Exhibit 99.1
AGREEMENT AND PLAN OF RESTRUCTURING AND MERGER
Among
WESTERN RESOURCES, INC.
HVOLT ENTERPRISES, INC.
PUBLIC SERVICE COMPANY OF NEW MEXICO
HVK, INC.
and
HVNM, INC.
Dated as of November 8, 2000
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Table of Contents
Page
Article I. The Transaction.....................................................2
1.1. The Split-Off..................................................2
1.2. The Merger.....................................................2
1.3. The Second Merger..............................................2
1.4. Effective Time.................................................2
Article II. The Surviving Corporation..........................................3
2.1. The Articles of Incorporation..................................3
2.2. The By-Laws....................................................3
2.3. Directors......................................................3
2.4. Officers.......................................................3
Article III. Effect of the Transaction on Capital Stock; Exchange of
Certificates.....................................................4
3.1. Apportionment of Company Common Stock..........................4
3.2. Effect of the Transaction on Capital Stock.....................4
3.3. Exchange of Certificates Exchanged in the Split-Off............9
3.4. Exchange of Certificates in the Merger........................10
3.5. Dissenters' Rights............................................13
3.6. Adjustments to Prevent Dilution...............................14
3.7. Restructuring of the Mergers..................................14
3.8. Manzano Guaranty; Etc.........................................15
Article IV. The Closing15
4.1. Closing.......................................................15
Article V. Representations and Warranties.....................................16
5.1. Representations and Warranties of the Company.................16
5.2. Representations and Warranties of Parent, PNM, Merger Sub-1
and Merger Sub-2............................................28
Article VI. Conduct of Business Pending the Transactions......................39
6.1. Covenants of the Company......................................39
6.2. Covenants of Parent, Manzano, PNM, Merger Sub-1 and Merger
Sub 2.......................................................42
6.3. Necessary Action..............................................45
Article VII. Additional Agreements............................................45
7.1. Access........................................................45
7.2. Acquisition Proposals.........................................46
7.3. Information Supplied..........................................47
7.4. Shareholders Meetings.........................................48
7.5. Filings; Other Actions; Notification..........................48
7.6. Affiliates....................................................50
7.7. Stock Exchange Listing and De-listing.........................50
7.8. Publicity.....................................................50
7.9. Benefits and Other Employee Matters...........................50
7.10. Board of Directors; Corporate Headquarters and Community
Involvement.................................................52
7.11. Dividends.....................................................53
7.12. Indemnification; Directors' and Officers' Insurance...........53
7.13. Expenses......................................................55
7.14. Takeover Statute..............................................55
7.15. Manzano Vote..................................................55
7.16. Agreements Relating to the Split-Off..........................55
7.17. Redemption of Preferred Shares................................55
7.18. Conveyance Taxes..............................................56
7.19. Transition Steering Team......................................56
7.20. Termination of Tax Sharing Agreements.........................56
7.21. Tax Disaffiliation Agreement..................................57
7.22. Shared Services Agreement.....................................57
7.23. Interim Reporting.............................................57
7.24. Possible Exchange.............................................57
Article VIII. Conditions.....................................................58
8.1. Conditions to Each Party's Obligation to Effect the
Transaction.................................................58
8.2. Conditions to Obligations of Parent, Merger Sub-1 and Merger
Sub-2.......................................................60
8.3. Conditions to Obligation of the Company.......................61
Article IX. Termination63
9.1. Termination by Mutual Consent.................................63
9.2. Termination by Either Parent or the Company...................63
9.3. Termination by the Company....................................63
9.4. Termination by Parent.........................................64
9.5. Effect of Termination and Abandonment.........................64
Article X. Miscellaneous and General..........................................66
10.1. Survival......................................................66
10.2. Modification or Amendment.....................................66
10.3. Waiver of Conditions..........................................66
10.4. Counterparts..................................................67
10.5. GOVERNING LAW AND VENUE.......................................67
10.6. Notices.......................................................67
10.7. Entire Agreement; NO OTHER REPRESENTATIONS....................68
10.8. No Third-Party Beneficiaries..................................69
10.9. Obligations of Parent and of the Company......................69
10.10. Severability..................................................69
10.11. Interpretation................................................69
10.12. Assignment....................................................69
EXHIBIT A - Split-Off Agreements
EXHIBIT B - Convertible Preference Certificate of Designation
EXHIBIT C - Parent Convertible Certificate of Designation
EXHIBIT D - Affiliates Letter
EXHIBIT E - Form of Stockholder Agreement
EXHIBIT F - Form of Registration Rights Agreement
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Indexed of Defined Terms
Page
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1935 Act.....................................................................16
Acquisition Proposal.........................................................46
Additional Cash...............................................................5
Adjustment Calculation........................................................7
Adjustment Shares.............................................................7
Affiliates Letter............................................................50
Aggregate Share Number........................................................6
Agreement.....................................................................1
Allocation and Separation Agreement...........................................1
Audit Date...................................................................20
Bankruptcy and Equity Exception..............................................18
Base Shares...................................................................6
Business Day.................................................................15
By-Laws.......................................................................3
Certificate...................................................................8
Certificate of Merger.........................................................2
Charter.......................................................................3
Chase........................................................................27
Closing......................................................................15
Closing Consideration.........................................................8
Closing Date.................................................................15
Code..........................................................................2
Company.......................................................................1
Company Common Stock..........................................................4
Company Contracts............................................................19
Company Disclosure Letter....................................................16
Company Dissenting Holder....................................................13
Company ERISA Affiliate......................................................22
Company Intellectual Property Rights.........................................26
Company Material Adverse Effect..............................................17
Company Pension Plan.........................................................22
Company Reports..............................................................19
Company Required Statutory Approvals.........................................18
Company Requisite Vote.......................................................27
Compensation and Benefit Plans...............................................21
Confidentiality Agreements...................................................68
Contracts....................................................................19
Conversion...................................................................57
Convertible Preference Shares.................................................5
Costs........................................................................53
Current Premium..............................................................54
Cut Off Date..................................................................4
D&O Insurance................................................................54
Effective Time................................................................3
Employees....................................................................21
Environmental Law............................................................24
ERISA........................................................................21
Exchange.....................................................................57
Exchange Act.................................................................17
Exchange Agent...............................................................10
Exchange Agreement............................................................1
Exchange Fund................................................................10
Exchange Ratio................................................................8
Excluded Share................................................................6
Excluded Shares...............................................................6
FERC.........................................................................18
Final Order..................................................................59
First Redemption Date........................................................58
GAAP.........................................................................17
Governmental Entity..........................................................18
Hazardous Substance..........................................................24
HSR Act......................................................................18
Indemnified Parties..........................................................53
IRS..........................................................................22
JP Morgan....................................................................38
KGCC..........................................................................2
knowledge....................................................................17
Laws.........................................................................23
Manzano.......................................................................1
Manzano Certificate...........................................................9
Manzano Common Stock..........................................................8
Manzano Dissenting Holder....................................................13
Manzano Exchange..............................................................1
Manzano Excluded Share........................................................8
Manzano Excluded Shares.......................................................8
Manzano Merger Consideration..................................................8
Manzano Transition Date.......................................................1
Merger........................................................................1
Merger Consideration..........................................................8
Merger Portion................................................................4
Merger Sub-1..................................................................1
Merger Sub-2..................................................................1
Mergers.......................................................................1
Neutral Auditor...............................................................8
NMBCA.........................................................................2
NMPRC.........................................................................3
Non-Union Employees..........................................................51
NYSE.........................................................................18
Order........................................................................59
Parent........................................................................1
Parent Common Stock...........................................................8
Parent Compensation and Benefit Plans........................................33
Parent Contracts.............................................................31
Parent Convertible Debt......................................................57
Parent Convertible Shares.....................................................8
Parent Disclosure Letter.....................................................28
Parent Employees.............................................................33
Parent ERISA Affiliate.......................................................33
Parent Material Adverse Effect...............................................29
Parent Pension Plan..........................................................33
Parent Required Statutory Approvals..........................................30
Parent Requisite Vote........................................................37
Parent Stock Plans...........................................................29
Parent Voting Debt...........................................................30
PBGC.........................................................................22
person.......................................................................11
PNM...........................................................................1
PNM Audit Date...............................................................32
PNM Common Stock.............................................................29
PNM Exchange.................................................................14
PNM Exchange Agreement.......................................................14
PNM Intellectual Property Rights.............................................37
PNM Preferred Shares.........................................................29
PNM Reports..................................................................31
Power Act....................................................................16
Preferred Shares.............................................................17
Prospectus/Proxy Statement...................................................47
Representatives..............................................................45
S-4 Registration Statement...................................................47
Salomon......................................................................27
SEC...........................................................................5
Second Merger.................................................................1
Securities Act...............................................................18
Significant Subsidiary.......................................................17
Split-Off.....................................................................1
Split-Off Agreements..........................................................1
Split-Off Consideration.......................................................6
Split-Off Exchange Ratio......................................................6
Split-Off Portion.............................................................4
Stock Award..................................................................50
Stock Plans..................................................................17
Subsidiary...................................................................16
Superior Proposal............................................................47
Surviving Corporation.........................................................2
Takeover Statute.............................................................23
Tax..........................................................................25
Tax Disaffiliation Agreement.................................................42
Taxable......................................................................25
Taxes........................................................................25
Taxing.......................................................................25
Termination Date.............................................................63
Trading Day...................................................................5
Transaction...................................................................1
TransactionTaxes.............................................................56
Transition Steering Team.....................................................56
Utility Subsidiaries.........................................................16
Voting Debt..................................................................18
Westar........................................................................1
Westar Common Stock...........................................................4
Westar Subsidiaries...........................................................1
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AGREEMENT AND PLAN OF RESTRUCTURING AND MERGER
AGREEMENT AND PLAN OF RESTRUCTURING AND MERGER (hereinafter called this
"Agreement"), dated as of November 8, 2000, among Western Resources, Inc., a
Kansas corporation (the "Company"), Public Service Company of New Mexico, a New
Mexico corporation ("PNM"), HVOLT Enterprises, Inc., a Delaware corporation
("Parent"), HVK, Inc., a Kansas corporation and a wholly owned subsidiary of
Parent ("Merger Sub-1") and HVNM, Inc., a New Mexico corporation and a wholly
owned subsidiary of Parent ("Merger Sub-2").
RECITALS
WHEREAS, PNM and Manzano Corporation, a New Mexico corporation ("Manzano"),
have entered into an Agreement and Plan of Share Exchange, dated as of April 17,
2000 (the "Exchange Agreement"), which provides for the mandatory share exchange
by the holders of the outstanding common stock of PNM for shares of the common
stock of Manzano at an exchange ratio of one share of Manzano common stock for
each share of PNM common stock, whereby PNM will become a wholly owned
subsidiary of Manzano (the "Manzano Exchange");
WHEREAS, upon consummation of the Exchange, Manzano will execute a
counterpart hereof as set forth below with the effect set forth herein (the date
on which PNM becomes a Subsidiary of Manzano and Manzano executes a counterpart
of this Agreement being referred to as the "Manzano Transition Date");
WHEREAS, the Company, Parent, PNM, Merger Sub-1 and Merger Sub-2 have
agreed to enter into an integrated transaction (the "Transaction") pursuant to
which, first (x) the Company shall deliver to its shareholders its then entire
ownership interest in Westar Industries, Inc., a Kansas corporation and a
subsidiary of the Company ("Westar", together with the subsidiaries of Westar at
the time of the Split-Off, the "Westar Subsidiaries") (such transaction being
referred to as the "Split-Off"), in exchange for a portion of their shares of
the Company Common Stock on the terms and conditions contained herein and in the
Asset Allocation and Separation Agreement (the "Allocation and Separation
Agreement") and the other agreements and term sheets attached thereto (together
with the Allocation and Separation Agreement, the "Split-Off Agreements")
between the Company and Westar in the forms attached hereto as Exhibit A, and
then (y) Merger Sub-1 will merge with and into the Company, whereby the Company
will become a wholly owned subsidiary of Parent (the "Merger"), and Merger Sub-2
will merge with and into Manzano, whereby Manzano and PNM will become wholly
owned subsidiaries of Parent (the "Second Merger" and, together with the Merger,
the "Mergers"), pursuant to the terms and conditions set forth in this
Agreement;
WHEREAS, the respective Boards of Directors of the Company, Parent, PNM,
Merger Sub-1 and Merger Sub-2 (i) have determined that the Transaction and other
transactions contemplated hereby are fair to, advisable and in the best
interests of the Company, Parent, PNM, Merger Sub-1 and Merger Sub-2 and their
shareholders, respectively, and (ii) have approved this Agreement and the
transactions contemplated hereby; and
WHEREAS, for federal income Tax (as defined below) purposes, it is intended
that (i) the Split-Off will be treated as a taxable exchange of the Split-Off
Portion (as defined below) of the Company Common Stock for Westar Common Stock,
and (ii) the Mergers taken together will be treated as a transaction described
in Section 351 of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
Article I
The Transaction
1.1. The Split-Off.
The Company has or will enter into the Allocation and Separation Agreement
and each other Split-Off Agreement to which it is a party, and, provided that
all conditions precedent to the Split-Off have been satisfied, immediately prior
to the Merger, the Company shall effect, and cause Westar to effect, the
Split-Off.
1.2. The Merger.
Upon the terms and subject to the conditions set forth in this Agreement,
at the Effective Time, Merger Sub-1 shall be merged with and into the Company
and the separate corporate existence of Merger Sub-1 shall thereupon cease. The
Company shall be the surviving corporation in the Merger (sometimes hereinafter
referred to as the "Surviving Corporation"), and the separate corporate
existence of the Company with all its rights, privileges, immunities, powers and
franchises shall continue unaffected by the Merger, except as set forth in
Article III. The Merger shall have the effects specified in the Kansas General
Corporation Code (the "KGCC").
1.3. The Second Merger.
Upon the terms and subject to the conditions set forth in this Agreement,
at the Effective Time, Merger Sub-2 shall be merged with and into Manzano and
the separate corporate existence of Merger Sub-2 shall thereupon cease. Manzano
shall be the surviving corporation in the Second Merger, and the separate
corporate existence of Manzano with all its rights, privileges, immunities,
powers and franchises shall continue unaffected by the Second Merger. The Second
Merger shall have the effects specified in the New Mexico Business Corporation
Act (the "NMBCA").
1.4. Effective Time.
On the Closing Date (as defined in Section 4.1), or if not reasonably
practicable, as soon as practicable following the Closing Date, the Company and
Parent will cause a Certificate of Merger (the "Certificate of Merger") to be
executed, acknowledged and filed with the Secretary of State of the State of
Kansas as provided in Sections 17-6003 and 17-6701 of the KGCC. The Merger shall
become effective at the time when the Certificate of Merger has been duly filed
with the Secretary of State of the State of Kansas or upon such later date as
agreed upon by the parties and specified in such Certificate of Merger (the
"Effective Time"). Not later than simultaneously with the filing of the
Certificate of Merger, Manzano and Parent will cause such certificates or other
instruments to be filed with the New Mexico Public Regulation Commission (the
"NMPRC") as are required in accordance with the NMBCA to cause the Second Merger
to become effective at the Effective Time.
Article II.
The Surviving Corporation
2.1. The Articles of Incorporation.
The restated articles of incorporation of the Company as in effect
immediately prior to the Effective Time shall be the articles of incorporation
of the Surviving Corporation (the "Charter"), until duly amended as provided
therein or by applicable law.
2.2. The By-Laws.
The by-laws of the Company as in effect immediately prior to the Effective
Time shall be the by-laws of the Surviving Corporation (the "By-Laws"), until
thereafter amended as provided therein or by applicable law.
2.3. Directors.
The directors of Merger Sub-1 at the Effective Time shall, from and after
the Effective Time, be the directors of the Surviving Corporation until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Charter and the
By-Laws. The directors of Merger Sub-1 at the Effective Time shall be appointed
by Parent in its sole discretion, provided that at least three such directors
shall be resident in the service territory of the Company or Kansas Gas and
Electric Company in the State of Kansas.
2.4. Officers.
The officers of Merger Sub-1 at the Effective Time shall, from and after
the Effective Time, be the officers of the Surviving Corporation until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Charter and the
By-Laws.
Article III.
Effect of the Transaction on Capital Stock; Exchange of Certificates
3.1. Apportionment of Company Common Stock.
(a) The Split-Off.
At the Effective Time and in accordance with the terms hereof and of the
Allocation and Separation Agreement, a portion (the "Split-Off Portion") of each
share of common stock, par value $5.00 per share, of the Company (the "Company
Common Stock") shall be exchanged for shares of common stock, par value $.01 per
share, of Westar (the "Westar Common Stock"). The Split-Off Portion shall be
calculated as follows: the market value of the shares of Westar Common Stock
issued to and held by the Company divided by the market value of the total
number of issued and outstanding shares of Company Common Stock, in each case
immediately prior to the effective time of the Split-Off and determined based on
the average (rounded to the nearest thousandth, or if there shall not be a
nearest thousandth, the next highest thousandth) of the volume weighted averages
(rounded to the nearest thousandth, or if there shall not be a nearest
thousandth, the next highest thousandth) of the trading price of Westar Common
Stock or Company Common Stock, as the case may be, on the New York Stock
Exchange as reported by Bloomberg Financial Markets, or if not reported thereby,
another reputable source, in the period of 20 consecutive Trading Days ending on
the close of business on the second Business Day immediately preceding the
effective time of the Split-Off; provided that if Westar Common Stock is not
listed for trading on the New York Stock Exchange, the market price for Westar
Common Stock shall be determined as the average of price quotes from three
investment banking firms, one appointed by Westar, one appointed by the Company
and the third by the two other appointees.
(b) The Merger.
At the Effective Time, the portion of each share of Company Common Stock
not included in the Split-Off Portion (the "Merger Portion") shall be converted
into the right to receive the Merger Consideration as set forth in Section
3.2(b) below.
3.2. Effect of the Transaction on Capital Stock.
(a) Permitted Intercompany Adjustments.
For the period from the date hereof through the close of business on the
day that is 15 Business Days prior to the Closing Date (the "Cut Off Date"), the
following intercompany transfers between the Company and Westar shall be
permitted and shall be adjustments to the Merger Consideration to the extent set
forth in subsection (b) below:
(i) Westar may pay Additional Cash to the Company, at Westar's option, as:
(A) consideration for the purchase of shares of Company Common Stock
at a price based on the average (rounded to the nearest thousandth, or if
there shall not be a nearest thousandth, the next higher thousandth) of the
volume weighted averages (rounded to the nearest thousandth, or if there
shall not be a nearest thousandth, the next higher thousandth) of the
trading price of Company Common Stock on the New York Stock Exchange as
reported by Bloomberg Financial Markets, or if not reported thereby,
another reputable source, in the period of 20 consecutive Trading Days
ending on the close of business on the Business Day immediately preceding
the date of purchase; or
(B) consideration for the purchase of convertible preference shares of
the Company having the terms set forth on Exhibit B hereto (as may be
amended following approval by the Company's shareholders of amendments to
the articles of incorporation of the Company with respect to the voting
rights of such shares) (the "Convertible Preference Shares") in accordance
with the terms thereof, at the price specified thereon; provided that (x)
prior to purchasing any Convertible Preference Shares, Westar will purchase
a number of shares of Company Common Stock that would be converted into
9.9% of the issued and outstanding shares of Parent Common Stock on a fully
diluted basis (based on the Company's good faith determination of the
likely number of shares of Parent Common Stock to be outstanding at the
Effective Time taking into consideration the most recent financial
statements filed with the Securities and Exchange Commission (the "SEC") by
the Company, PNM and Manzano and the Company's good faith estimate of the
Adjustment Shares to be issued pursuant to Section 3.2(b)) and (y) the
aggregate amount of cash paid by Westar to the Company pursuant to this
subsection (B) shall not exceed $375,000,000. The Convertible Preference
Shares may, but are not required to, be converted into shares of Company
Common Stock by the holder thereof on or prior to the Effective Time and,
to the extent so converted, shall be included in the calculation set forth
in Section 3.2(b)(ii)(A); or
(C) consideration for the repurchase of shares of Westar Common Stock
at a price based on the average (rounded to the nearest thousandth, or if
there shall not be a nearest thousandth, the next higher thousandth) of the
volume weighted averages (rounded to the nearest thousandth, or if there
shall not be a nearest thousandth, the next higher thousandth) of the
trading price of Westar Common Stock on the New York Stock Exchange as
reported by Bloomberg Financial Markets, or if not reported thereby,
another reputable source, in the period of 20 consecutive Trading Days
ending on the close of business on the Business Day immediately preceding
the date of purchase or the initial exercise price for rights to purchase
Westar Common Stock, whichever is higher; provided that Westar may not
redeem its Common Stock pursuant hereto unless the Westar Common Stock is
listed for trading on the New York Stock Exchange or other national
securities exchange; or
(D) an increase in the amount of the intercompany receivable owed by
the Company to Westar.
As used herein, the term "Trading Day" means a day on which the New York
Stock Exchange is open for trading. As used herein, the term "Additional
Cash" means cash other than cash paid by Westar or any Split-Off Subsidiary
to the Company pursuant to (i) any of the Company Contracts and other
arrangements specified in Section 5.1(u) of the Company Disclosure Letter
and (ii) the Company's tax sharing and allocation policy (Company
Accounting Manual Section No. 6.90) as in effect on the date hereof.
(ii) At any time between the date hereof and the Cut Off Date, Westar
may convert any amount of the intercompany receivable into any of the
securities listed in subsections (i)(A), (B) or (C) hereto; provided that
any remaining outstanding balance of the intercompany receivable shall be
so converted at the Effective Time, in each case consistent with the terms
of subsections (i)(A), (B) or (C), with Westar providing written notice to
the Company of its choice of conversion options on or prior to the Cut Off
Date.
(iii) The Company may pay cash to Westar, either as an equity
contribution or a reduction in the amount of the intercompany receivable
(but not below zero) in an amount not to exceed the limitation set forth in
Section 6.7(g) of the Company's $600 million Credit Agreement dated June
28, 2000, as in effect on the date hereof; provided that any cash payments
pursuant to (i) any of the Company contracts and other arrangements
specified in Section 5.1(u) of the Company Disclosure Letter and (ii) the
Company's tax sharing and allocation policy (Company Accounting Manual
Section No. 6.90) as in effect on the date hereof shall not be adjustments
to the Merger Consideration.
(iv) The maximum aggregate value of Company Common Stock and Company
Preference Shares purchased by Westar pursuant to this Section 3.2(a),
including without limitation as a result of the conversion of the existing
intercompany receivable, shall not exceed $641,000,000.
(b) Closing Consideration.
At the Effective Time, as a result of the Split-Off and Merger and without
any action on the part of the holder of any capital stock of the Company:
(i) The Split-Off Portion of each share of Company Common Stock issued
and outstanding immediately prior to the Effective Time (except for shares
of Company Common Stock owned by Parent, Merger Sub-1, Merger Sub-2 or any
other direct or indirect subsidiary of Parent or shares of Company Common
Stock that are owned by the Company or any direct or indirect subsidiary of
the Company but excluding any shares of Company Common Stock issued to and
owned directly or indirectly by Westar, and in each case not held on behalf
of third parties (each, an "Excluded Share" and collectively, "Excluded
Shares")), shall be exchanged for a number of shares of Westar Common Stock
equal to the Split-Off Exchange Ratio (the "Split-Off Consideration"). The
"Split-Off Exchange Ratio" shall be equal to the number of shares of Westar
Common Stock issued to and owned by the Company divided by the number of
shares of Company Common Stock issued and outstanding (other than the
Excluded Shares), in each case at the Effective Time.
(ii) (A) Subject to the provisions hereof, the aggregate number of
shares of Parent Common Stock to be issued in the Merger shall be
55,000,000 (the "Base Shares") plus the Adjustment Shares (as defined
below) (the "Aggregate Share Number").
