate, incomplete or misleading. In
addition, we have not conducted a physical inspection of the properties and
facilities of NSP or NCE, nor have we made an independent evaluation or
appraisal of the assets and liabilities of NSP or NCE. In addition, we have not
considered the relative merits of the Merger as compared to any other business
plan or opportunity that might be available to NSP or the effect of any other
arrangement in which NSP might engage. We have assumed that the Merger and the
other transactions contemplated by the Merger Agreement will be consummated on
substantially the same terms set forth therein and will be accounted for as a
pooling-of-interests under generally accepted accounting principles and will
qualify as a tax-free reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended. Our opinion is necessarily based upon
economic, market, monetary, regulatory and other conditions as they exist and
can be evaluated, and the information made available to us, as of the date
hereof. Furthermore, we express no opinion as to the prices or trading ranges at
which NSP Common Stock will trade at any time. We have assumed, with the
permission of NSP Management, that in the course of obtaining the necessary
regulatory or other consents or approvals (contractual or otherwise) for the
Merger, no restrictions or requirements will be imposed that will have a
material adverse effect on the contemplated benefits of the Merger.
This letter does not constitute a recommendation to any shareholder as to how
such holder should vote with respect to the Merger, and should not be relied
upon by any shareholder as such.
We have acted as financial advisor to NSP with respect to the proposed Merger
and will receive a fee from NSP for our services. NSP has also agreed to
indemnify us for certain liabilities that may arise out of the rendering of this
opinion. In addition, we have performed other investment banking and financial
advisory services for NSP in the past for which we have received customary
compensation.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the Conversion Ratio is fair to the holders of NSP Common Stock from a
financial point of view.
Very truly yours,
/s/THE BLACKSTONE GROUP L.P.
THE BLACKSTONE GROUP L.P.
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APPENDIX D
DISSENTERS' RIGHTS PROVISIONS
OF THE
MINNESOTA BUSINESS CORPORATION ACT
302A.471 RIGHTS OF DISSENTING SHAREHOLDERS.
SUBDIVISION 1. ACTIONS CREATING RIGHTS. A shareholder of a corporation may
dissent from, and obtain payment for the fair value of the shareholder's shares
in the event of, any of the following corporate actions:
(a) An amendment of the articles that materially and adversely affects the
rights or preferences of the shares of the dissenting shareholder in that it:
(1) alters or abolishes a preferential right of the shares;
(2) creates, alters, or abolishes a right in respect of the redemption of
the shares, including a provision respecting a sinking fund for the
redemption or repurchase of the shares;
(3) alters or abolishes a preemptive right of the holder of the shares to
acquire shares, securities other than shares, or rights to purchase
shares or securities other than shares;
(4) excludes or limits the right of a shareholder to vote on a matter, or
to cumulate votes, except as the right may be excluded or limited
through the authorization or issuance of securities of an existing or
new class or series with similar or different voting rights; except
that an amendment to the articles of an issuing public corporation that
provides that section 302A.671 does not apply to a control share
acquisition does not give rise to the right to obtain payment under
this section;
(b) A sale, lease, transfer, or other disposition of all or substantially
all of the property and assets of the corporation, but not including a
transaction permitted without shareholder approval in section 302A.661,
subdivision 1, or a disposition in dissolution described in section 302A.725,
subdivision 2, or a disposition pursuant to an order of a court, or a
disposition for cash on terms requiring that all or substantially all of the net
proceeds of disposition be distributed to the shareholders in accordance with
their respective interests within one year after the date of disposition;
(c) A plan of Merger, whether under this chapter or under chapter 322B, to
which the corporation is a party, except as provided in subdivision 3;
(d) A plan of exchange, whether under this chapter or under chapter 322B,
to which the corporation is a party as the corporation whose shares will be
acquired by the acquiring corporation, if the shares of the shareholder are
entitled to be voted on the plan; or
(e) Any other corporate action taken pursuant to a shareholder vote with
respect to which the articles, the bylaws, or a resolution approved by the board
directs that dissenting shareholders may obtain payment for their shares.
SUBDIVISION 2. BENEFICIAL OWNERS. (a) A shareholder shall not assert
dissenters' rights as to less than all of the shares registered in the name of
the shareholder, unless the shareholder dissents with respect to all the shares
that are beneficially owned by another person but registered in the name of the
shareholder and discloses the name and address of each beneficial owner on whose
behalf the shareholder dissents. In that event, the rights of the dissenter
shall be
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determined as if the shares as to which the shareholder has dissented and the
other shares were registered in the names of different shareholders.