The "Adjustment Shares" shall be determined by dividing (A) the
difference (which may be a positive or a negative number) between (x) the
sum of: (i) the amount of any proceeds (net of expenses relating to such
sale) from the sale of Westar securities received by the Company from the
date hereof through the Cut Off Date (excluding the amount of any such
proceeds received by Westar directly and transferred to the Company
pursuant to clause (iii) or (v) below); (ii) for each regular quarterly
record date for payment of dividends on shares of Company Common Stock
between the date hereof and the Closing Date, an amount equal to the
product of (A) the number of shares of Company Common Stock outstanding and
entitled to receive a dividend on such record date and (B) the difference
between $0.30 and the amount of the actual cash dividend or dividend
equivalent under the Stock Plans (as in effect on the date hereof except as
such plans may be amended in conformity with this Agreement) declared per
share of Common Stock outstanding on such record date; (iii) the value of
any shares of Company Common Stock issued to Westar pursuant to subsection
(a)(i)(A) or (a)(ii) above based on the consideration paid by Westar for
such shares; (iv) the value of any shares of Company Common Stock issued to
Westar pursuant to the conversion of Convertible Preference Shares issued
to Westar in accordance with subsection (a)(i)(B) or (a)(ii) above based on
the consideration paid by Westar for the Convertible Preference Shares
which were converted into such Company Common Stock (it being understood
that no adjustment shall be made pursuant hereto with respect to any
Convertible Preference Shares that will remain issued and outstanding at or
after the Effective Time); (v) the value of any shares of Westar Common
Stock repurchased by Westar in accordance with subsection (a)(i)(C) or
(a)(ii) above based on the purchase price paid by Westar for such shares;
(vi) the amount of cash received as consideration for shares of Company
Common Stock issued by the Company or the cash value of any compensation
paid to employees of the Company in the form of shares of Company Common
Stock, as the case may be, between the date hereof and the Cut Off Date
pursuant to the Company's Direct Stock Purchase Plan and the Stock Plans
(as defined in Section 5.1(b)); and (vii) the amount of any cash (or other
consideration pursuant to a cashless exercise) received from the exercise
of outstanding options (including pursuant to cashless exercises) to
purchase shares of Company Common Stock between the date hereof and the Cut
Off Date, and (y) the sum of (i) the amount of any cash paid by the Company
to Westar as an equity contribution pursuant to subsection (a)(iii) above
and (ii) $234 million, by (B) $27.00. On or prior to the Cut Off Date the
Company shall deliver to Parent a statement showing the adjustment
calculated in accordance with this Section 3.2(b) (the "Adjustment
Calculation"). The Adjustment Calculation shall have sufficient detail to
enable Parent to ascertain whether or not the adjustment proposed by the
Company was made in conformity with the provisions of this Agreement.
(B) Parent may dispute the Adjustment Calculation provided by the
Company by providing notice in writing to the Company within five Business
Days of receipt of the Adjustment Calculation. If Parent and the Company
are unable to reach resolution of any differences with respect to the
Adjustment Calculation within ten Business Days of receipt of Parent's
written notice of dispute to the Company, Parent and the Company shall
submit the amounts remaining in dispute to one of the five largest
nationally recognized independent auditing firms selected by the Company
but not to include the auditing firm who prepared the most recent audited
financial statements for Parent or the Company (the "Neutral Auditor"). The
Neutral Auditor shall --------------- be instructed to determine and report
to the parties, within 20 Business Days after such submission, upon such
remaining disputed amounts, and such report shall be final, binding and
conclusive on the parties hereto with respect to the amounts disputed. The
fees and disbursements of the Neutral Auditor shall be shared equally by
Parent and the Company.
(iii) The Merger Portion of each share of the Company Common Stock
issued and outstanding immediately prior to the Effective Time (other than
the Excluded Shares) shall be converted into, and become exchangeable for a
number of shares of common stock, par value $0.001 per share of Parent (the
"Parent Common Stock") equal to the Exchange Ratio (the "Merger
Consideration" and together with the Split-Off Consideration, the "Closing
Consideration"). The "Exchange Ratio" shall be equal to the Aggregate Share
Number divided by the number of outstanding shares of Company Common Stock
at the Effective Time (other than the Excluded Shares).
(iv) Each Excluded Share shall, by virtue of the Split-Off and Merger
and without any action on the part of the holder thereof, cease to be
outstanding, shall be cancelled and retired without payment of any
consideration therefor and shall cease to exist.
(v) At the Effective Time, all shares of Company Common Stock shall no
longer be outstanding and shall be cancelled and retired and shall cease to
exist, and each certificate (a "Certificate") formerly representing any
such shares of Company Common Stock (other than Excluded Shares) shall
thereafter represent only the right to receive the Closing Consideration
and the right, if any, to receive pursuant to Section 3.4(e) cash in lieu
of fractional shares into which such shares of Company Common Stock have
been converted pursuant to this Section 3.2(b) and any distribution or
dividend pursuant to Section 3.4(c).
(vi) Each issued and outstanding Convertible Preference Share shall be
converted into one share of convertible preferred stock of Parent having
the terms set forth on Exhibit C hereto (the "Parent Convertible Shares").
(c) Second Merger Consideration.
(i) Each share of common stock, par value $0.001 per share of Manzano
(the "Manzano Common Stock") issued and outstanding prior to the Effective
Time (excluding shares owned by Parent, PNM, Manzano or any of their direct
or indirect subsidiaries or by the Company or any Split-Off Subsidiary or
any other direct or indirect subsidiaries, in each case not held on behalf
of third parties, each a "Manzano Excluded Share" and collectively (the
"Manzano Excluded Shares")) shall be converted into, and exchangeable for,
one share of Parent Common Stock (the "Manzano Merger Consideration").
(ii) At the Effective Time, all shares of Manzano Common Stock shall
no longer be outstanding and shall be cancelled and retired and shall cease
to exist, and each certificate (a "Manzano Certificate") formerly
representing any such shares of Manzano Common Stock (other than Manzano
Excluded Shares) shall thereafter represent only the right to receive
shares of Parent Common Stock pursuant to subsection (i) above and the
right, if any, to receive pursuant to Section 3.4(e) cash in lieu of
fractional shares into which such shares of Manzano Common Stock have been
converted pursuant to this Section 3.2(c) and any distribution or dividend
pursuant to Section 3.4(c).
(iii) Each Manzano Excluded Share shall, by virtue of the Second
Merger and without any action on the part of the holder thereof, cease to
be outstanding, shall be cancelled and retired without payment of any
consideration therefor and shall cease to exist.
(d) Merger Sub-1.
At the Effective Time, each share of Common Stock, no par value, of
Merger Sub-1 issued and outstanding immediately prior to the Effective Time
shall be converted into one share of common stock of the Surviving
Corporation and shall constitute the only shares of capital stock of the
Surviving Corporation.
(e) Merger Sub-2.
At the Effective Time, each share of Common Stock, no par value, of
Merger Sub-2 issued and outstanding immediately prior to the Effective Time
shall be converted into one share of Manzano Common Stock and shall
constitute the only shares of capital stock of Manzano.
3.3. Exchange of Certificates Exchanged in the Split-Off.
(a) At the Effective Time, the Company shall deposit with the Exchange
Agent (as defined in Section 3.4 below) a stock certificate or certificates,
endorsed in blank by the Company, representing the shares of Westar Common Stock
owned by the Company.
(b) Following surrender of any Certificate formerly representing shares of
Company Common Stock in accordance with Section 3.4(b), there shall be issued to
the holder thereof, the Split-Off Consideration to which such holder is entitled
pursuant to the Split-Off.
(c) Holders of record at the Effective Time of unsurrendered Certificates
exchanged in the Split-Off shall be entitled to vote after the Effective Time at
any meeting of Westar shareholders the number of whole shares of Westar Common
Stock represented by such Certificates, regardless of whether such holders have
exchanged their Certificates.
3.4. Exchange of Certificates in the Merger.
(a) Exchange Agent.
At the Effective Time, Parent shall deposit, or shall cause to be
deposited, with an exchange agent (the "Exchange Agent"), selected by Parent
with the Company's prior approval, which shall not be unreasonably withheld, for
the benefit of the holders of shares of Company Common Stock, certificates
representing the shares of Parent Common Stock to be issued in the Merger
pursuant to Section 3.2 in exchange for outstanding shares of the Company Common
Stock (such shares of Parent Common Stock and shares of Westar Common Stock
deposited pursuant to Section 3.3, together with any dividends or distributions
with respect thereto with a record date after the Effective Time and any cash
payable in lieu of any fractional shares of Parent Common Stock or Westar Common
Stock, being hereinafter referred to as the "Exchange Fund"). At the Effective
Time, Parent shall also deposit with the Exchange Agent, to be held as part of
the Exchange Fund, certificates representing shares of Parent Common Stock to be
issued in the Second Merger in exchange for outstanding shares of Manzano Common
Stock, together with any dividends or distributions with respect thereto with a
record date after the Effective Time.
(b) Exchange Procedures.
As soon as reasonably practicable after the Effective Time, but in no event
later than three Business Days after the Effective Time, the Surviving
Corporation and Manzano shall cause the Exchange Agent to mail to each holder of
record of shares of Company Common Stock and Manzano Common Stock at the
Effective Time (other than holders of Excluded Shares) (i) a letter of
transmittal specifying that delivery of the Certificates or the Manzano
Certificates, as the case may be, shall be effected, and risk of loss and title
to the Certificates or the Manzano Certificates, as the case may be, shall pass,
only upon delivery of the Certificates or the Manzano Certificates, as the case
may be, (or affidavits of loss in lieu thereof) to the Exchange Agent, such
letter of transmittal to be in such form and have such other provisions as
Parent and the Company may reasonably agree, and (ii) instructions for use in
effecting the surrender of the Certificates or the Manzano Certificates, as the
case may be, in exchange for (A) Closing Consideration, in the case of the
Split-Off and Merger, or Manzano Merger Consideration, in the case of the Second
Merger and (B) any unpaid dividends and other distributions and cash in lieu of
fractional shares to be paid pursuant to this Agreement (such instructions shall
include instructions for the payment of the Closing Consideration, in the case
of the Split-Off and Merger, or, Manzano Merger Consideration, in the case of
the Second Merger, cash in lieu of fractional shares, and dividends or other
distributions to a Person other than the Person in whose name the surrendered
Certificate, or Manzano Certificate, as the case may be, is registered on the
transfer books of the Company or Manzano, as the case may be, subject to the
receipt of appropriate documentation for such transfer). Upon surrender of a
Certificate, or Manzano Certificate, as the case may be, (or evidence of loss in
lieu thereof) for cancellation to the Exchange Agent together with such letter
of transmittal, duly executed in accordance with the provisions of this Section
3.4(b), the holder of such Certificate, or Manzano Certificate, as the case may
be, shall be entitled to receive in exchange therefor (x) Merger Consideration,
in the case of the Merger, or, Manzano Merger Consideration, in the case of the
Second Merger, in each case that such holder is entitled to receive pursuant to
this Article III, and (y) a check in the amount (after giving effect to any
required tax withholdings) of (A) any cash in lieu of fractional shares plus (B)
any unpaid non-stock dividends and any other dividends or other distributions
that such holder has the right to receive pursuant to the provisions of this
Article III, and the Certificate, or Manzano Certificate, as the case may be, so
surrendered shall forthwith be cancelled. No interest will be paid or accrued on
any amount payable upon due surrender of the Certificates, or Manzano
Certificates, as the case may be. In the event of a transfer of ownership of
shares of Company Common Stock or Manzano Common Stock that is not registered in
the transfer records of the Company or Manzano, respectively, payment may be
issued to such a transferee if the Certificate, or Manzano Certificate, as the
case may be, formerly representing such shares of Company Common Stock or
Manzano Common Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and the person
requesting such issuance pays any transfer or other taxes required by reason of
such payment to a person other than the registered holder of such Certificate,
or Manzano Certificate, as the case may be, or establishes to the satisfaction
of Parent and the Company that such tax has been paid or is not applicable.
For the purposes of this Agreement, the term "person" shall mean any
individual, corporation (including not-for-profit corporations), general or
limited partnership, limited liability company, joint venture, estate, trust,
association, organization, Governmental Entity or other entity of any kind or
nature.
(c) Distributions with Respect to Unexchanged Shares; Voting.
(i) All shares of Parent Common Stock to be issued pursuant to the Mergers
shall be deemed issued and outstanding as of the Effective Time and whenever a
dividend or other distribution is declared by Parent in respect of the Parent
Common Stock, the record date for which is at or after the Effective Time, that
declaration shall include dividends or other distributions in respect of all
shares of Parent Common Stock issuable pursuant to this Agreement. No dividends
or other distributions in respect of the Parent Common Stock shall be paid to
any holder of any unsurrendered Certificate, or Manzano Certificate, as the case
may be, until such Certificate, or Manzano Certificate, as the case may be, is
surrendered for exchange in accordance with this Article IV. Following surrender
of any Certificate, or Manzano Certificate, as the case may be, there shall be
issued and/or paid to the holder of the certificates representing whole shares
of Parent Common Stock issued in exchange therefor, without interest, (A) at the
time of such surrender, the dividends and other distributions with a record date
after the Effective Time theretofore payable with respect to such whole shares
of Parent Common Stock and not paid with respect to such shares and (B) at the
appropriate payment date, the dividends and other distributions payable with
respect to such whole shares of Parent Common Stock with a record date after the
Effective Time but with a payment date subsequent to surrender.
(ii) Holders of record at the Effective Time of unsurrendered Certificates
shall be entitled to vote after the Effective Time at any meeting of Parent
shareholders the number of whole shares of Parent Common Stock represented by
such Certificates, regardless of whether such holders have exchanged their
Certificates. Holders of record at the Effective Time of unsurrendered Manzano
Certificates shall be entitled to vote after the Effective Time at any meeting
of Parent shareholders the number of whole shares of Parent Common Stock
represented by such Manzano Certificates, regardless of whether such holders
have exchanged their Manzano Certificates.
(d) Transfers, Etc.
After the Effective Time, there shall be no transfers on the stock transfer
books of the Company or Manzano of shares of Company Common Stock or Manzano
Common Stock that were outstanding immediately prior to the Effective Time.
(e) Fractional Shares.
Notwithstanding any other provision of this Agreement to the contrary and
solely for convenience and not as a separately bargained for consideration, no
fractional shares of Parent Common Stock will be issued and any holder of shares
of Company Common Stock entitled to receive a fractional share of Parent Common
Stock but for this Section 3.4(e) shall be entitled to receive a cash payment in
lieu thereof, as follows. The Exchange Agent will be directed to determine the
number of whole shares and fractional shares of Parent Common Stock issuable to
each holder of record of certificates formerly representing shares of Company
Common Stock as of the Effective Time. Upon the determination by the Exchange
Agent of such number of fractional shares, as soon as practicable after the
Effective Time, the Exchange Agent, acting on behalf of the holders thereof,
shall sell such fractional shares for cash on the open market in each case at
the then prevailing market prices and shall distribute to each holder entitled
thereto, in lieu of any fractional share, without interest, that holder's
ratable share of the proceeds of that sale, after making appropriate deductions
of the amount required, if any, to be withheld for United States income Tax
purposes.
(f) Termination of Exchange Fund.
Any portion of the Exchange Fund relating to the Merger Consideration in
the case of the Merger or the Manzano Merger Consideration, in the case of the
Second Merger that remains unclaimed by the shareholders of the Company or the
shareholders of Manzano for one year after the Effective Time shall be returned
to Parent. At the same time, any portion of the Exchange Fund comprised of
Split-Off Consideration shall be returned to Westar. Any shareholders of the
Company or of Manzano who have not theretofore complied with this Article III
shall thereafter look only to (i) Parent for payment of the Merger Consideration
in the case of the Merger, or Manzano Merger Consideration, in the case of the
Second Merger, and any cash, dividends and other distributions in respect
thereof payable and/or issuable pursuant to Section 3.2 and Section 3.4(c) upon
due surrender of their Certificates, or Manzano Certificates, as the case may
be, (or affidavits of loss in lieu thereof), and (ii) Westar for payment of the
Split-Off Consideration, in each case, without any interest thereon.
Notwithstanding the foregoing, none of Parent, the Surviving Corporation,
Manzano, Westar, the Exchange Agent or any other person shall be liable to any
former holder of shares of Company Common Stock or Manzano Common Stock for any
amount properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(g) Lost, Stolen or Destroyed Certificates.
In the event that any Certificate, or Manzano Certificate, as the case may
be, shall have been lost, stolen or destroyed, upon the making of an affidavit
of that fact by the person claiming such Certificate, or Manzano Certificate, as
the case may be, to be lost, stolen or destroyed and, if required by Parent, the
posting by such person of a bond in customary amount as indemnity against any
claim that may be made against it with respect to such Certificate, or Manzano
Certificates, as the case may be, the Exchange Agent will issue in exchange for
such lost, stolen or destroyed Certificate, or Manzano Certificate, as the case
may be, the Closing Consideration in the case of the Merger and the Split-Off,
or the Manzano Merger Consideration, in the case of the Second Merger, and, if
applicable, any cash payable and any unpaid dividends or other distributions
deliverable in respect thereof pursuant to Section 3.4(c) upon due surrender of
the shares of the Company Common Stock or Manzano Common Stock represented by
such Certificate, or Manzano Certificate, as the case may be, pursuant to this
Agreement.
(h) Affiliates.
Notwithstanding anything herein to the contrary, Certificates surrendered
by any "affiliate" (as determined pursuant to Section 7.6) of the Company shall
not be exchanged until Parent shall have received a written agreement from such
person as provided for in Section 7.6 hereof.
3.5. Dissenters' Rights.
(a) In the event that appraisal rights are available under Section 17-6712
of the KGCC to holders of shares of the Company Common Stock at the Effective
Time, any issued and outstanding shares of the Company Common Stock held by a
person who objects to the Transaction and complies with all applicable
provisions of the KGCC concerning the right of such person to dissent from the
Transaction and demands appraisal of shares ("Company Dissenting Holder") shall
from and after the Effective Time represent only the right to receive such
consideration as may be determined to be due to such Company Dissenting Holder
with respect to such shares pursuant to the KGCC and shall not be converted as
described in Section 3.2(b); provided, however, that shares outstanding
immediately prior to the Effective Time and held by a Company Dissenting Holder
who shall withdraw the demand for appraisal or lose the right of appraisal of
such shares pursuant to the KGCC shall be deemed to be converted, as of the
Effective Time, into the right to receive the Closing Consideration.
(b) Any issued and outstanding shares of Manzano Common Stock held by a
person who objects to the Second Merger and complies with all applicable
provisions of the NMBCA concerning the right of such person to dissent from the
Second Merger and demands appraisal of such shares ("Manzano Dissenting Holder")
shall from and after the Effective Time represent only the right to receive such
consideration as may be determined to be due to such Manzano Dissenting Holder
with respect to such shares pursuant to the NMBCA and shall not be converted as
described in Section 3.2(c); provided, however, that shares outstanding
immediately prior to the Effective Time and held by a Manzano Dissenting Holder
who shall withdraw the demand for appraisal, or lose the right of appraisal of
such shares pursuant to the NMBCA shall be deemed to be converted, as of the
Effective Time, into the right to receive the Manzano Merger Consideration.
3.6. Adjustments to Prevent Dilution.
In the event that the Company changes the number of shares of Company
Common Stock or securities convertible or exchangeable into or exercisable for
shares of Company Common Stock (other than the issuance of Convertible
Preference Shares), Manzano changes the number of shares of Manzano Common Stock
or securities convertible or exchangeable for shares of Manzano Common Stock, or
Parent changes the number of shares of Parent Common Stock or securities
convertible or exchangeable into or exercisable for shares of Parent Common
Stock, in each case issued and outstanding prior to the Effective Time as a
result of a reclassification, stock split (including a reverse stock split),
stock dividend or distribution, recapitalization, merger, subdivision, issuer
tender or exchange offer, or other similar transaction, the Closing
Consideration, the Exchange Ratio and the Split-Off Exchange Ratio shall be
equitably adjusted to reflect such change in the case of the Merger and the
Split-Off, and the number of shares of Parent Common Stock into which each share
of Manzano Common Stock shall be converted shall be equitably adjusted to
reflect such change, in the case of the Second Merger.
3.7. Restructuring of the Mergers.
If for any reason, the Manzano Transition Date can not occur, or the
regulatory approvals required to permit it to occur are likely to materially
delay the Effective Time, then the parties agree to restructure certain of the
transactions contemplated hereby and to exclude Manzano from participation in
the transactions contemplated hereby. In such event, PNM and Parent, in lieu of
the Manzano Exchange and the Second Merger, as provided for herein, shall enter
into an agreement and plan of share exchange (the "PNM Exchange Agreement")
(which agreement shall be substantially the same as the Exchange Agreement with
such changes therein as are appropriate to reflect Parent's status as a Delaware
corporation, except that Article VI of the Exchange Agreement shall be modified
to require all holders to surrender their certificates for cancellation or
cancellation and transfer) pursuant to which (i) the Exchange Agreement would be
terminated and the Manzano Exchange abandoned, (ii) at the Effective Time, each
share of PNM Common Stock would be automatically converted into shares of Parent
Common Stock based on the Manzano Exchange Ratio (the "PNM Exchange") and Parent
would thereby acquire and become the owner and holder of each issued and
outstanding share of PNM Common Stock. In the event the Manzano Transition Date
does not occur prior to the Effective Time, PNM shall retain all of its rights,
obligations, interests and liabilities under this Agreement. The Parties
recognize that there may be other circumstances in which it may be preferable to
effectuate a business combination between Parent, PNM and the Company by means
of an alternative structure to the Transaction. Accordingly, if, prior to
satisfaction of the conditions contained in Article VIII hereto, either party
proposes the adoption of an alternative structure that will not delay the
Effective Time and that otherwise substantially preserves for Parent, PNM, the
Company and the holders of the Company Common Stock the economic and Tax
benefits of the Transactions, then the parties shall make good faith to effect a
business combination among themselves by means of a mutually agreed upon
structure other than the Transactions that so preserves such benefits; provided
that if the Company Requisite Vote or the Parent Requisite Vote has already been
obtained, such alternative business combination does not require any additional
approval of the shareholders of the Company under the KGCC or other applicable
law or the shareholders of PNM under the NMBCA or other applicable law. In the
event that the parties adopt a restructured transaction, the Agreement shall be
revised to reflect such transaction as determined necessary by the parties
hereto and prior to closing any such restructured transaction, all material
third party and Governmental Authority declarations, filings, registrations,
notices, authorizations, consents or approvals necessary for the effectuation of
such alternative business combination shall have been obtained and all other
conditions to the parties' obligations to consummate the Transaction and other
transactions contemplated hereby, as applied to such alternative business
combination, shall have been satisfied or waived.
3.8. Manzano Guaranty; Etc.
Effective from the Manzano Transition Date, (i) Manzano unconditionally
guarantees the obligations of Parent under this Agreement but only through the
Effective Time, it being the intent of the parties that such obligations shall
be obligations solely of Parent from and after the Effective Time and (ii)
Manzano assumes and agrees to perform all obligations of PNM hereunder and shall
succeed to all rights, interests and liabilities of PNM hereunder and be
substituted for PNM for all purposes of this Agreement as if originally named
herein, in each case without necessity for further act by any party hereto.
Manzano agrees promptly to execute a counterpart of this Agreement upon PNM
becoming its Subsidiary. PNM agrees to give written notice to all other parties
hereto of the occurrence of the Manzano Transition Date.
Article IV.
The Closing
4.1. Closing.
The closing of the Transaction (the "Closing") shall take place (i) at the
offices of LeBoeuf, Lamb, Greene & MacRae, L.L.P., 125 West 55th Street, New
York, New York at 10:00 A.M. on the twentieth Business Day after the last to be
satisfied or waived of the conditions set forth in Article VIII (other than
those conditions that by their nature are to be satisfied at the Closing, but
subject to the satisfaction or waiver of those conditions) shall be satisfied or
waived (by the party entitled to the benefit of such condition) in accordance
with this Agreement or (ii) at such other place and time and/or on such other
date as the Company and Parent may agree in writing (the "Closing Date");
provided that in the event a dispute resolution process pursuant to Section
3.2(b)(ii)(B) is pending, the Closing Date shall automatically be extended to
two business days following the date of delivery of the report of the Neutral
Auditor. For purposes of this Agreement, the term "Business Day" means a day on
which banks are not required or authorized by law to close in New York City.
Article V.
Representations and Warranties
5.1. Representations and Warranties of the Company.
Except as set forth in the disclosure letter delivered to Parent by the
Company on or prior to entering into this Agreement (the "Company Disclosure
Letter") or the Company Reports, the Company hereby represents and warrants to
Parent, PNM, Merger Sub-1 and Merger Sub-2 that:
(a) Organization, Good Standing and Qualification.
Each of the Company and its Utility Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of organization and has all requisite corporate or
similar power and authority to own and operate its properties and assets and to
carry on its business as presently conducted in all material respects and is
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction where the ownership or operation of its properties or conduct
of its business requires such qualification, except where the failure to be so
qualified as a foreign corporation or be in good standing would not be
reasonably likely to have, either individually or in the aggregate, a Company
Material Adverse Effect. Wolf Creek Nuclear Operating Corporation is a
corporation in good standing under the laws of the state of Kansas. The Company
has made available to Parent complete and correct copies of the Company's and
each of its Utility Subsidiaries' articles of incorporation and by-laws (or
comparable governing instruments), as amended to date. The Company's and its
Utility Subsidiaries' articles of incorporation and by-laws (or comparable
governing instruments) so delivered are in full force and effect. Section 5.1(a)
of the Company Disclosure Letter sets forth a list, as of the date hereof, of
all of the Subsidiaries of the Company, the jurisdictions under which such
Subsidiaries were incorporated, the percent of the equity interest therein owned
by the Company and each Subsidiary of the Company, as applicable, whether such
Subsidiary has active business operations, and specifies each Subsidiary that as
of the date hereof, (i) (A) owns or operates any portion of the Company's
electric utility business as reflected in the unconsolidated balance sheet
included in Section 5.1(e)(ii) of the Company Disclosure Letter and (B) is to
remain a Subsidiary of the Company after giving effect to the Split-Off or (ii)
otherwise holds the Company's investments in affordable housing tax credits as
shown in the consolidated financial statements of the Company and its
Subsidiaries included in the Company Reports (the Subsidiaries so specified in
the list being herein collectively called the "Utility Subsidiaries"). Section
5.1(a) of the Company Disclosure Letter specifies the status of each Utility
Subsidiary under Section 2(a)(5), 2(a)(7), 2(a)(11), 32(a)(1) or 33(a)(3) of the
Public Utility Holding Company Act of 1935, as amended (the "1935 Act") and
Section 201(e) of the Federal Power Act (the "Power Act"). No Subsidiary which
is a Utility Subsidiary will be a Westar Subsidiary.
As used in this Agreement, the term "Subsidiary" means, with respect to the
Company, PNM, Parent, Merger Sub-1 or Merger Sub-2, as the case may be, any
entity, other than a Westar Subsidiary, whether incorporated or unincorporated,
of which at least a majority of the securities or ownership interests having by
their terms ordinary voting power to elect a majority of the board of directors
or other persons performing similar functions is directly or indirectly owned or
controlled by such party or by one or more of its respective Subsidiaries or by
such party and any one or more of its respective Subsidiaries.
As used in this Agreement, the term "Significant Subsidiary" means a
"significant subsidiary" (other than, with respect to the Company, a Westar
Subsidiary) within the meaning of Rule 1.02(w) of Regulation S-X promulgated
pursuant to the Securities Exchange Act of 1934, as amended ("Exchange Act").
As used in this Agreement, the term "Company Material Adverse Effect" means
a material adverse effect on the financial condition, business, assets or
results of operations of the Company and its Subsidiaries taken as a whole;
provided, however, that any such effect resulting from or arising out of (i) any
change in law, rule, regulation or generally accepted accounting principles
("GAAP") or interpretations thereof, (ii) economic or business conditions in the
United States generally, (iii) conditions generally affecting the electric
utility industry or (iv) the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby or by the Split-Off
Agreements shall not be considered when determining if a Company Material
Adverse Effect has occurred. As used in this Agreement, the term " " or any
similar formulation of knowledge shall mean the actual knowledge of, with
respect to the Company, those persons set forth in Section 5.1(a) of the Company
Disclosure Letter and, with respect to Parent and PNM, those persons set forth
in Section 5.2 of the Parent Disclosure Letter. Notwithstanding the foregoing,
the parties hereto acknowledge and agree that in no event shall any matter that
is or would be a Westar Group Liability (as such term is defined in the
Allocation and Separation Agreement) constitute or give rise to, in whole or in
part, a Company Material Adverse Effect; provided that, such matter does not
also constitute or result in a Western Group Liability (as such term is defined
in the Allocation and Separation Agreement).
(b) Capital Structure.
The authorized capital stock of the Company consists of (x) 150,000,000
shares of Company Common Stock, of which 69,980,902 shares were outstanding as
of the close of business on November 6, 2000, (y) 6,600,000 shares of preferred
stock, (the "Preferred Shares") of which 138,576 shares of 4 1/2% series were
outstanding, 60,000 shares of 4 1/4% series were outstanding, and 50,000 shares
of 5% series were outstanding, in each case, as of November 6, 2000, and (z)
4,000,000 shares of preference stock, none of which are outstanding as of
November 6, 2000. All of the issued and outstanding shares of capital stock of
the Company have been duly authorized and are validly issued, fully paid and
nonassessable. Each of the outstanding shares of capital stock or other
securities of each of the Company's Subsidiaries is duly authorized, validly
issued, fully paid and nonassessable and owned by the Company or a direct or
indirect wholly owned Subsidiary of the Company, free and clear of any lien,
pledge, security interest, claim or other encumbrance. Other than pursuant to
the Company Long Term Incentive and Share Award Plan, the Executive Stock for
Compensation Program, the Employee's Stock Purchase Plan and the 401(k) Plan
(collectively, the "Stock Plans") and pursuant to the Company Direct Stock
Purchase Plan, there are no preemptive or other outstanding rights, options,
warrants, conversion rights, stock appreciation rights, redemption rights,
repurchase rights, agreements, arrangements or commitments to issue or to sell
any shares of capital stock or other securities of the Company or any of its
Subsidiaries or any securities or obligations convertible or exchangeable into
or exercisable for, or giving any Person a right to subscribe for or acquire,
any securities of the Company or any of its Subsidiaries, and no securities or
obligations evidencing such rights are authorized, issued or outstanding. The
Company does not have outstanding any bonds, debentures, notes or other
obligations the holders of which have the right to vote (or convertible into or
exercisable for securities having the right to vote) with the shareholders of
the Company on any matter ("Voting Debt").
(c) Corporate Authority.
(i) The Company has all requisite corporate power and authority and
has taken all corporate action necessary in order to execute, deliver and
perform its obligations under this Agreement and to consummate, on the
terms and subject to the conditions of this Agreement, the transactions
contemplated hereby, subject only to receipt of the Company Requisite Vote
and the Company Required Statutory Approvals. This Agreement is a valid and
legally binding agreement of the Company enforceable against such party in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles (the "Bankruptcy and Equity Exception").
(ii) As of the date hereof the Board of Directors of the Company has
approved and adopted this Agreement and the Merger, the Split-Off and other
transactions contemplated hereby and, subject to its fiduciary duties, has
resolved to recommend that the shareholders of the Company approve this
Agreement and the transactions contemplated hereby.
(d) Governmental Filings; No Violations.
(i) Other than any reports, filings, registrations, approvals and/or
notices (A) required to be made pursuant to Section 1.4 (B) under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), the Securities Act of 1933, as amended (the "Securities Act"), and the
Exchange Act, (C) with, to or of the Federal Energy Regulatory Commission (the
"FERC"), (D) with, to or of the Kansas Corporation Commission; (E) with, to or
of the SEC under the 1935 Act; (F) to or with the Nuclear Regulatory Commission,
(G) to or with the Federal Communications Commission, (H) to comply with state
securities or "blue-sky" laws; and (I) to comply with the rules and regulations
of the New York Stock Exchange, Inc. (the "NYSE") (items B through I, the
"Company Required Statutory Approvals"), no notices, reports, registrations or
other filings are required to be made by the Company with, nor are any consents,
registrations, approvals, permits or authorizations required to be obtained by
the Company from, any governmental or regulatory authority, agency, commission,
body or other governmental entity (each a "Governmental Entity"), in connection
with the execution and delivery of this Agreement and the consummation by the
Company of the transactions contemplated hereby, except for those that the
failure to make or obtain are not, individually or in the aggregate, reasonably
likely to have a Company Material Adverse Effect or prevent, materially delay or
materially impair the ability of the Company to consummate the transactions
contemplated by this Agreement.
(ii) The execution, delivery and performance of this Agreement and the
consummation by the Company of the transactions contemplated hereby will not
constitute or result in (A) a breach or violation of, or a default under, either
the articles of incorporation of the Company or by-laws of the Company or the
comparable governing instruments of any Company Utility Subsidiary, (B) a breach
or violation of, or a default under, the acceleration of any obligations, the
loss of any right or benefit, or the creation of a lien, pledge, security
interest or other encumbrance on the assets of the Company or any Company
Utility Subsidiary (with or without notice, lapse of time or both) pursuant to,
any agreement, lease, contract, note, mortgage, indenture, arrangement or other
obligation not otherwise terminable by the other party thereto on 90 days' or
less notice ("Contracts") binding upon the Company or any Company Utility
Subsidiary (the "Company Contracts") or any Law (as defined in Section 5.1(i))
or governmental or non-governmental permit or license to which the Company or
any Company Utility Subsidiary is subject or (C) any change in the rights or
obligations of any party under any of the Company Contracts, except, in the case
of clause (B) or (C) above, for any breach, violation, default, acceleration,
creation or change that would not, individually or in the aggregate, be
reasonably likely to have a Company Material Adverse Effect or prevent, or
materially impair the ability of the Company to consummate the transactions
contemplated by this Agreement.
(e) Company Reports; Financial Statements.
(i) The filings required to be made (A) by the Company and its Subsidiaries
since January 1, 1999 under the Securities Act; the Exchange Act; the 1935 Act;
the Federal Power Act; and applicable state public utility laws and regulations
have been filed with the SEC, FERC, or the appropriate state public utilities
commission, as the case may be, and (B) by Wolf Creek Nuclear Operating
Corporation since January 1, 1999 under the Atomic Energy Act of 1954, as
amended, to the knowledge of the Company, have been filed with the NRC,
including all forms, statements, reports, agreements (oral or written) and all
documents, exhibits, amendments and supplements appertaining thereto, and
complied, as of their respective dates, in all material respects with all
applicable requirements of the appropriate statutes and the rules and
regulations thereunder, except for such filings the failure of which to have
been made or so to comply would not result in a Company Material Adverse Effect.
The Company has made available to Parent each registration statement, report,
proxy statement or information statement filed by it with the SEC (collectively,
including any amendments of any such reports, the "Company Reports") pursuant to
the Securities Act or the Exchange Act since January 1, 1999, and prior to the
date hereof, including (i) the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999 and (ii) the Company's Quarterly Reports on
Form 10-Q for the quarterly periods ended March 31, 2000 and June 30, 2000, each
in the form (including exhibits, annexes and any amendments thereto) promulgated
by the SEC under the Securities Act or the Exchange Act. None of the Company
Reports (in the case of Company Reports filed pursuant to the Securities Act),
as of their effective dates, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances under which
they were made, not misleading and none of the Company Reports (in the case of
Company Reports filed pursuant to the Exchange Act) as of the respective dates
filed with the SEC or first mailed to shareholders, as applicable, contained any
statement which, at the time and in the light of the circumstances under which
it was made, was false or misleading with respect to any material fact, or
omitted 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 consolidated financial statements of the Company and its
Subsidiaries included in such Company Reports comply as to form in all material
respects with the applicable rules and regulations of the SEC with respect
thereto. Each of the consolidated balance sheets included in or incorporated by
reference into the Company Reports (including the related notes and schedules)
presents fairly, in all material respects, the financial position of the Company
and its Subsidiaries as of its date and each of the consolidated statements of
income and consolidated statements of cash flow included in or incorporated by
reference into the Company Reports (including any related notes and schedules)
fairly presents in all material respects the results of operations, retained
earnings and changes in financial position, as the case may be, of the Company
and its Subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to the absence of notes and normal year-end audit
adjustments), in each case in accordance with GAAP consistently applied during
the periods involved, except as may be noted therein.
(ii) Section 5.1(e)(ii) of the Company Disclosure Letter contains the
unaudited pro forma consolidated balance sheet of the Company and its Utility
Subsidiaries as of September 30, 2000, which presents information as if the
Split-Off had occurred (on the terms and subject to the conditions set forth in
the Split-Off Agreements) as of the Audit Date. Such balance sheet is based on,
and should be read in conjunction with, the historical consolidated financial
statements included in the Company Reports. Such balance sheet fairly presents
in all material respects the consolidated financial position of the Company and
its Subsidiaries as of its date, as if the Split-Off had occurred (on the terms
and subject to the conditions set forth in the Split-Off Agreements) on such
date, subject to notes and normal year-end audit adjustments that will not be
material in amount or effect. The accounts reflected in the unaudited pro forma
balance sheet referred to in this subsection have been prepared in accordance
with GAAP on a basis consistent with the historical audited consolidated balance
sheets of the Company and its Subsidiaries (including the Split-Off
Subsidiaries) and were prepared in accordance with the requirements of SEC
Regulation S-X as it relates to pro forma balance sheets.
(f) Absence of Certain Changes.
Since December 31, 1999 (the "Audit Date"), except as expressly
contemplated by this Agreement and the Split-Off Agreements, the Company and its
Subsidiaries taken as a whole have conducted their business only in, and have
not engaged in any material transaction other than according to, the ordinary
and usual course of such business and there has not been (i) any change in the
financial condition, properties, assets, business or results of operations of
the Company and its Subsidiaries that has had or would be reasonably likely to
have a Company Material Adverse Effect; (ii) any declaration, setting aside or
payment of any dividend or other distribution in respect of the capital stock of
the Company or any repurchase, redemption or other acquisition by the Company or
any Subsidiary of any securities of the Company other than regular quarterly
dividends on shares of the Company Common Stock in the ordinary course
(including any periodic increase thereon consistent with past practice); or
(iii) any change by the Company in accounting principles, practices or methods
which is not required or permitted by GAAP. Since the Audit Date and through the
date hereof, except as provided for herein, there has not been any material
increase in the compensation payable or that could become payable by the Company
or any of its Subsidiaries to officers or key employees or any material
amendment of any of the Compensation and Benefit Plans other than increases or
amendments in the ordinary course of business consistent with past practice.
(g) Litigation.
(i) There are no civil, criminal or administrative actions, suits,
claims, hearings, investigations, reviews or proceedings pending or, to the
knowledge of the Company, threatened against the Company or any of its
Utility Subsidiaries, except for those that would not be reasonably likely
to have, either individually or in the aggregate, a Company Material
Adverse Effect.
(ii) To the knowledge of the Company, there are no civil, criminal or
administrative actions, suits, claims, hearings, investigations, reviews or
proceedings pending or threatened against Wolf Creek Nuclear Operating
Corporation, except for those that would not be reasonably likely to have,
either individually or in the aggregate, a Company Material Adverse Effect.
(h) Employee Benefits.
(i) A copy of (i) each bonus, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership,
stock bonus, stock purchase, change in control, retention, restricted
stock, stock option, employment, termination, severance, compensation,
medical, health or other plan, agreement, policy, practice or arrangement
that covers employees or former employees of the Company and its
Subsidiaries ("Employees"), or directors or former directors of the Company
(the "Compensation and Benefit Plans"); and (ii) any trust agreement or
insurance contract forming a part of such Compensation and Benefit Plans
has been made available to Parent prior to the date hereof. Section 5.1(h)
of the Company Disclosure Letter lists all Compensation and Benefit Plans
other than those that, in the aggregate, are not material to the Company
and its Subsidiaries and any Compensation and Benefit Plans containing
"change of control" or similar provisions therein are specifically
identified in Section 5.1(h) of the Company Disclosure Letter.
(ii) All Compensation and Benefit Plans, to the extent subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") are
in substantial compliance with the applicable provisions of ERISA. Each
Compensation and Benefit Plan that is an "employee pension benefit plan"
within the meaning of Section 3(2) of ERISA (a "Company Pension Plan") and
that is intended to be qualified under Section 401(a) of the Code has
received a favorable determination letter from the Internal Revenue Service
(the "IRS"), and nothing has occurred, whether by action or failure to act,
that would cause the loss of such qualification or that would result in
costs to the Company or any of its Subsidiaries under the Internal Revenue
Service's Employee Plans Compliance Resolution System that would be
reasonably likely to have a Company Material Adverse Effect. As of the date
hereof, there is no material pending or to the knowledge of the Company
threatened litigation relating to the Compensation and Benefit Plans.
Neither the Company nor any of its Subsidiaries nor, to the knowledge of
the Company, any other person has engaged in a transaction with respect to
any Compensation and Benefit Plan that, assuming the taxable period of such
transaction expired as of the date hereof, would subject the Company or any
of its Subsidiaries to a material tax or penalty imposed by either Section
4975 of the Code or Section 502(i) of ERISA.
(iii) No liability under Subtitle C or D of Title IV of ERISA has been
or is expected to be incurred by the Company or any of its Subsidiaries
with respect to any ongoing, frozen or terminated "single-employer plan",
within the meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by any of them, or the single-employer plan of any entity which
is considered one employer with the Company under Section 4001 of ERISA or
Section 414 of the Code (a "Company ERISA Affiliate"). The Company and its
Subsidiaries have not incurred and do not expect to incur and would not
expect to incur any withdrawal liability with respect to a multiemployer
plan under Subtitle E of Title IV of ERISA (regardless of whether based on
contributions of a Company ERISA Affiliate) if, as of the date hereof, the
Company or a Company ERISA Affiliate were to engage in a "complete
withdrawal" (as defined in Section 4203 of ERISA) or a "partial withdrawal"
(as defined in Section 4205 of ERISA) from such multiemployer plan. No
notice of a "reportable event", within the meaning of Section 4043 of ERISA
for which the 30-day reporting requirement has not been waived or extended,
other than the extension provided by PBGC Reg. Section 4043.66, has been
required to be filed for any Company Pension Plan or by any Company ERISA
Affiliate within the 12-month period ending on the date hereof.
(iv) All contributions required to be made under the terms of any
Compensation and Benefit Plan as of the date hereof have been timely made
or have been reflected on the most recent consolidated balance sheet filed
or incorporated by reference in the Company Reports and all premium
payments to the Pension Benefit Guaranty Corporation ("PBGC") have been
made when due for such plans. Neither any Company Pension Plan nor any
single-employer plan of a Company ERISA Affiliate has an "accumulated
funding deficiency" (whether or not waived) within the meaning of Section
412 of the Code or Section 302 of ERISA and no Company ERISA Affiliate has
an outstanding funding waiver. Neither the Company nor any of its
Subsidiaries has provided, or is required to provide, security to any
Company Pension Plan or to any single-employer plan of a Company ERISA
Affiliate pursuant to Section 401(a)(29) of the Code.
(v) Neither the Company nor its Subsidiaries have any obligations for,
or liabilities with respect to, retiree health and life benefits under any
Compensation and Benefit Plan, except for benefits required to be provided
under Section 4980B of the Code.
(vi) Notwithstanding anything to the contrary contained in this
Section 5.1(h), the representations and warranties contained in this
Section 5.1(h) shall be deemed to be true and correct unless such failures
to be true and correct are reasonably likely to have a Company Material
Adverse Effect.
(i) Compliance with Laws.
As of the date hereof, the business of the Company and its Subsidiaries,
taken as a whole, is not being conducted in violation of any federal, state,
local or foreign law, statute, ordinance, rule, regulation, judgment, order,
injunction, decree, arbitration award, agency requirement, license or permit of
any Governmental Entity (collectively, "Laws"), except for violations that would
not be reasonably likely to have, either individually or in the aggregate, a
Company Material Adverse Effect or prevent or materially impair the ability of
the Company to consummate the transactions contemplated by this Agreement. As of
the date hereof, no investigation or review by any Governmental Entity with
respect to the Company or any of its Subsidiaries is pending or, to the
knowledge of the Company, threatened, nor has any Governmental Entity indicated
an intention to conduct the same, except for those the outcome of which would
not be reasonably likely to have, either individually or in the aggregate, a
Company Material Adverse Effect or prevent or materially impair the ability of
the Company to consummate the transactions contemplated by this Agreement. The
Company and each of its Utility Subsidiaries each has all permits, licenses,
franchises, variances, exemptions, orders and other governmental authorizations,
consents and approvals from Governmental Entities necessary to conduct its
business as presently conducted, except for those the absence of which would not
be reasonably likely to have, either individually or in the aggregate, a Company
Material Adverse Effect or prevent or materially impair the ability of the
Company to consummate the transactions contemplated by this Agreements.
(j) Takeover Statutes.
Assuming the accuracy of the representation contained in Section 5.2(q), no
business combination, control share, fair price, moratorium or similar
anti-takeover provision (a "Takeover Statute") of the KGCC or any applicable
anti-takeover provision in the certificate of incorporation of the Company or
the bylaws of the Company is applicable to the Transaction or any other
transaction contemplated hereby.
(k) Environmental Matters.
Except for such matters that would not, either individually or in the
aggregate, be reasonably likely to cause a Company Material Adverse Effect: (i)
the Company's operations are in compliance with all applicable Environmental
Laws; (ii) the Company possesses and maintains in effect all environmental and
natural resources permits, licenses, authorizations and approvals required under
applicable Environmental Laws with respect to the business of the Company as
presently conducted; (iii) the Company has not received any written
environmental claim, notice or request for information during the past three
years concerning any violation or alleged violation of any applicable
Environmental Law or concerning any liability under any applicable Environmental
Law; and (iv) there are no material writs, injunctions, decrees, orders or
judgments outstanding, or any actions, suits or proceedings pending relating to
compliance by the Company with any environmental permits, licenses,
authorizations and approvals required under applicable Environmental Laws or
liability of the Company under any applicable Environmental Law.
The representations and warranties in this Section 5.1(k) constitute the
sole representations and warranties of the Company with respect to any
Environmental Law or Hazardous Substance.
As used herein, the term "Environmental Law" means any federal, state or
local laws (including common law), regulations, codes, rules, ordinances,
permits, authorizations, decrees, orders, injunctions or judgments and any
binding administrative or judicial interpretations thereof relating to: (a)
pollution; (b) the protection of the environment (including air, water, soil,
subsurface strata, biota and natural resources) or human health and safety from
exposure to Hazardous Substances; and (c) the regulation of the generation, use,
storage, handling, transportation, treatment, release, remediation or disposal
of Hazardous Substances.
As used herein, the term "Hazardous Substance" means (a) any substances,
mixtures, chemicals, products, materials or wastes that, pursuant to
Environmental Law, are defined by or regulated as or having the characteristics
of "hazardous," "toxic," "pollutant," "contaminant," "flammable," "corrosive,"
"reactive," "explosive" or "radioactive"; or (b) any petroleum, petroleum
products or by-products, friable asbestos or any material or equipment
containing regulated concentrations of polychlorinated biphenyls.