(b) A beneficial owner of shares who is not the shareholder may assert
dissenters' rights with respect to shares held on behalf of the beneficial
owner, and shall be treated as a dissenting shareholder under the terms of this
section and section 302A.473, if the beneficial owner submits to the corporation
at the time of or before the assertion of the rights a written consent of the
shareholder.
SUBDIVISION 3. RIGHTS NOT TO APPLY. (a) Unless the articles, the bylaws, or
a resolution approved by the board otherwise provide, the right to obtain
payment under this section does not apply to a shareholder of the surviving
corporation in a Merger, if the shares of the shareholder are not entitled to be
voted on the Merger.
(b) If a date is fixed according to section 302A.445, subdivision 1, for
the determination of shareholders entitled to receive notice of and to vote on
an action described in subdivision 1, only shareholders as of the date fixed,
and beneficial owners as of the date fixed who hold through shareholders, as
provided in subdivision 2, may exercise dissenters' rights.
SUBDIVISION 4. OTHER RIGHTS. The shareholders of a corporation who have a
right under this section to obtain payment for their shares do not have a right
at law or in equity to have a corporate action described in subdivision 1 set
aside or rescinded, except when the corporate action is fraudulent with regard
to the complaining shareholder or the corporation.
302A.473 PROCEDURES FOR ASSERTING DISSENTERS' RIGHTS.
SUBDIVISION 1. DEFINITIONS. (a) For purposes of this section, the terms
defined in this subdivision have the meanings given them.
(b) "Corporation" means the issuer of the shares held by a dissenter before
the corporate action referred to in section 302A.471, subdivision 1 or the
successor by Merger of that issuer.
(c) "Fair value of the shares" means the value of the shares of a
corporation immediately before the effective date of the corporate action
referred to in section 302A.471, subdivision 1.
(d) "Interest" means interest commencing five days after the effective date
of the corporate action referred to in section 302A.471, subdivision 1, up to
and including the date of payment, calculated at the rate provided in section
549.09 for interest on verdicts and judgments.
SUBDIVISION 2. NOTICE OF ACTION. If a corporation calls a shareholder
meeting at which any action described in section 302A.471, subdivision 1 is to
be voted upon, the notice of the meeting shall inform each shareholder of the
right to dissent and shall include a copy of section 302A.471 and this section
and a brief description of the procedure to be followed under these sections.
SUBDIVISION 3. NOTICE OF DISSENT. If the proposed action must be approved
by the shareholders, a shareholder who is entitled to dissent under section
302A.471 and who wishes to exercise dissenters' rights must file with the
corporation before the vote on the proposed action a written notice of intent to
demand the fair value of the shares owned by the shareholder and must not vote
the shares in favor of the proposed action.
SUBDIVISION 4. NOTICE OF PROCEDURE; DEPOSIT OF SHARES. (a) After the
proposed action has been approved by the board and, if necessary, the
shareholders, the corporation
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shall send to all shareholders who have complied with subdivision 3 and to all
shareholders entitled to dissent if no shareholder vote was required, a notice
that contains:
(1) The address to which a demand for payment and certificates of
certificated shares must be sent in order to obtain payment and the
date by which they must be received;
(2) Any restrictions on transfer of uncertificated shares that will apply
after the demand for payment is received;
(3) A form to be used to certify the date on which the shareholder, or the
beneficial owner on whose behalf the shareholder dissents, acquired the
shares or an interest in them and to demand payment; and
(4) A copy of section 302A.471 and this section and a brief description of
the procedures to be followed under these sections.
(b) In order to receive the fair value of the shares, a dissenting
shareholder must demand payment and deposit certificated shares or comply with
any restrictions on transfer of uncertificated shares within 30 days after the
notice required by paragraph (a) was given, but the dissenter retains all other
rights of a shareholder until the proposed action takes effect.
SUBDIVISION 5. PAYMENT; RETURN OF SHARES. (a) After the corporate action
takes effect, or after the corporation receives a valid demand for payment,
whichever is later, the corporation shall remit to each dissenting shareholder
who has complied with subdivisions 3 and 4 the amount the corporation estimates
to be the fair value of the shares, plus interest, accompanied by:
(1) the corporation's closing balance sheet and statement of income for a
fiscal year ending not more than 16 months before the effective date of
the corporate action, together with the latest available interim
financial statements;
(2) an estimate by the corporation of the fair value of the shares and a
brief description of the method used to reach the estimate; and
(3) a copy of section 302A.471 and this section, and a brief description of
the procedure to be followed in demanding supplemental payment.