As used in this Section 5.1(k), the "Company" shall mean the
Company and each of its Subsidiaries.
(l) Taxes.
Except as would not have a Company Material Adverse Effect, the Company and
each of its Utility Subsidiaries (i) have duly and timely filed (taking into
account any extension of time within which to file) all Tax Returns (as defined
below) required to be filed by any of them as of the date hereof and all such
filed Tax Returns are complete and accurate in all respects; (ii) (A) have
timely paid all Taxes that are shown as due on such filed Tax Returns, except
with respect to matters contested in good faith and for which adequate reserves
have been established and (B) no penalties or charges are due with respect to
the late filing of any Tax Return required to be filed by or with respect to any
of them on or before the Effective Time; (iii) with respect to any filed Tax
Returns, have not waived any statute of limitations with respect to Taxes or
agreed to any extension of time with respect to a Tax assessment or deficiency;
(iv) as of the date hereof, does not have any deficiency, or any such audits,
examinations, investigations or other proceedings in respect of Taxes or Tax
matters pending or proposed or threatened in writing; and (v) has not been or is
not a party to any Tax sharing agreement or similar arrangement. Except as would
not have a Company Material Adverse Effect when aggregated with the preceding
sentence, the Split-Off will not result in any Member of the Mustang Group (as
defined in the Allocation and Separation Agreement) or their Affiliates
recognizing income or gain pursuant to Treasury Regulation Section 1.1502-13.
"Tax" (and the correlative meaning, "Taxes", "Taxing" and "Taxable") shall
mean (i) any net income, gross income, gross receipts, alternative or add-on
minimum, sales, use, ad valorem, franchise, profits, license, withholding,
payroll, employment, excise, transfer, recording, severance, stamp, occupation,
premium, property, environmental, custom duty, or other tax, governmental fee or
other like assessment or charge of any kind whatsoever, together with any
interest and any penalty, addition to Tax or additional amount imposed by a
Taxing Authority; (ii) any liability of the Company, Westar or any Affiliate of
the Company or Westar (or, in each case, any predecessor or successor in
interest thereto by merger or otherwise), as the case may be, for the payment of
any amounts of the type described in clause (i) for any Taxable period resulting
from the application of Treasury Regulation Section 1.1502-6 or, in the case of
any similar provision applicable under state, local or foreign law; and (iii)
any liability of the Company, Westar or any Affiliate of the Company or Westar
(or, in each case, any predecessor or successor in interest thereto by merger or
otherwise) for the payment of any amounts described in clause (i) as a result of
any express or implied obligation to indemnify any other party.
(m) Labor and Employment Matters.
(i) Labor Relations. Except as would not have a Company Material
Adverse Effect, (A) neither the Company nor any of its Subsidiaries is a
party to any collective bargaining agreement or other labor agreement with
any labor union, labor organization, employee association or similar
organization, nor does the Company or any of its Subsidiaries have
knowledge of any such union, labor organization, employee association or
similar organization that represents or claims to represent any of the
Company's or any of its Subsidiaries' employees or intends to organize any
of the Company's or any its Subsidiaries' employees; (B) there is no labor
strike, dispute, slowdown, stoppage, lockout or other labor dispute
actually pending, nor to the knowledge of the Company or any of its
Subsidiaries, threatened against or affecting the Company or any of its
Subsidiaries; (C) to the knowledge of the Company, neither the Company nor
any of its Subsidiaries is engaged in any unfair labor practices as defined
in the National Labor Relations Act or other applicable law, ordinance or
regulation; nor is there an unfair labor practice charge or complaint
against the Company or any of its Subsidiaries pending or, to the knowledge
of the Company, threatened before the National Labor Relations Board or any
similar state agency; and (D) there is no grievance pending, nor, to the
knowledge of the Company, is there any grievance threatened arising out of
any collective bargaining agreement or other grievance procedure.
(ii) Employment. Except as would not have a Company Material Adverse
Effect, (A) neither the Company nor any of its Subsidiaries is in material
violation of any applicable laws respecting employment and employment
practices, terms and conditions of employment, wages, hours of work and
occupational safety and health; (B) to the knowledge of the Company, there
are no charges with respect to or relating to the Company or any of its
Subsidiaries pending before the Equal Employment Opportunity Commission or
any other agency responsible for the prevention of unlawful employment
practices; (C) to the knowledge of the Company, neither the Company nor any
of its Subsidiaries received notice of the intent of any federal, state or
local agency responsible for the enforcement of labor or employment laws to
conduct an investigation with respect to or relating to the Company or any
of its Subsidiaries and no such investigation is in progress; and (D) to
the knowledge of the Company, there are no complaints, lawsuits or other
proceedings pending or threatened in any forum by or on behalf of any
present or former employee of the Company or any of its Subsidiaries, any
applicant for employment or classes of the foregoing alleging breach of any
express or implied contract for employment, any law or regulation governing
employment or the termination thereof or other discriminatory, wrongful or
tortuous conduct in connection with the employment relationship.
(iii) WARN Act. The Company is presently in compliance with its
notification obligations with respect to the Company's employees pursuant
to the Worker Adjustment and Retraining Notification (WARN) Act and will
conduct any plant closing or mass layoff prior to the date of Closing in
accordance with WARN.
(n) Intellectual Property.
(i) After giving effect to the Split-Off, the Company or its Utility
Subsidiaries will own, or will be licensed or otherwise possess sufficient
legally enforceable rights to use, all patents, trademarks, trade names,
service marks, copyrights, technology, know-how, computer software programs
or applications, databases and tangible or intangible proprietary
information or materials that are currently used in its and its
Subsidiaries' businesses (collectively, "Company Intellectual Property
Rights"), except for any such failures to own, be licensed or possess that,
individually or in the aggregate, are not reasonably likely to have a
Company Material Adverse Effect.
(ii) Except as disclosed in the Company Reports filed prior to the
date hereof, and except for such matters that, individually or in the
aggregate, are not reasonably likely to have a Company Material Adverse
Effect, (i) to the knowledge of the Company, the use of the Company
Intellectual Property Rights by the Company or its Utility Subsidiaries
does not conflict with, infringe upon, violate or interfere with or
constitute an appropriation of any right, title, interest or goodwill,
including, without limitation, any intellectual property right, patent,
trademark, trade name, service mark, copyright of any other Person and (ii)
there have been no claims made and neither the Company nor any of its
Utility Subsidiaries has received written notice of any claim or otherwise
knows that any Company Intellectual Property Right is invalid, or conflicts
with the asserted right of any other Person.
(o) Vote Required.
Provided that the Preferred Shares have been redeemed pursuant to Section
7.17, the approval of the majority of the shares of Company Common Stock
outstanding on the record date for such vote (the "Company Requisite Vote") is
the only vote of any class or series of the capital stock of the Company
required to approve this Agreement and the transactions contemplated hereby.
(p) Regulation as a Utility.
The Company is a holding company exempt under Section 3(a)(1) pursuant to
Rule 2 from all provisions of the 1935 Act except Section 9(a)(2) thereof. The
Company and Kansas Gas and Electric Company are regulated as public utility
companies in the state of Kansas and by the FERC. Except as set forth above and
in Section 5.1(p) of the Company Disclosure Letter or as contemplated by the
Split-Off Agreements, neither the Company nor any "subsidiary company" or
"affiliate" of the Company is subject to regulation as a public utility or
public service company (or similar designation) by the Federal government of the
United States, any state in the United States or any political subdivision
thereof, or any foreign country. As used in this Section 5.1(p), the terms
"subsidiary company" and "affiliate" shall have the respective meanings ascribed
to them in Section 2(a)(8) and Section 2(a)(11), respectively, of the 1935 Act.
(q) Ownership of Parent, PNM, Merger Sub-1 or Merger Sub-2 Common Stock.
None of the Company or any of the Company Subsidiaries or the Westar
Subsidiaries beneficially owns any Parent Common Stock or common stock of PNM,
Merger Sub-1 or Merger Sub-2.
(r) Brokers and Finders.
Except for Chase Securities, Inc. ("Chase") and Salomon Smith Barney Inc.
("Salomon"), neither the Company nor any of its officers, directors or employees
has employed any broker or finder or incurred any liability for any brokerage
fees, commissions or finders' fees in connection with the Transaction or the
other transactions contemplated hereby.
(s) Opinion of Financial Advisor.
The Company has received the opinions of Chase and Salomon dated as of the
date hereof, each to the effect that, as of such date, the Closing Consideration
is fair from a financial point of view to holders of Company Common Stock.
(t) Nuclear Power Plant Operations.
To the knowledge of the Company, the operations of the Wolf Creek
Generating Station are being conducted in compliance with applicable health,
safety, regulatory and other legal requirements, except where the failure to be
in compliance in the aggregate does not, and insofar as can reasonably be
foreseen, would not have a Company Material Adverse Effect.
(u) Affiliate Contracts.
Section 5.1(u) of the Company Disclosure Letter lists all Company Contracts
and other arrangements, including those relating to goods, rights or services
provided or licensed between the Company or any Utility Subsidiary and any
Westar Subsidiary other than Company Contracts or other arrangements which are
Split-Off Agreements.
(v) No Other Representations or Warranties.
Except for the representations and warranties contained in this Section
5.1, neither the Company nor any other Person makes any other express or implied
representation or warranty on behalf of the Company or any of its Subsidiaries.
5.2. Representations and Warranties of Parent, PNM, Merger Sub-1 and Merger
Sub-2.
Except as set forth in the disclosure letter delivered to the Company by
Parent on or prior to entering into this Agreement (the "Parent Disclosure
Letter") or the PNM Reports, Parent, PNM, Merger Sub-1 and Merger Sub-2 each
represents and warrants to the Company that:
(a) Capitalization of Merger Sub-1 and Merger Sub-2.
The authorized capital stock of Merger Sub-1 consists of 40,000,000 shares
of common stock, no par value, of which one was issued and outstanding on the
date hereof and 10 million shares of preferred stock, no par value. The
authorized capital stock of Merger Sub-2 consists of 1,000 shares of common
stock, no par value, of which one was issued and outstanding on the date hereof.
All of the issued and outstanding capital stock of Merger Sub-1 and Merger Sub-2
is, and at the Effective Time will be, owned by Parent, and there are (i) no
other shares of capital stock or voting securities of Merger Sub-1 and Merger
Sub-2 authorized, (ii) no securities of Merger Sub-1 and Merger Sub-2
convertible into or exchangeable for shares of capital stock or voting
securities of Merger Sub-1 and Merger Sub-2 and (iii) no options or other rights
to acquire from Merger Sub-1 and Merger Sub-2, and no obligations of Merger
Sub-1 and Merger Sub-2 to issue, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of Merger Sub-1 and Merger Sub-2. Merger Sub-1 and Merger Sub-2 have
not conducted any business prior to the date hereof and has no, and prior to the
Effective Time will have no, assets, liabilities or obligations of any nature
other than those incident to its formation and pursuant to or in connection with
the this Agreement and the transactions contemplated hereby.
(b) Organization, Good Standing and Qualification.
Each of Parent and its Significant Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of organization and has all requisite corporate or
similar power and authority to own and operate its material properties and
assets and to carry on its business as presently conducted in all material
respects and is qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where the ownership or operation of its
properties or conduct of its business requires such qualification, except where
the failure to be so qualified as a foreign corporation or be in good standing
would not be reasonably likely to have, either individually or in the aggregate,
a Parent Material Adverse Effect. Parent has made available to the Company a
complete and correct copy of Parent's, Manzano's and PNM's and its Significant
Subsidiaries' certificates of incorporation and by-laws (or comparable governing
instruments), as amended to date and the certificate of incorporation and
by-laws of Parent are set forth in Section 5.2(b) of the Parent Disclosure
Schedule. Parent's, Manzano's and PNM's and its Significant Subsidiaries'
certificates of incorporation and by-laws (or comparable governing instruments)
so delivered are in full force and effect.
As used in this Agreement, the term "Parent Material Adverse Effect" means
a material adverse effect on the financial condition, business, assets or
results of operations of Manzano and PNM and their Subsidiaries taken as a
whole; provided, however, that any such effect resulting from or arising out of
(i) any change in law, rule, regulation or GAAP or interpretations thereof, (ii)
economic or business conditions in the United States generally, (iii) conditions
generally affecting the electric or gas utility industries or (iv) the execution
and delivery of this Agreement, or the contemplated consummation of the
transactions contemplated hereby, shall not be considered when determining if a
Parent Material Adverse Effect has occurred.
(c) Capital Structure.
The authorized capital stock of PNM consists of (x) 80,000,000 shares of
common stock, par value $5.00 per share ("PNM Common Stock"), of which
39,082,599 shares were issued and outstanding on November 6, 2000, and (y)
10,000,000 shares of preferred stock (the "PNM Preferred Shares"), of which
128,000 shares were issued and outstanding on November 6, 2000. All of the
issued and outstanding shares of PNM Common Stock and PNM Preferred Shares have
been duly authorized and are validly issued, fully paid and nonassessable. The
authorized capital stock of Parent consists of 200,000,000 shares of Parent
Common Stock, one of which was issued and outstanding on the date hereof and
10,000,000 shares of preferred stock, none of which were outstanding on the date
hereof. The authorized capital stock of Manzano consists of 120,000,000 shares
of Manzano Common Stock, 100 of which were issued and outstanding on the date
hereof. Each of the outstanding shares of capital stock or other securities of
each of PNM's Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable and owned by PNM or a direct or indirect wholly-owned Subsidiary
of PNM, free and clear of any lien, pledge, security interest, claim or other
encumbrance. Other than pursuant to the First Restated and Amended Director
Retainer Plan, the Third Restated and Amended Performance Stock Plan, the
Manzano Omnibus Performance Equity Plan and the PNM Direct Plan (the "Parent
Stock Plans"), there are no preemptive or other outstanding rights, options,
warrants, conversion rights, stock appreciation rights, redemption rights,
repurchase rights, agreements, arrangements or commitments to issue or to sell
any shares of capital stock or other securities of Parent, PNM or Manzano or any
of their Subsidiaries or any securities or obligations convertible or
exchangeable into or exercisable for, or giving any Person a right to subscribe
for or acquire, any securities of Parent, Manzano, PNM or any of its
Subsidiaries, and no securities or obligations evidencing such rights are
authorized, issued or outstanding. Parent, PNM and Manzano do not have
outstanding any bonds, debentures, notes or other obligations the holders of
which have the right to vote (or convertible into or exercisable for securities
having the right to vote) with the shareholders of Parent on any matter ("Parent
Voting Debt").
(d) Corporate Authority and Approval.
(i) Each of Parent, Manzano, PNM, Merger Sub-1 and Merger Sub-2 has
all requisite corporate power and authority and has taken all corporate
action necessary in order to execute, deliver and perform its obligations
under this Agreement, and to consummate, subject only to the receipt of the
Parent Requisite Vote and the Parent Required Statutory Approvals, the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Parent, Manzano, PNM, Merger Sub-1 and Merger Sub-2 and,
assuming due authorization, execution and delivery by the Company, is a
valid and legally binding agreement of Parent, Manzano, PNM, Merger Sub-1
and Merger Sub-2, enforceable against each of Parent, PNM, Merger Sub-1 and
Merger Sub-2 in accordance with its terms, subject to the Bankruptcy and
Equity Exception.
(ii) As of the date hereof, the Board of Directors of Parent, Manzano,
PNM, Merger Sub-1 and Merger Sub-2 have approved and adopted this Agreement
and the Mergers and other transactions set forth herein, and subject to
their respective fiduciary duties, the Boards of Directors of PNM and
Manzano have resolved to recommend that the shareholders of PNM and Manzano
approve this Agreement and the transactions contemplated hereby.
(iii) Prior to the Effective Time, Parent will have taken all
necessary action to permit it to issue the number of shares of Parent
Common Stock required to be issued pursuant to Article III and upon
conversion of any Parent Convertible Shares held by Westar. The Parent
Common Stock, when issued, will be validly issued, fully paid and
nonassessable, and no shareholder of Parent will have any preemptive right
of subscription or purchase in respect thereof. The Parent Common Stock,
when issued, will be registered under the Securities Act and Exchange Act
and registered or exempt from registration under any applicable state
securities or "blue sky" laws.
(e) Governmental Filings; No Violations.
(i) Other than any reports, filings, registrations, approvals and/or
notices (A) required to be made pursuant to Section 1.4, (B) required to be
made under the HSR Act, the Securities Act and the Exchange Act, (C) with,
to or of the SEC under the 1935 Act, (D) with, to or of the FERC, (E) with
or to the Nuclear Regulatory Commission, (F) with or to the Federal
Communications Commission, (G) with or to the NMPRC, (H) to comply with
state securities or "blue sky" laws, and (I) required to be made with the
NYSE, (items B through I, the "Parent Required Statutory Approvals"), no
notices, reports, registrations or other filings are required to be made by
Parent, Manzano, PNM, Merger Sub-1 or Merger Sub-2 with, nor are any
consents, registrations, approvals, permits or authorizations required to
be obtained by Parent, Manzano, PNM, Merger Sub-1 or Merger Sub-2 from, any
Governmental Entity, in connection with the execution and delivery of this
Agreement by Parent, Manzano, PNM, Merger Sub-1 and Merger Sub-2 and the
consummation by Parent, Manzano, PNM, Merger Sub-1 or Merger Sub-2 of the
Mergers and the other transactions contemplated hereby, except for those
that the failure to make or obtain would not be reasonably likely to have,
either individually or in the aggregate, a Parent Material Adverse Effect
or prevent, materially delay or materially impair the ability of Parent,
Manzano, PNM, Merger Sub-1 or Merger Sub-2 to consummate the transactions
contemplated hereby.
(ii) The execution, delivery and performance of this Agreement by
Parent, Manzano, PNM, Merger Sub-1 or Merger Sub-2 do not, and the
consummation by Parent, Manzano, PNM, Merger Sub-1 or Merger Sub-2 of the
Merger and the other transactions contemplated hereby will not, constitute
or result in (A) breach or violation of, or a default under, either the
certificate of incorporation or by-laws of Parent, Manzano, PNM, Merger
Sub-1 or Merger Sub-2 or the comparable governing instruments of any of
PNM's Significant Subsidiaries, (B) a breach or violation of, or a default
under, the acceleration of any obligations, the loss of any right or
benefit or the creation of a lien, pledge, security interest or other
encumbrance on the assets of PNM or any of its Significant Subsidiaries
(with or without notice, lapse of time or both) pursuant to any Contracts
binding upon PNM or any of its Significant Subsidiaries (the "Parent
Contracts") or any Law or governmental or non-governmental permit or
license to which PNM or any of its Significant Subsidiaries is subject or
(C) any change in the rights or obligations of any party under any of the
Parent Contracts, except, in the case of clause (B) or (C) above, for any
breach, violation, default, acceleration, creation or change that would not
be reasonably likely to have, either individually or in the aggregate, a
Parent Material Adverse Effect or prevent, materially delay or materially
impair the ability of Parent, Manzano, PNM, Merger Sub-1 or Merger Sub-2 to
consummate the transactions contemplated hereby.
(f) PNM Reports; Financial Statements.
The filings required to be made by PNM and its Subsidiaries since January
1, 1999 under the Securities Act; the Exchange Act; the 1935 Act; the Federal
Power Act; the Atomic Energy Act of 1954, as amended, and applicable state
public utility laws and regulations have been filed with the SEC, FERC, the NRC
or the appropriate state public utilities commission, 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, as of their respective dates, in all material respects with all
applicable requirements of the appropriate statutes and the rules and
regulations thereunder, except for such filings the failure of which to have
been made or so to comply would not result in a Parent Material Adverse Effect.
PNM has made available to the Company each registration statement, report, proxy
statement or information statement filed by it with the SEC (collectively,
including any amendments of any such reports, the "PNM Reports") pursuant to the
Securities Act or the Exchange Act since December 31, 1999, and prior to the
date hereof, including (i) PNM Annual Report on Form 10-K for the fiscal year
ended December 31, 1999 and (ii) PNM Quarterly Reports on Form 10-Q for the
quarterly periods ended March 31, 2000 and June 30, 2000, each in the form
(including exhibits, annexes and any amendments thereto) promulgated by the SEC
under the Securities Act or the Exchange Act. None of the PNM Reports (in the
case of PNM Reports filed pursuant to the Securities Act), as of their effective
dates, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were made, not
misleading and none of the PNM Reports (in the case of PNM Reports filed
pursuant to the Exchange Act) as of the respective dates first mailed to
shareholders contained any statement which, at the time and in the light of the
circumstances under which it was made, was false or misleading with respect to
any material fact, or omitted 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 consolidated financial statements of the PNM and its
Subsidiaries included in such PNM Reports comply as to form in all material
respects with the applicable rules and regulations of the SEC with respect
thereto. Each of the consolidated balance sheets included in or incorporated by
reference into the PNM Reports (including the related notes and schedules)
presents fairly, in all material respects, the financial position of the PNM and
its Subsidiaries as of its date and each of the consolidated statements of
income and consolidated statements of cash flow included in or incorporated by
reference into the PNM Reports (including any related notes and schedules)
fairly presents in all material respects the results of operations, retained
earnings and changes in financial position, as the case may be, of the PNM and
its Subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to the absence of notes and normal year-end audit
adjustments), in each case in accordance with GAAP consistently applied during
the periods involved, except as may be noted therein.
(g) Absence of Certain Changes.
Since the December 31, 1999 (the "PNM Audit Date"), PNM and its
Subsidiaries, taken as a whole, have conducted their business only in, and have
not engaged in any material transaction other than according to, the ordinary
and usual course of such business and there has not been (i) any change in the
financial condition, properties, assets, business or results of operations of
PNM and its Subsidiaries that has had or would be reasonably likely to have a
Parent Material Adverse Effect; (ii) any declaration, setting aside or payment
of any dividend or other distribution in respect of the capital stock of PNM or
any repurchase, redemption or other acquisition by PNM or any Subsidiary of any
securities of PNM other than quarterly dividends in the ordinary course
(including any increase thereon consistent with past practice); or (iii) any
change by PNM in accounting principles, practices or methods which is not
required or permitted by GAAP. Since the PNM Audit Date and through the date
hereof, except as provided for herein or as disclosed in the PNM Reports, there
has not been any material increase in the compensation payable or that could
become payable by PNM or any of its Subsidiaries to officers or key employees or
any material amendment of any of the PNM Compensation and Benefit Plans other
than increases or amendments in the ordinary course of business consistent with
past practice.
(h) Litigation.
There are no civil, criminal or administrative actions, suits, claims,
hearings, investigations, reviews or proceedings pending or, to the knowledge of
Parent and PNM, threatened against Parent, PNM, or any of its Significant
Subsidiaries, except for those that would not be reasonably likely to have,
either individually or in the aggregate, a Parent Material Adverse Effect.
(i) Employee Benefits.
(i) A copy of (i) each bonus, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership,
stock bonus, stock purchase, change in control, retention, restricted
stock, stock option, employment, termination, severance, compensation,
medical, health or other plan, agreement, policy, practice or
arrangement that covers employees or former employees of PNM and
Parent and their Subsidiaries ("Parent Employees"), or directors or
former directors of PNM or Parent (the "Parent Compensation and
Benefit Plans"); and (ii) any trust agreement or insurance contract
forming a part of such PNM Compensation and Benefit Plans has been
made available to the Company prior to the date hereof. Section 5.2(i)
of the Parent Disclosure Letter lists all Parent Compensation and
Benefit Plans other than those that, in the aggregate, are not
material to PNM or Parent and their Subsidiaries and any Parent
Compensation and Benefit Plans containing "change of control" or
similar provisions therein are specifically identified in Section
5.2(i) of the Parent Disclosure Letter.
(ii) All Parent Compensation and Benefit Plans, to the extent
subject to ERISA are in substantial compliance with the applicable
provisions of ERISA. Each Parent Compensation and Benefit Plan that is
an "employee pension benefit plan" within the meaning of Section 3(2)
of ERISA (a "Parent Pension Plan") and that is intended to be
qualified under Section 401(a) of the Code has received favorable
determination letter from the IRS, and nothing has occurred, whether
by action or failure to act, that would cause the loss of such
qualification or that would result in costs to PNM, Parent or any of
their Subsidiaries under the Internal Revenue Service's Employee Plans
Compliance Resolution System that would reasonably be likely to have a
Parent Material Adverse Effect. As of the date hereof, there is no
material pending or to the knowledge of Parent or PNM threatened
litigation relating to the PNM Compensation and Benefit Plans. Neither
Parent nor any of its Subsidiaries nor, to the knowledge of Parent,
any other person has engaged in a transaction with respect to any
Parent Compensation and Benefit Plan that, assuming the taxable period
of such transaction expired as of the date hereof, would subject
Parent or any of its Subsidiaries to a material tax or penalty imposed
by either Section 4975 of the Code or Section 502(i) of ERISA.
(iii) No liability under Subtitle C or D of Title IV of ERISA has
been or is expected to be incurred by Parent, PNM or any of their
Subsidiaries with respect to any ongoing, frozen or terminated
"single-employer plan", within the meaning of Section 4001(a)(15) of
ERISA, currently or formerly maintained by any of them, or the
single-employer plan of any entity which is considered one employer
with Parent, PNM or any of their Subsidiaries under Section 4001 of
ERISA or Section 414 of the Code (a "Parent ERISA Affiliate"). Parent,
PNM and their Subsidiaries have not incurred and do not expect to
incur and would not expect to incur any withdrawal liability with
respect to a multiemployer plan under Subtitle E of Title IV of ERISA
(regardless of whether based on contributions of a Parent ERISA
Affiliate) if, as of the date hereof, Parent, PNM or a Parent ERISA
Affiliate were to engage in a "complete withdrawal" (as defined in
Section 4203 of ERISA) or a "partial withdrawal" (as defined in
Section 4205 of ERISA) form such multiemployer plan. No notice of a
"reportable event", within the meaning of Section 4043 of ERISA for
which the 30-day reporting requirement has not been waived or
extended, other than the extension provided by PBGC Reg. Section
4043.66, has been required to be filed for any Parent Pension Plan or
by any ERISA Affiliate within the 12-month period ending on the date
hereof.
(iv) All contributions required to be made under the terms of any
Parent Compensation and Benefit Plan as of the date hereof have been
timely made or have been reflected on the most recent consolidated
balance sheet filed or incorporated by reference in the PNM Reports
and all premium payments to the PBGC have been made when due for such
plans. Neither any Parent Pension Plan nor any single-employer plan of
a Parent ERISA Affiliate has an "accumulated funding deficiency"
(whether or not waived) within the meaning of Section 412 of the Code
or Section 302 of ERISA and no Parent ERISA Affiliate has an
outstanding funding waiver. None of Parent, PNM or any of their
Subsidiaries has provided, or is required to provide, security to any
Pension Plan or to any single-employer plan of a Parent ERISA
Affiliate pursuant to Section 401(a)(29) of the Code.
(v) None of Parent, PNM or any of their Subsidiaries have any
obligations for, or liabilities with respect to, retiree health and
life benefits under any PNM Compensation and Benefit Plan, except for
benefits required to be provided under Section 4980B of the Code.
(vi) Notwithstanding anything to the contrary contained in this
Section 5.2(i), the representations and warranties contained in this
Section 5.2(i) shall be deemed to be true and correct unless such
failures to be true and correct are reasonably likely to have a Parent
Material Adverse Effect.
(j) Compliance with Laws.
As of the date hereof, the business of PNM and its Subsidiaries, taken as a
whole, is not being conducted in violation of any Laws, except for violations
that would not be reasonably likely to have, either individually or in the
aggregate, a Parent Material Adverse Effect or prevent or materially impair the
ability of Parent, Manzano, PNM, Merger Sub-1 or Merger Sub-2 to consummate the
transactions contemplated hereby. As of the date hereof, no investigation or
review by any Governmental Entity with respect to Parent or any of its
Subsidiaries is pending or to the knowledge of Parent threatened, nor has any
Governmental Entity indicated an intention to conduct the same, except for those
the outcome of which would not be reasonably likely to have, either individually
or in the aggregate, a Parent Material Adverse Effect or prevent or materially
impair the ability of Parent, Manzano, PNM, Merger Sub-1 or Merger Sub-2 to
consummate the transactions contemplated hereby. PNM and its Significant
Subsidiaries each has all permits, licenses, franchises, variances, exemptions,
orders and other governmental authorizations, consents and approvals from
Governmental Entities necessary to conduct its business as presently conducted,
except for those the absence of which would not be reasonably likely to have,
either individually or in the aggregate, a Parent Material Adverse Effect or
prevent or materially impair the ability of Parent, Manzano, PNM, Merger Sub-1
or Merger Sub-2 to consummate the transactions contemplated hereby.
(k) Takeover Statutes.
Assuming the accuracy of the representation contained in Section 5.1(q), no
Takeover Statute of the NMBCA or any applicable anti-takeover provision in the
certificate of incorporation of PNM, Manzano or Parent or by-laws of PNM,
Manzano or Parent is applicable to the Transaction or any of the other
transactions contemplated hereby.
(l) Environmental Matters.
Except for such matters that would not be reasonably likely to cause a
Parent Material Adverse Effect: (i) PNM's operations are in compliance with all
applicable Environmental Laws; (ii) PNM possesses and maintains in effect all
environmental and natural resources permits, licenses, authorizations and
approvals required under applicable Environmental Laws with respect to the
business of PNM as presently conducted; (iii) PNM has not received any written
environmental claim, notice or request for information during the past three
years concerning any violation or alleged violation of any applicable
Environmental Law or concerning any obligation or liability under any applicable
Environmental Law; and (iv) there are no material writs, injunctions, decrees,
orders or judgments outstanding, or any actions, suits or proceedings pending
relating to compliance by PNM with any environmental permits, licenses,
authorizations or approvals required under applicable Environmental Laws or
liability of PNM under any applicable Environmental Law.
The representations and warranties in this Section 5.1(l) constitute the
sole representations and warranties of Parent or PNM with respect to any
Environmental Law or Hazardous Substance.
As used in this Section 5.2(l), "PNM" shall mean PNM and each of its
Subsidiaries.
(m) Taxes.
Except as would not have a Parent Material Adverse Effect, PNM and each of
its Significant Subsidiaries (i) have duly and timely filed (taking into account
any extension of time within which to file) all Tax Returns required to be filed
by any of them as of the date hereof and all such filed Tax Returns are complete
and accurate in all respects; (ii) (A) have timely paid all Taxes that are shown
as due on such filed Tax Returns, except with respect to matters contested in
good faith and (B) no penalties or charges are due with respect to the late
filing of any Tax Return required to be filed by or with respect to any of them
on or before the Effective Time; (iii) with respect to any filed Tax Returns,
have not waived any statute of limitations with respect to Taxes or agreed to
any extension of time with respect to a Tax assessment or deficiency; (iv) as of
the date hereof, does not have any deficiency, or any such audits, examinations,
investigations or other proceedings in respect of Taxes or Tax matters pending
or proposed or threatened in writing; and (v) has not been or is not a party to
any Tax sharing agreement or similar arrangement. Except as would not have a
Parent Material Adverse Effect when aggregated with the preceding sentence,
neither PNM nor any PNM Subsidiary (x) has engaged in any intercompany
transaction within the meaning of Treasury Regulation Section 1.1502-13 for
which any income or gain remains unrecognized and (y) has constituted a
"distributing corporation" in a distribution of stock qualifying for tax-free
treatment under Section 355 of the Code (1) in the past 24-month period, or (2)
in a distribution which could otherwise constitute part of a "plan" or "series
of related transactions" within the meaning of Section 355(e) of the Code, in
each case, excluding any transactions described in Section 355(e)(3) of the
Code.
(n) Labor and Employment Matters.
(i) Labor Relations. Except as would not have a Parent Material
Adverse Effect, (A) neither PNM nor any of its Subsidiaries is a party to
any collective bargaining agreement or other labor agreement with any labor
union, labor organization, employee association or similar organization,
nor does PNM or any of its Subsidiaries have knowledge of any such union,
labor organization, employee association or similar organization that
represents or claims to represent any of PNM's or any of its Subsidiaries'
employees or intends to organize any of PNM's or any its Subsidiaries'
employees; (B) there is no labor strike, dispute, slowdown, stoppage,
lockout or other labor dispute actually pending, nor to the knowledge of
PNM, threatened against or affecting PNM or any of its Subsidiaries; (C) to
the knowledge of Parent and PNM, neither PNM nor any of its Subsidiaries is
engaged in any unfair labor practices as defined in the National Labor
Relations Act or other applicable law, ordinance or regulation; nor is
there an unfair labor practice charge or complaint against PNM or any of
its Subsidiaries pending or, to the knowledge of PNM, threatened before the
National Labor Relations Board or any similar state agency; and (D) there
is no grievance pending, nor to the knowledge of PNM, is there any
grievance threatened arising out of any collective bargaining agreement or
other grievance procedure.
(ii) Employment. Except as would not have Parent Material Adverse
Effect, (A) neither PNM nor any of its Subsidiaries is in material
violation of any applicable laws respecting employment and employment
practices, terms and conditions of employment, wages, hours of work and
occupational safety and health, nor have they ever been; (B) to the
knowledge of the Parent and PNM, there are no charges with respect to or
relating to PNM or any of its Subsidiaries pending before the Equal
Employment Opportunity Commission or any other agency responsible for the
prevention of unlawful employment practices; (C) to the knowledge of the
Parent and PNM, neither PNM nor any of its Subsidiaries received notice of
the intent of any federal, state or local agency responsible for the
enforcement of labor or employment laws to conduct an investigation with
respect to or relating to PNM or any of its Subsidiaries and no such
investigation is in progress; and (D) to the knowledge of the Parent and
PNM, there are no complaints, lawsuits or other proceedings pending or
threatened in any forum by or on behalf of any present or former employee
of PNM or any of its Subsidiaries, any applicant for employment or classes
of the foregoing alleging breach of any express or implied contract for
employment, any law or regulation governing employment or the termination
thereof or other discriminatory, wrongful or tortuous conduct in connection
with the employment relationship.
(iii) WARN Act. PNM is presently in compliance with its notification
obligations with respect to PNM's employees pursuant to the Worker
Adjustment and Retraining Notification (WARN) Act and will conduct any
plant closing or mass layoff prior to the date of Closing in accordance
with WARN.
(o) Intellectual Property.
(i) PNM and its Significant Subsidiaries own, or are licensed or
otherwise possess sufficient legally enforceable rights to use, all
patents, trademarks, trade names, service marks, copyrights, technology,
know-how, computer software programs or applications, databases and
tangible or intangible proprietary information or materials that are
currently used in its and its Subsidiaries' businesses (collectively, "PNM
Intellectual Property Rights"), except for any such failures to own, be
licensed or possess that, individually or in the aggregate, are not
reasonably likely to have a Parent Material Adverse Effect.
(ii) Except as disclosed in the PNM Reports filed prior to the date
hereof, and except for such matters that, individually or in the aggregate,
are not reasonably likely to have a Parent Material Adverse Effect, (i) to
the knowledge of Parent, the use of the PNM Intellectual Property Rights by
PNM or its Significant Subsidiaries does not conflict with, infringe upon,
violate or interfere with or constitute an appropriation of any right,
title, interest or goodwill, including, without limitation, any
intellectual property right, patent, trademark, trade name, service mark,
copyright of any other Person and (ii) there have been no claims made and
neither the PNM nor any of its Significant Subsidiaries has received
written notice of any claim or otherwise knows that any PNM Intellectual
Property Right is invalid, or conflicts with the asserted right of any
other Person.
(p) Vote Required.
The approval of the Second Merger by two-thirds of the holders of Manzano
Common Stock or PNM Common Stock, as the case may be, (the "Parent Requisite
Vote") is the only vote of the holders of any class or series of the capital
stock of Parent, Manzano or PNM required to approve this Agreement and the
transactions contemplated hereby.
(q) Ownership of Company Common Stock.
None of Parent, Manzano, PNM, Merger Sub-1 Merger Sub-2 or any of their
respective Subsidiaries beneficially owns any Company Common Stock.
(r) Regulation as to Utility.
None of Merger Sub-1, Merger Sub-2 or Parent is a "public utility company,"
or a "holding company" under the 1935 Act. None of Merger Sub-1, Merger Sub-2 or
Parent is subject to regulation as a public utility company in any state or by
the FERC. PNM is a public utility company subject to regulation as such in the
State of New Mexico and by the FERC. At the Manzano Transition Date, Manzano
will be a "holding company" exempt under Section 3(a)(1) pursuant to Rule 2 from
all provisions of the 1935 Act except Section 9(a)(2) thereof. Otherwise, except
as set forth in Section 5.2(r) of the Parent Disclosure Letter, none of Parent,
PNM, Merger Sub-1, Merger Sub-2, Manzano and their respective "subsidiary
companies" and "affiliates" is subject to regulation as a public utility or
public service company (or similar designation) by the Federal government of the
United States, any state in the United States or any political subdivision
thereof, or any foreign country. As used in this Section 5.2(r) the terms
"subsidiary companies" and "affiliates" have meanings correlative to the terms
"subsidiary company" and "affiliate" as used in Section 5.1(p) of the Agreement.
(s) Brokers and Finders.
Except for J.P. Morgan Securities Inc. ("JP Morgan"), neither Parent nor
any of its officers, directors or employees has employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finders' fees in
connection with the Transaction or the other transactions contemplated by this
Agreement.
(t) Opinion of Financial Advisor.
PNM has received the opinion of JP Morgan dated as of the date hereof to
the effect that, as of such date, the PNM ownership percentage is fair from a
financial point of view to the holders of PNM Common Stock.
(u) Nuclear Plant Operation.
To the knowledge of PNM, the operations of the Palo Verde Nuclear
Generating Station are being conducted in compliance with applicable health,
safety, regulatory and other legal requirements, except where the failure to be
in compliance in the aggregate does not, and insofar as can reasonably be
foreseen, would not have a Parent Material Adverse Effect.
(v) Shareholder Matters.
(i) To the knowledge of PNM and Manzano, (x) no shareholders of PNM
(excluding Manzano as sole shareholder of PNM following the effective time
of the Manzano Exchange) or Manzano has entered into any agreement, written
or unwritten, express or implied, to act in concert with others to control
the management and policies of Parent or the Surviving Corporation
immediately following the Effective Time and (y) no shareholder of PNM or
Manzano will own more than 5% of the outstanding voting securities of
Parent immediately following the Effective Time.
(ii) No shareholder of PNM (excluding Manzano as sole shareholder of
PNM following the effective time of the Manzano Exchange) or Manzano has
entered into any agreement or arrangement to vote in favor of any
particular individual or individuals for election to the board of directors
of the Surviving Corporation following the Effective Time.
(w) No Other Representations or Warranties.
Except for the representations and warranties contained in this
Section 5.2, neither Parent nor any other Person makes any other express or
implied representation or warranty on behalf of Parent or any of its
Subsidiaries.
Article VI.
Conduct of Business Pending the Transactions
6.1. Covenants of the Company.
The Company covenants and agrees as to itself and its Subsidiaries that,
from the date hereof and prior to the Effective Time, except as expressly
contemplated or permitted by this Agreement or the Split-Off Agreements, as set
forth on Section 6.1 of the Company Disclosure Letter, as required by Law or to
the extent Parent shall otherwise consent in writing, which decision regarding
consent shall be made as soon as reasonably practicable, and provided that,
except as specifically stated therein, the provisions of this Section 6.1 shall
not apply to the Westar Subsidiaries and the Company shall not be obligated to
cause the Westar Subsidiaries to comply with the obligations of this Section
6.1:
(i) the business of the Company and its Subsidiaries shall be
conducted only in the ordinary and usual course and, to the extent
consistent therewith, it and its Subsidiaries shall use their respective
reasonable best efforts to (a) subject to prudent management of workforce
needs and ongoing programs currently in force, preserve its business
organization intact and maintain its existing relations and goodwill with
customers, suppliers, distributors, creditors, lessors, employees and
business associates, (b) maintain and keep material properties and assets
in good repair and condition, subject to ordinary wear and tear and (c)
maintain in effect all material governmental permits pursuant to which the
Company or any of its Significant Subsidiaries currently operates;
(ii) the Company shall not (w) amend its articles of incorporation or
by-laws or the comparable governing instruments of any of its Subsidiaries
except for such amendments that would not prevent or materially impair the
consummation of the transactions contemplated by this Agreement; (x) split,
combine or reclassify its outstanding shares of capital stock; (y) declare,
set aside or pay any dividend payable in cash, stock or property in respect
of any capital stock (other than (A) dividends from its direct or indirect
wholly owned Subsidiaries to it or a wholly-owned Subsidiary, (B) regular
quarterly dividends on shares of Common Stock with usual record and payment
dates in amounts not to exceed $1.20 annually per share of Common Stock or
(C) dividends required to be paid on Preferred Shares or preferred
securities of subsidiary trusts outstanding on the date hereof until
redeemed pursuant to Section 7.17 or on Convertible Preference Shares
issued to Westar, in each case in accordance with their respective terms)
or (z) repurchase, redeem or otherwise acquire any shares of its capital
stock or any securities convertible into or exchangeable or exercisable for
any shares of its capital stock or permit any of its Subsidiaries to
purchase or otherwise acquire, any shares of its capital stock or any
securities convertible into or exchangeable or exercisable for any shares
of its capital stock (other than for the purpose of funding or providing
benefits under the Stock Plans and the Direct Stock Purchase Plan);
(iii) neither the Company nor any of its Subsidiaries shall issue,
sell, pledge, dispose of or encumber any shares of, or securities
convertible into or exchangeable or exercisable for, or options, warrants,
calls, commitments or rights of any kind to acquire, any shares of its
capital stock of any class or any Voting Debt or any other property or
assets (other than (A) shares of the Company Common Stock issuable pursuant
to options or restricted share units (whether or not vested) outstanding on
the date hereof under the Stock Plans, issuances of additional options or
restricted share units or rights to acquire shares of the Company Common
Stock granted pursuant to the terms of the Stock Plans as in effect on the
date hereof in the ordinary and usual course of the operation of such Stock
Plans and issuances of shares of the Company Common Stock pursuant to
options or restricted share units granted after the date hereof pursuant to
the Stock Plans; or (B) issuances of shares of the Company Common Stock,
including restricted shares, in the ordinary and usual course of the Stock
Plans and the Direct Stock Purchase Plan, each as in effect on the date
hereof);
(iv) neither the Company nor any of its Subsidiaries shall, other than
in the ordinary and usual course of business and other than transactions
not in excess of $50,000,000 in the aggregate in any calendar year,
transfer, lease, license, guarantee, sell, mortgage, pledge, dispose of or
encumber any other property or assets (including capital stock of any of
its Subsidiaries);
(v) neither the Company nor any of its Subsidiaries shall, by any
means, make any acquisition of, or investment (other than capital
expenditures) in, assets or stock (whether by way of merger, consolidation,
tender offer, share exchange or other activity) in any transaction or any
series of transactions (whether or not related) for an aggregate purchase
price or prices, including the assumption of any debt, in excess of
$50,000,000 in the aggregate in any calendar year;
(vi) neither the Company nor any of its Subsidiaries shall, other than
in the ordinary and usual course of business, (i) modify, amend, or
terminate any Contract that is material to the Company and its Subsidiaries
taken as a whole, (ii) waive, release, relinquish or assign any such
Contract (or any of the material rights of the Company or any of its
Subsidiaries thereunder), right or claim, or (iii) cancel or forgive any
material indebtedness owed to the Company or any of its Subsidiaries;
(vii) neither the Company nor any of its Subsidiaries will (i) adopt a
plan of complete or partial liquidation, dissolution, merger,
consolidation, recapitalization or other similar reorganization of the
Company or any Significant Subsidiary of the Company, or (ii) accelerate or
delay collection of notes or accounts receivable in advance of or beyond
their regular due dates, other than in the usual and ordinary course of
business;
(viii) neither the Company nor any of its Subsidiaries shall
terminate, establish, adopt, enter into, make any new grants or awards
under, amend or otherwise modify any Compensation and Benefit Plans (other
than issuances of additional shares of Company Common Stock or options or
rights to acquire shares of Common Stock granted pursuant to the terms of
the Stock Plans as in effect on the date hereof in the ordinary and usual
course of the operation of such Stock Plans), or increase the salary, wage,
bonus or other compensation of any employees except for (A) grants or
awards or increases under existing Compensation and Benefit Plans occurring
in the ordinary and usual course of business (which shall include normal
periodic performance reviews and related compensation and benefit
increases), (B) annual reestablishment of Compensation and Benefit Plans
and the provision of individual compensation or benefit plans and
agreements for newly hired or appointed officers and employees of the
Company and its Subsidiaries comparable in form and amount to such
individual compensation or benefit plans or agreements currently maintained
by the Company and its Subsidiaries, provided such individual plans and
agreements (other than award agreements issued under existing plans) shall
not include change of control provisions which would be triggered solely by
the execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby and voluntary action by an individual
employee or (C) actions necessary to satisfy existing contractual
obligations under Compensation and Benefit Plans or agreements existing as
of the date hereof or applicable law;
(ix) the Company shall, and shall cause its Subsidiaries to, maintain
with financially responsible insurance companies (or through self
insurance) insurance in such amounts and against such risks and losses as
are consistent with the insurance maintained by the Company and its
Subsidiaries in the ordinary course of business consistent with past
practice;
(x) except in the ordinary and usual course of business or as may be
required by applicable Law, neither the Company nor any of its Subsidiaries
shall change any accounting principle, practice or method in a manner that
is inconsistent with past practice, except to the extent required by GAAP
as advised by the Company's regular independent accountants;
(xi) neither the Company nor any of its Subsidiaries shall engage in
or allow any transfer of assets or liabilities or other transactions
between the Company and its Subsidiaries, on the one hand, and the Westar
Subsidiaries, on the other hand except (a) transactions relating to
services rendered in the ordinary course of business pursuant to the
Contracts specified in Section 5.1(u) of the Company Disclosure Letter or
which individually, or in the aggregate, do not involve payments in excess
of $250,000 per year or are terminable upon 90 days' notice in any event
prior to the Effective Time, (b) as permitted under Section 3.2(a) hereof,
including without limitation the conversion of Convertible Preference
Shares into Convertible Preference Shares having amended voting terms on a
one-for-one basis; provided that any interest accruing or payable on the
intercompany receivable shall be at a rate not in excess of 8 1/2% or (c)
as contemplated by the Split-Off Agreements to occur prior to the Effective
Time;
(xii) except as may be required by applicable Law, neither the Company
nor any of its Subsidiaries shall make capital expenditures during any
fiscal year in excess of $400,000,000;
(xiii) the Company shall promptly notify PNM of any change or event
that has had or could reasonably be expected to have a Company Material
Adverse Effect or a material adverse effect under Section 8.2(f) hereto and
shall provide copies, in advance of filing the same, of any significant
regulatory filings proposed to be made by or on behalf of the Company or
any of its Utility Subsidiaries;
(xiv) except as otherwise required by law and only to the extent
material, all Tax Returns of the Company and any of its Subsidiaries and
Affiliates that are filed between the date hereof and the Closing Date
shall be prepared in a manner consistent with the allocation of tax
liability principles set forth in the agreement to be entered into between
the Company and Westar allocating Taxes between the Company and Westar
after the Split-Off (the "Tax Disaffiliation Agreement"); and
(xv) neither the Company nor any of its Subsidiaries will authorize or
enter into an agreement to do anything prohibited by the foregoing.