(b) The corporation may withhold the remittance described in paragraph (a)
from a person who was not a shareholder on the date the action dissented from
was first announced to the public or who is dissenting on behalf of a person who
was not a beneficial owner on that date. If the dissenter has complied with
subdivisions 3 and 4, the corporation shall forward to the dissenter the
materials described in paragraph (a), a statement of the reason for withholding
the remittance, and an offer to pay to the dissenter the amount listed in the
materials if the dissenter agrees to accept that amount in full satisfaction.
The dissenter may decline the offer and demand payment under subdivision 6.
Failure to do so entitles the dissenter only to the amount offered. If the
dissenter makes demand, subdivisions 7 and 8 apply.
(c) If the corporation fails to remit payment within 60 days of the deposit
of certificates or the imposition of transfer restrictions on uncertificated
shares, it shall return all deposited certificates and cancel all transfer
restrictions. However, the corporation may again give notice under subdivision 4
and require deposit or restrict transfer at a later time.
SUBDIVISION 6. SUPPLEMENTAL PAYMENT; DEMAND. If a dissenter believes that
the amount remitted under subdivision 5 is less than the fair value of the
shares plus interest, the dissenter may give written notice to the corporation
of the dissenter's own estimate of the fair value of the shares, plus interest,
within 30 days after the corporation mails the remittance under
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subdivision 5, and demand payment of the difference. Otherwise, a dissenter is
entitled only to the amount remitted by the corporation.
SUBDIVISION 7. PETITION; DETERMINATION. If the corporation receives a
demand under subdivision 6, it shall, within 60 days after receiving the demand,
either pay to the dissenter the amount demanded or agreed to by the dissenter
after discussion with the corporation or file in court a petition requesting
that the court determine the fair value of the shares, plus interest. The
petition shall be filed in the county in which the registered office of the
corporation is located, except that a surviving foreign corporation that
receives a demand relating to the shares of a constituent domestic corporation
shall file the petition in the county in this state in which the last registered
office of the constituent corporation was located. The petition shall name as
parties all dissenters who have demanded payment under subdivision 6 and who
have not reached agreement with the corporation. The corporation shall, after
filing the petition, serve all parties with a summons and copy of the petition
under the rules of civil procedure. Nonresidents of this state may be served by
registered or certified mail or by publication as provided by law. Except as
otherwise provided, the rules of civil procedure apply to this proceeding. The
jurisdiction of the court is plenary and exclusive. The court may appoint
appraisers, with powers and authorities the court deems proper, to receive
evidence on and recommend the amount of the fair value of the shares. The court
shall determine whether the shareholder or shareholders in question have fully
complied with the requirements of this section, and shall determine the fair
value of the shares, taking into account any and all factors the court finds
relevant, computed by any method or combination of methods that the court, in
its discretion, sees fit to use, whether or not used by the corporation or by a
dissenter. The fair value of the shares as determined by the court is binding on
all shareholders, wherever located. A dissenter is entitled to judgment in cash
for the amount by which the fair value of the shares as determined by the court,
plus interest, exceeds the amount, if any, remitted under subdivision 5, but
shall not be liable to the corporation for the amount, if any, by which the
amount, if any, remitted to the dissenter under subdivision 5 exceeds the fair
value of the shares as determined by the court, plus interest.
SUBDIVISION 8. COSTS; FEES; EXPENSES. (a) The court shall determine the
costs and expenses of a proceeding under subdivision 7, including the reasonable
expenses and compensation of any appraisers appointed by the court, and shall
assess those costs and expenses against the corporation, except that the court
may assess part or all of those costs and expenses against a dissenter whose
action in demanding payment under subdivision 6 is found to be arbitrary,
vexatious, or not in good faith.
(b) If the court finds that the corporation has failed to comply
substantially with this section, the court may assess all fees and expenses of
any experts or attorneys as the court deems equitable. These fees and expenses
may also be assessed against a person who has acted arbitrarily, vexatiously, or
not in good faith in bringing the proceeding, and may be awarded to a party
injured by those actions.
(c) The court may award, in its discretion, fees and expenses to an
attorney for the dissenters out of the amount awarded to the dissenters, if any.
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