6.2. Covenants of Parent, Manzano, PNM, Merger Sub-1 and Merger Sub-2.
Parent, PNM and Manzano each covenants and agrees as to itself and its
Subsidiaries that after the date hereof and prior to the Effective Time, except
as expressly contemplated or permitted by this Agreement, as set forth on
Section 6.2 of the Parent Disclosure Letter, as required by Law or to the extent
the Company shall otherwise consent in writing, which decision regarding consent
shall be made as soon as reasonably practicable:
(i) the business of PNM and its Subsidiaries shall be conducted only
in the ordinary and usual course and, to the extent consistent therewith,
it and its Subsidiaries shall use their respective reasonable best efforts
to (a) subject to prudent management of workforce needs and ongoing
programs currently in force, preserve its business organization intact and
maintain its existing relations and goodwill with customers, suppliers,
distributors, creditors, lessors, employees and business associates, (b)
maintain and keep material properties and assets in good repair and
condition, subject to ordinary wear and tear and (c) maintain in effect all
existing material governmental permits pursuant to which PNM or any of its
Significant Subsidiaries currently operates;
(ii) PNM, Manzano and Parent shall not (w) amend its certificate of
incorporation or by-laws or the comparable governing instruments of any of
its Subsidiaries except for such amendments that would not prevent or
materially delay the consummation of the transactions contemplated by this
Agreement; (x) split, combine or reclassify its outstanding shares of
capital stock; (y) declare, set aside or pay any dividend payable in cash,
stock or property in respect of any capital stock (other than (A) dividends
from its direct or indirect wholly owned Subsidiaries to it or a wholly
owned Subsidiary, (B) dividends required to be paid on any preferred stock
of any Subsidiary of PNM outstanding on the date hereof or preferred stock
issued to refinance currently outstanding preferred stock, in each case, in
accordance with their respective terms and (C) regular quarterly dividends
on shares of PNM Common Stock with usual record and payment dates
(including any periodic increase thereon consistent with past practice) or
(z) repurchase, redeem or otherwise acquire any shares of its capital stock
or any securities convertible into or exchangeable or exercisable for any
shares of its capital stock or permit any of its Subsidiaries to purchase
or otherwise acquire, any shares of its capital stock or any securities
convertible into or exchangeable or exercisable for any shares of its
capital stock (other than (A) as required by the respective terms of any
preferred stock of any Subsidiary of PNM outstanding on the date hereof or
preferred stock issued to refinance currently outstanding preferred stock
in accordance with the terms of the this Agreement, (B) in connection with
refunding preferred stock of any Subsidiary of PNM with preferred stock or
debt at a lower cost of funds (calculating such cost on an after-tax basis)
and (C) for the purpose of funding or providing benefits under the PNM
Stock Plans and any dividend reinvestment plan in accordance with past
practice);
(iii) none of Parent, Manzano, PNM or any of their Subsidiaries shall
issue, sell, pledge, dispose of or encumber any shares of, or securities
convertible into or exchangeable or exercisable for, or options, warrants,
calls, commitments or rights of any kind to acquire, any shares of its
capital stock of any class or any Parent Voting Debt or any other property
or assets (other than (A) shares of PNM Common Stock issuable pursuant to
options (whether or not vested) outstanding on the date hereof under the
Parent Stock Plans, issuances of additional options or rights to acquire
shares of PNM Common Stock granted pursuant to the terms of the Parent
Stock Plans as in effect on the date hereof in the ordinary and usual
course of the operation of such Parent Stock Plans and issuances of shares
of PNM Common Stock pursuant to options granted after the date hereof
pursuant to the Parent Stock Plans, (B) issuances of shares of PNM Common
Stock in the ordinary and usual course of Parent Compensation and Benefits
Plans, each as in effect on the date hereof, and (C) the issuance of PNM
preferred shares in connection with the repurchase or redemption of
preferred stock outstanding on the date of this Agreement either at its
stated maturity or at a lower cost of funds (calculating such cost on an
after-tax basis));
(iv) neither PNM nor any of its Subsidiaries shall, other than in the
ordinary and usual course of business and other than transactions not in
excess of $50,000,000 in the aggregate in any calendar year, transfer,
lease, license, guarantee, sell, mortgage, pledge, dispose of or encumber
any other property or assets (including capital stock of any of its
Subsidiaries);
(v) neither PNM nor any of its Subsidiaries shall, by any means, make
any acquisition of, or investment (other than capital expenditures) in,
assets or stock (whether by way of merger, consolidation, tender offer,
share exchange or other activity) in any transaction or any series of
transactions (whether or not related) for an aggregate purchase price or
prices, including the assumption of any debt, in excess of $50,000,000 in
any calendar year;
(vi) neither PNM nor any of its Significant Subsidiaries shall, other
than in the ordinary and usual course of business, (i) modify, amend, or
terminate any Contract that is material to PNM and its Subsidiaries taken
as a whole, (ii) waive, release, relinquish or assign any such material
contract (or any of the material rights of PNM or any of its Subsidiaries
thereunder), right or claim, or (iii) cancel or forgive any material
indebtedness owed to PNM or any of its Subsidiaries;
(vii) neither PNM nor any of its Subsidiaries will (i) adopt a plan of
complete or partial liquidation, dissolution, merger, consolidation,
recapitalization or other similar reorganization of PNM or any Significant
Subsidiary of Parent, or (ii) accelerate or delay collection of notes or
accounts receivable in advance of or beyond their regular due dates, other
than in the usual and ordinary course of business;
(viii) neither PNM nor any of its Subsidiaries shall terminate,
establish, adopt, enter into, make any new grants or awards under, amend or
otherwise modify, any Parent Compensation and Benefit Plans (other than
issuances of additional shares of PNM Common Stock or options or rights to
acquire shares of PNM Common Stock granted pursuant to the terms of the
Parent Stock Plans as in effect on the date hereof in the ordinary and
usual course of the operation of such Parent Stock Plans), or increase the
salary, wage, bonus or other compensation of any employees except for (A)
grants or awards or increases under existing Parent Compensation and
Benefit Plans occurring in the ordinary and usual course of business (which
shall include normal periodic performance reviews and related compensation
and benefit increases), (B) annual reestablishment of Parent Compensation
and Benefit Plans and the provision of individual compensation or benefit
plans and agreements for newly hired or appointed officers and employees of
PNM and its Subsidiaries comparable in form and amount to such individual
compensation or benefit plans or agreements currently maintained by the
Parent and its Subsidiaries, provided such individual plans and agreements
shall not include change of control provisions which would be triggered
solely by the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby or (C) actions necessary to satisfy
existing contractual obligations under Parent Stock Plans or agreements
existing as of the date hereof or applicable law;
(ix) PNM shall, and shall cause its Subsidiaries to, maintain with
financially responsible insurance companies (or through self insurance)
insurance in such amounts and against such risks and losses as are
consistent with the insurance maintained by PNM and its Subsidiaries in the
ordinary course of business consistent with past practice;
(x) except in the ordinary and usual course of business or as may be
required by applicable Law, neither PNM nor any of its Subsidiaries shall
change any accounting principle, practice or method in a manner that is
inconsistent with past practice, except to the extent required by GAAP as
advised by Parent's regular independent accountants;
(xi) except as may be required by applicable Law, neither PNM nor any
of its Subsidiaries shall make capital expenditures during any fiscal year
in excess of $400,000,000;
(xii) PNM, Manzano and Parent shall promptly notify the Company of any
change or event that has had or could reasonably be expected to have a
Parent Material Adverse Effect or a material adverse effect under Section
8.2(e) hereto and shall provide copies, in advance of filing the same, of
any significant regulatory filings proposed to be made by or on behalf of
PNM or any Subsidiary;
(xiii) except as otherwise required by law and only to the extent
material, all Tax returns of PNM, Manzano, Parent and their Subsidiaries
that are filed between the date hereof and the Closing Date shall be filed
in a manner consistent with past practices; and
(xiv) none of PNM, Manzano, Parent or any of their Subsidiaries will
authorize or enter into an agreement to do anything prohibited by the
foregoing.
(b) 1935 Act.
None of the parties hereto shall, nor shall any such party permit any of
its Subsidiaries to, except as required or contemplated by this Agreement or the
Split-Off Agreements, engage in any activities that would cause a change in its
status, or that of its Subsidiaries, under the 1935 Act if such change would
prevent or delay the consummation of the transactions contemplated by this
Agreement.
6.3. Necessary Action.
(a) Neither the Company nor PNM, nor any of their respective Subsidiaries,
shall take or fail to take any action that is reasonably likely to (i) result in
any failure of the conditions to the Mergers set forth in Article VIII, (ii)
prevent or delay consummation of the transactions contemplated by this
Agreement, (iii) make any representation or warranty of the Company, PNM,
Manzano or Parent contained herein inaccurate in any material respect at, or as
of any time prior to, the Effective Time, or (iv) individually or in the
aggregate, have a Company Material Adverse Effect or a Parent Material Adverse
Effect, as the case may be.
(b) The parties shall cooperate and use their best efforts to ensure that
the Effective Time does not occur at a time when any of the adjustment events
listed in Sections 3.2(b)(ii)(A)(vi) or (vii) would take place in the ordinary
course between the Cut Off Date and the Effective Time.
Article VII.
Additional Agreements
7.1. Access.
PNM and the Company agree that upon reasonable notice, and except as may
otherwise be required by applicable Law, each shall (and shall cause its
Subsidiaries to) afford the other's officers, employees, counsel, accountants
and other authorized representatives ("Representatives") reasonable access,
during normal business hours throughout the period prior to the Effective Time,
to its executive officers, to its properties, books, contracts and records and,
during such period, each shall (and each shall cause its Subsidiaries to)
furnish promptly to the other all information concerning its business,
properties and personnel as may reasonably be requested but only to the extent
such access does not unreasonably interfere with the business and operations of
such party; provided that no investigation pursuant to this Section 7.1 shall
affect or be deemed to modify any representation or warranty made by the
Company, Parent, Manzano, PNM, Merger Sub-1 or Merger Sub-2, and provided
further that the foregoing shall not require any party to permit any inspection,
or to disclose any information, that in the reasonable judgment of such party,
would (i) result in the disclosure of any trade secrets of third parties or the
loss of any applicable attorney-client privilege, work-product doctrine,
self-audit privilege or other privilege or (ii) violate any of its obligations
with respect to confidentiality if such party shall have used reasonable efforts
to obtain the consent of such third party to such inspection or disclosure. All
requests for information made pursuant to this Section 7.1 shall be directed to
an executive officer of Manzano, PNM or the Company, as applicable, or such
Person as may be designated by either of its executive officers. All such
information shall be governed by the terms of the Confidentiality Agreements.
7.2. Acquisition Proposals.
Except pursuant to the Exchange Agreement, each of the Company, Manzano,
and PNM agrees that neither it nor any of its Subsidiaries nor any of its or its
Subsidiaries' officers and directors shall, and that it shall direct and use its
reasonable best efforts to cause its and its Subsidiaries' agents and other
representatives (including any investment banker, attorney or accountant
retained by it or any of its Subsidiaries) not to, directly or indirectly,
initiate, solicit, encourage or otherwise facilitate any inquiries or the making
of any proposal or offer with respect to (i) a merger, reorganization, share
exchange, consolidation or similar transaction involving it or its Significant
Subsidiaries or, in the case of the Company, its Utility Subsidiaries, (ii) any
sale, lease, exchange, mortgage, pledge, transfer or purchase of all or
substantially all of the assets or equity securities of, it and its
Subsidiaries, taken as a whole, in a single transaction or series of related
transactions or (iii) any tender offer or exchange offer for 20% or more of the
outstanding shares of the Company Common Stock or PNM Common Stock or Manzano
Common Stock (any such proposal or offer being hereinafter referred to as an
"Acquisition Proposal"). Each of the Company, Manzano and PNM further agrees
that neither it nor any of its Subsidiaries nor any of its or its Subsidiaries'
officers and directors shall, and that it shall direct and use its reasonable
best efforts to cause its and its Subsidiaries' agents and representatives not
to, directly or indirectly, engage in any negotiations concerning, or provide
any confidential information or data to, or have any discussions with, any
person relating to an Acquisition Proposal, or otherwise facilitate any effort
or attempt to make or implement an Acquisition Proposal; provided, however, that
nothing contained in this Agreement shall prevent the Board of Directors of the
Company or of Manzano and PNM, or their respective representatives from, prior
to the time their respective required shareholders approvals have been obtained
(A) complying with Rule 14e-2 promulgated under the Exchange Act with regard to
an Acquisition Proposal or otherwise complying with the Exchange Act; (B)
providing information in response to a request therefor by a person who has made
a bona fide unsolicited Acquisition Proposal; (C) engaging in any negotiations
or discussions with any person who has made a bona fide unsolicited Acquisition
Proposal or otherwise facilitating any effort or attempt to implement an
Acquisition Proposal; or (D) withdrawing or modifying the approval or
recommendation by such Board of Directors of this Agreement, approving or
recommending any Acquisition Proposal or causing the applicable party to enter
into any letter of intent, agreement in principle, acquisition agreement or
other similar agreement relating to any Acquisition Proposal, if, and only to
the extent that in each such case referred to in clause (B), (C) or (D) above,
the Board of Directors of the Company, Manzano or PNM, as the case may be,
determines in good faith, after consultation with outside legal counsel that
such action is necessary to act in a manner consistent with the directors'
fiduciary duties under applicable law and determines in good faith after
consultation with its financial advisors that the person or group making such
Acquisition Proposal has adequate sources of financing to consummate such
Acquisition Proposal and that such Acquisition Proposal, if consummated as
proposed, is materially more favorable to the shareholders of such party from a
financial point of view (any such more favorable Acquisition Proposal being
referred to as a "Superior Proposal") and (y) in the case of clause (D) above
the Board of Directors of the Company or Manzano or PNM, as the case may be,
determines in good faith that such Acquisition Proposal is reasonably capable of
being consummated, taking into account legal, financial, regulatory and other
aspects of the proposal and the person making the proposal, and prior to taking
any such action set forth in clause (B), (C) or (D) above (other than with
respect to actions related to entering into a confidentiality agreement), the
Company or Manzano or PNM, as the case may be, provides reasonable notice to the
other party to the effect that it is taking such action and receives from the
person making the Acquisition Proposal an executed confidentiality agreement in
reasonably customary form and, in any event, containing terms not materially
more favorable to such third party than those contained in the Confidentiality
Agreements (as defined in Section 10.7). Prior to or substantially
contemporaneous with providing any information to or entering into any
discussions or negotiations with any person in connection with an Acquisition
Proposal by such person, the Company or Manzano or PNM, as the case may be,
shall notify the other party of such Acquisition Proposal (including, without
limitation, the material terms and conditions thereof and the identity of the
person making it), and, subject to the confidentiality agreement required to be
entered into, as specified above, shall provide the other party with a copy of
any written Acquisition Proposal or amendment or supplements thereto and shall
thereafter inform the other party on a prompt basis of any material changes to
the terms and conditions of such Acquisition Proposal. Each of the Company and
Manzano and PNM agrees that it will immediately cease and cause to be terminated
any existing discussions or negotiations with any parties conducted heretofore
with respect to any Acquisition Proposal. Each of the Company and each of
Manzano and PNM agrees that it will take the necessary steps to promptly inform
the individuals or entities referred to in the first sentence hereof of the
obligations undertaken in this Section 7.2.
7.3. Information Supplied.
The Company, Parent, Manzano and PNM each agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be supplied by it or
its Subsidiaries for inclusion or incorporation by reference in (i) the
Registration Statement on Form S-4 to be filed with the SEC by Parent in
connection with the issuance of shares of Parent Common Stock in the Mergers
(including the joint proxy statement and prospectus (the "Prospectus/Proxy
Statement") constituting a part thereof) (the "S-4 Registration Statement")
will, at the time the S-4 Registration Statement becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and (ii) the Prospectus/Proxy Statement and any amendment or
supplement thereto will, at the date of mailing to shareholders of the Company
and shareholders of Manzano or PNM, as the case may be, and at the time of the
meeting of shareholders of the Company and at the time of the meeting of the
shareholders of Manzano or PNM, as the case may be, to be held in connection
with this Agreement and the transactions contemplated hereby, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
7.4. Shareholders Meetings.
The Company will take, in accordance with applicable law and its restated
articles of incorporation, as amended, and by-laws, all action necessary to
convene a meeting of holders of Company Common Stock as promptly as practicable
after the Proxy Statement/Prospectus is mailed to its shareholders to consider
and vote upon the approval of this Agreement and the transactions contemplated
hereby. Manzano or PNM will take, in accordance with its certificate and
by-laws, all action necessary to convene a meeting of holders of Manzano Common
Stock or PNM Common Stock, as the case may be, as promptly as practicable after
the Proxy Statement/Prospectus is mailed to its shareholders to consider and
vote upon the approval of this Agreement and the transactions contemplated
hereby. Subject to fiduciary obligations under applicable law, each of the
Company's and Manzano's or PNM' board of directors shall recommend such approval
and shall take all lawful action to solicit such approval.
7.5. Filings; Other Actions; Notification.
(a) Parent, Manzano or PNM and the Company shall promptly, following the
date hereof, prepare and file with the SEC the Prospectus/Proxy Statement, and
Parent shall promptly, following the date hereof, prepare and file with the SEC
the S-4 Registration Statement. Parent and the Company each shall use its best
efforts to have the S-4 Registration Statement declared effective under the
Securities Act as promptly as practicable after such filing, and as soon as
practicable thereafter mail the Prospectus/Proxy Statement to the shareholders
of the Company and the shareholders of Manzano or PNM, as the case may be, and,
if necessary after the Prospectus/Proxy Statement is mailed, promptly circulate
amended supplemental proxy material, and, if required, resolicit proxies. Parent
shall also use its best efforts to obtain prior to the effective date of the S-4
Registration Statement all necessary state securities law or "blue sky" permits
and approvals required in connection with the Mergers and to consummate the
other transactions contemplated hereby and will pay all expenses incident
thereto.
(b) The Company, Manzano or PNM, as the case may be, each shall use its
reasonable best efforts to cause to be delivered to the other party and its
directors a letter of its independent auditors, dated (i) the date on which the
S-4 Registration Statement shall become effective and (ii) the Closing Date, and
addressed to the other party and its directors, in form and substance customary
for "comfort" letters delivered by independent public accountants in connection
with registration statements similar to the S-4 Registration Statement.
(c) Each party hereto shall file or cause to be filed with the Federal
Trade Commission and the Department of Justice any notifications required to be
filed under the HSR Act, and the rules and regulations promulgated thereunder
with respect to the transactions contemplated hereby. Each party hereto will use
all commercially reasonable efforts to make such filings in a timely manner and
to respond on a timely basis to any requests for additional information made by
either of such agencies.
(d) The Company, Manzano and PNM shall cooperate with each other and use
(and shall cause their respective Subsidiaries to use) their respective
reasonable best efforts to take or cause to be taken all actions, and do or
cause to be done all things, necessary, proper or advisable on its part under
this Agreement and applicable Laws to consummate and make effective the
Transaction and the other transactions contemplated hereby as soon as
practicable, including preparing and filing as soon as practicable all
documentation to effect all necessary notices, reports and other filings and to
obtain as soon as practicable all consents, registrations, approvals, permits
and authorizations necessary or advisable to be obtained from any third party
and/or any Governmental Entity in order to consummate the Transaction or any of
the other transactions contemplated hereby. Subject to applicable Laws relating
to the exchange of information and the preservation of any applicable
attorney-client privilege, work-product doctrine, self-audit privilege or other
similar privilege, each of Manzano, PNM and the Company shall have the right to
review and comment on in advance, and to the extent practicable each will
consult the other on, all the information relating to such party, and any of
their respective Subsidiaries, that appear in any filing made with, or written
materials submitted to, any third party and/or any Governmental Entity in
connection with the Transaction and the other transactions contemplated hereby.
In exercising the foregoing right, each of the Company, Manzano and PNM shall
act reasonably and as promptly as practicable.
(e) Subject to applicable Laws and the preservation of any applicable
attorney-client privilege, the Company, PNM and Manzano each shall, upon request
by the other, furnish the other with all information concerning itself, its
Subsidiaries, directors, officers and shareholders and such other matters as may
be reasonably necessary or advisable in connection with the Prospectus/Proxy
Statement, the S-4 Registration Statement or any other statement, filing, notice
or application made by or on behalf of Parent, Manzano, PNM, the Company or any
of their respective Subsidiaries to any third party and/or any Governmental
Entity in connection with the Mergers and the other transactions contemplated
hereby.
(f) Subject to any confidentiality obligations and the preservation of any
attorney-client privilege, the Company and Manzano and PNM each shall keep the
other apprised of the status of matters relating to completion of the
transactions contemplated hereby, including promptly furnishing the other with
copies of notices or other communications received by Parent, Manzano, PNM or
the Company, as the case may be, or any of its Subsidiaries, from any third
party and/or any Governmental Entity with respect to the Transaction and the
other transactions contemplated hereby.
7.6. Affiliates.
At least 10 days prior to the date of the shareholders meeting of the
Company with respect to this Agreement, the Company shall deliver to Parent a
list of names and addresses of those Persons who the Company expects will be, as
of 30 days prior to the Effective Time, "affiliates" of the Company within the
meaning of Rule 145 under the Securities Act. There shall be added to such list
the names and addresses of any other Person subsequently identified by the
Company as a Person who may be deemed within 30 days prior to the Effective Time
to be an affiliate of the Company for the purposes described above. The Company
shall exercise commercially reasonable efforts to deliver or cause to be
delivered to Parent, prior to the date of its shareholders meeting with respect
to this Agreement, from each affiliate of the Company identified in the
foregoing list (as the same may be supplemented as aforesaid), a letter dated as
of the date of such shareholders meeting substantially in the form attached as
Exhibit D (the "Affiliates Letter").
7.7. Stock Exchange Listing and De-listing.
Parent shall use its best efforts to cause the shares of Parent Common
Stock to be issued in the Mergers to be approved for listing on the NYSE,
subject to official notice of issuance, prior to the Closing Date. The Surviving
Corporation shall use its best efforts to cause the shares of Company Common
Stock to be removed from quotation on the NYSE and de-registered under the
Exchange Act as soon as practicable following the Effective Time.
7.8. Publicity.
The initial press release shall be a joint press release and thereafter the
Company and PNM each shall consult with the other prior to issuing any press
releases or otherwise making public announcements with respect to the Mergers
and the other transactions contemplated hereby and prior to making any filings
with any third party and/or any Governmental Entity with respect thereto, except
as may be required by Law or by obligations pursuant to any listing agreement
with or rules of any national securities exchange or national market system.
7.9. Benefits and Other Employee Matters.
(a) Stock Plans.
With respect to each Stock Plan that remains in effect following the
Effective Time and each award granted prior to the Effective Time pursuant to a
Stock Plan that is to be settled in shares of Company Common Stock (a "Stock
Award") which Stock Award remains outstanding following the Effective Time, the
Company and Parent shall take all corporate action necessary or appropriate to
(i) provide for the issuance or purchase in the open market of Parent Common
Stock rather than Company Common Stock pursuant thereto, (ii) obtain shareholder
approval with respect to such Stock Plans to the extent such approval is
required for purposes of the Code or other applicable law, (iii) reserve for
issuance under such Stock Plans or otherwise provide a sufficient number of
shares of Parent Common Stock for delivery upon payment of benefits, grant of
awards or exercise of options under such Stock Plans or Stock Award and (iv) as
soon as practicable after the Effective Time, file registration statements on
Form S-8 or amendments on such forms to the Form S-4 Registration Statement, as
the case may be (or any successor or other appropriate forms), with respect to
the shares of Parent Common Stock subject to such Stock Plans or Stock Award to
the extent such registration statement is required under applicable law, and
Parent shall use its best efforts to maintain the effectiveness of such
registration statements (and maintain the current status of the prospectuses
contained therein) for so long as such benefits and grants remain payable and
such options remain outstanding. 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, the Surviving Corporation shall administer
the Stock Plans after the Effective Time, where applicable, in a manner that
complies with Rule 16b-3 promulgated under the Exchange Act.
(b) Contributions to Rabbi Trusts.
Prior to the Effective Time, the Company shall contribute to the rabbi
trusts maintained or to be established by the Company and its Subsidiaries for
(i) the Executive Stock Compensation Program under the Long Term Incentive and
Share Award Plan, (ii) the Restricted Share Unit Program under the Long Term
Incentive and Share Award Plan, and (iii) the Executive Salary Continuation
Plan, the amount of cash or shares of Company Common Stock that it reasonably
believes will be required to satisfy outstanding awards or other obligations
under such plans (other than any such awards that will be converted to Merger
Consideration that is immediately distributed to the holder thereof), and at or
prior to the end of each year commencing with the year in which the Closing
occurs, Parent shall contribute or cause to be contributed to the rabbi trust
any amount of cash or securities required to make up any shortfall in earnings
and any additional amounts to keep all benefits and estimated expenses fully
funded.
(c) Employee Benefits.
Parent agrees that, during the period commencing at the Effective Time and
ending on the second anniversary thereof, the non-union employees of the Company
and its Subsidiaries who continue to be employees of the Surviving Corporation,
Parent or their respective Subsidiaries (the "Non-Union Employees") will
continue to be provided with benefits under employee benefit plans that are no
less favorable in the aggregate than those currently provided by the Company and
its Subsidiaries to such employees. Following the Effective Time, Parent shall
cause service by Non-Union Employees of the Company and its Subsidiaries (and
any predecessor entities) to be taken into account for all purposes (including,
without limitation, eligibility to participate, eligibility to commence
benefits, vesting, benefit accrual and severance) under the Compensation and
Benefit Plans or any other benefit plans of Parent or its Subsidiaries in which
such employees participate.
From and after the Effective Time, Parent shall (i) cause to be waived any
pre-existing condition limitations under benefit plans, policies or practices of
Parent or its Subsidiaries in which employees of the Company or its Subsidiaries
participate and (ii) cause to be credited any deductibles and out-of-pocket
expenses incurred by such employees and their beneficiaries and dependents
during the portion of the calendar year prior to participation in the benefit
plans provided by Parent and its Subsidiaries.
Parent shall, and shall cause the Surviving Corporation to, honor all
employee benefit obligations to current and former employees and directors under
the Compensation and Benefit Plans and to honor all collective bargaining
agreements or other labor agreements in effect at the Effective Time. Parent
shall cause the Surviving Corporation to assume in writing the rights and
obligations under the employment agreements and change of control agreements to
which the Company is a party at the Effective Time as required by such
agreements; provided, however, that the foregoing shall not prevent Parent or
the Surviving Corporation from enforcing such employment agreements and change
of control agreements in accordance with their terms, including, without
limitation, any reserved right to amend, modify, suspend, revoke or terminate
any such employment agreements and change of control agreements.
Parent acknowledges that the transactions contemplated by this Agreement
meet the definition of, and shall constitute, a "change in control" under each
Compensation and Benefit Plan listed in Section 7.9 of the Company Disclosure
Letter.
(d) Employees.
It is the present intention of Parent and the Company that following the
Effective Time, there will be no involuntary reductions in workforce at the
Surviving Corporation or its Subsidiaries, and that Parent, the Surviving
Corporation and their respective Subsidiaries will continue Parent's and the
Company's present strategy of achieving workforce reductions through attrition
or other voluntary means; provided, however, that if any reductions in workforce
in respect of employees of Parent and its Subsidiaries, including the Surviving
Corporation and its Subsidiaries, become necessary, they shall be made on a fair
and equitable basis, in light of the circumstances and the objectives to be
achieved, giving consideration to previous work history, job experience,
qualifications, and business needs without regard to whether employment prior to
the Effective Time was with the Company or its Subsidiaries or Parent or its
Subsidiaries, and any employees whose employment is terminated or jobs are
eliminated by Parent, the Surviving Corporation or any of their respective
Subsidiaries shall be entitled to participate on a fair and equitable basis in
the job opportunity and employment placement programs offered by Parent, the
Surviving Corporation or any of their respective Subsidiaries. Any workforce
reductions carried out following the Effective Time by Parent or the Surviving
Corporation and their respective Subsidiaries shall be done in accordance with
all applicable collective bargaining agreements, and all Laws and regulations
governing the employment relationship and termination thereof including, without
limitation, the Worker Adjustment and Retraining Notification Act and
regulations promulgated thereunder, and any comparable state or local law.
7.10. Board of Directors; Corporate Headquarters and Community Involvement.
(a) Election to Parent's Board of Directors.
At the Effective Time, Parent shall take such action as may be necessary to
cause two individuals selected by Parent from a pool of nominees designated by
the Company, including members of the Board of Directors of the Company, to be
appointed to the Board of Directors of Parent with each such designee serving in
a different class on the Parent Board of Directors. The directors designated by
the Company shall comply with the Parent's criteria for membership on its Board
of Directors as in effect for PNM as of the date hereof and set forth in Section
7.10 of the Parent Disclosure Schedule. Each of the directors designated by the
Company shall be appointed to serve on a committee of the Parent Board of
Directors. The rights set forth in this Section 7.10 are separate from and in
addition to any rights Westar shall have to designate members of the Board of
Directors of Parent pursuant to the terms of the Stockholder Agreement between
Westar and Parent to be entered into as of the Effective Time.
(b) Regional Headquarters.
Following the Effective Time, the Surviving Corporation shall maintain its
regional headquarters in Topeka, Kansas.
(c) Community Involvement.
Parent acknowledges that after the Effective Time, it intends to provide
charitable contributions and community support within the service areas of the
Company and its Subsidiaries at levels consistent with past practice.
7.11. Dividends.
The Company and Parent shall coordinate with each other the declaration,
setting of record dates and payment dates of dividends on shares of their
respective common stock so that holders of shares of Company Common Stock do not
receive dividends on both shares of Company Common Stock and Parent Common Stock
received in the Merger in respect of any single calendar quarter or fail to
receive a dividend on either shares of Company Common Stock or Parent Common
Stock received in the Merger in respect of any single calendar quarter.
7.12. Indemnification; Directors' and Officers' Insurance.
(a) Parent shall indemnify and hold harmless, to the fullest extent
permitted under applicable law and as required pursuant to the existing
indemnity agreements of the Company (and Parent shall also advance expenses as
incurred to the fullest extent permitted under applicable law and as required
pursuant to the existing indemnity agreements of the Company provided the Person
to whom expenses are advanced provides an undertaking to repay such advances if
it is ultimately determined that such Person is not entitled to
indemnification), each present and former director, officer and employee of the
Company and its Subsidiaries (collectively, the "Indemnified Parties") against
any costs or expenses (including attorneys' fees and expenses), judgments,
fines, losses, claims, damages or liabilities (collectively, "Costs") incurred
in connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of or pertaining
to matters existing or occurring at or prior to the Effective Time, including
the transactions contemplated hereby. In the event any claim or claims are
asserted or made within six years after the Effective Time, all rights to
indemnification in respect of any such claim or claims shall continue until
final disposition of any and all such claims.
(b) Any Indemnified Party wishing to claim indemnification under paragraph
(a) of this Section 7.12, upon receiving written notification of any such claim,
action, suit, proceeding or investigation, shall promptly notify the Surviving
Corporation thereof, but the failure to so notify shall not relieve the
Surviving Corporation of any liability it may have to such Indemnified Party if
such failure does not materially and irreversibly prejudice Parent. In the event
of any such claim, action, suit, proceeding or investigation (whether arising
before or after the Effective Time), (i) Parent shall pay the fees and expenses
of counsel selected by the Indemnified Party, which counsel shall be reasonably
satisfactory to Parent, promptly after statements therefor are received, and
otherwise advance to such Indemnified Party upon request reimbursement of
documented expenses reasonably incurred, (ii) Parent will cooperate in the
defense of any such matter, and (iii) any determination required to be made with
respect to whether an Indemnified Party's conduct complies with the standards
set forth under applicable Law shall be made by independent counsel mutually
acceptable to Parent and the Indemnified Party; provided, however, that (A)
Parent shall be obligated pursuant to this paragraph (b) to pay for only one
firm of counsel for all Indemnified Parties in any jurisdiction, except to the
extent there is, in the opinion of counsel to an Indemnified Party, under
applicable standards of professional conduct, a conflict on any significant
issue between the positions of such Indemnified Party and any other Indemnified
Party or Indemnified Parties, in which case each Indemnified Party with a
conflicting position on a significant issue shall be entitled to retain separate
counsel mutually satisfactory to Parent and such Indemnified Party, (B) the
Indemnified Parties shall cooperate in the defense of any such matter and (C)
Parent shall not be liable for any settlement effected without its prior written
consent (which consent may not be unreasonably withheld or delayed).
(c) The Surviving Corporation shall maintain the Company's existing
officers' and directors' liability insurance ("D&O Insurance") for a period of
six years after the Effective Time so long as the annual premium therefor is not
in excess of 200% of the last annual premium paid prior to the date hereof (the
"Current Premium"); provided, however, if the existing D&O Insurance is
terminated or cancelled during such six-year period, the Surviving Corporation
shall use its best efforts to obtain as much D&O Insurance as can be obtained
for the remainder of such period for a premium not in excess (on an annualized
basis) of 200% of the Current Premium and shall agree to indemnify the directors
and officers for any Costs not covered by such D&O Insurance; and (iii) if the
annual premiums for the existing D&O Insurance exceed 200% of the Current
Premium, the Surviving Corporation shall obtain as much D&O Insurance as can be
obtained for the remainder of such period for a premium not in excess (on an
annualized basis) of 200% of the Current Premium.
(d) If Parent or the Surviving Corporation or any of its successors or
assigns (i) shall consolidate with or merge into any other corporation or entity
and shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) shall transfer all or substantially all of its
properties and assets to any individual, corporation or other entity, then, and
in each such case, proper provisions shall be made so that the successors and
assigns of Parent or the Surviving Corporation shall assume all of the
obligations set forth in this Section 7.12.
(e) The provisions of this Section 7.12 are intended to be for the benefit of,
and shall be enforceable by, each of the Indemnified Parties, their heirs and
their representatives.
7.13. Expenses.
Subject to Sections 9.5(b) through (e), whether or not the Mergers are
consummated, all costs and expenses incurred in connection with the Mergers and
the other transactions contemplated hereby shall be paid by the party incurring
such expense, except that each of the Company and PNM shall bear and pay
one-half of the costs and expenses incurred in connection with the filing,
printing and mailing of the S-4 Registration Statement and the Prospectus/Proxy
Registration Statement (including SEC filing fees).
7.14. Takeover Statute.
If any Takeover Statute is or may become applicable to the Mergers or the
other transactions contemplated hereby, each of Parent, Manzano, PNM, Merger
Sub-1 Merger Sub-2 and the Company and their respective Board of Directors shall
grant such approvals and take such actions as are necessary so that such
transactions may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise act to eliminate or minimize the effects of
such statute or regulation on such transactions.
7.15. Manzano Vote.
Parent and Manzano shall vote (or consent with respect to) or cause to be
voted (or a consent to be given with respect to) any shares of Company Common
Stock and any shares of common stock of Merger Sub-1 and Merger Sub-2
beneficially owned by it or any of its Affiliates or with respect to which it or
any of its Affiliates has the power (by agreement, proxy or otherwise) to cause
to be voted (or to provide a consent), in favor of the approval of this
Agreement and the transactions contemplated hereby at any meeting of
shareholders of the Company, Merger Sub-1 or Merger Sub-2, respectively, at
which this Agreement shall be submitted for approval and at all adjournments or
postponements thereof (or, if applicable, by any action of shareholders of
either the Company, Merger Sub-1 or Merger Sub-2 by consent in lieu of a
meeting).
7.16. Agreements Relating to the Split-Off.
The terms of the Split-Off Agreements may be amended by the Company and
Westar; provided however, that Parent's consent, which shall not be unreasonably
withheld, shall be required in connection with any revision to the terms of the
Split-Off Agreements in the forms attached hereto as Exhibit A that would
reasonably be expected to be adverse in any manner to the Company or to Parent.
7.17. Redemption of Preferred Shares.
Prior to the Effective Time, the Board of Directors of the Company shall
call for redemption all outstanding Preferred Shares (not including the
Convertible Preference Shares) at a redemption price equal to the amount set
forth in the restated articles of incorporation of the Company, together with
all dividends accrued and unpaid to the date of such redemption and take all
other required action so that all Preferred Shares shall be redeemed and no such
Preferred Shares shall be deemed to be outstanding at the Effective Time or
entitled to vote on the approval of this Agreement and the transactions
contemplated hereby. The parties agree to cooperate in connection with
registering Parent as a "holding company" under Section 5 of the 1935 Act to use
the provisions of subparagraph (iv) of subdivision (c) of paragraph 6 of section
A of Article IV of the restated articles of incorporation of the Company as a
means of obviating the need to seek approval of this Agreement and the
transactions contemplated hereby by the holders of Preferred Shares as a
separate class, in which case the outstanding Preferred Shares shall not be
called for redemption and shall remain outstanding notwithstanding the Merger.
7.18. Conveyance Taxes.
The Company, Parent, PNM and Manzano shall cooperate in the preparation,
execution and filing of all returns, questionnaires, applications or other
documents regarding any real property transfer or gains, sales, use, transfer,
value added, stock transfer and stamp Taxes, any transfer, recording,
registration and other fees, and any similar Taxes which become payable in
connection with the transactions contemplated by this Agreement ("Transaction
Taxes") that are required or permitted to be paid on or before the Effective
Time. The Company shall pay, without deduction or withholding (except where such
deduction or withholding is required by applicable law) from any amount payable
to the holders of any shares of the Company Common Stock, any such Transaction
Taxes which become payable in connection with the Split-Off and Merger, on
behalf of the shareholders of the Company. Manzano, or PNM, as the case may be,
shall pay, without deduction or withholding (except where such deduction or
withholding is required by applicable law) from any amount payable to the
holders of any shares of Manzano Common Stock or PNM Common Stock, any such
Transfer Taxes which become payable in connection with the Transaction.
7.19. Transition Steering Team.
As soon as reasonably practicable after the date hereof, PNM and the
Company shall create a special transition steering team (the "Transition
Steering Team"), with representation from PNM and the Company, that will develop
recommendations concerning the future structure and operations of the Surviving
Corporation after the Effective Time, subject to applicable law. The members of
the Transition Steering Team shall be appointed by the Chief Executive Officers
of PNM and the Company. The functions of the Transition Steering Team shall
include (i) to direct the exchange of information and documents between the
parties and their subsidiaries as contemplated by Section 7.1, and (ii) the
development of regulatory plans and proposals, corporate organizational and
management plans, workforce combination proposals, and such other matters as
they deem appropriate.
7.20. Termination of Tax Sharing Agreements.
At the effective time of the Split-Off, the Company shall cause the Tax
sharing agreement with Protection One, Inc. and all other tax sharing agreements
and arrangements (other than the Disaffiliation Agreement) to be terminated or
no longer in effect with respect to periods following the date of the Split-Off
as between any member of the Western Group and its Affiliates (as those terms
are defined in the Tax Disaffiliation Agreement) on the one hand and any member
of the Westar Group and its Affiliates (as those terms are defined in the Tax
Disaffiliation Agreement) on the other hand.
7.21. Tax Disaffiliation Agreement.
At the Effective Time, Parent shall succeed to the rights and obligations
of the Company under the Tax Disaffiliation Agreement and shall perform all
agreements and covenants contained therein.
7.22. Shared Services Agreement.
Effective upon the Closing, the Company or such other affiliate of the
Company as shall be designated by Parent subject to Westar's approval shall
enter into a Shared Services Agreement in form and substance reasonably
satisfactory to each party and satisfying all requirements of the 1935 Act,
pursuant to which the Company shall provide services to Westar on the terms and
conditions specified in Exhibit B to the Allocation and Separation Agreement.
Effective as of the Closing Date, the Company will assign the Service Agreement
between the Company and Protection One, Inc., dated April 1, 1999, as amended,
to Westar.
7.23. Interim Reporting.
No later than the tenth Business Day of each calendar month through the
Cut-Off Date, the Company will deliver a statement with respect to the
immediately preceding calendar month, of (i) Additional Cash paid to the Company
(including information as to the source) during such month, (ii) the application
of such Additional Cash, and (iii) the option selected by Westar pursuant to
Section 3.2(a)(i), such statement also to include a summary of cumulative
amounts and any changes in amounts since the date hereof.
7.24. Possible Exchange.
The parties recognize that it would be beneficial for Parent if, in lieu of
the conversion of the Convertible Preference Shares into the Parent Convertible
Shares pursuant to Section 3.2(b)(iv) hereof (the "Conversion"), the Convertible
Preference Shares were instead exchanged (an "Exchange") for a principal amount
of 7.5% subordinated debt instruments of Parent equal to the aggregate
liquidation preference of the Convertible Preference Shares which debt
instruments ("Parent Convertible Debt") would be (i) convertible into shares of
Parent Common Stock at the same conversion ratio as the Convertible Preference
Shares, (ii) otherwise substantially in the form of the Company's 7-7/8%
Cumulative Quarterly Income Preferred Shares, Series A, and (iii) redeemable at
the option of Parent at par plus accrued interest on the same date on which the
Parent Convertible Shares would have been first redeemable at the option of
Parent. Accordingly, if, prior to satisfaction of the conditions contained in
Article VIII hereof, Parent proposes that an Exchange occur and such Exchange
would (i) not delay the Effective Time and (ii) otherwise preserves for Westar
the economic and tax benefits of ownership of Parent Convertible Shares that
otherwise would have been received upon conversion of the Convertible Preference
Shares including, but not limited to, the payment to Westar of cash in an amount
that reasonably compensates Westar for the reasonably estimated additional Tax
payments, if any, resulting from the Proposed Exchange (taking into account,
among other things, the amount (as reasonably projected on the Effective Date)
of (x) Westar's additional tax liability from the Exchange being taxable and
Westar subsequently receiving interest instead of dividends until the date that
the Parent Convertible Debt could have first been redeemed by Parent (the "First
Redemption Date") and (y) the utilization of or loss of any current or future
tax benefits of the Westar Group that could be used to offset tax liability of
any member of the Westar Group in any Tax period through the end of the Tax
period which includes the First Redemption Date), then the parties shall make a
good faith effort to effect an Exchange instead of a Conversion by means of
mutually agreed customary documentation that so preserves such benefits;
provided that if the Company Requisite Vote or the Parent Requisite Vote has
already been obtained, such Exchange does not require any additional approval of
the shareholders of the Company under the KGCC or other applicable law or the
shareholders of PNM or Parent under the NMBCA or other applicable law. In the
event that the parties adopt an Exchange, the Agreement shall be revised to
reflect such transaction as determined necessary by the parties hereto and prior
to effecting any such Exchange, all material third party and Governmental
Authority declarations, filings, registrations, notices, authorizations,
consents or approvals necessary for the effectuation of such Exchange shall have
been obtained and all other conditions to the parties' obligations to consummate
the Transaction and other transactions contemplated hereby, as applied to such
Exchange, shall have been satisfied or waived.
Article VIII.
Conditions
8.1. Conditions to Each Party's Obligation to Effect the Transaction.
The respective obligation of each party to effect the Mergers is subject to
the satisfaction or waiver at or prior to the Effective Time of each of the
following conditions:
(a) Shareholder Approval.
The Company Requisite Vote and the Parent Requisite Vote shall have been
obtained. This Agreement shall have been approved by the sole shareholder of
Merger Sub-1 and Merger Sub-2.
(b) NYSE Listing.
The shares of Parent Common Stock issuable to the shareholders of the
Company and Manzano in the Mergers pursuant to Article II shall have been
authorized for listing on the NYSE upon official notice of issuance.
(c) HSR.
The waiting period applicable to the consummation of the Mergers under the
HSR Act shall have expired or been earlier terminated.
(d) Other Regulatory Consents.
The Parent Required Statutory Approvals and the Company 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 such
Final Order shall impose terms or conditions that would have, or would be
reasonably likely to have a material adverse effect on the financial condition,
business, assets or results of operations of Parent, Manzano, PNM and the
Company (together with their respective Subsidiaries) taken as a whole; it being
understood that the effect of any law, regulation, ruling, order or decree
referred to in Sections 8.2(f) and 8.3(e) shall not be taken into account in
making such determination. A "Final Order" means action (including the approval
of transfer, assignment or modification of Environmental Permits) 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.
(e) Injunction.
No court or Governmental Entity of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any statute, law, ordinance,
rule, regulation, judgment, decree, injunction or other order that is in effect
and permanently enjoins or otherwise prohibits consummation of the Mergers or
the other transactions contemplated hereby (collectively, an "Order").
(f) S-4.
The S-4 Registration Statement shall have become effective under the
Securities Act. No stop order suspending the effectiveness of the S-4
Registration Statement shall have been issued, and no proceedings for that
purpose shall have been initiated or be threatened, by the SEC.
(g) Split-Off.
The Split-Off shall have been consummated in accordance with the terms
hereof and of the Allocation and Separation Agreement and the Company shall have
received copies of the "solvency opinions" delivered in connection with the
Split-Off.
(h) Stockholder and Registration Rights Agreement.
Each of the Stockholder Agreement between Parent and Westar substantially
in the form attached hereto as Exhibit E and the Registration Rights Agreement
between Parent and Westar substantially in the form attached hereto as Exhibit F
shall have been executed by the parties thereto.
(i) Blue Sky Approvals.
Parent shall have received all state securities and "blue sky" permits and
approvals necessary to consummate the Mergers.
8.2. Conditions to Obligations of Parent, Merger Sub-1 and Merger Sub-2.
The obligations of Parent and Merger Sub 1 and Merger Sub-2 to effect the
Mergers are also subject to the satisfaction or waiver by Parent at or prior to
the Effective Time of the following conditions:
(a) Representations and Warranties.
The representations and warranties of the Company set forth in this
Agreement which are not modified by the words "Material Adverse Effect" shall be
true and correct as of the Closing Date as though made on and as of the Closing
Date, except for failures to be true and correct that individually or in the
aggregate would not reasonably be likely to have a Company Material Adverse
Effect (except to the extent any such representation or warranty expressly
speaks as of an earlier date, which representations and warranties shall be true
and correct as of such date in the same manner as specified above), and the
representations and warranties of the Company set forth in this Agreement which
are modified by the words "Material Adverse Effect" shall be true and correct as
of the Closing Date as though made on and as of the Closing Date (except to the
extent any such representation or warranty expressly speaks as of an earlier
date, which representations and warranties shall be true and correct as of such
date in the same manner as specified above), and Parent shall have received a
certificate signed on behalf of the Company by an executive officer of the
Company to such effect.
(b) Performance of Obligations of the Company.
The Company shall have performed in all material respects all material
obligations required to be performed by it under this Agreement at or prior to
the Closing Date, and Parent shall have received a certificate signed on behalf
of the Company by an executive officer of the Company to such effect.
(c) Tax Opinion.
Parent shall have received an opinion from Winthrop, Stimson, Putnam &
Roberts, tax counsel to Parent, in form and substance reasonably satisfactory to
Parent, dated as of the Closing Date, substantially to the effect that the
Mergers, taken together, will be treated as a transaction described in Section
351 of the Code or the Second Merger will be treated as a transaction described
in Section 368(a) of the Code, in each case in which neither the holders of PNM
Common Stock or the holders of Company Common Stock (other than Westar) nor
Parent or the Company will recognize taxable gain or loss. In rendering such
opinion, Winthrop, Stimson, Putnam & Roberts may require and rely upon
representations reasonably satisfactory to Winthrop, Stimson, Putnam & Roberts
contained in certificates of officers of the Company, Westar, Parent, Manzano,
PNM, Merger Sub-1 and Merger Sub-2.
(d) Consents Under Agreements.
The Company shall have obtained the consent or approval of each person
whose consent or approval shall be required under any material Company Contract
except for such consents or approvals the failure of which to obtain would not
be reasonably likely to result in a material adverse effect on Parent and the
Company (together with the Subsidiaries of Parent and the Company), taken as a
whole.
(e) Affiliates Letters.
Parent shall have received an Affiliates Letter from each person identified
as an affiliate of the Company pursuant to Section 7.6.
(f) No Adverse Regulatory Change.
Since the date of this Agreement, no law, regulation, ruling, order or
decree (or new interpretation of any of the foregoing) affecting the Company or
Kansas Gas and Electric Company shall have been adopted, amended or issued that,
individually or in the aggregate, would have a material adverse effect on the
financial condition, business, assets or results of operations of Parent,
Manzano, PNM and the Company (together with their respective Subsidiaries) taken
as a whole. In determining whether this condition has been satisfied, Parent (i)
shall also take into account the effects of any ruling, order or decree by any
Governmental Entity issued between the date hereof and the Closing Date on the
electric rates and charges of the Company and Kansas Gas and Electric Company or
on the revenue potential of the Company and Kansas Gas and Electric Company as
existing on the date of this Agreement, and (ii) shall not take into account the
Parent Required Statutory Approvals and the Company Required Statutory
Approvals.
8.3. Conditions to Obligation of the Company.
The obligation of the Company to effect the Merger is also subject to the
satisfaction or waiver by the Company at or prior to the Effective Time of the
following conditions:
(a) Representations and Warranties.
The representations and warranties of Parent, PNM, Manzano, Merger Sub-1
and Merger Sub-2 set forth in this Agreement which are not modified by the words
"Material Adverse Effect" shall be true and correct as of the Closing Date as
though made on and as of the Closing Date, except for failures to be true and
correct that individually or in the aggregate would not reasonably be likely to
have a Parent Material Adverse Effect (except to the extent any such
representation or warranty expressly speaks as of an earlier date, which
representations and warranties shall be true and correct as of such date in the
same manner as specified above) and the representations and warranties of
Parent, PNM, Manzano, Merger Sub-1 and Merger Sub-2 set forth in this Agreement
which are modified by the words "Material Adverse Effect" shall be true and
correct as of the Closing Date as though made on and as of the Closing Date
(except to the extent any such representation or warranty expressly speaks as of
an earlier date, which representations and warranties shall be true and correct
as of such date in the same manner as specified above), and the Company shall
have received a certificate signed on behalf of Parent by an executive officer
of Parent to such effect.
(b) Performance of Obligations of Parent and Merger Sub.
Each of Parent, Manzano, PNM, Merger Sub-1 and Merger Sub-2 shall have
performed in all material respects all material obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and the
Company shall have received a certificate signed on behalf of Parent by an
executive officer of Parent to such effect.
(c) Tax Opinion.
The Company shall have received an opinion from LeBoeuf, Lamb, Greene &
MacRae L.L.P., tax counsel to the Company, in form and substance reasonably
satisfactory to the Company, dated as of the Closing Date, substantially to the
effect that (i) the Split-Off will be treated as a taxable exchange of the
Split-Off Portion of the Company Common Stock for shares of Westar Common Stock
and (ii) the Mergers, taken together, will be treated as a transaction described
in Section 351 of the Code or the Merger will be treated as a transaction
described in Section 368(a) of the Code; provided, however, that the condition
set forth in clause (i) above shall also be satisfied to the extent the Company
receives a private letter ruling from the Internal Revenue Service, in form and
substance reasonably satisfactory to the Company, substantially to the same
effect as the opinion described in clause (i) above. In rendering such opinion
LeBoeuf, Lamb, Greene & MacRae, L.L.P. may require and rely upon representations
reasonably satisfactory to LeBoeuf, Lamb, Greene & MacRae, L.L.P. contained in
certificates of officers of the Company, Westar, Parent, Manzano, PNM, Merger
Sub-1 or Merger Sub-2.
(d) Consents Under Agreements.
Parent shall have obtained the consent or approval of each Person whose
consent or approval shall be required under any material Parent Contract except
for such consents or approvals the failure of which to obtain would not be
reasonably likely to result in a material adverse effect on Parent and the
Company (together with the Subsidiaries of Parent and the Company) taken as a
whole.
(e) No Adverse Regulatory Change.
Since the date of this Agreement, no law, regulation, ruling, order or
decree (or new interpretation of any of the foregoing) affecting the Parent
shall have been adopted, amended or issued that, individually or in the
aggregate, would have a material adverse effect on the financial condition,
business, assets or results of operations of Parent, Manzano, PNM and the
Company (together with their respective Subsidiaries) taken as a whole. In
determining whether this condition has been satisfied, the Company (i) shall
also take into account the effects of any ruling, order or decree by any
Governmental Entity issued between the date hereof and the Closing Date on the
rates and charges of PNM (or any successor regulated as to rates by the NMPRC or
the FERC) or on the revenue potential of the Company and PNM (or any successor
regulated as to rates by the NMPRC or the FERC) as existing on the date of this
Agreement, and (ii) shall not take into account the Parent Required Statutory
Approvals and the Company Required Statutory Approvals.
(f) Ownership Percentage.
At the Effective Time, the holders of outstanding shares of Company Common
Stock, excluding Westar, will receive an amount of shares of Parent Common Stock
in excess of the number of shares of Parent Common Stock to be received by
shareholders of PNM or Manzano at the Effective Time.
Article IX.
Termination
9.1. Termination by Mutual Consent.
This Agreement may be terminated and the Mergers may be abandoned at any
time prior to the Effective Time, whether before or after receipt of the Company
Requisite Vote or the Parent Requisite Vote, by mutual written consent of the
Company and PNM by action of their respective Boards of Directors.
9.2. Termination by Either Parent or the Company.
This Agreement may be terminated and the Mergers may be abandoned at any
time prior to the Effective Time by action of the Board of Directors of either
PNM or the Company if (a) the Mergers shall not have been consummated by
December 31, 2001, whether such date is before or after the date of receipt of
the Company Requisite Vote or the Parent Requisite Vote (the "Termination
Date"), provided that the Termination Date shall be automatically extended for
twelve months if, on the Termination Date any of the conditions set forth in
Section 8.1(c), (d) or (g) shall not have been satisfied or waived but (x) each
of the other conditions to the consummation of the Mergers set forth in Article
VIII has been satisfied or waived or remains capable of satisfaction, and (y)
any approvals required by Section 8.1(c) or (d) that have not yet been obtained
are being pursued diligently and in good faith, (b) the Company Requisite Vote
or the Parent Requisite Vote shall not have been obtained at a meeting duly
convened therefor or at any adjournment or postponement thereof, or (c) any
Order permanently restraining, enjoining or otherwise prohibiting consummation
of the Mergers shall become final and non-appealable after the parties have used
their respective best efforts to have such Order removed, repealed or overturned
(whether before or after the approval by the shareholders of the Company);
provided, that the right to terminate this Agreement pursuant to clause (a)
above shall not be available to any party that has breached in any material
respect its obligations under this Agreement in any manner that shall have
proximately caused the occurrence of the failure of the Mergers to be
consummated.
9.3. Termination by the Company.
This Agreement may be terminated and the Mergers may be abandoned by action
of the Board of Directors of the Company at any time prior to (a) receipt of the
Company Requisite Vote, if the Board of Directors of the Company shall adopt an
agreement providing for a Superior Proposal; provided, however, that (i) the
Company is not then in breach of Section 7.2 and (ii) the termination pursuant
to this Section 9.3(a) shall not be effective unless the Company shall at or
prior to the time of such termination make the payment required by Section
9.5(b); or (b) the Effective Time, whether before or after receipt of the
Company Requisite Vote, if there has been a material breach by Parent, PNM,
Manzano, Merger Sub-1 or Merger Sub-2 of any material representation, warranty,
covenant or agreement contained in this Agreement that is not curable or, if
curable, is not cured within 20 days after written notice of such breach is
given by the Company to the party committing such breach or (c) to the Effective
Time if the Board of Directors of PNM or Manzano withdraws or adversely modifies
its adoption of this Agreement or its recommendation that the shareholders of
PNM or Manzano approve this Agreement.
9.4. Termination by Parent.
This Agreement may be terminated and the Mergers may be abandoned by action
of the Board of Directors of PNM at any time prior to (a) receipt of the Parent
Requisite Vote, if the Board of Directors of PNM or Manzano shall adopt an
agreement providing for a Superior Proposal; provided, however, that (i) such
party is not then in breach of Section 7.2 and (ii) the termination pursuant to
this Section 9.4(a) shall not be effective unless PNM shall at or prior to the
time of such termination make the payment required by Section 9.5(c); or (b) the
Effective Time, whether before or after receipt of the Parent Requisite Vote, if
there has been a material breach by the Company of any material representation,
warranty, covenant or agreement contained in this Agreement that is not curable
or, if curable, is not cured within 20 days after written notice of such breach
is given by PNM to the Company or (c) the Effective Time if the Board of
Directors of the Company withdraws or adversely modifies its adoption of this
Agreement or its recommendation that the shareholders of the Company approve
this Agreement.
9.5. Effect of Termination and Abandonment.
(a) In the event of termination of this Agreement and the abandonment of
the Mergers pursuant to this Article IX, this Agreement (other than as set forth
in Section 10.1) shall become void and of no effect with no liability on the
part of any party hereto (or of any of its directors, officers, employees,
agents, legal and financial advisors or other representatives); provided,
however, that except as otherwise provided herein, no such termination shall
relieve any party hereto of any liability or damages resulting from any breach
of this Agreement.
(b) In the event that this Agreement is terminated by the Company pursuant
to Section 9.3(a), then the Company shall promptly, but in no event later than
two days after the date of such termination, pay PNM a termination fee (as
liquidated damages) of $35 million by wire transfer of same day funds to an
account previously designated in writing by PNM to the Company. In the event
that an Acquisition Proposal shall have been made to the Company after the date
hereof or any person (other than PNM or any of its Affiliates) shall have
publicly announced after the date hereof an intention (whether or not
conditional) to make an Acquisition Proposal with respect to the Company and
thereafter this Agreement is terminated (i) by either PNM or the Company
pursuant to Section 9.2(b) (following the failure to obtain the Company
Requisite Vote at a time when such Acquisition Proposal remains outstanding) or
(ii) by PNM pursuant to Section 9.4(c) (following withdrawal or failure to
affirm the recommendation by the Company's Board of Directors), pay PNM a
termination fee (as liquidated damages) of $35 million by wire transfer of same
day funds to an account previously designated by PNM to the Company in writing.
(c) In the event that this Agreement is terminated by PNM pursuant to
Section 9.4(a), then PNM shall promptly, but in no event later than two days
after the date of such termination, pay the Company a termination fee (as
liquidated damages) of $35 million by wire transfer of same day funds to an
account previously designated in writing by the Company to PNM. In the event
that an Acquisition Proposal shall have been made to PNM or Manzano after the
date hereof or any person (other than the Company or any of its Affiliates)
shall have publicly announced after the date hereof an intention (whether or not
conditional) to make an Acquisition Proposal with respect to PNM and thereafter
this Agreement is terminated (i) by either the Company or PNM pursuant to
Section 9.2(b) (following the failure to obtain the Parent Requisite Vote at a
time when such Acquisition Proposal remains outstanding) or (ii) or by the
Company pursuant to Section 9.3(c) (following withdrawal or failure to affirm
the recommendation by Board of Directors of PNM or Manzano), pay the Company a
termination fee (as liquidated damages) of $35 million, by wire transfer of same
day funds to an account previously designated by the Company to PNM in writing.
(d) In the event that this Agreement is terminated by either PNM or the
Company pursuant to Section 9.2(b) as a result of failure to obtain the Company
Requisite Vote and at the time of the related meeting of Company Shareholders no
Acquisition Proposal for the Company is outstanding, then the Company shall
promptly, but in no event later than two days after the date of such
termination, pay to PNM by wire transfer of same day funds to an account
previously designated by PNM to the Company in writing an amount equal to $17.5
million. In the event that this Agreement is terminated by either the Company or
PNM pursuant to Section 9.2(b) as a result of failure to obtain the Parent
Requisite Vote and at the time of the related meeting of PNM or Manzano
shareholders, as the case may be, no Acquisition Proposal for PNM or Manzano is
outstanding, then PNM shall promptly, but in no event later than five days after
the date of such termination, pay to the Company by wire transfer of same day
funds to an account previously designated by the Company to PNM in writing an
amount equal to $17.5 million.
(e) In the event that this Agreement is terminated by PNM pursuant to
Section 9.4(c) following withdrawal or failure to affirm the recommendation by
the Company's Board of Directors and at such time no Acquisition Proposal for
the Company is outstanding, then the Company shall promptly, but in no event
later than two days after the date of such termination, pay to PNM by wire
transfer of same day funds to an account previously designated by PNM to the
Company in writing an amount equal to $25 million. In the event this Agreement
is terminated by the Company pursuant to Section 9.3(c) following withdrawal or
failure to affirm the recommendation by the Board of Directors of PNM or Manzano
and at such time no Acquisition Proposal for PNM or Manzano is outstanding, then
PNM shall promptly, but is no event later than two days after the date of such
termination, pay to the Company by wire transfer of same day funds to an account
previously designated by the Company to PNM in writing as amount equal to $25
million.
(f) The parties acknowledge that the agreements contained in Sections
9.5(b) through (e) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements the other party would not have
entered into this Agreement; accordingly, if any party fails to promptly pay any
amounts due pursuant to Sections 9.5(b) through (e) and in order to obtain such
payment the other party commences a suit which results in a judgement against
the defaulting party for payment of all or a portion of a termination fee, the
defaulting party shall pay to the other party its costs and expenses (including
its reasonable attorneys' fees) incurred in connection with such suit, together
with interest from the date of termination of this Agreement on the amounts owed
at the prime rate of Citibank, N.A. in effect from time to time during such
period. The payment of such termination fee shall be the sole and exclusive
remedy of the other party with respect to the facts and circumstances giving
rise to such payment obligation and the Termination Fee is payable whether or
not there has been a breach of this Agreement.
Article X.
Miscellaneous and General
10.1. Survival.
This Article X and the agreements of the Company, Parent, Manzano, PNM,
Merger Sub-1 and Merger Sub-2 contained in Sections 7.7 (Stock Exchange Listing
and De-listing), 7.9 (Benefits and Other Employee Matters), 7.12
(Indemnification; Directors' and Officers' Insurance), 7.13 (Expenses) and 7.21
(Tax Disaffiliation Agreement) shall survive the consummation of the Mergers.
This Article X, the agreements of the Company, Parent, Manzano and PNM Sub
contained in Section 7.13 (Expenses), Section 9.5 (Effect of Termination and
Abandonment) and the Confidentiality Agreements shall survive the termination of
this Agreement. All other representations, warranties, covenants and agreements
in this Agreement shall not survive the consummation of the Mergers or the
termination of this Agreement.
10.2. Modification or Amendment.
Subject to the provisions of applicable Law, at any time prior to the
Effective Time, the parties hereto may modify or amend this Agreement, by
written agreement executed and delivered by duly authorized officers of the
respective parties.
10.3. Waiver of Conditions.
The conditions to each of the parties' obligations to consummate the
Mergers are for the sole benefit of such party and may be waived by such party
in whole or in part to the extent permitted by applicable law.
10.4. Counterparts.
This Agreement may be executed in any number of counterparts, each such
counterpart being deemed to be an original instrument, and all such counterparts
shall together constitute the same agreement.
10.5. GOVERNING LAW AND VENUE.
THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE
INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE
STATE OF NEW YORK APPLICABLE TO CONTRACTS TO BE WHOLLY PERFORMED IN SUCH STATE.
The parties hereby irrevocably submit to the jurisdiction of the courts of the
State of New York and the Federal courts of the United States of America located
in the State of New York in each case in the borough of Manhattan solely in
respect of the interpretation and enforcement of the provisions of this
Agreement and of the documents referred to in this Agreement, and in respect of
the Transactions, and hereby waive, and agree not to assert, as a defense in any
action, suit or proceeding for the interpretation or enforcement hereof or of
any such document, that it is not subject thereto or that such action, suit or
proceeding may not be brought or is not maintainable in said courts or that the
venue thereof may not be appropriate or that this Agreement or any such document
may not be enforced in or by such courts, and the parties hereto irrevocably
agree that all claims with respect to such action or proceeding shall be heard
and determined in such a State of New York or Federal court. The parties hereby
consent to and grant any such court jurisdiction over the person of such parties
and over the subject matter of such dispute and agree that mailing of process or
other papers in connection with any such action or proceeding in the manner
provided in Section 10.6 or in such other manner as may be permitted by law
shall be valid and sufficient service thereof.
10.6. Notices.
Any notice, request, instruction or other document to be given hereunder by
any party to the others shall be in writing and delivered personally or sent by
registered or certified mail, postage prepaid, or by facsimile:
if to Parent, PNM, Manzano, Merger Sub-1 or Merger Sub-2
Public Service Company of New Mexico and
Manzano Corporation
Alvarado Square,
Albuquerque, NM 87158
Attention: Chief Financial Officer
Fax: (505) 241-2368
with a copy to
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004
Attn: Timothy Michael Toy, Esq.
Stephen R. Rusmisel, Esq.
Fax: (212) 858-1500
if to the Company
Western Resources, Inc.
818 South Kansas Avenue
Topeka, KS 66612
Attention: Richard D. Terrill, Esq.
Executive Vice President and
General Counsel
Fax: (785) 575-1936
with a copy to
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, New York 10019
Attn: William S. Lamb, Esq.
Benjamin G. Clark, Esq.
Fax: (212) 424-8500
or to such other persons or addresses as may be designated in writing by
the party to receive such notice as provided above.
10.7. Entire Agreement; NO OTHER REPRESENTATIONS.
This Agreement (including any exhibits hereto), the Company Disclosure
Letter, the Parent Disclosure Letter and the Confidentiality Agreement dated
July 25 2000, between PNM and the Company and the Confidentiality Agreement
dated October 24, 2000 between the Company and PNM (collectively, the
"Confidentiality Agreements") constitute the entire agreement, and supersede all
other prior agreements, understandings, representations and warranties both
written and oral, among the parties, with respect to the subject matter hereof.
EACH PARTY HERETO AGREES THAT, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES
CONTAINED IN THIS AGREEMENT, NEITHER PARENT, MERGER SUB-1 AND MERGER SUB-2, NOR
THE COMPANY MAKES ANY OTHER REPRESENTATIONS OR WARRANTIES, AND EACH HEREBY
DISCLAIMS ANY OTHER REPRESENTATIONS OR WARRANTIES MADE BY ITSELF OR ANY OF ITS
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, FINANCIAL AND LEGAL ADVISORS OR OTHER
REPRESENTATIVES, WITH RESPECT TO THE EXECUTION AND DELIVERY OF THIS AGREEMENT OR
THE TRANSACTIONS, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO THE OTHER OR THE
OTHER'S REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER INFORMATION WITH RESPECT
TO ANY ONE OR MORE OF THE FOREGOING.
10.8. No Third-Party Beneficiaries.
Other than with respect to the matters set forth in Section 7.12
(Indemnification; Directors' and Officers' Insurance) and Section 7.21 (Tax
Disaffiliation Agreement), this Agreement is not intended to confer upon any
Person other than the parties hereto any rights or remedies hereunder.
10.9. Obligations of Parent and of the Company.
Except as otherwise specifically provided herein, whenever this Agreement
requires a Subsidiary of Parent or PNM to take any action, such requirement
shall be deemed to include an undertaking on the part of Parent or PNM to cause
such Subsidiary to take such action. Whenever this Agreement requires a
Subsidiary of the Company to take any action, such requirement shall be deemed
to include an undertaking on the part of the Company to cause such Subsidiary to
take such action and, after the Effective Time, on the part of the Surviving
Corporation to cause such Subsidiary to take such action.
10.10. Severability.
The provisions of this Agreement shall be deemed severable and the
invalidity or unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof. If any provision of this
Agreement, or the application thereof to any Person or any circumstance, is
invalid or unenforceable, (a) a suitable and equitable provision shall be
substituted therefor in order to carry out, so far as may be valid and
enforceable, the intent and purpose of such invalid or unenforceable provision
and (b) the remainder of this Agreement and the application of such provision to
other Persons or circumstances shall not be affected by such invalidity or
unenforceability, nor shall such invalidity or unenforceability affect the
validity or enforceability of such provision, or the application thereof, in any
other jurisdiction.
10.11. Interpretation.
The table of contents and headings herein are for convenience of reference
only, do not constitute part of this Agreement and shall not be deemed to limit
or otherwise affect any of the provisions hereof. Where a reference in this
Agreement is made to a Section or Exhibit, such reference shall be to a Section
of or Exhibit to this Agreement unless otherwise indicated. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation."
10.12. Assignment.
This Agreement shall not be assignable by operation of law or otherwise;
provided, however, that Parent may designate, by written notice to the Company,
another wholly owned direct or indirect subsidiary to be a constituent
corporation in lieu of Merger Sub-1 or Merger Sub-2, so long as such designation
would not reasonably be expected to (i) impose any material delay in the
obtaining of, or significantly increase the risk of not obtaining any Parent
Required Statutory Approval or Company Required Statutory Approval or the
expiration or termination of any applicable waiting period, (ii) significantly
increase the risk of any Governmental Entity entering an order prohibiting the
consummation of the Mergers, (iii) significantly increase the risk of not being
able to remove any such order on appeal or otherwise or (iv) materially delay
the consummation of the Mergers. If the requirements of the previous sentence
are met and Parent wishes to designate another wholly owned direct or indirect
subsidiary to be a constituent corporation in lieu of Merger Sub-1 or Merger
Sub-2, then, all references herein to Merger Sub-1 or Merger Sub-2, as the case
may be, shall be deemed references to such other subsidiary, except that all
representations and warranties made herein with respect to Merger Sub-1 or
Merger Sub-2, as the case may be, as of the date of this Agreement shall be
deemed representations and warranties made with respect to such other subsidiary
as of the date of such designation.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed, acknowledged
and delivered by the duly authorized officers of the parties hereto as of the
date first written above.
WESTERN RESOURCES, INC.
By: /s/David C. Wittig
--------------------------------
Name: David C. Wittig
Title: Chairman of the Board,
President and Chief
Executive Officer
HVOLT ENTERPRISES, INC.
By: /s/ Jeffry E. Sterba
--------------------------------
Name: Jeffry E. Sterba
Title: President
HVK, INC.
By: /s/ Jeffry E. Sterba
--------------------------------
Name: Jeffry E. Sterba
Title: President
HVNM, INC.
By: /s/ Jeffry E. Sterba
--------------------------------
Name: Jeffry E. Sterba
Title: President
PUBLIC SERVICE COMPANY OF NEW MEXICO
By: /s/ Jeffry E. Sterba
--------------------------------
Name: Jeffry E. Sterba
Title: Chairman, President &
Chief Executive Officer
Pursuant to Section 3.8 of this foregoing Agreement, the undersigned hereby
joins in such Agreement this __ day of ___________, 2001.
MANZANO CORPORATION
By:
--------------------------------
Name:
Title:
