SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) of the
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 28, 1995
NORTHERN STATES POWER COMPANY
(Exact name of registrant as specified in charter)
Minnesota
(State or other jurisdiction
of incorporation)
1-3034 41-0448030
(Commission File No.) (IRS employer
identification no.)
414 Nicollet Mall, Minneapolis, Minnesota 55401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (612) 330-5500<PAGE>
ITEM 5. OTHER EVENTS
MERGER AGREEMENT WITH WISCONSIN ENERGY CORPORATION
Northern States Power Company, a Minnesota corpora-
tion ("NSP"), Wisconsin Energy Corporation, a Wisconsin corpo-
ration ("WEC"), Northern Power Wisconsin Corp., a Wisconsin
corporation and wholly-owned subsidiary of NSP ("New NSP") and
WEC Sub Corp., a Wisconsin corporation and wholly-owned sub-
sidiary of WEC ("WEC Sub"), have entered into an Agreement and
Plan of Merger, dated as of April 28, 1995 (the "Merger Agree-
ment"), which provides for a strategic business combination
involving NSP and WEC in a "merger-of-equals" transaction (the
"Transaction"). The Transaction, which was unanimously ap-
proved by the Boards of Directors of the constituent companies,
is expected to close shortly after all of the conditions to the
consummation of the Transaction, including obtaining applicable
regulatory approvals, are met or waived. The regulatory ap-
proval process is expected to take approximately 12 to 18
months.
In the Transaction, the holding company of the com-
bined enterprise will be registered under the Public Utility
Holding Company Act of 1935, as amended. The holding company
will be named Primergy Corporation ("Primergy") and will be the
parent company of both NSP (which, for regulatory reasons, will
reincorporate in Wisconsin) and of WEC's present principal
utility subsidiary, Wisconsin Electric Power Company ("WEPCO"),
which will be renamed "Wisconsin Energy Company." Wisconsin
Energy Company will include the operations of WEC's other
present utility subsidiary, Wisconsin Natural Gas Company,
which is anticipated to be merged into WEPCO by year-end 1995,
pending regulatory approval, as previously planned. It is an-
ticipated that, following the Transaction, NSP's Wisconsin
utility subsidiary, Northern States Power, a Wisconsin corpo-
ration ("NSP-W") will be merged into Wisconsin Energy Company.
The Merger Agreement, the press release issued in
connection therewith and the related Stock Option Agreements
(defined below) are filed as exhibits to this report and are
incorporated herein by reference. The descriptions of the
Merger Agreement and the Stock Option Agreements set forth
herein do not purport to be complete and are qualified in their
entirety by the provisions of the Merger Agreement and the
Stock Option Agreements, as the case may be.
Under the terms of the Merger Agreement, NSP will be
merged with and into New NSP and immediately thereafter WEC Sub
will be merged with and into New NSP, with New NSP being the
surviving corporation. Each outstanding share of Common Stock,<PAGE>
par value $2.50 per share, of NSP will be cancelled and con-
verted into the right to receive 1.626 shares of Common Stock,
par value $.01 per share, of Primergy ("Primergy Common
Stock"). The outstanding shares of WEC Common Stock, par value
$.01 per share, will remain outstanding, unchanged, as shares
of Primergy Common Stock. As of the date of the Merger Agree-
ment, NSP had 67.3 million common shares outstanding and WEC
had 109.4 million common shares outstanding. Based on such
capitalization, the Transaction would result in the common
shareholders of NSP receiving 50% of the common equity of
Primergy and the common shareholders of WEC owning the other
50% of the common equity of Primergy. Each outstanding share
of Cumulative Preferred Stock, par value $100.00 per share, of
NSP will be cancelled and converted into the right to receive
one share of Cumulative Preferred Stock, par value $100.00 per
share, of New NSP with identical rights (including dividend
rights) and designations. WEPCO's outstanding preferred stock
will remain outstanding and be unchanged in the Transaction.
It is anticipated that Primergy will adopt NSP's
dividend payment level adjusted for the exchange ratio. NSP
currently pays $2.64 per share annually, and WEC's annual div-
idend rate is currently $1.47 per share. Based on the exchange
ratio and NSP's current dividend rate, the pro forma dividend
rate for Primergy would be $1.62 per share.
The Transaction is subject to customary closing con-
ditions, including, without limitation, the receipt of required
shareholder approvals of WEC and NSP; and the receipt of all
necessary governmental approvals and the making of all neces-
sary governmental filings, including approvals of state utility
regulators in Wisconsin, Minnesota and certain other states,
the approval of the Federal Energy Regulatory Commission, the
Securities and Exchange Commission (the "SEC"), the Nuclear
Regulatory Commission, and the filing of the requisite notifi-
cation with the Federal Trade Commission and the Department of
Justice under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the expiration of the applicable
waiting period thereunder. The Transaction is also subject to
receipt of assurances from the Internal Revenue Service and
opinions of counsel that the Transaction will qualify as a tax-
free reorganization, and the assurances from the parties' in-
dependent accountants, that the Transaction will qualify as a
pooling of interests for accounting purposes. In addition, the
Transaction is conditioned upon the effectiveness of a regis-
tration statement to be filed by WEC with the SEC with respect
to the Primergy Common Stock to be issued in the Transaction
and the approval for listing of such shares on the New York
Stock Exchange. (See Article VIII of the Merger Agreement.)
-2-<PAGE>
Shareholder meetings to vote upon the Transaction will be con-
vened as soon as practicable and are expected to be held in the
third or fourth quarter of 1995.
The Merger Agreement contains certain covenants of
the parties pending the consummation of the Transaction. Gen-
erally, the parties must carry on their businesses in the or-
dinary course consistent with past practice, may not increase
dividends on common stock beyond specified levels, and may not
issue any capital stock beyond certain limits. The Merger
Agreement also contains restrictions on, among other things,
charter and bylaw amendments, capital expenditures, acquisi-
tions, dispositions, incurrence of indebtedness, certain in-
creases in employee compensation and benefits, and affiliate
transactions. (See Article VI of the Merger Agreement.)
The Merger Agreement provides that, after the ef-
fectiveness of the Transaction (the "Effective Time"), the
corporate headquarters and principal executive offices of
Primergy and NSP will be located in Minneapolis, Minnesota, and
the headquarters of Wisconsin Energy Company will remain in
Milwaukee, Wisconsin. Primergy's Board of Directors, which
will be divided into three classes, will consist of a total of
12 directors, 6 of whom will be designated by WEC and 6 of whom
will be designated by NSP. Mr. James J. Howard, the current
Chairman of the Board, President and Chief Executive Officer
("CEO") of NSP, will serve as CEO of Primergy from the Effec-
tive Time until the later of 16 months after the Effective Time
or the date of the annual meeting of shareholders of Primergy
that occurs in 1998, and Chairman of Primergy until the later
of July 1, 2000 or two years after he ceases to be CEO. Mr.
Abdoo, the current Chairman of the Board, President and CEO of
WEC, will serve as Vice Chairman of the Board, President and
Chief Operating Officer of Primergy until the date when Mr.
Howard ceases to be CEO, at which time he will be entitled to
assume the additional role of CEO. Mr. Abdoo will assume the
position of Chairman when Mr. Howard ceases to be Chairman.
The Merger Agreement may be terminated under certain
circumstances, including (1) by mutual consent of the parties;
(2) by any party if the Transaction is not consummated by April
30, 1997 (provided, however, that such termination date shall
be extended to October 31, 1997 if all conditions to closing
the Transaction, other than the receipt of certain consents
and/or statutory approvals by any of the parties, have been
satisfied by April 30, 1997); (3) by any party if either NSP's
or WEC's shareholders vote against the Transaction or if any
state or federal law or court order prohibits the Transaction;
(4) by a non-breaching party if there exist breaches of any
representations or warranties contained in the Merger Agreement
-3-<PAGE>
as of the date thereof which breaches, individually or in the
aggregate, would result in a material adverse effect on the
breaching party and which is not cured within twenty (20) days
after notice; (5) by a non-breaching party if there occur
breaches of specified covenants or material breaches of any
covenant or agreement which are not cured within twenty (20)
days after notice; (6) by either party if the Board of Direc-
tors of the other party shall withdraw or adversely modify its
recommendation of the Transaction or shall approve any compet-
ing transaction; or (7) by either party, under certain circum-
stances, as a result of a third-party tender offer or business
combination proposal which such party's board of directors de-
termines in good faith that their fiduciary duties require be
accepted, after the other party has first been given an oppor-
tunity to make concessions and adjustments in the terms of the
Merger Agreement.
The Merger Agreement provides that if a breach de-
scribed in clause (4) or (5) of the previous paragraph occurs,
then, if such breach is not willful, the non-breaching party is
entitled to reimbursement of its out-of-pocket expenses, not to
exceed $10 million. In the event of a willful breach, the non-
breaching party will be entitled to its out-of-pocket expenses
(which shall not be limited to $10 million) and any remedies it
may have at law or in equity, provided that if, at the time of
the breaching party's willful breach, there shall have been a
third party tender offer or business combination proposal which
shall not have been rejected by the breaching party and with-
drawn by the third party, and within two and one-half years of
any termination by the non-breaching party, the breaching party
accepts an offer to consummate or consummates a business com-
bination with such third party, then such breaching party, upon
the signing of a definitive agreement relating to such a busi-
ness combination, or, if no such agreement is signed then at
the closing of such business combination, will pay to the non-
breaching party an additional fee equal to $75 million. The
Merger Agreement also requires payment of a termination fee of
$75 million (and reimbursement of out-of-pocket expenses) by
one party (the "Payor") to the other in certain circumstances,
if (i) the Merger Agreement is terminated (x) as a result of
the acceptance by the Payor of a third-party tender offer or
business combination proposal, (y) following a failure of the
shareholders of the Payor to grant their approval to the
Transaction or (z) as a result of the Payor's material failure
to convene a shareholder meeting, distribute proxy materials
and, subject to its board of directors' fiduciary duties, rec-
ommend the Transaction to its shareholders; (ii) at the time of
such termination or prior to the meeting of such party's
shareholders there shall have been a third-party tender offer
-4-<PAGE>
or business combination proposal which shall not have been re-
jected by the Payor and withdrawn by such third party; and
(iii) within two and one-half years of any such termination
described in clause (i) above, the Payor accepts an offer to
consummate or consummates a business combination with such
third party. Such termination fee and out-of-pocket expenses
referred to in the previous sentence shall be paid upon the
signing of a definitive agreement between the Payor and the
third party, or, if no such agreement is signed, then at the
closing of such third-party business combination. The termi-
nation fees payable by NSP or WEC under these provisions and
the aggregate amount which could be payable by NSP or WEC upon
a required purchase of the options granted pursuant to the
Stock Option Agreements (defined below) may not exceed $125
million in the aggregate. (See Article IX of the Merger
Agreement.)
Concurrently with the Merger Agreement, the parties
have entered into reciprocal stock option agreements (the
"Stock Option Agreements") each granting the other an irrevo-
cable option to purchase up to that number of shares of common
stock of the other company which equals 19.9% of the number of
shares of common stock of the other company outstanding on
April 28, 1995 at an exercise price of $44.075 per share, in
the case of NSP common stock, or $27.675 per share, in the case
of WEC common stock, under certain circumstances if the Merger
Agreement becomes terminable by one party as a result of the
other party's breach or as a result of the other party becoming
the subject of a third-party proposal for a business combina-
tion. Any party whose option becomes exercisable (the "Exer-
cising Party") may request the other party to repurchase from
it all or any portion of the Exercising Party's option at the
price specified in the Stock Option Agreements. (See the Stock
Option Agreements.)
A preliminary estimate indicates that the Transaction
will result in net savings of approximately $2.0 billion in
costs over 10 years. It is anticipated that the synergies
created by the Transaction will allow the companies to imple-
ment a modest reduction in electric retail rates followed by a
rate freeze for electric retail customers through the year
2000. The allocation of the net savings between ratepayers and
shareholders of NSP will be determined by various regulatory
agencies.
Both NSP and WEC recognize that the divestiture of
their existing gas operations and certain non-utility opera-
tions is a possibility under the new registered holding company
structure, but will seek approval from the SEC to maintain such
businesses. If divestiture is ultimately required, the SEC has
-5-<PAGE>
historically allowed companies sufficient time to accomplish
divestitures in a manner that protects shareholder value.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) EXHIBITS. The following exhibits are filed herewith:
(2)-1 Agreement and Plan of Merger, dated as of
April 28, 1995, by and among Northern
States Power Company, Wisconsin Energy
Corporation, Northern Power Wisconsin Corp.
and WEC Sub Corp. ("Merger Agreement)1
2 WEC Stock Option Agreement, dated as of
April 28, 1995, by and among Northern
States Power Company and Wisconsin Energy
Corporation
3 NSP Stock Option Agreement, dated as of
April 28, 1995, by and among Wisconsin En-
ergy Corporation and Northern States Power
Company
4 Committees of the Board of Directors of
Primergy Corporation (Exhibit 7.13 to the
Agreement and Plan of Merger)
5 Form of Employment Agreement of James J.
Howard (Exhibit 7.15.1 to the Agreement and
Plan of Merger)
6 Form of Employment Agreement with Richard
A. Abdoo (Exhibit 7.15.2 to the Agreement
and Plan of Merger)
7 Form of Amended and Restated Articles of
Incorporation of Northern Power Wisconsin
Corp. (Exhibit 7.20(b) to the Agreement and
Plan of Merger)
(99)-1 Press Release, dated May 1, 1995, of Nort-
hern States Power Company
_____________________
1 The registrant agrees to furnish supplementally any omit-
ted exhibit to the Commission upon request.
-6-<PAGE>
NORTHERN STATES POWER COMPANY
SIGNATURES
Pursuant to the requirements of the Securities Ex-
change Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned thereunto duly
authorized.
NORTHERN STATES POWER COMPANY
(Registrant)
/s/ EDWARD J. MCINTYRE
Date: May 3, 1995 Edward J. McIntyre, Vice
President and Chief Financial
Officer<PAGE>
NORTHERN STATES POWER COMPANY
EXHIBIT INDEX
Current Report on Form 8-K
Report Dated May 3, 1995
Exhibit
Number
(2)-l Agreement and Plan of Merger, dated as of April 28,
1995, by and among Northern States Power Company,
Wisconsin Energy Corporation, Northern Power Wiscon-
sin Corp. and WEC Sub Corp.
2 WEC Stock Option Agreement, dated as of April 28,
1995, by and among Northern States Power Company and
Wisconsin Energy Corporation
3 NSP Stock Option Agreement, dated as of April 28,
1995, by and among Wisconsin Energy Corporation and
Northern States Power Company
4 Committees of the Board of Directors of Primergy
Corporation (Exhibit 7.13 to the Agreement and Plan
of Merger)
5 Form of Employment Agreement of James J. Howard (Ex-
hibit 7.15.1 to the Agreement and Plan of Merger)
6 Form of Employment Agreement with Richard A. Abdoo
(Exhibit 7.15.2 to the Agreement and Plan of Merger)
7 Form of Amended and Restated Articles of Incorpora-
tion of Northern Power Wisconsin Corp. (Exhibit
7.20(b) to the Agreement and Plan of Merger)
(99)-1 Press Release, dated May 1, 1995, of Northern States
Power Company.
EXHIBIT (2)-1 CONFORMED COPY
AGREEMENT AND PLAN OF MERGER
by and among
NORTHERN STATES POWER COMPANY,
WISCONSIN ENERGY CORPORATION,
NORTHERN POWER WISCONSIN CORP.
AND
WEC SUB CORP.
dated as of April 28, 1995<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGERS
SECTION 1.1 The Mergers............................... 1
SECTION 1.2 Effects of the Mergers.................... 2
SECTION 1.3 Effective Time of the Mergers............. 2
ARTICLE II
TREATMENT OF SHARES
SECTION 2.1 Effect of the Mergers on Capital Stock.... 3
SECTION 2.2 Dissenting Shares......................... 5
SECTION 2.3 Issuance of New Certificates.............. 5
ARTICLE III
THE CLOSING
SECTION 3.1 Closing................................... 8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NSP
SECTION 4.1 Organization and Qualification............ 8
SECTION 4.2 Subsidiaries.............................. 9
SECTION 4.3 Capitalization............................ 10
SECTION 4.4 Authority; Non-Contravention; Statutory
Approvals; Compliance................... 11
SECTION 4.5 Reports and Financial Statements.......... 13
SECTION 4.6 Absence of Certain Changes or Events...... 13
SECTION 4.7 Litigation................................ 14
SECTION 4.8 Registration Statement and Proxy
Statement............................... 14
SECTION 4.9 Tax Matters............................... 15
SECTION 4.10 Employee Matters; ERISA................... 17
SECTION 4.11 Environmental Protection.................. 19
SECTION 4.12 Regulation as a Utility................... 22
SECTION 4.13 Vote Required............................. 22
SECTION 4.14 Accounting Matters........................ 22
-i-<PAGE>
Page
SECTION 4.15 Applicability of Certain Minnesota Law.... 23
SECTION 4.16 Opinion of Financial Advisor.............. 23
SECTION 4.17 Insurance................................. 23
SECTION 4.18 Ownership of WEC Common Stock............. 23
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WEC
SECTION 5.1 Organization and Qualification............ 24
SECTION 5.2 Subsidiaries.............................. 24
SECTION 5.3 Capitalization............................ 25
SECTION 5.4 Authority; Non-Contravention; Statutory
Approvals; Compliance................... 26
SECTION 5.5 Reports and Financial Statements.......... 28
SECTION 5.6 Absence of Certain Changes or Events...... 28
SECTION 5.7 Litigation................................ 29
SECTION 5.8 Registration Statement and Proxy
Statement............................... 29
SECTION 5.9 Tax Matters............................... 29
SECTION 5.10 Employee Matters; ERISA................... 31
SECTION 5.11 Environmental Protection.................. 34
SECTION 5.12 Regulation as a Utility................... 35
SECTION 5.13 Vote Required............................. 35
SECTION 5.14 Accounting Matters........................ 35
SECTION 5.15 Applicability of Certain Wisconsin Law.... 36
SECTION 5.16 Opinion of Financial Advisor.............. 36
SECTION 5.17 Insurance................................. 36
SECTION 5.18 Ownership of Old NSP Common Stock......... 36
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGERS
SECTION 6.1 Covenants of the Parties.................. 36
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1 Access to Information..................... 46
SECTION 7.2 Joint Proxy Statement and Registration
Statement............................... 46
SECTION 7.3 Regulatory Matters........................ 48
SECTION 7.4 Shareholder Approval...................... 48
SECTION 7.5 Directors' and Officers' Indemnification.. 49
SECTION 7.6 Disclosure Schedules...................... 51
-ii-<PAGE>
Page
SECTION 7.7 Public Announcements...................... 51
SECTION 7.8 Rule 145 Affiliates....................... 52
SECTION 7.9 Employee Agreements and Workforce
Matters................................. 52
SECTION 7.10 Employee Benefit Plans.................... 53
SECTION 7.11 Stock Option and Other Stock Plans........ 55
SECTION 7.12 No Solicitations.......................... 56
SECTION 7.13 Company Board of Directors................ 57
SECTION 7.14 Company Officers.......................... 57
SECTION 7.15 Employment Contracts...................... 58
SECTION 7.16 Post-Merger Operations.................... 58
SECTION 7.17 Expenses.................................. 59
SECTION 7.18 Further Assurances........................ 59
SECTION 7.19 Utility Asset Transfer.................... 60
SECTION 7.20 Charter and By-law Amendments............. 60
ARTICLE VIII
CONDITIONS
SECTION 8.1 Conditions to Each Party's Obligation
to Effect the Mergers................... 60
SECTION 8.2 Conditions to Obligation of WEC to
Effect the Mergers...................... 62
SECTION 8.3 Conditions to Obligation of NSP to
Effect the Mergers...................... 63
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1 Termination............................... 64
SECTION 9.2 Effect of Termination..................... 68
SECTION 9.3 Termination Fee; Expenses................. 68
SECTION 9.4 Amendment................................. 70
SECTION 9.5 Waiver.................................... 70
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1 Non-Survival; Effect of Representations
and Warranties.......................... 71
SECTION 10.2 Brokers................................... 71
SECTION 10.3 Notices................................... 71
SECTION 10.4 Miscellaneous............................. 73
SECTION 10.5 Interpretation............................ 73
-iii-<PAGE>
Page
SECTION 10.6 Counterparts; Effect...................... 73
SECTION 10.7 Parties in Interest....................... 74
SECTION 10.8 Waiver of Jury Trial and Certain
Damages................................. 74
SECTION 10.9 Enforcement............................... 74
Exhibit A Form of WEC Stock Option Agreement
Exhibit B Form of NSP Stock Option Agreement
Exhibit 7.8 Form of Affiliate Agreement
Exhibit 7.10(a) Form of NSP Severance Plan
Exhibit 7.10(b) Form of WEC Severance Plan
Exhibit 7.13 Committees of the Board of Directors of
the Company
Exhibit 7.15.1 Form of Employment Agreement of James J.
Howard
Exhibit 7.15.2 Form of Employment Agreement of Richard A.
Abdoo
Exhibit 7.20(b) Form of Amended and Restated Articles of
Incorporation of New NSP
Exhibit 7.20(c) Form of Amended and Restated Articles of
Incorporation of WEC Sub
-iv-<PAGE>
Index of Defined Terms
Term Page
1935 Act................................................ 9
affiliate............................................... 22
Affiliate Agreement..................................... 52
Affiliated Employees.................................... 53
Agreement............................................... 1
Business Combination.................................... 65
Business Combination Proposal........................... 56
Cancelled Common Shares................................. 5
Cancelled Preferred Shares.............................. 6
Certificates............................................ 6
Closing................................................. 8
Closing Agreement....................................... 16
Closing Date............................................ 8
Code.................................................... 15
Committee............................................... 54
Common Certificates..................................... 5
Company................................................. 1
Company Common Stock.................................... 4
Company Replacement Plans............................... 54
Company Shares.......................................... 6
Company Stock Plan...................................... 54
Confidentiality Agreement............................... 46
control................................................. 23
Direct Subsidiary....................................... 9
Disclosure Schedules.................................... 51
Effective Time.......................................... 3
Environmental Claim..................................... 21
Environmental Laws...................................... 21
Environmental Permits................................... 20
ERISA................................................... 17
Exchange Act............................................ 13
Exchange Agent.......................................... 5
FERC.................................................... 13
Final Order............................................. 61
Foundation.............................................. 59
GAAP.................................................... 13
Governmental Authority.................................. 12
Hazardous Materials..................................... 21
HSR Act................................................. 48
Indemnified Liabilities................................. 49
Indemnified Party....................................... 49
Initial Termination Date................................ 64
IRS..................................................... 62
Joint Proxy/Registration Statement...................... 46
joint venture........................................... 9
MBCA.................................................... 2
-v-<PAGE>
Term Page
Mergers................................................. 1
Mr. Abdoo............................................... 44
Mr. Howard.............................................. 44
New NSP................................................. 1
NRC..................................................... 13
NSP..................................................... 1
NSP Benefit Plans....................................... 17
NSP Common Stock........................................ 3
NSP Disclosure Schedule................................. 51
NSP Dissenting Shares................................... 5
NSP Effective Time...................................... 3
NSP Financial Statements................................ 13
NSP Incentive Plan...................................... 53
NSP Joint Venture....................................... 9
NSP Material Adverse Effect............................. 14
NSP Merger.............................................. 2
NSP Preferred Shares.................................... 6
NSP Preferred Stock..................................... 4
NSP Required Consents................................... 12
NSP Required Statutory Approvals........................ 12
NSP SEC Reports......................................... 13
NSP Shareholders' Approval.............................. 22
NSP Special Meeting..................................... 48
NSP Stock Awards........................................ 55
NSP Stock Option........................................ 55
NSP Stock Option Agreement.............................. 1
NSP Stock Plan.......................................... 53
NSP Subsidiary.......................................... 9
NSP Unrestricted Subsidiaries........................... 10
NSP-W................................................... 22
NYSE.................................................... 7
Old NSP Common Stock.................................... 3
Old NSP Preferred Stock................................. 4
PBGC.................................................... 18
PCBs.................................................... 21
Power Act............................................... 13
Preferred Certificates.................................. 6
Proxy Statement......................................... 14
Ratio................................................... 4
Registration Statement.................................. 14
Reincorporation Effective Time.......................... 3
Reincorporation Merger.................................. 1
Release................................................. 22
Representatives......................................... 46
SEC..................................................... 13
Securities Act.......................................... 13
Stock Plans............................................. 56
subsidiary.............................................. 8
Target Party............................................ 69
Task Force.............................................. 43
-vi-<PAGE>
Term Page
Tax Return.............................................. 15
Tax Ruling.............................................. 16
Taxes................................................... 15
Three Year Period....................................... 74
Violation............................................... 10
WBCL.................................................... 2
WEC..................................................... 1
WEC Article Amendments.................................. 60
WEC Benefit Plans....................................... 31
WEC Common Stock........................................ 4
WEC Disclosure Schedule................................. 51
WEC Financial Statements................................ 28
WEC Incentive Plan...................................... 53
WEC Joint Venture....................................... 24
WEC Material Adverse Effect............................. 28
WEC Preferred Stock..................................... 25
WEC Required Consents................................... 27
WEC Required Statutory Approvals........................ 27
WEC SEC Reports......................................... 28
WEC Shareholders' Approval.............................. 35
WEC Special Meeting..................................... 48
WEC Stock Option Agreement.............................. 1
WEC Stock Plan.......................................... 53
WEC Sub................................................. 1
WEC Subsidiary.......................................... 24
WEC Unrestricted Subsidiaries........................... 25
WEPCO................................................... 25
WEPCO Common Stock...................................... 25
WEPCO 6% Preferred Stock................................ 25
WEPCO $100 Par Value Serial Preferred Stock............. 25
WEPCO $25 Par Value Serial Preferred Stock.............. 25
WEPCO Preferred Stock................................... 25
WN...................................................... 35
-vii-<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of April 28,
1995 (this "Agreement"), by and among Northern States Power
Company, a Minnesota corporation ("NSP"), Wisconsin Energy
Corporation, a Wisconsin corporation ("WEC" and, after the Ef-
fective Time (as defined below), the "Company"), Northern Power
Wisconsin Corp., a Wisconsin corporation ("New NSP"), and WEC
Sub Corp., a Wisconsin corporation ("WEC Sub").
WHEREAS, NSP and WEC have determined to engage in a
business combination as peer firms in a merger of equals;
WHEREAS, in furtherance thereof, the respective
Boards of Directors of NSP, WEC, New NSP and WEC Sub have ap-
proved this Agreement and the transactions contemplated hereby
on the terms and conditions set forth in this Agreement (such
transactions referred to herein collectively as the "Mergers");
WHEREAS, the Board of Directors of WEC has approved
and WEC has executed an agreement with NSP in the form of Ex-
hibit A (the "WEC Stock Option Agreement") and the Board of
Directors of NSP has approved and NSP has executed an agreement
with WEC in the form of Exhibit B (the "NSP Stock Option
Agreement") whereby each of WEC and NSP, respectively, has
granted to the other an option to purchase shares of its common
stock on the terms and conditions provided in such agreement;
and
WHEREAS, for federal income tax purposes, it is in-
tended that the parties hereto and their respective stockhold-
ers will recognize no gain or loss for federal income tax pur-
poses as a result of the consummation of the Mergers;
NOW THEREFORE, in consideration of the premises and
the representations, warranties, covenants and agreements con-
tained herein, the parties hereto, intending to be legally
bound hereby, agree as follows:
ARTICLE I
THE MERGERS
Section 1.1 The Mergers. Upon the terms and subject
to the conditions of this Agreement:
(i) At the Reincorporation Effective Time (as de-
fined in Section 1.3), NSP shall be merged with and into
New NSP (the "Reincorporation Merger") in accordance with
the laws of the States of Minnesota and Wisconsin. New<PAGE>
NSP shall be the surviving corporation in the Reincorpo-
ration Merger and shall continue its corporate existence
under the laws of the State of Wisconsin. The effects and
the consequences of the Reincorporation Merger shall be as
set forth in Section 1.2(a). Throughout this Agreement,
the term "NSP" shall refer to NSP and/or New NSP, as the
context requires.
(ii) At the NSP Effective Time (as defined in Sec-
tion 1.3), WEC Sub shall be merged with and into New NSP
(the "NSP Merger") in accordance with the laws of the
State of Wisconsin. New NSP shall be the surviving cor-
poration in the NSP Merger and shall continue its corpo-
rate existence under the laws of the State of Wisconsin.
The effects and the consequences of the NSP Merger shall
be as set forth in Section 1.2(b).
Section 1.2 Effects of the Mergers. (a) At the
Reincorporation Effective Time, (i) the articles of incorpora-
tion of New NSP, as in effect immediately prior to the Rein-
corporation Effective Time, shall be the articles of incorpo-
ration of the surviving corporation in the Reincorporation
Merger until thereafter amended as provided by law and such
articles of incorporation, and (ii) the by-laws of New NSP, as
in effect immediately prior to the Reincorporation Effective
Time, shall be the by-laws of the surviving corporation in the
Reincorporation Merger until thereafter amended as provided by
law, the articles of incorporation of the surviving corporation
in the Reincorporation Merger and such by-laws. Subject to the
foregoing, the additional effects of the Reincorporation Merger
shall be as provided in the applicable provisions of the Min-
nesota Business Corporation Act (the "MBCA") and the Wisconsin
Business Corporation Law (the "WBCL").
(b) At the NSP Effective Time, (i) the articles of
incorporation of New NSP, as in effect immediately prior to the
NSP Effective Time, shall be the articles of incorporation of
the surviving corporation in the NSP Merger until thereafter
amended as provided by law and such articles of incorporation,
and (ii) the by-laws of New NSP, as in effect immediately prior
to the NSP Effective Time, shall be the by-laws of the surviv-
ing corporation in the NSP Merger until thereafter amended as
provided by law, the articles of incorporation of the surviving
corporation in the NSP Merger and such by-laws. Subject to the
foregoing, the additional effects of the NSP Merger shall be as
provided in the applicable provisions of the WBCL.
Section 1.3 Effective Time of the Mergers. On the
Closing Date (as defined in Section 3.1), (a) with respect to
the Reincorporation Merger, articles of merger complying with
-2-<PAGE>
the requirements of the WBCL and the MBCA shall be executed by
NSP and New NSP and shall be filed by New NSP with the Secre-
tary of State of each of the States of Wisconsin and Minnesota,
and (b) with respect to the NSP Merger, articles of merger
complying with the requirements of the WBCL shall be executed
by New NSP and WEC Sub and shall be filed by New NSP with the
Secretary of State of the State of Wisconsin. The Reincorpo-
ration Merger shall become effective at the time specified in
the articles of merger filed with respect to the Reincorpo-
ration Merger (the "Reincorporation Effective Time"). The NSP
Merger shall become effective at the time specified in the ar-
ticles of merger filed with respect to the NSP Merger (the "NSP
Effective Time" or the "Effective Time"). The effective time
specified in the articles of merger to be filed with respect to
the Reincorporation Merger shall be prior to the effective time
specified in the articles of merger filed with respect to the
NSP Merger.
ARTICLE II
TREATMENT OF SHARES
Section 2.1 Effect of the Mergers on Capital Stock.
(a) At the Reincorporation Effective Time, by virtue of the
Reincorporation Merger and without any action on the part of
any holder of any capital stock of NSP or New NSP:
(i) Cancellation of New NSP Stock. Each share of
Common Stock, par value $2.50 per share, of New NSP (the
"NSP Common Stock") that is owned by NSP shall be can-
celled and shall cease to exist.
(ii) Treatment of NSP Common Stock. Each issued and
outstanding share of Common Stock, par value $2.50 per
share, of NSP (the "Old NSP Common Stock"), other than NSP
Dissenting Shares (as defined in Section 2.2), shall be
cancelled and converted into the right to receive one
fully paid and, subject to Section 180.0622(2)(b) of the
WBCL, as judicially interpreted, non-assessable share of
NSP Common Stock. Upon such cancellation, all such shares
of Old NSP Common Stock shall cease to exist, and each
holder of a certificate formerly representing any such
shares of Old NSP Common Stock shall cease to have any
rights with respect thereto, except the right to receive
the shares of NSP Common Stock to be issued in consider-
ation therefor and, following the NSP Merger, the right to
receive the shares of Company Common Stock (as defined in
Section 2.1(b)(ii)) to be issued in consideration therefor
-3-<PAGE>
upon the surrender of such certificate in accordance with
Section 2.3.
(iii) Treatment of NSP Preferred Stock. Each issued
and outstanding share of Cumulative Preferred Stock, par
value $100.00 per share, of NSP (the "Old NSP Preferred
Stock"), other than NSP Dissenting Shares, shall be can-
celled and converted into the right to receive one fully
paid and, subject to Section 180.0622(2)(b) of the WBCL,
as judicially interpreted, non-assessable share of Cumu-
lative Preferred Stock, par value $100.00 per share, of
New NSP ("NSP Preferred Stock") with identical rights
(including dividend rates) and designations to the can-
celled share of Old NSP Preferred Stock. Upon such can-
cellation, all such shares of Old NSP Preferred Stock
shall cease to exist, and each holder of a certificate
representing any such shares of Old NSP Preferred Stock
shall cease to have any rights with respect thereto, ex-
cept the right to receive the shares of NSP Preferred
Stock to be issued in consideration therefor upon the
surrender of such certificate in accordance with Sec-
tion 2.3.
(b) At the NSP Effective Time, by virtue of the NSP
Merger and without any action on the part of any holder of any
capital stock of New NSP or WEC Sub:
(i) Cancellation of Certain NSP Stock. Each share
of NSP Common Stock and each share of NSP Preferred Stock
that is owned by New NSP as treasury stock, by subsidiar-
ies of New NSP or by WEC or any of its subsidiaries shall
be cancelled and cease to exist.
(ii) Treatment of NSP Common Stock. Each issued and
outstanding share of NSP Common Stock (other than shares
cancelled pursuant to Section 2.1(b)(i) and NSP Dissenting
Shares) shall be cancelled and converted into the right to
receive 1.626 (the "Ratio") fully paid and, subject to
Section 180.0622(2)(b) of the WBCL, as judicially inter-
preted, non-assessable shares of Common Stock, par value
$.01 per share, of WEC (the "WEC Common Stock" and, with
respect to any period after the Effective Time, the "Com-
pany Common Stock"). Upon such cancellation, all such
Shares of NSP Common Stock shall cease to exist, and each
holder of a certificate formerly representing any such
shares shall cease to have any rights with respect there-
to, except the right to receive the shares of Company
Common Stock to be issued in consideration therefor upon
the surrender of such certificate in accordance with Sec-
tion 2.3.
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(iii) No Change in NSP Preferred Stock. Each issued
and outstanding share of NSP Preferred Stock (other than
shares cancelled pursuant to Section 2.1(b)(i)) shall be
unchanged as a result of the NSP Merger and shall remain
outstanding thereafter.
(iv) Treatment of WEC Sub Stock. Each issued and
outstanding share of Common Stock, par value $.01 per
share, of WEC Sub shall be cancelled and converted into
one fully paid and, subject to Section 180.0622(2)(b) of
the WBCL, as judicially interpreted, non-assessable share
of NSP Common Stock.
Section 2.2 Dissenting Shares. Shares of Old NSP
Common Stock and Old NSP Preferred Stock held by any holder
entitled to relief as a dissenting shareholder under Section
471 of the MBCA (the "NSP Dissenting Shares") shall not become
the right to receive NSP Common Stock or NSP Preferred Stock,
as the case may be, in the Reincorporation Merger or, in the
case of Old NSP Common Stock, into the right to receive Company
Common Stock in the NSP Merger, but shall be cancelled and
converted into such consideration as may be due with respect to
such shares pursuant to the applicable provisions of the MBCA,
unless and until the right of such holder to receive fair cash
value for such NSP Dissenting Shares terminates in accordance
with Section 473 of the MBCA. If such right is terminated
otherwise than by the purchase of such shares by NSP, then such
shares shall cease to be NSP Dissenting Shares and shall rep-
resent the right to receive Company Common Stock, as provided
in Section 2.1(b), or NSP Preferred Stock, as provided in
Section 2.1(a).
Section 2.3 Issuance of New Certificates.
(a) Deposit with Exchange Agent. As soon as prac-
ticable after the Effective Time, the Company shall deposit
with such bank or trust company mutually agreeable to WEC and
NSP (the "Exchange Agent"), certificates representing shares of
Company Common Stock and NSP Preferred Stock required to effect
the issuances referred to in Section 2.1, together with cash
payable in respect of fractional shares pursuant to Section
2.3(d).
(b) Issuance Procedures. As soon as practicable
after the Effective Time, the Exchange Agent shall mail (x) to
each holder of record of a certificate or certificates (the
"Common Certificates") which immediately prior to the Reincor-
poration Effective Time represented outstanding shares of Old
NSP Common Stock (the "Cancelled Common Shares") that were
cancelled and became instead the right to receive shares of
-5-<PAGE>
Company Common Stock (the "Company Shares") pursuant to Sec-
tion 2.1 and (y) to each holder of record of a certificate or
certificates (the "Preferred Certificates" and together with
the Common Certificates, the "Certificates") which immediately
prior to the Reincorporation Effective Time represented out-
standing shares of Old NSP Preferred Stock (the "Cancelled
Preferred Shares") that were cancelled and became instead the
right to receive NSP Preferred Stock (the "NSP Preferred
Shares") pursuant to Section 2.1(a)(iii), (i) a letter of
transmittal (which shall specify that delivery shall be ef-
fected, and risk of loss and title to the Certificates shall
pass, only upon actual delivery of the Certificates to the Ex-
change Agent) and (ii) instructions for use in effecting the
surrender of the Certificates in exchange for certificates
representing Company Shares (or NSP Preferred Shares, as the
case may be). Upon surrender of a Certificate to the Exchange
Agent for cancellation (or to such other agent or agents as may
be appointed by agreement of NSP and WEC), together with a duly
executed letter of transmittal and such other documents as the
Exchange Agent shall require, the holder of such Certificate
shall be entitled to receive a certificate representing that
number of whole Company Shares (or NSP Preferred Shares, as the
case may be) which such holder has the right to receive pursu-
ant to the provisions of this Article II. In the event of a
transfer of ownership of Cancelled Common Shares (or Cancelled
Preferred Shares) which is not registered in the transfer
records of NSP, a certificate representing the proper number of
Company Shares (or NSP Preferred Shares, as the case may be)
may be issued to a transferee if the Certificate representing
such Cancelled Common Shares (or Cancelled Preferred Shares, as
the case may be) is presented to the Exchange Agent, accom-
panied by all documents required to evidence and effect such
transfer and by evidence satisfactory to the Exchange Agent
that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 2.3, each Certifi-
cate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the
certificate representing Company Shares (or NSP Preferred
Shares, as the case may be) and cash in lieu of any fractional
shares of Company Common Stock as contemplated by this Sec-
tion 2.3.
(c) Distributions with Respect to Unsurrendered
Shares. No dividends or other distributions declared or made
after the Effective Time with respect to Company Shares or NSP
Preferred Shares with a record date after the Effective Time
shall be paid to the holder of any unsurrendered Certificate
with respect to the Company Shares or NSP Preferred Shares
represented thereby and no cash payment in lieu of fractional
shares shall be paid to any such holder pursuant to Section
-6-<PAGE>
2.3(d) until the holder of record of such Certificate shall
surrender such Certificate. Subject to the effect of unclaimed
property, escheat and other applicable laws, following sur-
render of any such Certificate, there shall be paid to the
record holder of the certificates representing whole Company
Shares or NSP Preferred Shares issued in consideration there-
for, without interest, (i) at the time of such surrender, the
amount of any cash payable in lieu of a fractional share of
Company Common Stock to which such holder is entitled pursuant
to Section 2.3(d) and the amount of dividends or other distri-
butions with a record date after the Effective Time theretofore
paid with respect to such whole Company Shares or NSP Preferred
Shares and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the
Effective Time but prior to surrender and a payment date sub-
sequent to surrender payable with respect to such whole Company
Shares or NSP Preferred Shares, as the case may be.
(d) No Fractional Securities. Notwithstanding any
other provision of this Agreement, no certificates or scrip
representing fractional shares of Company Common Stock shall be
issued upon the surrender for exchange of Certificates and such
fractional shares shall not entitle the owner thereof to vote
or to any other rights of a holder of Company Common Stock. A
holder of NSP Common Stock who would otherwise have been en-
titled to a fractional share of Company Common Stock shall be
entitled to receive a cash payment in lieu of such fractional
share in an amount equal to the product of such fraction mul-
tiplied by the average of the last reported sales price, regu-
lar way, per share of Old NSP Common Stock on the New York
Stock Exchange ("NYSE") Composite Tape for the ten business
days prior to and including the last business day on which Old
NSP Common Stock was traded on the NYSE, without any interest
thereon.
(e) Closing of Transfer Books. From and after the
NSP Effective Time the stock transfer books of NSP shall be
closed and no transfer of any capital stock of NSP shall
thereafter be made. If, after the Effective Time, Certificates
are presented to the Company, they shall be cancelled and ex-
changed for certificates representing the appropriate number of
Company Shares or NSP Preferred Shares, as the case may be, as
provided in this Section 2.3.
(f) Termination of Exchange Agent. Any certificates
representing Company Shares or NSP Preferred Shares deposited
with the Exchange Agent pursuant to Section 2.3(a) and not ex-
changed within one year after the Effective Time pursuant to
this Section 2.3 shall be returned by the Exchange Agent to the
Company, which shall thereafter act as Exchange Agent. All
-7-<PAGE>
funds held by the Exchange Agent for payment to the holders of
unsurrendered Certificates and unclaimed at the end of one year
from the Effective Time shall be returned to the Company, after
which time any holder of unsurrendered Certificates shall look
as a general creditor only to the Company for payment of such
funds to which such holder may be due, subject to applicable
law. The Company shall not be liable to any person for such
shares or funds delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
ARTICLE III
THE CLOSING
Section 3.1 Closing. The closing of the Mergers
(the "Closing") shall take place at the offices of Wachtell,
Lipton, Rosen & Katz, 51 West 52nd Street, New York, New York
at 10:00 A.M., local time, on the second business day imme-
diately following the date on which the last of the conditions
set forth in Article VIII hereof is fulfilled or waived, or at
such other time and date and place as NSP and WEC shall mutu-
ally agree (the "Closing Date").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NSP
NSP represents and warrants to WEC as follows:
Section 4.1 Organization and Qualification. Except
as set forth in Section 4.1 of the NSP Disclosure Schedule (as
defined in Section 7.6(ii)), each of NSP and each of the NSP
Subsidiaries (as defined below) is a corporation duly orga-
nized, validly existing and in good standing under the laws of
its jurisdiction of incorporation or organization, has all
requisite corporate power and authority, and has been duly au-
thorized by all necessary approvals and orders to own, lease
and operate its assets and properties to the extent owned,
leased and operated and to carry on its business as it is now
being conducted and is duly qualified and in good standing to
do business in each jurisdiction in which the nature of its
business or the ownership or leasing of its assets and proper-
ties makes such qualification necessary. As used in this
Agreement, (a) the term "subsidiary" of a person shall mean any
corporation or other entity (including partnerships and other
business associations) of which at least a majority of the
outstanding capital stock or other voting securities having
voting power under ordinary circumstances to elect directors or
-8-<PAGE>
similar members of the governing body of such corporation or
entity shall at the time be held, directly or indirectly, by
such person, (b) the term "NSP Subsidiary" shall mean those of
the subsidiaries of NSP identified as NSP Subsidiaries in Sec-
tion 4.2 of the NSP Disclosure Schedule and (c) the term "Di-
rect Subsidiary" shall be deemed to mean NSP Subsidiaries or
WEC Subsidiaries (as defined in Section 5.1), as the case may
be.
Section 4.2 Subsidiaries. Section 4.2 of the NSP
Disclosure Schedule sets forth a description as of the date
hereof, of all subsidiaries and joint ventures of NSP, includ-
ing (a) the name of each such entity and NSP's interest there-
in, and (b) as to each NSP Subsidiary and NSP Joint Venture (as
defined below), a brief description of the principal line or
lines of business conducted by each such entity. Except as set
forth in Section 4.2 of the NSP Disclosure Schedule, none of
the NSP Subsidiaries is a "public utility company", a "holding
company", a "subsidiary company" or an "affiliate" of any pub-
lic utility company within the meaning of Section 2(a)(5),
2(a)(7), 2(a)(8) or 2(a)(11) of the Public Utility Holding
Company Act of 1935, as amended (the "1935 Act"), respectively.
Except as set forth in Section 4.2 of the NSP Disclosure
Schedule, all of the issued and outstanding shares of capital
stock of each NSP Subsidiary are validly issued, fully paid,
nonassessable (subject to Section 180.0622(2)(b) of the WBCL,
as judicially interpreted, in the case of New NSP and NSP-W (as
defined in Section 4.12)) and free of preemptive rights, and
are owned, directly or indirectly, by NSP free and clear of any
liens, claims, encumbrances, security interests, equities,
charges and options of any nature whatsoever and there are no
outstanding subscriptions, options, calls, contracts, voting
trusts, proxies or other commitments, understandings, restric-
tions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instru-
ment or other agreement, obligating any such NSP Subsidiary to
issue, deliver or sell, or cause to be issued, delivered or
sold, additional shares of its capital stock or obligating it
to grant, extend or enter into any such agreement or commit-
ment. As used in this Agreement, (a) the term "joint venture"
of a person shall mean any corporation or other entity (in-
cluding partnerships and other business associations) that is
not a subsidiary of such person, in which such person or one or
more of its subsidiaries owns an equity interest, other than
equity interests held for passive investment purposes which are
less than 5% of any class of the outstanding voting securities
or equity of any such entity and (b) the term "NSP Joint Ven-
ture" shall mean those of the joint ventures of NSP or any NSP
Subsidiary identified as a NSP Joint Venture in Section 4.2 of
the NSP Disclosure Schedule. With respect to the subsidiaries
-9-<PAGE>
and joint ventures of NSP that are not NSP Subsidiaries (the
"NSP Unrestricted Subsidiaries"): (i) except as set forth in
Section 4.2 of the NSP Disclosure Schedule, neither NSP nor any
NSP Subsidiary is liable for any obligations or liabilities of
any NSP Unrestricted Subsidiary; (ii) neither NSP nor any NSP
Subsidiary is obligated to make any loans or capital contribu-
tions to, or to undertake any guarantees or other obligations
with respect to, NSP Unrestricted Subsidiaries, except for
loans, capital contributions, guarantees and other obligations
not in excess of $75,000,000 in the aggregate to all such NSP
Unrestricted Subsidiaries; and (iii) the aggregate book value
as of December 31, 1994, of NSP's investment in the NSP Unre-
stricted Subsidiaries was not in excess of $300,000,000.
Section 4.3 Capitalization. The authorized capital
stock of NSP consists of 160,000,000 shares of Old NSP Common
Stock, and 7,000,000 shares of Old NSP Preferred Stock. As of
the close of business on April 20, 1995, there were issued and
outstanding 67,275,241 shares of Old NSP Common Stock and
2,400,000 shares of Old NSP Preferred Stock, consisting of:
275,000 shares of $3.60 series; 150,000 shares of $4.08 series;
175,000 shares of $4.10 series; 200,000 shares of $4.11 series;
100,000 shares of $4.16 series; 150,000 shares of $4.56 series;
200,000 shares of $6.80 series; 200,000 shares of $7.00 series;
300,000 shares of Adjustable Rate Series A; and 650,000 shares
of Adjustable Rate Series B. All of the issued and outstanding
shares of the capital stock of NSP are, and any shares of Old
NSP Common Stock issued pursuant to the NSP Stock Option
Agreement will be, validly issued, fully paid, nonassessable
and free of preemptive rights. Except as set forth in Section
4.3 of the NSP Disclosure Schedule, as of the date hereof,
there are no outstanding subscriptions, options, calls, con-
tracts, voting trusts, proxies or other commitments, under-
standings, restrictions, arrangements, rights or warrants, in-
cluding any right of conversion or exchange under any out-
standing security, instrument or other agreement, obligating
NSP or any of the NSP Subsidiaries to issue, deliver or sell,
or cause to be issued, delivered or sold, additional shares of
the capital stock of NSP, or obligating NSP to grant, extend or
enter into any such agreement or commitment, other than under
the NSP Stock Option Agreement. There are no outstanding stock
appreciation rights of NSP which were not granted in tandem
with a related stock option and no outstanding limited stock
appreciation rights or other rights to redeem for cash options
or warrants of NSP.
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Section 4.4 Authority; Non-Contravention; Statutory
Approvals; Compliance.
(a) Authority. NSP has all requisite power and au-
thority to enter into this Agreement and the NSP Stock Option
Agreement, and, subject to the applicable NSP Shareholders'
Approval (as defined in Section 4.13) and the applicable NSP
Required Statutory Approvals (as defined in Section 4.4(c)), to
consummate the transactions contemplated hereby or thereby.
The execution and delivery of this Agreement and the NSP Stock
Option Agreement and the consummation by NSP of the transac-
tions contemplated hereby and thereby have been duly authorized
by all necessary corporate action on the part of NSP, subject
to obtaining the applicable NSP Shareholders' Approval. Each
of this Agreement and the NSP Stock Option Agreement has been
duly and validly executed and delivered by NSP and, assuming
the due authorization, execution and delivery hereof and
thereof by the other signatories hereto and thereto, consti-
tutes the valid and binding obligation of NSP enforceable
against it in accordance with its terms.
(b) Non-Contravention. Except as set forth in Sec-
tion 4.4(b) of the NSP Disclosure Schedule, the execution and
delivery of this Agreement and the NSP Stock Option Agreement
by NSP do not, and the consummation of the transactions con-
templated hereby or thereby will not, in any material respect,
violate, conflict with, or result in a material breach of any
provision of, or constitute a material default (with or without
notice or lapse of time or both) under, or result in the ter-
mination or modification of, or accelerate the performance re-
quired by, or result in a right of termination, cancellation,
or acceleration of any obligation or the loss of a material
benefit under, or result in the creation of any material lien,
security interest, charge or encumbrance upon any of the prop-
erties or assets of NSP or any of the NSP Subsidiaries or NSP
Joint Ventures (any such violation, conflict, breach, default,
right of termination, modification, cancellation or accelera-
tion, loss or creation, a "Violation" with respect to NSP, such
term when used in Article V having a correlative meaning with
respect to WEC) pursuant to any provisions of (i) the articles
of incorporation, by-laws or similar governing documents of NSP
or any of the NSP Subsidiaries or the NSP Joint Ventures, (ii)
subject to obtaining the NSP Required Statutory Approvals and
the receipt of the NSP Shareholders' Approval, any statute,
law, ordinance, rule, regulation, judgment, decree, order, in-
junction, writ, permit or license of any Governmental Authority
(as defined in Section 4.4(c)) applicable to NSP or any of the
NSP Subsidiaries or the NSP Joint Ventures or any of their re-
spective properties or assets or (iii) subject to obtaining the
third-party consents set forth in Section 4.4(b) of the NSP
-11-<PAGE>
Disclosure Schedule (the "NSP Required Consents") any material
note, bond, mortgage, indenture, deed of trust, license, fran-
chise, permit, concession, contract, lease or other instrument,
obligation or agreement of any kind to which NSP or any of the
NSP Subsidiaries or the NSP Joint Ventures is a party or by
which it or any of its properties or assets may be bound or
affected.
(c) Statutory Approvals. No declaration, filing or
registration with, or notice to or authorization, consent or
approval of, any court, federal, state, local or foreign gov-
ernmental or regulatory body (including a stock exchange or
other self-regulatory body) or authority (each, a "Governmental
Authority") is necessary for the execution and delivery of this
Agreement or the NSP Stock Option Agreement by NSP or the con-
summation by NSP of the transactions contemplated hereby or
thereby, except as described in Section 4.4(c) of the NSP Dis-
closure Schedule (the "NSP Required Statutory Approvals", it
being understood that references in this Agreement to "obtain-
ing" such NSP Required Statutory Approvals shall mean making
such declarations, filings or registrations; giving such no-
tices; obtaining such authorizations, consents or approvals;
and having such waiting periods expire as are necessary to
avoid a violation of law).
(d) Compliance. Except as set forth in Section
4.4(d), Section 4.10 or Section 4.11 of the NSP Disclosure
Schedule, or as disclosed in the NSP SEC Reports (as defined in
Section 4.5) filed prior to the date hereof, neither NSP nor
any of the NSP Subsidiaries nor, to the knowledge of NSP, any
NSP Joint Venture is in material violation of, is under inves-
tigation with respect to any material violation of, or has been
given notice or been charged with any material violation of,
any law, statute, order, rule, regulation, ordinance or judg-
ment (including, without limitation, any applicable environ-
mental law, ordinance or regulation) of any Governmental Au-
thority. Except as set forth in Section 4.4(d) of the NSP
Disclosure Schedule or in Section 4.11 of the NSP Disclosure
Schedule, NSP and the NSP Subsidiaries and NSP Joint Ventures
have all permits, licenses, franchises and other governmental
authorizations, consents and approvals necessary to conduct
their businesses as presently conducted in all material re-
spects. Except as set forth in Section 4.4(d) of the NSP Dis-
closure Schedule, NSP and each of the NSP Subsidiaries is not
in material breach or violation of or in material default in
the performance or observance of any term or provision of, and
no event has occurred which, with lapse of time or action by a
third party, could result in a material default under, (i) its
-12-<PAGE>
articles of incorporation or by-laws or (ii) any material con-
tract, commitment, agreement, indenture, mortgage, loan agree-
ment, note, lease, bond, license, approval or other instrument
to which it is a party or by which it is bound or to which any
of its property is subject.
Section 4.5 Reports and Financial Statements. The
filings required to be made by NSP and the NSP Subsidiaries
since January 1, 1990 under the Securities Act of 1933, as
amended (the "Securities Act"), the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the 1935 Act, the Fed-
eral Power Act (the "Power Act"), the Atomic Energy Act and
applicable state laws and regulations have been filed with the
Securities and Exchange Commission (the "SEC"), the Federal
Energy Regulatory Commission (the "FERC"), the Nuclear Regula-
tory Commission ("NRC") or the appropriate state public utili-
ties commission, as the case may be, including all forms,
statements, reports, agreements (oral or written) and all doc-
uments, exhibits, amendments and supplements appertaining
thereto, and complied, as of their respective dates, in all
material respects with all applicable requirements of the ap-
propriate statute and the rules and regulations thereunder.
NSP has made available to WEC a true and complete copy of each
report, schedule, registration statement and definitive proxy
statement filed by NSP with the SEC since January 1, 1992 (as
such documents have since the time of their filing been amend-
ed, the "NSP SEC Reports"). As of their respective dates, the
NSP SEC Reports did not contain any untrue statement of a ma-
terial fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading. The audited consolidated financial statements and
unaudited interim financial statements of NSP included in the
NSP SEC Reports (collectively, the "NSP Financial Statements")
have been prepared in accordance with generally accepted ac-
counting principles applied on a consistent basis ("GAAP")
(except as may be indicated therein or in the notes thereto and
except with respect to unaudited statements as permitted by
Form 10-Q of the SEC) and fairly present the financial position
of NSP as of the dates thereof and the results of its opera-
tions and cash flows for the periods then ended, subject, in
the case of the unaudited interim financial statements, to
normal, recurring audit adjustments. True, accurate and com-
plete copies of the Restated Articles of Incorporation and by-
laws of NSP, as in effect on the date hereof, are included (or
incorporated by reference) in the NSP SEC Reports.
Section 4.6 Absence of Certain Changes or Events.
Except as disclosed in the NSP SEC Reports filed prior to the
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date hereof or as set forth in Section 4.6 of the NSP Disclo-
sure Schedule, from December 31, 1994, NSP and each of the NSP
Subsidiaries have conducted their business only in the ordinary
course of business consistent with past practice and there has
not been, and no fact or condition exists which would have or,
insofar as reasonably can be foreseen, could have, a material
adverse effect on the business, assets, financial condition,
results of operations or prospects of NSP and its subsidiaries
taken as a whole (a "NSP Material Adverse Effect").
Section 4.7 Litigation. Except as disclosed in the
NSP SEC Reports filed prior to the date hereof or as set forth
in Section 4.7, Section 4.9 or Section 4.11 of the NSP Disclo-
sure Schedule, (i) there are no material claims, suits, actions
or proceedings, pending or, to the knowledge of NSP, threat-
ened, nor are there, to the knowledge of NSP, any material in-
vestigations or reviews pending or threatened against, relating
to or affecting NSP or any of the NSP Subsidiaries, (ii) there
have not been any significant developments since December 31,
1994 with respect to such disclosed claims, suits, actions,
proceedings, investigations or reviews and (iii) there are no
material judgments, decrees, injunctions, rules or orders of
any court, governmental department, commission, agency, in-
strumentality or authority or any arbitrator applicable to NSP
or any of the NSP Subsidiaries.
Section 4.8 Registration Statement and Proxy State-
ment. None of the information supplied or to be supplied by or
on behalf of NSP for inclusion or incorporation by reference in
(i) the registration statement on Form S-4 to be filed with the
SEC by the Company in connection with the issuance of shares of
Company Common Stock in the Mergers (the "Registration State-
ment") will, at the time the Registration Statement is filed
with the SEC and at the time it becomes effective under the
Securities Act, contain any untrue statement of a material fact
or omit to state any material fact required to be stated
therein or necessary to make the statements therein not mis-
leading and (ii) the joint proxy statement, in definitive form,
relating to the meetings of NSP and WEC shareholders to be held
in connection with the Mergers (the "Proxy Statement") will
not, at the dates mailed to shareholders and at the times of
the meetings of shareholders to be held in connection with the
Mergers, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light
of the circumstances under which they are made, not misleading.
The Registration Statement and the Proxy Statement will comply
as to form in all material respects with the provisions of the
Securities Act and the Exchange Act and the rules and regula-
tions thereunder.
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Section 4.9 Tax Matters. "Taxes", as used in this
Agreement, means any federal, state, county, local or foreign
taxes, charges, fees, levies, or other assessments, including
all net income, gross income, sales and use, ad valorem,
transfer, gains, profits, excise, franchise, real and personal
property, gross receipt, capital stock, production, business
and occupation, disability, employment, payroll, license, es-
timated, stamp, custom duties, severance or withholding taxes
or charges imposed by any governmental entity, and includes any
interest and penalties (civil or criminal) on or additions to
any such taxes. "Tax Return", as used in this Agreement, means
a report, return or other information required to be supplied
to a governmental entity with respect to Taxes including, where
permitted or required, combined or consolidated returns for any
group of entities that includes NSP or any of its subsidiaries,
or WEC or any of its subsidiaries, as the case may be.
Except as set forth in Section 4.9 of the NSP Dis-
closure Schedule:
(a) Filing of Timely Tax Returns. NSP and each of
the NSP Subsidiaries have filed (or there has been filed
on its behalf) all material Tax Returns required to be
filed by each of them under applicable law. All such Tax
Returns were and are in all material respects true, com-
plete and correct and filed on a timely basis.
(b) Payment of Taxes. NSP and each of the NSP Sub-
sidiaries have, within the time and in the manner pre-
scribed by law, paid all Taxes that are currently due and
payable except for those contested in good faith and for
which adequate reserves have been taken.
(c) Tax Reserves. NSP and the NSP Subsidiaries have
established on their books and records reserves adequate
to pay all Taxes and reserves for deferred income taxes in
accordance with GAAP.
(d) Tax Liens. There are no Tax liens upon the as-
sets of NSP or any of the NSP Subsidiaries except liens
for Taxes not yet due.
(e) Withholding Taxes. NSP and each of the NSP
Subsidiaries have complied in all material respects with
the provisions of the Internal Revenue Code of 1986, as
amended (the "Code") relating to the withholding of Taxes,
as well as similar provisions under any other laws, and
have, within the time and in the manner prescribed by law,
withheld from employee wages and paid over to the proper
governmental authorities all amounts required.
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(f) Extensions of Time for Filing Tax Returns.
Neither NSP nor any of the NSP Subsidiaries has requested
any extension of time within which to file any Tax Return,
which Tax Return has not since been filed.
(g) Waivers of Statute of Limitations. Neither NSP
nor any of the NSP Subsidiaries has executed any out-
standing waivers or comparable consents regarding the ap-
plication of the statute of limitations with respect to
any Taxes or Tax Returns.
(h) Expiration of Statute of Limitations. The
statute of limitations for the assessment of all Taxes has
expired for all applicable Tax Returns of NSP and each of
the NSP Subsidiaries or those Tax Returns have been exam-
ined by the appropriate taxing authorities for all periods
through the date hereof, and no deficiency for any Taxes
has been proposed, asserted or assessed against NSP or any
of the NSP Subsidiaries that has not been resolved and
paid in full.
(i) Audit, Administrative and Court Proceedings. No
audits or other administrative proceedings or court pro-
ceedings are presently pending with regard to any Taxes or
Tax Returns of NSP or any of the NSP Subsidiaries.
(j) Powers of Attorney. No power of attorney cur-
rently in force has been granted by NSP or any of the NSP
Subsidiaries concerning any Tax matter.
(k) Tax Rulings. Neither NSP nor any of the NSP
Subsidiaries has received a Tax Ruling (as defined below)
or entered into a Closing Agreement (as defined below)
with any taxing authority that would have a continuing
adverse effect after the Closing Date. "Tax Ruling", as
used in this Agreement, shall mean a written ruling of a
taxing authority relating to Taxes. "Closing Agreement",
as used in this Agreement, shall mean a written and le-
gally binding agreement with a taxing authority relating
to Taxes.
(l) Availability of Tax Returns. NSP has made
available to WEC complete and accurate copies of (i) all
Tax Returns, and any amendments thereto, filed by NSP or
any of the NSP Subsidiaries, (ii) all audit reports re-
ceived from any taxing authority relating to any Tax Re-
turn filed by NSP or any of the NSP Subsidiaries and (iii)
any Closing Agreements entered into by NSP or any of the
NSP Subsidiaries with any taxing authority.
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(m) Tax Sharing Agreements. Neither NSP nor any NSP
Subsidiary is a party to any agreement relating to allo-
cating or sharing of Taxes.
(n) Code Section 280G. Neither NSP nor any of the
NSP Subsidiaries is a party to any agreement, contract, or
arrangement that could result, on account of the transac-
tions contemplated hereunder, separately or in the aggre-
gate, in the payment of any "excess parachute payments"
within the meaning of Section 280G of the Code.
(o) Liability for Others. None of NSP or any of the
NSP Subsidiaries has any liability for Taxes of any person
other than NSP and the NSP Subsidiaries (i) under Treasury
Regulations Section 1.1502-6 (or any similar provision of
state, local or foreign law) as a transferee or successor,
(ii) by contract, or (iii) otherwise.
Section 4.10 Employee Matters; ERISA. Except as set
forth in Section 4.10 of the NSP Disclosure Schedule:
(a) Benefit Plans. Section 4.10(a) of the NSP Dis-
closure Schedule contains a true and complete list of each em-
ployee benefit plan covering employees, former employees or
directors of NSP and each of the NSP Subsidiaries or their
beneficiaries, or providing benefits to such persons in respect
of services provided to any such entity, including, but not
limited to, any employee benefit plans within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") and any severance or change in con-
trol agreement (collectively, the "NSP Benefit Plans"). For
the purposes of this Section 4.10 only, the term "NSP" shall be
deemed to include the predecessors of such company.
(b) Contributions. All material contributions and
other payments required to be made by NSP or any of the NSP
Subsidiaries to any NSP Benefit Plan (or to any person pursuant
to the terms thereof) have been made or the amount of such
payment or contribution obligation has been reflected in the
NSP Financial Statements.
(c) Qualification; Compliance. Each of the NSP
Benefit Plans intended to be "qualified" within the meaning of
Section 401(a) of the Code has been determined by the IRS to be
so qualified, and, to the best knowledge of NSP, no circum-
stances exist that are reasonably expected by NSP to result in
the revocation of any such determination. NSP is in compliance
in all material respects with, and each of the NSP Benefit
Plans is and has been operated in all material respects in
compliance with, all applicable laws, rules and regulations
-17-<PAGE>
governing such plan, including, without limitation, ERISA and
the Code. Each NSP Benefit Plan intended to provide for the
deferral of income, the reduction of salary or other compensa-
tion, or to afford other income tax benefits, complies with the
requirements of the applicable provisions of the Code or other
laws, rules and regulations required to provide such income tax
benefits.
(d) Liabilities. With respect to the NSP Benefit
Plans, individually and in the aggregate, no event has oc-
curred, and, to the best knowledge of NSP, there does not now
exist any condition or set of circumstances, that could subject
NSP or any of the NSP Subsidiaries to any material liability
arising under the Code, ERISA or any other applicable law (in-
cluding, without limitation, any liability to any such plan or
the Pension Benefit Guaranty Corporation (the "PBGC")), or un-
der any indemnity agreement to which NSP is a party, excluding
liability for benefit claims and funding obligations payable in
the ordinary course.
(e) Welfare Plans. None of the NSP Benefit Plans
that are "welfare plans", within the meaning of Section 3(1) of
ERISA, provides for any retiree benefits, other than continua-
tion coverage required to be provided under Section 4980B of
the Code or Part 6 of Title I of ERISA.
(f) Documents Made Available. NSP has made avail-
able to WEC a true and correct copy of each collective bar-
gaining agreement to which NSP or any of the NSP Subsidiaries
is a party or under which NSP or any of the NSP Subsidiaries
has obligations and, with respect to each NSP Benefit Plan,
where applicable, (i) such plan and summary plan description,
(ii) the most recent annual report filed with the IRS, (iii)
each related trust agreement, insurance contract, service pro-
vider or investment management agreement (including all amend-
ments to each such document), (iv) the most recent determina-
tion of the IRS with respect to the qualified status of such
NSP Benefit Plan, and (v) the most recent actuarial report or
valuation.
(g) Payments Resulting from Mergers. (i) The con-
summation or announcement of any transaction contemplated by
this Agreement will not (either alone or upon the occurrence of
any additional or further acts or events) result in any (A)
payment (whether of severance pay or otherwise) becoming due
from NSP or any of the NSP Subsidiaries to any officer, em-
ployee, former employee or director thereof or to the trustee
under any "rabbi trust" or similar arrangement, or (B) benefit
under any NSP Benefit Plan being established or becoming ac-
celerated, vested or payable and (ii) neither NSP nor any of
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the NSP Subsidiaries is a party to (A) any management, employ-
ment, deferred compensation, severance (including any payment,
right or benefit resulting from a change in control), bonus or
other contract for personal services with any officer, director
or employee, (B) any consulting contract with any person who
prior to entering into such contract was a director or officer
of NSP, or (C) any plan, agreement, arrangement or understand-
ing similar to any of the foregoing.
(h) Labor Agreements. As of the date hereof, nei-
ther NSP nor any of the NSP Subsidiaries is a party to any
collective bargaining agreement or other labor agreement with
any union or labor organization. To the best knowledge of NSP,
as of the date hereof, there is no current union representation
question involving employees of NSP or any of the NSP Subsid-
iaries, nor does NSP know of any activity or proceeding of any
labor organization (or representative thereof) or employee
group to organize any such employees. Except as disclosed in
the NSP SEC Reports filed prior to the date hereof or in Sec-
tion 4.10(h) of the NSP Disclosure Schedule, (i) there is no
unfair labor practice, employment discrimination or other ma-
terial complaint against NSP or any of the NSP Subsidiaries
pending, or to the best knowledge of NSP, threatened, (ii)
there is no strike or lockout or material dispute, slowdown or
work stoppage pending, or to the best knowledge of NSP,
threatened, against or involving NSP, and (iii) there is no
proceeding, claim, suit, action or governmental investigation
pending or, to the best knowledge of NSP, threatened, in re-
spect of which any director, officer, employee or agent of NSP
or any of the NSP Subsidiaries is or may be entitled to claim
indemnification from NSP or such NSP Subsidiary pursuant to
their respective articles of incorporation or by-laws or as
provided in the indemnification agreements listed in Section
4.10(h) of the NSP Disclosure Schedule.
Section 4.11 Environmental Protection. Except as
set forth in Section 4.11 of the NSP Disclosure Schedule or in
the NSP SEC Reports filed prior to the date hereof:
(a) Compliance. NSP and each of the NSP Subsidiar-
ies is in material compliance with all applicable Environmental
Laws (as defined in Section 4.11(g)(ii)); and neither NSP nor
any of the NSP Subsidiaries has received any communication
(written or oral), from any person or Governmental Authority
that alleges that NSP or any of the NSP Subsidiaries is not in
such compliance with applicable Environmental Laws.
-19-<PAGE>
(b) Environmental Permits. NSP and each of the NSP
Subsidiaries has obtained or has applied for all material en-
vironmental, health and safety permits and governmental autho-
rizations (collectively, the "Environmental Permits") necessary
for the construction of their facilities or the conduct of
their operations, and all such Environmental Permits are in
good standing or, where applicable, a renewal application has
been timely filed and is pending agency approval, and NSP and
the NSP Subsidiaries are in material compliance with all terms
and conditions of the Environmental Permits.
(c) Environmental Claims. To the best knowledge of
NSP, there is no material Environmental Claim (as defined in
Section 4.11(g)(i)) pending (i) against NSP or any of the NSP
Subsidiaries or NSP Joint Ventures, (ii) against any person or
entity whose liability for any Environmental Claim NSP or any
of the NSP Subsidiaries has or may have retained or assumed
either contractually or by operation of law, or (iii) against
any real or personal property or operations which NSP or any of
the NSP Subsidiaries owns, leases or manages, in whole or in
part.
(d) Releases. NSP has no knowledge of any material
Releases (as defined in Section 4.11(g)(iv)) of any Hazardous
Material (as defined in Section 4.11(g)(iii)) that would be
reasonably likely to form the basis of any material Environ-
mental Claim against NSP or any of the NSP Subsidiaries, or
against any person or entity whose liability for any material
Environmental Claim NSP or any of the NSP Subsidiaries has or
may have retained or assumed either contractually or by opera-
tion of law.
(e) Predecessors. NSP has no knowledge, with re-
spect to any predecessor of NSP or any of the NSP Subsidiaries,
of any material Environmental Claim pending or threatened, or
of any Release of Hazardous Materials that would be reasonably
likely to form the basis of any material Environmental Claim.
(f) Disclosure. To NSP's best knowledge, NSP has
disclosed to WEC all material facts which NSP reasonably be-
lieves form the basis of a material Environmental Claim arising
from (i) the cost of NSP pollution control equipment currently
required or known to be required in the future; (ii) current
NSP remediation costs or NSP remediation costs known to be re-
quired in the future; or (iii) any other environmental matter
affecting NSP.
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(g) As used in this Agreement:
(i) "Environmental Claim" means any and all admin-
istrative, regulatory or judicial actions, suits, demands,
demand letters, directives, claims, liens, investigations,
proceedings or notices of noncompliance or violation
(written or oral) by any person or entity (including any
Governmental Authority) alleging potential liability (in-
cluding, without limitation, potential responsibility for
or liability for enforcement, investigatory costs, cleanup
costs, governmental response costs, removal costs, reme-
dial costs, natural-resources damages, property damages,
personal injuries or penalties) arising out of, based on
or resulting from (A) the presence, or Release or threat-
ened Release into the environment, of any Hazardous Mate-
rials at any location, whether or not owned, operated,
leased or managed by NSP or any of the NSP Subsidiaries or
NSP Joint Ventures (for purposes of this Section 4.11), or
by WEC or any of the WEC Subsidiaries or WEC Joint Ven-
tures (for purposes of Section 5.11); or (B) circumstances
forming the basis of any violation, or alleged violation,
of any Environmental Law; or (C) any and all claims by any
third party seeking damages, contribution, indemnifica-
tion, cost recovery, compensation or injunctive relief
resulting from the presence or Release of any Hazardous
Materials.
(ii) "Environmental Laws" means all federal, state,
local laws, rules and regulations relating to pollution,
the environment (including, without limitation, ambient
air, surface water, groundwater, land surface or subsur-
face strata) or protection of human health as it relates
to the environment including, without limitation, laws and
regulations relating to Releases or threatened Releases of
Hazardous Materials, or otherwise relating to the manu-
facture, processing, distribution, use, treatment, stor-
age, disposal, transport or handling of Hazardous Mate-
rials.
(iii) "Hazardous Materials" means (a) any petroleum
or petroleum products, radioactive materials, asbestos in
any form that is or could become friable, urea formalde-
hyde foam insulation, and transformers or other equipment
that contain dielectric fluid containing polychlorinated
biphenyls ("PCBs"); and (b) any chemicals, materials or
substances which are now defined as or included in the
definition of "hazardous substances", "hazardous wastes",
"hazardous materials", "extremely hazardous wastes", "re-
stricted hazardous wastes", "toxic substances", "toxic
-21-<PAGE>
pollutants", or words of similar import, under any Envi-
ronmental Law; and (c) any other chemical, material, sub-
stance or waste, exposure to which is now prohibited,
limited or regulated under any Environmental Law in a ju-
risdiction in which NSP or any of the NSP Subsidiaries or
NSP Joint Ventures operates (for purposes of this Section
4.11) or in which WEC or any of the WEC Subsidiaries or
WEC Joint Ventures operates (for purposes of Section
5.11).
(iv) "Release" means any release, spill, emission,
leaking, injection, deposit, disposal, discharge, dis-
persal, leaching or migration into the atmosphere, soil,
surface water, groundwater or property.
Section 4.12 Regulation as a Utility. NSP is regu-
lated as a public utility in the States of Minnesota, North
Dakota and South Dakota and in no other state. Northern States
Power Company, a Wisconsin corporation ("NSP-W"), is regulated
as a public utility in the States of Wisconsin and Michigan and
in no other state. Except as set forth in Section 4.12 of the
NSP Disclosure Schedule, neither NSP nor any "subsidiary com-
pany" or "affiliate" of NSP is subject to regulation as a pub-
lic utility or public service company (or similar designation)
by any other state in the United States or any foreign country.
NSP is an exempt holding company under Section 3(a)(2) of the
1935 Act.
Section 4.13 Vote Required. The approval of the
Mergers by a majority of the votes entitled to be cast by all
holders of Old NSP Common Stock and Old NSP Preferred Stock
voting together as a single class (the "NSP Shareholders' Ap-
proval") is the only vote of the holders of any class or series
of the capital stock of NSP or any of its subsidiaries required
to approve this Agreement, the Mergers and the other transac-
tions contemplated hereby, provided that the approval of
shareholders of NSP may be required for the repurchase of
shares of Old NSP Common Stock pursuant to Section 7(a) of the
NSP Stock Option Agreement under circumstances where Subdivi-
sion 3 of Section 302A.553 of the MBCA would be applicable.
Section 4.14 Accounting Matters. Neither NSP nor,
to NSP's best knowledge, any of its affiliates has taken or
agreed to take any action that would prevent the Company from
accounting for the transactions to be effected pursuant to this
Agreement as a pooling of interests in accordance with GAAP and
applicable SEC regulations. As used in this Agreement (except
as specifically otherwise defined), the term "affiliate", ex-
cept where otherwise defined herein, shall mean, as to any
person, any other person which directly or indirectly controls,
-22-<PAGE>
or is under common control with, or is controlled by, such
person. As used in this definition, "control" (including, with
its correlative meanings, "controlled by" and "under common
control with") shall mean possession, directly or indirectly,
of power to direct or cause the direction of management or
policies (whether through ownership of securities or partner-
ship or other ownership interests, by contract or otherwise).
Section 4.15 Applicability of Certain Minnesota Law.
Assuming the representation and warranty of WEC made in Section
5.18 is correct, none of the control share acquisition provi-
sions of Section 302A.671 of the MBCA, the business combination
provisions of Sections 302A.673 and 675 of the MBCA or any
similar provisions of the MBCA (or, to the best knowledge of
NSP, any other similar state statute) or the Restated Articles
of Incorporation or by-laws of NSP, are applicable to the
transactions contemplated by this Agreement, including the
granting or exercise of the NSP Stock Option Agreement.
Section 4.16 Opinion of Financial Advisor. NSP has
received the opinion of Goldman, Sachs & Co., dated April 28,
1995, to the effect that, as of the date thereof, the Ratio is
fair from a financial point of view to the holders of Old NSP
Common Stock.
Section 4.17 Insurance. Except as set forth in
Section 4.17 of the NSP Disclosure Schedule, NSP and each of
the NSP Subsidiaries is, and has been continuously since Janu-
ary 1, 1990, insured with financially responsible insurers in
such amounts and against such risks and losses as are customary
in all material respects for companies conducting the business
as conducted by NSP and the NSP Subsidiaries during such time
period. Except as set forth in Section 4.17 of the NSP Dis-
closure Schedule, neither NSP nor any of the NSP Subsidiaries
has received any notice of cancellation or termination with
respect to any material insurance policy of NSP or any of the
NSP Subsidiaries. The insurance policies of NSP and each of
the NSP Subsidiaries are valid and enforceable policies in all
material respects.
Section 4.18 Ownership of WEC Common Stock. Except
pursuant to the terms of the WEC Stock Option Agreement, NSP
does not "beneficially own" (as such term is defined for pur-
poses of Section 13(d) of the Exchange Act) any shares of WEC
Common Stock.
-23-<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WEC
WEC represents and warrants to NSP as follows:
Section 5.1 Organization and Qualification. Except
as set forth in Section 5.1 of the WEC Disclosure Schedule (as
defined in Section 7.6(i)), each of WEC and each of the WEC
Subsidiaries (as defined below) is a corporation duly orga-
nized, validly existing and in active status under the laws of
its jurisdiction of incorporation or organization, has all
requisite corporate power and authority, and has been duly au-
thorized by all necessary approvals and orders to own, lease
and operate its assets and properties to the extent owned,
leased and operated and to carry on its business as it is now
being conducted and is duly qualified and in good standing to
do business in each jurisdiction in which the nature of its
business or the ownership or leasing of its assets and proper-
ties makes such qualification necessary. As used in this
Agreement, the term: (a) "WEC Subsidiary" shall mean those of
the subsidiaries of WEC identified as WEC Subsidiaries in Sec-
tion 5.2 of the WEC Disclosure Schedule; and (b) "WEC Joint
Venture" shall mean those of the joint ventures of WEC or any
WEC Subsidiary identified as a WEC Joint Venture in Section 5.2
of the WEC Disclosure Schedule.
Section 5.2 Subsidiaries. Section 5.2 of the WEC
Disclosure Schedule sets forth a description as of the date
hereof of all subsidiaries and joint ventures of WEC, including
(a) the name of each such entity and WEC's interest therein,
and (b) as to each WEC Subsidiary and WEC Joint Venture, a
brief description of the principal line or lines of business
conducted by each such entity. Except as set forth in Section
5.2 of the WEC Disclosure Schedule, none of the WEC Subsidiar-
ies is a "public utility company", a "holding company", a
"subsidiary company" or an "affiliate" of any public utility
company within the meaning of Section 2(a)(5), 2(a)(7), 2(a)(8)
or 2(a)(11) of the 1935 Act, respectively. Except as set forth
in Section 5.2 of the WEC Disclosure Schedule, all of the is-
sued and outstanding shares of capital stock of each WEC Sub-
sidiary are validly issued, fully paid, nonassessable (subject
to Section 180.0622(2)(b) of the WBCL, as judicially inter-
preted) and free of preemptive rights, and are owned directly
or indirectly by WEC free and clear of any liens, claims, en-
cumbrances, security interests, equities, charges and options
of any nature whatsoever and there are no outstanding sub-
scriptions, options, calls, contracts, voting trusts, proxies
or other commitments, understandings, restrictions, arrange-
ments, rights or warrants, including any right of conversion or
-24-<PAGE>
exchange under any outstanding security, instrument or other
agreement, obligating any such WEC Subsidiary to issue, deliver
or sell, or cause to be issued, delivered or sold, additional
shares of its capital stock or obligating it to grant, extend
or enter into any such agreement or commitment. With respect
to the subsidiaries and joint ventures of WEC that are not WEC
Subsidiaries (the "WEC Unrestricted Subsidiaries"): (i) except
as set forth in Section 5.2 of the WEC Disclosure Schedule,
neither WEC nor any WEC Subsidiary is liable for any obliga-
tions or liabilities of any WEC Unrestricted Subsidiary; (ii)
neither WEC nor any WEC Subsidiary is obligated to make any
loans or capital contributions to, or to undertake any guaran-
tees or other obligations with respect to, WEC Unrestricted
Subsidiaries, except for loans, capital contributions, guaran-
tees and other obligations not in excess of $35 million in the
aggregate to all such WEC Unrestricted Subsidiaries; and (iii)
the aggregate book value as of December 31, 1994, of WEC's in-
vestment in the WEC Unrestricted Subsidiaries was not in excess
of $120 million.
Section 5.3 Capitalization. The authorized capital
stock of WEC consists of 325,000,000 shares of WEC Common
Stock, and 15,000,000 shares of Preferred Stock, par value $.01
per share (the "WEC Preferred Stock"). As of the close of
business on April 20, 1995, there were issued and outstanding
109,415,713 shares of WEC Common Stock and no shares of WEC
Preferred Stock. All of the issued and outstanding shares of
the capital stock of WEC are, and any WEC Common Stock issued
pursuant to the WEC Stock Option Agreement will be, validly is-
sued, fully paid, nonassessable (subject to Section
180.0622(2)(b) of the WBCL, as judicially interpreted) and free
of preemptive rights. The authorized capital stock of Wiscon-
sin Electric Power Company, a Wisconsin corporation ("WEPCO"),
consists of 65,000,000 shares of Common Stock, par value $10.00
per share (the "WEPCO Common Stock"), 45,000 shares of 6% Pre-
ferred Stock, par value $100.00 per share (the "WEPCO 6% Pre-
ferred Stock"); 2,286,500 shares of Serial Preferred Stock, par
value $100.00 per share (the "WEPCO $100 Par Value Serial Pre-
ferred Stock") and 5,000,000 shares of Serial Preferred Stock,
par value $25.00 per share (the "WEPCO $25 Par Value Serial
Preferred Stock" and, together with the WEPCO 6% Preferred
Stock and the WEPCO $100 Par Value Serial Preferred Stock, the
"WEPCO Preferred Stock"). As of the close of business on April
20, 1995, there were issued and outstanding 33,289,327 shares
of WEPCO Common Stock, 44,508 shares of the WEPCO 6% Preferred
Stock, 260,000 shares of the WEPCO $100 Par Value Serial Pre-
ferred Stock, 3.60% Series, and no shares of the WEPCO $25 Par
Value Serial Preferred Stock. Except as set forth in Section
5.3 of the WEC Disclosure Schedule, as of the date hereof,
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there are no outstanding subscriptions, options, calls, con-
tracts, voting trusts, proxies or other commitments, under-
standings, restrictions, arrangements, rights or warrants, in-
cluding any right of conversion or exchange under any out-
standing security, instrument or other agreement, obligating
WEC or any of the WEC Subsidiaries to issue, deliver or sell,
or cause to be issued, delivered or sold, additional shares of
the capital stock of WEC, or obligating WEC to grant, extend or
enter into any such agreement or commitment, other than under
the WEC Stock Option Agreement. There are no outstanding stock
appreciation rights of WEC which were not granted in tandem
with a related stock option and no outstanding limited stock
appreciation rights or other rights to redeem for cash options
or warrants of WEC.
Section 5.4 Authority; Non-Contravention; Statutory
Approvals; Compliance.
(a) Authority. WEC has all requisite power and au-
thority to enter into this Agreement and the WEC Stock Option
Agreement, and, subject to the applicable WEC Shareholders'
Approval (as defined in Section 5.13) and the applicable WEC
Required Statutory Approvals (as defined in Section 5.4(c)), to
consummate the transactions contemplated hereby or thereby.
The execution and delivery of this Agreement and the WEC Stock
Option Agreement and the consummation by WEC of the transac-
tions contemplated hereby and thereby have been duly authorized
by all necessary corporate action on the part of WEC, subject
to obtaining the applicable WEC Shareholders' Approval. Each
of this Agreement and the WEC Stock Option Agreement has been
duly and validly executed and delivered by WEC and, assuming
the due authorization, execution and delivery hereof and
thereof by the other signatories hereto and thereto, consti-
tutes the valid and binding obligation of WEC enforceable
against it in accordance with its terms.
(b) Non-Contravention. Except as set forth in Sec-
tion 5.4(b) of the WEC Disclosure Schedule, the execution and
delivery of this Agreement and the WEC Stock Option Agreement
by WEC do not, and the consummation of the transactions con-
templated hereby or thereby will not, result in a material
Violation pursuant to any provisions of (i) the articles of
incorporation, by-laws or similar governing documents of WEC or
any of the WEC Subsidiaries or the WEC Joint Ventures, (ii)
subject to obtaining the WEC Required Statutory Approvals and
the receipt of the WEC Shareholders' Approval, any statute,
law, ordinance, rule, regulation, judgment, decree, order, in-
junction, writ, permit or license of any Governmental Authority
applicable to WEC or any of the WEC Subsidiaries or the WEC
Joint Ventures or any of their respective properties or assets
-26-<PAGE>
or (iii) subject to obtaining the third-party consents set
forth in Section 5.4(b) of the WEC Disclosure Schedule (the
"WEC Required Consents") any material note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, conces-
sion, contract, lease or other instrument, obligation or
agreement of any kind to which WEC or any of the WEC Subsid-
iaries or the WEC Joint Ventures is a party or by which it or
any of its properties or assets may be bound or affected.
(c) Statutory Approvals. No declaration, filing or
registration with, or notice to or authorization, consent or
approval of, any Governmental Authority is necessary for the
execution and delivery of this Agreement or the WEC Stock Op-
tion Agreement by WEC or the consummation by WEC of the trans-
actions contemplated hereby or thereby, except as described in
Section 5.4(c) of the WEC Disclosure Schedule (the "WEC Re-
quired Statutory Approvals", it being understood that refer-
ences in this Agreement to "obtaining" such WEC Required Stat-
utory Approvals shall mean making such declarations, filings or
registrations; giving such notices; obtaining such authoriza-
tions, consents or approvals; and having such waiting periods
expire as are necessary to avoid a violation of law).
(d) Compliance. Except as set forth in Section
5.4(d), Section 5.10 or Section 5.11 of the WEC Disclosure
Schedule, or as disclosed in the WEC SEC Reports (as defined in
Section 5.5) filed prior to the date hereof, neither WEC nor
any of the WEC Subsidiaries nor, to the knowledge of WEC, any
WEC Joint Venture, is in material violation of, is under in-
vestigation with respect to any material violation of, or has
been given notice or been charged with any material violation
of, any law, statute, order, rule, regulation, ordinance or
judgment (including, without limitation, any applicable envi-
ronmental law, ordinance or regulation) of any Governmental
Authority. Except as set forth in Section 5.4(d) of the WEC
Disclosure Schedule or in Section 5.11 of the WEC Disclosure
Schedule, WEC and the WEC Subsidiaries and WEC Joint Ventures
have all permits, licenses, franchises and other governmental
authorizations, consents and approvals necessary to conduct
their businesses as presently conducted in all material re-
spects. Except as set forth in Section 5.4(d) of the WEC Dis-
closure Schedule, WEC and each of the WEC Subsidiaries is not
in material breach or violation of or in material default in
the performance or observance of any term or provision of, and
no event has occurred which, with lapse of time or action by a
third party, could result in a material default under, (i) its
articles of incorporation or by-laws or (ii) any material con-
tract, commitment, agreement, indenture, mortgage, loan agree-
ment, note, lease, bond, license, approval or other instrument
-27-<PAGE>
to which it is a party or by which it is bound or to which any
of its property is subject.
Section 5.5 Reports and Financial Statements. The
filings required to be made by WEC and the WEC Subsidiaries
since January 1, 1990 under the Securities Act, the Exchange
Act, the 1935 Act, the Power Act, the Atomic Energy Act and
applicable state laws and regulations have been filed with the
SEC, the FERC, the NRC or the appropriate state public utili-
ties commission, as the case may be, including all forms,
statements, reports, agreements (oral or written) and all doc-
uments, exhibits, amendments and supplements appertaining
thereto, and complied, as of their respective dates, in all
material respects with all applicable requirements of the ap-
propriate statute and the rules and regulations thereunder.
WEC has made available to NSP a true and complete copy of each
report, schedule, registration statement and definitive proxy
statement filed by WEC with the SEC since January 1, 1992 (as
such documents have since the time of their filing been amend-
ed, the "WEC SEC Reports"). As of their respective dates, the
WEC SEC Reports did not contain any untrue statement of a ma-
terial fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not
misleading. The audited consolidated financial statements and
unaudited interim financial statements of WEC included in the
WEC SEC Reports (collectively, the "WEC Financial Statements")
have been prepared in accordance with GAAP (except as may be
indicated therein or in the notes thereto and except with re-
spect to unaudited statements as permitted by Form 10-Q of the
SEC) and fairly present the financial position of WEC as of the
dates thereof and the results of its operations and cash flows
for the periods then ended, subject, in the case of the unau-
dited interim financial statements, to normal, recurring audit
adjustments. True, accurate and complete copies of the Re-
stated Articles of Incorporation and by-laws of WEC, as in ef-
fect on the date hereof, are included (or incorporated by ref-
erence) in the WEC SEC Reports.
Section 5.6 Absence of Certain Changes or Events.
Except as disclosed in the WEC SEC Reports filed prior to the
date hereof or as set forth in Section 5.6 of the WEC Disclo-
sure Schedule, from December 31, 1994, WEC and each of the WEC
Subsidiaries have conducted their business only in the ordinary
course of business consistent with past practice and there has
not been, and no fact or condition exists which would have or,
insofar as reasonably can be foreseen, could have, a material
adverse effect on the business, assets, financial condition,
results of operations or prospects of WEC and its subsidiaries
taken as a whole (an "WEC Material Adverse Effect").
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Section 5.7 Litigation. Except as disclosed in the
WEC SEC Reports filed prior to the date hereof or as set forth
in Section 5.7, Section 5.9 or Section 5.11 of the WEC Disclo-
sure Schedule, (i) there are no material claims, suits, actions
or proceedings, pending or, to the knowledge of WEC, threat-
ened, nor are there, to the knowledge of WEC, any material in-
vestigations or reviews pending or threatened against, relating
to or affecting WEC or any of the WEC Subsidiaries, (ii) there
have not been any significant developments since December 31,
1994 with respect to such disclosed claims, suits, actions,
proceedings, investigations or reviews and (iii) there are no
material judgments, decrees, injunctions, rules or orders of
any court, governmental department, commission, agency, in-
strumentality or authority or any arbitrator applicable to WEC
or any of the WEC Subsidiaries.
Section 5.8 Registration Statement and Proxy State-
ment. None of the information supplied or to be supplied by or
on behalf of WEC for inclusion or incorporation by reference in
(i) the Registration Statement will, at the time the Registra-
tion Statement is filed with the SEC and at the time it becomes
effective under the Securities Act, contain any untrue state-
ment of a material fact or omit to state any material fact re-
quired to be stated therein or necessary to make the statements
therein not misleading and (ii) the Proxy Statement will not,
at the dates mailed to shareholders and at the times of the
meetings of shareholders to be held in connection with the
Mergers, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light
of the circumstances under which they are made, not misleading.
The Registration Statement and the Proxy Statement will comply
as to form in all material respects with the provisions of the
Securities Act and the Exchange Act and the rules and regula-
tions thereunder.
Section 5.9 Tax Matters. Except as set forth in
Section 5.9 of the WEC Disclosure Schedule:
(a) Filing of Timely Tax Returns. WEC and each of
the WEC Subsidiaries have filed (or there has been filed
on its behalf) all material Tax Returns required to be
filed by each of them under applicable law. All such Tax
Returns were and are in all material respects true, com-
plete and correct and filed on a timely basis.
(b) Payment of Taxes. WEC and each of the WEC Sub-
sidiaries have, within the time and in the manner pre-
scribed by law, paid all Taxes that are currently due and
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payable except for those contested in good faith and for
which adequate reserves have been taken.
(c) Tax Reserves. WEC and the WEC Subsidiaries have
established on their books and records reserves adequate
to pay all Taxes and reserves for deferred income taxes in
accordance with GAAP.
(d) Tax Liens. There are no Tax liens upon the as-
sets of WEC or any of the WEC Subsidiaries except liens
for Taxes not yet due.
(e) Withholding Taxes. WEC and each of the WEC
Subsidiaries have complied in all material respects with
the provisions of the Code relating to the withholding of
Taxes, as well as similar provisions under any other laws,
and have, within the time and in the manner prescribed by
law, withheld from employee wages and paid over to the
proper governmental authorities all amounts required.
(f) Extensions of Time for Filing Tax Returns.
Neither WEC nor any of the WEC Subsidiaries has requested
any extension of time within which to file any Tax Return,
which Tax Return has not since been filed.
(g) Waivers of Statute of Limitations. Neither WEC
nor any of the WEC Subsidiaries has executed any out-
standing waivers or comparable consents regarding the ap-
plication of the statute of limitations with respect to
any Taxes or Tax Returns.
(h) Expiration of Statute of Limitations. The
statute of limitations for the assessment of all Taxes has
expired for all applicable Tax Returns of WEC and each of
the WEC Subsidiaries or those Tax Returns have been exam-
ined by the appropriate taxing authorities for all periods
through the date hereof, and no deficiency for any Taxes
has been proposed, asserted or assessed against WEC or any
of the WEC Subsidiaries that has not been resolved and
paid in full.
(i) Audit, Administrative and Court Proceedings. No
audits or other administrative proceedings or court pro-
ceedings are presently pending with regard to any Taxes or
Tax Returns of WEC or any of the WEC Subsidiaries.
(j) Powers of Attorney. No power of attorney cur-
rently in force has been granted by WEC or any of the WEC
Subsidiaries concerning any Tax matter.
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(k) Tax Rulings. Neither WEC nor any of the WEC
Subsidiaries has received a Tax Ruling or entered into a
Closing Agreement with any taxing authority that would
have a continuing adverse effect after the Closing Date.
(l) Availability of Tax Returns. WEC has made
available to NSP complete and accurate copies of (i) all
Tax Returns, and any amendments thereto, filed by WEC or
any of the WEC Subsidiaries, (ii) all audit reports re-
ceived from any taxing authority relating to any Tax Re-
turn filed by WEC or any of the WEC Subsidiaries and (iii)
any Closing Agreements entered into by WEC or any of the
WEC Subsidiaries with any taxing authority.
(m) Tax Sharing Agreements. Neither WEC nor any WEC
Subsidiary is a party to any agreement relating to allo-
cating or sharing of Taxes.
(n) Code Section 280G. Neither WEC nor any of the
WEC Subsidiaries is a party to any agreement, contract, or
arrangement that could result, on account of the transac-
tions contemplated hereunder, separately or in the aggre-
gate, in the payment of any "excess parachute payments"
within the meaning of Section 280G of the Code.
(o) Liability for Others. None of WEC or any of the
WEC Subsidiaries has any liability for Taxes of any person
other than WEC and the WEC Subsidiaries (i) under Treasury
Regulations Section 1.1502-6 (or any similar provision of
state, local or foreign law) as a transferee or successor,
(ii) by contract, or (iii) otherwise.
Section 5.10 Employee Matters; ERISA. Except as set
forth in Section 5.10 of the WEC Disclosure Schedule:
(a) Benefit Plans. Section 5.10(a) of the WEC Dis-
closure Schedule contains a true and complete list of each
employee benefit plan covering employees, former employees
or directors of WEC and each of the WEC Subsidiaries or
their beneficiaries, or providing benefits to such persons
in respect of services provided to any such entity, in-
cluding, but not limited to, any employee benefit plans
within the meaning of Section 3(3) of ERISA and any sev-
erance or change in control agreement (collectively, the
"WEC Benefit Plans"). For the purposes of this Section
5.10 only, the term "WEC" shall be deemed to include the
predecessors of such company.
(b) Contributions. All material contributions and
other payments required to be made by WEC or any of the
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WEC Subsidiaries to any WEC Benefit Plan (or to any person
pursuant to the terms thereof) have been made or the
amount of such payment or contribution obligation has been
reflected in the WEC Financial Statements.
(c) Qualification; Compliance. Each of the WEC
Benefit Plans intended to be "qualified" within the mean-
ing of Section 401(a) of the Code has been determined by
the IRS to be so qualified, and, to the best knowledge of
WEC, no circumstances exist that are reasonably expected
by WEC to result in the revocation of any such determina-
tion. WEC is in compliance in all material respects with,
and each of the WEC Benefit Plans is and has been operated
in all material respects in compliance with, all appli-
cable laws, rules and regulations governing such plan,
including, without limitation, ERISA and the Code. Each
WEC Benefit Plan intended to provide for the deferral of
income, the reduction of salary or other compensation, or
to afford other income tax benefits, complies with the
requirements of the applicable provisions of the Code or
other laws, rules and regulations required to provide such
income tax benefits.
(d) Liabilities. With respect to the WEC Benefit
Plans, individually and in the aggregate, no event has
occurred, and, to the best knowledge of WEC, there does
not now exist any condition or set of circumstances, that
could subject WEC or any of the WEC Subsidiaries to any
material liability arising under the Code, ERISA or any
other applicable law (including, without limitation, any
liability to any such plan or the PBGC), or under any in-
demnity agreement to which WEC is a party, excluding li-
ability for benefit claims and funding obligations payable
in the ordinary course.
(e) Welfare Plans. None of the WEC Benefit Plans
that are "welfare plans", within the meaning of Section
3(1) of ERISA, provides for any retiree benefits, other
than continuation coverage required to be provided under
Section 4980B of the Code or Part 6 of Title I of ERISA.
(f) Documents Made Available. WEC has made avail-
able to NSP a true and correct copy of each collective
bargaining agreement to which WEC or any of the WEC Sub-
sidiaries is a party or under which WEC or any of the WEC
Subsidiaries has obligations and, with respect to each WEC
Benefit Plan, where applicable, (i) such plan and summary
plan description, (ii) the most recent annual report filed
with the IRS, (iii) each related trust agreement, insur-
ance contract, service provider or investment management
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agreement (including all amendments to each such docu-
ment), (iv) the most recent determination of the IRS with
respect to the qualified status of such WEC Benefit Plan,
and (v) the most recent actuarial report or valuation.
(g) Payments Resulting from Mergers. (i) The con-
summation or announcement of any transaction contemplated
by this Agreement will not (either alone or upon the oc-
currence of any additional or further acts or events) re-
sult in any (A) payment (whether of severance pay or oth-
erwise) becoming due from WEC or any of the WEC Subsid-
iaries to any officer, employee, former employee or di-
rector thereof or to the trustee under any "rabbi trust"
or similar arrangement, or (B) benefit under any WEC Ben-
efit Plan being established or becoming accelerated, ves-
ted or payable and (ii) neither WEC nor any of the WEC
Subsidiaries is a party to (A) any management, employment,
deferred compensation, severance (including any payment,
right or benefit resulting from a change in control), bo-
nus or other contract for personal services with any of-
ficer, director or employee, (B) any consulting contract
with any person who prior to entering into such contract
was a director or officer of WEC, or (C) any plan, agree-
ment, arrangement or understanding similar to any of the
foregoing.
(h) Labor Agreements. As of the date hereof, nei-
ther WEC nor any of the WEC Subsidiaries is a party to any
collective bargaining agreement or other labor agreement
with any union or labor organization. To the best knowl-
edge of WEC, as of the date hereof, there is no current
union representation question involving employees of WEC
or any of the WEC Subsidiaries, nor does WEC know of any
activity or proceeding of any labor organization (or rep-
resentative thereof) or employee group to organize any
such employees. Except as disclosed in the WEC SEC Re-
ports filed prior to the date hereof or in Section 5.10(h)
of the WEC Disclosure Schedule, (i) there is no unfair
labor practice, employment discrimination or other mate-
rial complaint against WEC or any of the WEC Subsidiaries
pending, or to the best knowledge of WEC, threatened, (ii)
there is no strike, or lockout or material dispute, slow-
down or work stoppage pending, or to the best knowledge of
WEC, threatened, against or involving WEC, and (iii) there
is no proceeding, claim, suit, action or governmental in-
vestigation pending or, to the best knowledge of WEC,
threatened, in respect of which any director, officer,
employee or agent of WEC or any of the WEC Subsidiaries is
or may be entitled to claim indemnification from WEC or
such WEC Subsidiary pursuant to their respective articles
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of incorporation or by-laws or as provided in the indem-
nification agreements listed in Section 5.10(h) of the WEC
Disclosure Schedule.
Section 5.11 Environmental Protection. Except as
set forth in Section 5.11 of the WEC Disclosure Schedule or in
the WEC SEC Reports filed prior to the date hereof:
(a) Compliance. WEC and each of the WEC Subsidiar-
ies is in material compliance with all applicable Envi-
ronmental Laws; and neither WEC nor any of the WEC Sub-
sidiaries has received any communication (written or
oral), from any person or Governmental Authority that al-
leges that WEC or any of the WEC Subsidiaries is not in
such compliance with applicable Environmental Laws.
(b) Environmental Permits. WEC and each of the WEC
Subsidiaries has obtained or has applied for all the En-
vironmental Permits necessary for the construction of
their facilities or the conduct of their operations, and
all such Environmental Permits are in good standing or,
where applicable, a renewal application has been timely
filed and is pending agency approval, and WEC and the WEC
Subsidiaries are in material compliance with all terms and
conditions of the Environmental Permits.
(c) Environmental Claims. To the best knowledge of
WEC, there is no material Environmental Claim pending (i)
against WEC or any of the WEC Subsidiaries or WEC Joint
Ventures, (ii) against any person or entity whose liab-
ility for any Environmental Claim WEC or any of the WEC
Subsidiaries has or may have retained or assumed either
contractually or by operation of law, or (iii) against any
real or personal property or operations which WEC or any
of the WEC Subsidiaries owns, leases or manages, in whole
or in part.
(d) Releases. WEC has no knowledge of any material
Releases of any Hazardous Material that would be reason-
ably likely to form the basis of any material Environmen-
tal Claim against WEC or any of the WEC Subsidiaries, or
against any person or entity whose liability for any ma-
terial Environmental Claim WEC or any of the WEC Subsid-
iaries has or may have retained or assumed either con-
tractually or by operation of law.
(e) Predecessors. WEC has no knowledge, with re-
spect to any predecessor of WEC or any of the WEC Sub-
sidiaries, of any material Environmental Claim pending or
threatened, or of any Release of Hazardous Materials that
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would be reasonably likely to form the basis of any mate-
rial Environmental Claim.
(f) Disclosure. To WEC's best knowledge, WEC has
disclosed to NSP all material facts which WEC reasonably
believes form the basis of a material Environmental Claim
arising from (i) the cost of WEC pollution control equip-
ment currently required or known to be required in the
future; (ii) current WEC remediation costs or WEC reme-
diation costs known to be required in the future; or (iii)
any other environmental matter affecting WEC.
Section 5.12 Regulation as a Utility. WEC is regu-
lated as a public utility holding company under Section 196.795
of the Wisconsin Statutes. WEPCO is regulated as a public
utility in the States of Wisconsin and Michigan and in no other
state. Wisconsin Natural Gas Company, a Wisconsin corporation
("WN"), is regulated as a public utility in the State of Wis-
consin and in no other state. Neither WEC nor any "subsidiary
company" or "affiliate" of WEC is subject to regulation as a
public utility or public service company (or similar designa-
tion) by any other state in the United States or any foreign
country. WEC is an exempt holding company under Section
3(a)(1) of the 1935 Act.
Section 5.13 Vote Required. The approval of the
issuance of Company Common Stock in connection with the NSP
Merger by a majority of the votes entitled to be cast by the
holders of the shares of WEC Common Stock represented at the
meeting and entitled to vote thereon (in which the total vote
cast represents over 50% of all shares entitled to vote
thereon) and approval of the WEC Article Amendments (as defined
in Section 7.20) by the votes required in the WEC Restated Ar-
ticles of Incorporation (collectively, the "WEC Shareholders'
Approval") are the only votes of the holders of any class or
series of the capital stock of WEC or any of its subsidiaries
required to approve this Agreement, the Mergers and the other
transactions contemplated hereby, provided that the approval of
shareholders of WEC may be required for the repurchase of
shares of WEC Common Stock pursuant to Section 7(a) of the WEC
Stock Option Agreement under circumstances where Section
180.1134(1) of the WBCL or Article III.D.(1) of WEC's Restated
Articles of Incorporation would be applicable.
Section 5.14 Accounting Matters. Neither WEC nor,
to WEC's best knowledge, any of its affiliates has taken or
agreed to take any action that would prevent the Company from
accounting for the transactions to be effected pursuant to this
Agreement as a pooling of interests in accordance with GAAP and
applicable SEC regulations.
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Section 5.15 Applicability of Certain Wisconsin Law.
Assuming that the representation and warranty of NSP made in
Section 4.18 is correct, none of the control share acquisition
provisions of Section 180.1150 of the WBCL, the business com-
bination provisions of Sections 180.1140 to 180.1144 of the
WBCL, the "fair price" provisions of Sections 180.1130 to
180.1134 of the WBCL or any similar provisions of the WBCL (or,
to the best knowledge of WEC, any other similar state statute)
or the Restated Articles of Incorporation or by-laws of WEC,
are applicable to the transactions contemplated by this Agree-
ment, including the granting or exercise of the WEC Stock Op-
tion Agreement (except as set forth in Section 5.15 of the WEC
Disclosure Schedule).
Section 5.16 Opinion of Financial Advisor. WEC has
received the opinion of Barr Devlin Associates, dated April 28,
1995, to the effect that, as of the date thereof, the Ratio is
fair from a financial point of view to the holders of WEC Com-
mon Stock.
Section 5.17 Insurance. Except as set forth in
Section 5.17 of the WEC Disclosure Schedule, WEC and each of
the WEC Subsidiaries is, and has been continuously since Janu-
ary 1, 1990, insured with financially responsible insurers in
such amounts and against such risks and losses as are customary
in all material respects for companies conducting the business
as conducted by WEC and the WEC Subsidiaries during such time
period. Except as set forth in Section 5.17 of the WEC Dis-
closure Schedule, neither WEC nor any of the WEC Subsidiaries
has received any notice of cancellation or termination with
respect to any material insurance policy of WEC or any of the
WEC Subsidiaries. The insurance policies of WEC and each of
the WEC Subsidiaries are valid and enforceable policies in all
material respects.
Section 5.18 Ownership of Old NSP Common Stock.
Except pursuant to the terms of the NSP Stock Option Agreement,
WEC does not "beneficially own" (as such term is defined for
purposes of Section 13(d) of the Exchange Act) any shares of
Old NSP Common Stock or Old NSP Preferred Stock.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGERS
Section 6.1 Covenants of the Parties. After the
date hereof and prior to the Effective Time or earlier termi-
nation of this Agreement, NSP and WEC each agree as follows,
each as to itself and to each of the NSP Subsidiaries and the
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WEC Subsidiaries, as the case may be, except as expressly con-
templated or permitted in this Agreement, the NSP Stock Option
Agreement or the WEC Stock Option Agreement, or to the extent
the other parties hereto shall otherwise consent in writing:
(a) Ordinary Course of Business. Each party hereto
shall, and shall cause its Direct Subsidiaries to, carry
on their respective businesses in the usual, regular and
ordinary course in substantially the same manner as here-
tofore conducted and use all commercially reasonable ef-
forts to preserve intact their present business organi-
zations and goodwill, preserve the goodwill and relation-
ships with customers, suppliers and others having business
dealings with them and, subject to prudent management of
workforce needs and ongoing programs currently in force,
keep available the services of their present officers and
employees. Except as set forth in Section 6.1(a) of the
NSP Disclosure Schedule or the WEC Disclosure Schedule,
respectively, no party shall, nor shall any party permit
any of its Direct Subsidiaries to, enter into a new line
of business, or make any change in the line of business it
engages in as of the date hereof involving any material
investment of assets or resources or any material exposure
to liability or loss, in the case of NSP, to NSP and its
subsidiaries taken as a whole, and in the case of WEC, to
WEC and its subsidiaries taken as a whole.
(b) Dividends. No party shall, nor shall any party
permit any of its Direct Subsidiaries to, (i) declare or
pay any dividends on or make other distributions in re-
spect of any of their capital stock other than to such
party or its wholly-owned subsidiaries and other than
dividends required to be paid on any WEPCO Preferred Stock
or Old NSP Preferred Stock in accordance with the respec-
tive terms thereof, regular quarterly dividends on WEC
Common Stock with usual record and payment dates not,
during any fiscal year, in excess of 106% of the dividends
for the prior fiscal year and regular quarterly dividends
on Old NSP Common Stock with usual record and payment
dates not, during any fiscal year, in excess of 106% of
the dividends for the prior fiscal year; (ii) split, com-
bine or reclassify any of their capital stock or issue or
authorize or propose the issuance of any other securities
in respect of, in lieu of, or in substitution for, shares
of their capital stock; or (iii) redeem, repurchase or
otherwise acquire any shares of their capital stock, other
than (A) redemptions, purchases or acquisitions required
by the respective terms of any series of WEPCO Preferred
Stock or Old NSP Preferred Stock, (B) in connection with
refunding of WEPCO Preferred Stock or Old NSP Preferred
-37-<PAGE>
Stock with preferred stock or debt at a lower cost of
funds (calculating such cost on an after-tax basis), (C)
in connection with intercompany purchases of capital stock
or (D) for the purpose of funding employee stock ownership
plans in accordance with past practice. The last record
date of each of WEC and NSP on or prior to the Effective
Time which relates to a regular quarterly dividend on WEC
Common Stock or Old NSP Common Stock, as the case may be,
shall be the same date and shall be prior to the Effective
Time. Notwithstanding the foregoing, (i) NSP may redeem
all or any portion of the Old NSP Preferred Stock if the
Board of Directors of NSP determines such course of action
will facilitate the transactions contemplated hereby and
(ii) WEPCO may redeem all or any portion of the WEPCO
Preferred Stock, if the WEPCO Board of Directors deter-
mines such course of action will facilitate the transac-
tions contemplated hereby.
(c) Issuance of Securities. No party shall, nor
shall any party permit any of its Direct Subsidiaries to,
issue, agree to issue, deliver, sell, award, pledge, dis-
pose of or otherwise encumber or authorize or propose the
issuance, delivery, sale, award, pledge, disposal or other
encumbrance of, any shares of their capital stock of any
class or any securities convertible into or exchangeable
for, or any rights, warrants or options to acquire, any
such shares or convertible or exchangeable securities,
other than pursuant to the NSP Stock Option Agreement and
the WEC Stock Option Agreement, as the case may be, other
than intercompany issuances of capital stock, and other
than issuances (i) in the case of WEC and the WEC Subsid-
iaries (x) in connection with refunding WEPCO Preferred
Stock with preferred stock or debt at a lower cost of
funds (calculating such cost on an after-tax basis); and
(y) up to 1,600,000 shares of WEC Common Stock to be is-
sued for general corporate purposes, including issuances
in connection with acquisitions and financing and issu-
ances pursuant to employee benefit plans, stock option and
other incentive compensation plans, directors plans and
stock purchase and dividend reinvestment plans; and (ii),
in the case of NSP and the NSP Subsidiaries (x) in con-
nection with refunding of Old NSP Preferred Stock with
preferred stock or debt at a lower cost of funds (calcu-
lating such cost on an after-tax basis); and (y) up to
2,900,000 shares of NSP Common Stock to be issued for
general corporate purposes, including issuances in con-
nection with acquisitions and financing and issuances
pursuant to employee benefit plans, stock option and other
incentive compensation plans, directors plans and stock
purchase and dividend reinvestment plans. The parties
-38-<PAGE>
shall promptly furnish to each other such information as
may be reasonably requested including financial informa-
tion and take such action as may be reasonably necessary
and otherwise fully cooperate with each other in the
preparation of any registration statement under the Secu-
rities Act and other documents necessary in connection
with issuance of securities as contemplated by this Sec-
tion 6.1(c), subject to obtaining customary indemnities.
(d) Charter Documents. Except as set forth in Sec-
tion 6.1(d) of the NSP Disclosure Schedule or the WEC
Disclosure Schedule, no party shall amend or propose to
amend its respective articles of incorporation, by-laws or
regulations, or similar organic documents, except as con-
templated herein.
(e) No Acquisitions. Except as set forth in Section
6.1(e) of the NSP Disclosure Schedule or the WEC Disclo-
sure Schedule, other than acquisitions by a party and its
Direct Subsidiaries not in excess of $50 million over the
amount budgeted by such party for acquisition expendi-
tures, as set forth in such Section 6.1(e) of the NSP
Disclosure Schedule or the WEC Disclosure Schedule, sin-
gularly or in the aggregate, no party shall, nor shall any
party permit any of its Direct Subsidiaries to, acquire,
or publicly propose to acquire, or agree to acquire, by
merger or consolidation with, or by purchase or otherwise,
a substantial equity interest in or a substantial portion
of the assets of, any business or any corporation, part-
nership, association or other business organization or
division thereof, nor shall any party acquire or agree to
acquire a material amount of assets other than in the or-
dinary course of business consistent with past practice.
(f) Capital Expenditures and Emission Allowances.
Except as set forth in Section 6.1(f) of the NSP Disclo-
sure Schedule or the WEC Disclosure Schedule or as re-
quired by law, no party shall, nor shall any party permit
any of its Direct Subsidiaries to, (i) make capital ex-
penditures in excess of $100 million over the amount bud-
geted by such party for capital expenditures as set forth
in such Section 6.1(f) of the NSP Disclosure Schedule or
the WEC Disclosure Schedule or (ii) enter into written
commitments for the purchase of sulfur dioxide emission
allowances as provided for by the Clean Air Act Amendments
of 1990, in excess of $20 million, singularly or in the
aggregate.
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(g) No Dispositions. Except as set forth in Section
6.1(g) of the NSP Disclosure Schedule or the WEC Disclo-
sure Schedule, other than dispositions by a party and its
Direct Subsidiaries of less than $50 million, singularly
or in the aggregate, no party shall, nor shall any party
permit any of its Direct Subsidiaries to, sell, lease,
license, encumber or otherwise dispose of, any of its as-
sets, other than encumbrances or dispositions in the or-
dinary course of its business consistent with past prac-
tice.
(h) Indebtedness. Except as contemplated by this
Agreement, no party shall, nor shall any party permit any
of its Direct Subsidiaries to, incur or guarantee any in-
debtedness (including any debt borrowed or guaranteed or
otherwise assumed including, without limitation, the is-
suance of debt securities or warrants or rights to acquire
debt) or enter into any "keep well" or other agreement to
maintain any financial statement condition of another
person or enter into any arrangement having the economic
effect of any of the foregoing other than (i) short-term
indebtedness in the ordinary course of business consistent
with past practice (such as the issuance of commercial
paper or the use of existing credit facilities); (ii)
long-term indebtedness not aggregating more than $650
million; (iii) arrangements between such party and its
Direct Subsidiaries or among its Direct Subsidiaries; (iv)
as set forth in Section 6.1(h) of the NSP Disclosure
Schedule or the WEC Disclosure Schedule; (v) in connection
with the refunding of existing indebtedness at a lower
cost of funds; or (vi) in connection with the refunding of
WEPCO Preferred Stock or Old NSP Preferred Stock as per-
mitted in Section 6.1(b).
(i) Compensation, Benefits. Except as set forth in
Section 6.1(i) of the NSP Disclosure Schedule or the WEC
Disclosure Schedule, as may be required by applicable law
or as contemplated by this Agreement, no party shall, nor
shall any party permit any of its Direct Subsidiaries to,
(i) enter into, adopt or amend or increase the amount or
accelerate the payment or vesting of any benefit or amount
payable under, any employee benefit plan or other con-
tract, agreement, commitment, arrangement, plan or policy
maintained by, contributed to or entered into by such
party or any of its Direct Subsidiaries, or increase, or
enter into any contract, agreement, commitment or arrange-
ment to increase in any manner, the compensation or fringe
benefits, or otherwise to extend, expand or enhance the
engagement, employment or any related rights, of any di-
rector, officer or other employee of such party or any of
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its Direct Subsidiaries, except for normal increases in
the ordinary course of business consistent with past prac-
tice that, in the aggregate, do not result in a material
increase in benefits or compensation expense to such party
or any of its Direct Subsidiaries or (ii) enter into or
amend any employment, severance or special pay arrangement
with respect to the termination of employment or other
similar contract, agreement or arrangement with any di-
rector or officer or other employee other than in the or-
dinary course of business consistent with past practice.
(j) 1935 Act. Except as set forth in Section 6.1(j)
of the NSP Disclosure Schedule or WEC Disclosure Schedule,
no party shall, nor shall any party permit any of its Di-
rect Subsidiaries to, except as required or contemplated
by this Agreement, engage in any activities which would
cause a change in its status, or that of its subsidiaries,
under the 1935 Act, or that would impair the ability of
NSP to claim an exemption as of right under Rule 2 of the
1935 Act or that would impair the ability of WEC to claim
an exemption pursuant to its order under Section 3(a)(1)
of the 1935 Act prior to the Effective Time, other than
(i) the application to the SEC under the 1935 Act contem-
plated by this Agreement for approval to the extent re-
quired of the transactions contemplated hereby and (ii)
the registration of the Company pursuant to the 1935 Act.
(k) Transmission, Generation. Except as required
pursuant to tariffs on file with the FERC as of the date
hereof, in the ordinary course of business consistent with
past practice, or as set forth in Section 6.1(k) of the
NSP Disclosure Schedule or the WEC Disclosure Schedule, no
party shall, nor shall any party permit any of its Direct
Subsidiaries to, (i) commence construction of any addi-
tional generating, transmission or delivery capacity, or
(ii) obligate itself to purchase or otherwise acquire, or
to sell or otherwise dispose of, or to share, any addi-
tional generating, transmission or delivery capacity ex-
cept as set forth in the budgets of NSP and WEC.
(l) Accounting. Except as set forth in Section
6.1(l) of the NSP Disclosure Schedule or WEC Disclosure
Schedule, no party shall, nor shall any party permit any
of its Direct Subsidiaries to, make any changes in their
accounting methods, except as required by law, rule, reg-
ulation or GAAP.
(m) Pooling. No party shall, nor shall any party
permit any of its subsidiaries to, take any action which
-41-<PAGE>
would, or would be reasonably likely to, prevent the Com-
pany from accounting for the transactions to be effected
pursuant to this Agreement as a pooling of interests in
accordance with GAAP and applicable SEC regulations, and
each party hereto shall use all reasonable efforts to
achieve such result (including taking such actions as may
be necessary to cure any facts or circumstances that could
prevent such transactions from qualifying for pooling-of-
interests accounting treatment).
(n) Tax-Free Status. No party shall, nor shall any
party permit any of its subsidiaries to, take any actions
which would, or would be reasonably likely to, adversely
affect the status of the Mergers as tax-free transactions
(except as to dissenters' rights and fractional shares)
under Section 368(a) of the Code, and each party hereto
shall use all reasonable efforts to achieve such result.
(o) Affiliate Transactions. Except as set forth in
Section 6.1(o) of each of the NSP Disclosure Schedule or
the WEC Disclosure Schedule, no party shall, nor shall any
party permit any of its Direct Subsidiaries to, enter into
any material agreement or arrangement with any of their
respective affiliates (other than wholly-owned subsidiar-
ies) on terms materially less favorable to such party than
could be reasonably expected to have been obtained with an
unaffiliated third party on an arm's-length basis.
(p) Cooperation, Notification. Each party shall,
and shall cause its Direct Subsidiaries to, (i) confer on
a regular and frequent basis with one or more representa-
tives of the other party to discuss, subject to applicable
law, material operational matters and the general status
of its ongoing operations; (ii) promptly notify the other
party of any significant changes in its business, proper-
ties, assets, condition (financial or other), results of
operations or prospects; (iii) advise the other party of
any change or event which has had or, insofar as reason-
ably can be foreseen, is reasonably likely to result in,
in the case of NSP, a NSP Material Adverse Effect or, in
the case of WEC, a WEC Material Adverse Effect; and (iv)
promptly provide the other party with copies of all fil-
ings made by such party or any of its Direct Subsidiaries
with any state or federal court, administrative agency,
commission or other Governmental Authority in connection
with this Agreement and the transactions contemplated
hereby.
(q) Rate Matters. Each of NSP and WEC shall, and
shall cause its Direct Subsidiaries to, discuss with the
-42-<PAGE>
other any changes in its or its Direct Subsidiaries' rates
or charges (other than pass-through fuel and gas rates or
charges), standards of service or accounting from those in
effect on the date hereof and consult with the other prior
to making any filing (or any amendment thereto), or ef-
fecting any agreement, commitment, arrangement or consent
with governmental regulators, whether written or oral,
formal or informal, with respect thereto, and no party
will make any filing to change its rates on file with the
FERC that would have a material adverse effect on the
benefits associated with the business combination provided
for herein.
(r) Third-Party Consents. NSP shall, and shall
cause its Direct Subsidiaries to, use all commercially
reasonable efforts to obtain all NSP Required Consents.
NSP shall promptly notify WEC of any failure or prospec-
tive failure to obtain any such consents and, if requested
by WEC, shall provide copies of all NSP Required Consents
obtained by NSP to WEC. WEC shall, and shall cause its
Direct Subsidiaries to, use all commercially reasonable
efforts to obtain all WEC Required Consents. WEC shall
promptly notify NSP of any failure or prospective failure
to obtain any such consents and, if requested by NSP,
shall provide copies of all WEC Required Consents obtained
by WEC to NSP.
(s) No Breach, Etc. No party shall, nor shall any
party permit any of its Direct Subsidiaries to, willfully
take any action that would or is reasonably likely to re-
sult in a material breach of any provision of this Agree-
ment, the NSP Stock Option Agreement or the WEC Stock Op-
tion Agreement, as the case may be, or in any of its rep-
resentations and warranties set forth in this Agreement,
the NSP Stock Option Agreement, or the WEC Stock Option
Agreement, as the case may be, being untrue on and as of
the Closing Date.
(t) Tax-Exempt Status. No party shall, nor shall
any party permit any Direct Subsidiary to, take any action
that would likely jeopardize the qualification of NSP's or
WEPCO's outstanding revenue bonds which qualify on the
date hereof under Section 142(a) of the Code as "exempt
facility bonds" or as tax-exempt industrial development
bonds under Section 103(b)(4) of the Internal Revenue Code
of 1954, as amended, prior to the Tax Reform Act of 1986.
(u) Transition Management. As soon as practicable
after the date hereof, the parties shall create a special
transition management task force (the "Task Force") which
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shall be headed by James J. Howard ("Mr. Howard") and Ri-
chard A. Abdoo ("Mr. Abdoo"). The Task Force shall exam-
ine various alternatives regarding the manner in which to
best organize and manage the business of the Company after
the Effective Time, subject to applicable law. Messrs.
Howard and Abdoo will have joint decision-making authority
regarding the Task Force, and Mr. Abdoo will manage and be
responsible for the day-to-day activities and operations
of the Task Force.
(v) Company Actions. WEC and NSP shall cause the
Company to take only those actions, from the date hereof
until the Effective Time, that are required or contem-
plated by this Agreement to be so taken by the Company,
including, without limitation, the declaration, filing or
registration with, or notice to or authorization, consent
or approval of, any Governmental Authority, as set forth
in Section 4.4(b) of the NSP Disclosure Schedule, Section
4.4(c) of the NSP Disclosure Schedule, Section 5.4(b) of
the WEC Disclosure Schedule and Section 5.4(c) of the WEC
Disclosure Schedule.
(w) Tax Matters. Except as set forth in Section
6.1(w) of the NSP Disclosure Schedule or the WEC Disclo-
sure Schedule, no party shall make or rescind any material
express or deemed election relating to taxes, settle or
compromise any material claim, action, suit, litigation,
proceeding, arbitration, investigation, audit or contro-
versy relating to taxes, or change any of its methods of
reporting income or deductions for federal income tax
purposes from those employed in the preparation of its
federal income tax return for the taxable year ending De-
cember 31, 1993, except as may be required by applicable
law.
(x) Discharge of Liabilities. No party shall pay,
discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, dis-
charge or satisfaction, in the ordinary course of business
consistent with past practice (which includes the payment
of final and unappealable judgments) or in accordance with
their terms, of liabilities reflected or reserved against
in, or contemplated by, the most recent consolidated fi-
nancial statements (or the notes thereto) of such party
included in such party's reports filed with the SEC, or
incurred in the ordinary course of business consistent
with past practice.
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(y) Contracts. No party shall, except in the ordi-
nary course of business consistent with past practice,
modify, amend, terminate, renew or fail to use reasonable
business efforts to renew any material contract or agree-
ment to which such party or any Direct Subsidiary of such
party is a party or waive, release or assign any material
rights or claims.
(z) Insurance. Each party shall, and shall cause
its Direct Subsidiaries to, maintain with financially re-
sponsible insurance companies insurance in such amounts
and against such risks and losses as are customary for
companies engaged in the electric and gas utility industry
and employing methods of generating electric power and
fuel sources similar to those methods employed and fuels
used by such party or its Direct Subsidiaries.
(aa) Permits. Each party shall, and shall cause its
Direct Subsidiaries to, use reasonable efforts to maintain
in effect all existing governmental permits pursuant to
which such party or its Direct Subsidiaries operate.
(bb) Limitation on Investments in Unrestricted Sub-
sidiaries. From and after the date hereof, NSP will not
make, and will not permit any NSP Subsidiary to make, any
additional investments in, or loans or capital contribu-
tions to, or to undertake any guarantees or other obliga-
tions with respect to, any NSP Unrestricted Subsidiary in
excess of $350 million (which number shall be made up of,
and shall not be in duplication of, the amounts budgeted
for capital expenditures and acquisitions as set forth in
Sections 6.1(e) and (f) of the NSP Disclosure Schedule and
amounts spent pursuant to the $50 million basket refer-
enced in Section 6.1(e)) in the aggregate to all NSP Un-
restricted Subsidiaries; and WEC will not make, and will
not permit any WEC Subsidiary to make, any additional in-
vestments in, or loans or capital contributions to, or to
undertake any guarantees or other obligations with respect
to, any WEC Unrestricted Subsidiary in excess of $100
million (which number shall be made up of, and shall not
be in duplication of, the amounts budgeted for capital
expenditures and acquisitions as set forth in Sections
6.1(e) and (f) of the WEC Disclosure Schedule and amounts
spent pursuant to the $50 million basket referenced in
Section 6.1(e)) in the aggregate to all WEC Unrestricted
Subsidiaries.
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ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access to Information. Upon reasonable
notice, each party shall, and shall cause its Direct Subsid-
iaries to, afford to the officers, directors, employees, ac-
countants, counsel, investment bankers, financial advisors and
other representatives of the other (collectively, "Representa-
tives") reasonable access, during normal business hours
throughout the period prior to the Effective Time, to all of
its properties, books, contracts, commitments and records (in-
cluding, but not limited to, Tax Returns) and, during such pe-
riod, each party shall, and shall cause its Direct Subsidiaries
to, furnish promptly to the other (i) access to each report,
schedule and other document filed or received by it or any of
its Direct Subsidiaries pursuant to the requirements of federal
or state securities laws or filed with or sent to the SEC, the
FERC, the NRC, the Department of Justice, the Federal Trade
Commission, the Minnesota Public Utilities Commission, the
Public Service Commission of Wisconsin or any other federal or
state regulatory agency or commission, and (ii) access to all
information concerning themselves, their subsidiaries, direc-
tors, officers and shareholders and such other matters as may
be reasonably requested by the other party in connection with
any filings, applications or approvals required or contemplated
by this Agreement or for any other reason related to the
transactions contemplated by this Agreement. Each party shall
provide access to those premises, documents, reports and in-
formation described above of subsidiaries of such party that
are not Direct Subsidiaries to the extent such party has or is
able to obtain such access. Each party shall, and shall cause
its subsidiaries and Representatives to, hold in strict confi-
dence all documents and information concerning the other fur-
nished to it in connection with the transactions contemplated
by this Agreement in accordance with the Confidentiality
Agreement, dated January 17, 1995, between NSP and WEC, as it
may be amended from time to time (the "Confidentiality Agree-
ment").
Section 7.2 Joint Proxy Statement and Registration
Statement.
(a) Preparation and Filing. The parties will pre-
pare and file with the SEC as soon as reasonably practicable
after the date hereof the Registration Statement and the Proxy
Statement (together, the "Joint Proxy/Registration Statement").
The parties hereto shall each use reasonable efforts to cause
the Registration Statement to be declared effective under the
Securities Act as promptly as practicable after such filing.
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Each party hereto shall also take such action as may be rea-
sonably required to cause the shares of Company Common Stock
issuable in connection with the Mergers to be registered or to
obtain an exemption from registration under applicable state
"blue sky" or securities laws; provided, however, that no party
shall be required to register or qualify as a foreign corpora-
tion or to take other action which would subject it to service
of process in any jurisdiction where it will not be, following
the Mergers, so subject. Each of the parties hereto shall
furnish all information concerning itself which is required or
customary for inclusion in the Joint Proxy/Registration State-
ment. The parties shall use reasonable efforts to cause the
shares of Company Common Stock issuable in the Mergers to be
approved for listing on the NYSE upon official notice of issu-
ance. The information provided by any party hereto for use in
the Joint Proxy/Registration Statement shall be true and cor-
rect in all material respects without omission of any material
fact which is required to make such information not false or
misleading. No representation, covenant or agreement is made
by any party hereto with respect to information supplied by any
other party for inclusion in the Joint Proxy Statement/Regis-
tration Statement.
(b) Letter of NSP's Accountants. NSP shall use best
efforts to cause to be delivered to WEC letters of Deloitte &
Touche LLP and Price Waterhouse LLP, dated a date within two
business days before the date of the Joint Proxy/Registration
Statement, and addressed to WEC, in form and substance reason-
ably satisfactory to WEC and customary in scope and substance
for "cold comfort" letters delivered by independent public ac-
countants in connection with registration statements on Form
S-4.
(c) Letter of WEC's Accountants. WEC shall use best
efforts to cause to be delivered to NSP a letter of Price Wa-
terhouse LLP, dated a date within two business days before the
date of the Joint Proxy/Registration Statement, and addressed
to NSP, in form and substance reasonably satisfactory to NSP
and customary in scope and substance for "cold comfort" letters
delivered by independent public accountants in connection with
registration statements on Form S-4.
(d) Fairness Opinions. It shall be a condition to
the mailing of the Joint Proxy/Registration Statement to the
shareholders of NSP and WEC that (i) NSP shall have received an
opinion from Goldman, Sachs & Co., dated the date of the Joint
Proxy/Registration Statement, to the effect that, as of the
date thereof, the Ratio is fair to the holders of Old NSP Com-
mon Stock and (ii) WEC shall have received an opinion from Barr
Devlin Associates, dated the date of the Joint Proxy Statement,
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to the effect that, as of the date thereof, the Ratio is fair
from a financial point of view to the holders of WEC Common
Stock.
Section 7.3 Regulatory Matters.
(a) HSR Filings. 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 by
their respective "ultimate parent" companies under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended
(the "HSR Act"), and the rules and regulations promulgated
thereunder with respect to the transactions contemplated here-
by. Such parties will use all commercially reasonable efforts
to make such filings promptly and to respond promptly to any
requests for additional information made by either of such
agencies.
(b) Other Regulatory Approvals. Each party hereto
shall cooperate and use its best efforts to promptly prepare
and file all necessary documentation, to effect all necessary
applications, notices, petitions, filings and other documents,
and to use all commercially reasonable efforts to obtain all
necessary permits, consents, approvals and authorizations of
all Governmental Authorities necessary or advisable to consum-
mate the transactions contemplated by this Agreement, includ-
ing, without limitation, the NSP Required Statutory Approvals
and the WEC Required Statutory Approvals.
Section 7.4 Shareholder Approval.
(a) Approval of WEC Shareholders. Subject to the
provisions of Section 7.4(c) and Section 7.4(d), WEC shall, as
soon as reasonably practicable after the date hereof (i) take
all steps necessary to duly call, give notice of, convene and
hold a special meeting of its shareholders (the "WEC Special
Meeting") for the purpose of securing the WEC Shareholders'
Approval, (ii) distribute to its shareholders the joint Proxy
Statement in accordance with applicable federal and state law
and with its Restated Articles of Incorporation and by-laws,
(iii) subject to the fiduciary duties of its Board of Direc-
tors, recommend to its shareholders the approval of the NSP
Merger, this Agreement and the transactions contemplated hereby
(including the WEC Article Amendments) and (iv) cooperate and
consult with NSP with respect to each of the foregoing matters.
(b) Approval of NSP Shareholders. Subject to the
provisions of Section 7.4(c) and Section 7.4(d), NSP shall, as
soon as reasonably practicable after the date hereof (i) take
all steps necessary to duly call, give notice of, convene and
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hold a special meeting of its shareholders (the "NSP Special
Meeting") for the purpose of securing the NSP Shareholders'
Approval, (ii) distribute to its shareholders the joint Proxy
Statement in accordance with applicable federal and state law
and with its Restated Articles of Incorporation and by-laws,
(iii) subject to the fiduciary duties of its Board of Direc-
tors, recommend to its shareholders the approval of the NSP
Merger, this Agreement and the transactions contemplated hereby
and (iv) cooperate and consult with WEC with respect to each of
the foregoing matters.
(c) Meeting Date. The WEC Special Meeting for the
purpose of securing the WEC Shareholders' Approval and the NSP
Special Meeting for the purpose of securing the NSP Sharehold-
ers' Approval shall be held on such dates as NSP and WEC shall
mutually determine.
(d) Fairness Opinions Not Withdrawn. It shall be a
condition to the obligation of NSP to hold the NSP Special
Meeting that the opinion of Goldman, Sachs & Co., referred to
in Section 7.2(d), shall not have been withdrawn, and it shall
be a condition to the obligation of WEC to hold the WEC Special
Meeting that the opinion of Barr Devlin Associates, referred to
in Section 7.2(d), shall not have been withdrawn.
Section 7.5 Directors' and Officers' Indemnifica-
tion.
(a) Indemnification. To the extent, if any, not
provided by an existing right of indemnification or other
agreement or policy, from and after the Effective Time, the
Company shall, to the fullest extent permitted by applicable
law, indemnify, defend and hold harmless each person who is
now, or has been at any time prior to the date hereof, or who
becomes prior to the Effective Time, an officer, director or
employee of any of the parties hereto or any subsidiary (each
an "Indemnified Party" and collectively, the "Indemnified Par-
ties") against (i) all losses, expenses (including reasonable
attorney's fees and expenses), claims, damages or liabilities
or, subject to the proviso of the next succeeding sentence,
amounts paid in settlement, arising out of actions or omissions
occurring at or prior to the Effective Time (and whether as-
serted or claimed prior to, at or after the Effective Time)
that are, in whole or in part, based on or arising out of the
fact that such person is or was a director, officer or employee
of such party (the "Indemnified Liabilities"), and (ii) all
Indemnified Liabilities to the extent they are based on or
arise out of or pertain to the transactions contemplated by
this Agreement. In the event of any such loss, expense, claim,
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damage or liability (whether or not arising before the Effec-
tive Time), (i) the Company shall pay the reasonable fees and
expenses of counsel selected by the Indemnified Parties, which
counsel shall be reasonably satisfactory to the Company,
promptly after statements therefor are received and otherwise
advance to such Indemnified Party upon request reimbursement of
documented expenses reasonably incurred, in either case to the
extent not prohibited by the WBCL and upon receipt of any af-
firmation and undertaking required by Section 180.0853 of the
WBCL, (ii) the Company 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 Wisconsin law and the Re-
stated Articles of Incorporation (including the WEC Article
Amendments) or By-laws of the Company (as the same shall be
amended pursuant to Section 7.20) shall be made by independent
counsel mutually acceptable to the Company and the Indemnified
Party; provided, however, that the Company shall not be liable
for any settlement effected without its written consent (which
consent shall not be unreasonably withheld). The Indemnified
Parties as a group may retain only one law firm with respect to
each related matter 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 signifi-
cant issue between positions of such Indemnified Party and any
other Indemnified Party or Indemnified Parties.
(b) Insurance. For a period of six years after the
Effective Time, the Company shall cause to be maintained in
effect policies of directors' and officers' liability insurance
maintained by NSP and WEC for the benefit of those persons who
are currently covered by such policies on terms no less favor-
able than the terms of such current insurance coverage; pro-
vided, however, that the Company shall not be required to ex-
pend in any year an amount in excess of 200% of the annual ag-
gregate premiums currently paid by NSP and WEC for such in-
surance; and provided, further, that if the annual premiums of
such insurance coverage exceed such amount, the Company shall
be obligated to obtain a policy with the best coverage avail-
able, in the reasonable judgment of the Board of Directors of
the Company, for a cost not exceeding such amount.
(c) Successors. In the event the Company or any of
its successors or assigns (i) consolidates with or merges into
any other person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger or (ii)
transfers all or substantially all of its properties and assets
to any person, then and in either such case, proper provisions
shall be made so that the successors and assigns of the Company
shall assume the obligations set forth in this Section 7.5.
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(d) Survival of Indemnification. To the fullest
extent permitted by law, from and after the Effective Time, all
rights to indemnification as of the date hereof in favor of the
employees, agents, directors and officers of NSP, WEC and their
respective subsidiaries with respect to their activities as
such prior to the Effective Time, as provided in their respec-
tive articles of incorporation and by-laws in effect on the
date thereof, or otherwise in effect on the date hereof, shall
survive the Mergers and shall continue in full force and effect
for a period of not less than six years from the Effective
Time.
(e) Benefit. The provisions of this Section 7.5 are
intended to be for the benefit of, and shall be enforceable by,
each Indemnified Party, his or her heirs and his or her repre-
sentatives.
Section 7.6 Disclosure Schedules. On the date
hereof, (i) WEC has delivered to NSP a schedule (the "WEC Dis-
closure Schedule"), accompanied by a certificate signed by the
chief financial officer of WEC stating the WEC Disclosure
Schedule is being delivered pursuant to this Section 7.6(i) and
(ii) NSP has delivered to WEC a schedule (the "NSP Disclosure
Schedule"), accompanied by a certificate signed by the chief
financial officer of NSP stating the NSP Disclosure Schedule is
being delivered pursuant to this Section 7.6(ii). The NSP
Disclosure Schedule and the WEC Disclosure Schedule are col-
lectively referred to herein as the "Disclosure Schedules".
The Disclosure Schedules constitute an integral part of this
Agreement and modify the respective representations, warran-
ties, covenants or agreements of the parties hereto contained
herein to the extent that such representations, warranties,
covenants or agreements expressly refer to the Disclosure
Schedules. Anything to the contrary contained herein or in the
Disclosure Schedules notwithstanding, any and all statements,
representations, warranties or disclosures set forth in the
Disclosure Schedules shall be deemed to have been made on and
as of the date hereof.
Section 7.7 Public Announcements. Subject to each
party's disclosure obligations imposed by law, NSP and WEC will
cooperate with each other in the development and distribution
of all news releases and other public information disclosures
with respect to this Agreement or any of the transactions con-
templated hereby and shall not issue any public announcement or
statement with respect hereto or thereto without the consent of
the other party (which consent shall not be unreasonably with-
held).
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Section 7.8 Rule 145 Affiliates. Within 30 days
after the date of this Agreement, NSP shall identify in a let-
ter to WEC, and WEC shall identify in a letter to NSP, all
persons who are, and to such person's best knowledge who will
be at the Closing Date, "affiliates" of NSP and WEC, respec-
tively, as such term is used in Rule 145 under the Securities
Act (or otherwise under applicable SEC accounting releases with
respect to pooling-of-interests accounting treatment). Each of
NSP and WEC shall use all reasonable efforts to cause their
respective affiliates (including any person who may be deemed
to have become an affiliate after the date of the letter re-
ferred to in the prior sentence) to deliver to the Company on
or prior to the Closing Date a written agreement substantially
in the form attached as Exhibit 7.8 (each, an "Affiliate
Agreement").
Section 7.9 Employee Agreements and Workforce Mat-
ters.
(a) Certain Employee Agreements. Subject to Section
7.10, Section 7.14 and Section 7.15, the Company and its sub-
sidiaries shall honor, without modification, all contracts,
agreements, collective bargaining agreements and commitments of
the parties prior to the date hereof which apply to any current
or former employee or current or former director of the parties
hereto; provided, however, that this undertaking is not in-
tended to prevent the Company from enforcing such contracts,
agreements, collective bargaining agreements and commitments in
accordance with their terms, including, without limitation, any
reserved right to amend, modify, suspend, revoke or terminate
any such contract, agreement, collective bargaining agreement
or commitment.
(b) Workforce Matters. Subject to applicable col-
lective bargaining agreements, for a period of three years
following the Effective Time, any reductions in workforce in
respect of employees of the Company shall be made on a fair and
equitable basis, in light of the circumstances and the objec-
tives to be achieved, giving consideration to previous work
history, job experience, and qualifications, without regard to
whether employment was with NSP or its subsidiaries or WEC or
its subsidiaries, and any employees whose employment is termi-
nated or jobs are eliminated by the Company or any of its sub-
sidiaries during such period shall be entitled to participate
on a fair and equitable basis in the job opportunity and em-
ployment placement programs offered by the Company or any of
its subsidiaries. Any workforce reductions carried out fol-
lowing the Effective Time by the Company and its subsidiaries
shall be done in accordance with all applicable collective
bargaining agreements, and all laws and regulations governing
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the employment relationship and termination thereof including,
without limitation, the Worker Adjustment and Retraining Noti-
fication Act and regulations promulgated thereunder, and any
comparable state or local law.
Section 7.10 Employee Benefit Plans.
(a) Maintenance of NSP and WEC Benefit Plans. Sub-
ject to Section 7.10(b), Section 7.10(c) and Section 6.1(i),
each of the NSP Benefit Plans and WEC Benefit Plans in effect
at the date hereof shall be maintained in effect with respect
to the employees or former employees of NSP and any of its Di-
rect Subsidiaries, on the one hand, and of WEC and any of its
Direct Subsidiaries, on the other hand, respectively, who are
covered by any such benefit plan immediately prior to the
Closing Date (the "Affiliated Employees") until the Company
otherwise determines after the Effective Time; provided, how-
ever, that nothing herein contained shall limit any reserved
right contained in any such NSP Benefit Plan or WEC Benefit
Plan to amend, modify, suspend, revoke or terminate any such
plan; provided, further, however, that the Company or its sub-
sidiaries shall provide to the Affiliated Employees for a pe-
riod of not less than one year following the Effective Time
benefits, other than with respect to plans referred to in Sec-
tion 7.10(b) and Section 7.11, which are no less favorable in
the aggregate than those provided under the NSP Benefit Plans
or the WEC Benefit Plans, as the case may be. Without limita-
tion of the foregoing, each participant of any such NSP Benefit
Plan or WEC Benefit Plan shall receive credit for purposes of
eligibility to participate, vesting, benefit accrual and eli-
gibility to receive benefits under any benefit plan of the
Company or any of its subsidiaries or affiliates for service
credited for the corresponding purpose under such benefit plan;
provided, however, that such crediting of service shall not
operate to duplicate any benefit to any such participant or the
funding for any such benefit. Any person hired by the Company
or any of its subsidiaries after the Closing Date who was not
employed by any party hereto or its subsidiaries immediately
prior to the Closing Date shall be eligible to participate in
such benefit plans maintained, or contributed to, by the sub-
sidiary, division or operation by which such person is em-
ployed, provided that such person meets the eligibility re-
quirements of the applicable plan.
(b) Adoption of Company Replacement Plans. With
respect to the WEC Short-Term Performance Plan (the "WEC In-
centive Plan"), the NSP Executive Incentive Compensation Plan
(the "NSP Incentive Plan"), the NSP Long-Term Incentive Award
Stock Plan (the "NSP Stock Plan") and the WEC 1993 Omnibus
Stock Incentive Plan (the "WEC Stock Plan"), the Company and
-53-<PAGE>
its subsidiaries shall adopt replacement plans as set forth in
this Section 7.10(b) (collectively, the "Company Replacement
Plans"). Each Company Replacement Plan shall amend and super-
sede the corresponding NSP or WEC plan and such corresponding
plan shall, as of the Effective Time, be merged with and into
the appropriate Company Replacement Plan. The WEC Incentive
Plan and the NSP Incentive Plan shall be replaced by a new an-
nual bonus plan under which cash bonuses, based on percentages
of base salaries, are awarded based upon the achievement of
performance goals determined in advance by the Compensation
Committee of the Board of Directors of the Company (the "Com-
mittee"). With respect to those participants in the new plan
who are, or who the Committee determines are likely to be,
"covered individuals" within the meaning of Section 162(m) of
the Code, the performance goals shall be objective standards
that are approved by shareholders in accordance with the re-
quirements for exclusion from the limits of Section 162(m) of
the Code as performance-based compensation. The NSP Stock Plan
and the WEC Stock Plan shall be replaced by a stock compensa-
tion plan (the "Company Stock Plan") providing for the grant of
stock options, stock appreciation rights, restricted stock and
such other awards based upon the Company Common Stock as the
Board of Directors may determine, subject to shareholder ap-
proval of the Company Stock Plan. The Company shall reserve 12
million shares for issuance under the Company Stock Plan.
(c) NSP and WEC Action. With respect to each of the
Company Replacement Plans, each of NSP and WEC shall take all
corporate action necessary or appropriate to obtain the ap-
proval of the respective shareholders with respect to such plan
prior to the Effective Time. Before the Effective Time, WEC
shall take all steps necessary to amend (i) the WEC Supplemen-
tal Executive Retirement Plan, (ii) the WEC Executive Non-
Qualified Trust, (iii) each of the Supplemental Retirement
Benefit Agreements set forth in Section 5.10(g) of the WEC
Disclosure Schedule, (iv) the WEC Executive Deferred Compensa-
tion Plan, (v) the WEC Directors' Deferred Compensation Plan,
and (vi) the WEPCO Directors' Deferred Compensation Plan, so
that none of the transactions contemplated by this Agreement
shall constitute a Change of Control for purposes of said ar-
rangements, provided that with respect to items (iii) through
(vi), WEC shall use its best efforts to obtain the consent of
the other parties thereto. Prior to or as soon as practicable
after the date hereof, each of NSP and WEC shall adopt sever-
ance plans substantially in the forms attached hereto as Ex-
hibits 7.10(a) and 7.10(b), respectively.
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Section 7.11 Stock Option and Other Stock Plans.
(a) Amendment of NSP Stock Plan and Agreements. Ef-
fective as of the Effective Time, NSP shall amend the NSP Stock
Plan and each underlying award agreement to provide that (i)
each outstanding option to purchase shares of Old NSP Common
Stock (each, a "NSP Stock Option"), along with any tandem stock
appreciation right, shall constitute an option to acquire
shares of Company Common Stock, on the same terms and condi-
tions as were applicable under such NSP Stock Option, based on
the same number of shares of the Company Common Stock as the
holder of such NSP Stock Option would have been entitled to
receive pursuant to the NSP Merger in accordance with Article
II had such holder exercised such option in full immediately
prior to the Effective Time; provided, that the number of
shares, the option price, and the terms and conditions of ex-
ercise of such option, shall be determined in a manner that
preserves both (A) the aggregate gain (or loss) on the NSP
Stock Option immediately prior to the Effective Time and (B)
the ratio of the exercise price per share subject to the NSP
Stock Option to the fair market value (determined immediately
prior to the Effective Time) per share subject to such option;
and provided, further, that in the case of any option to which
Section 421 of the Code applies by reason of its qualification
under any of Sections 422-424 of the Code, the option price,
the number of shares purchasable pursuant to such option and
the terms and conditions of exercise of such option shall be
determined in order to comply with Section 424(a) of the Code;
and (ii) each other outstanding award under the NSP Stock Plan
("NSP Stock Awards") shall constitute an award based upon the
same number of shares of Company Common Stock as the holder of
such NSP Stock Award would have been entitled to receive pur-
suant to the NSP Merger in accordance with Article II had such
holder been the absolute owner, immediately before the Effec-
tive Time, of the shares of NSP Common Stock on which such NSP
Stock Award is based, and otherwise on the same terms and con-
ditions as governed such NSP Stock Award immediately before the
Effective Time. At the Effective Time, the Company shall as-
sume each stock award agreement relating to the NSP Stock Plan,
each as amended as previously provided. As soon as practicable
after the Effective Time, the Company shall deliver to the
holders of NSP Stock Options and NSP Stock Awards appropriate
notices setting forth such holders' rights pursuant to the
Company Stock Plan and each underlying stock award agreement,
each as assumed by the Company.
(b) Amendment of WEC Stock Plan and Agreements.
Effective as of the Effective Time, WEC shall amend the WEC
Stock Plan and use its best efforts to amend each underlying
stock award agreement to provide that none of the transactions
-55-<PAGE>
contemplated by this Agreement shall constitute a Change in
Control for purposes of the WEC Stock Plan.
(c) Company Action. With respect to each of the NSP
Stock Plan, the WEC Stock Plan, the NSP Employee Stock Owner-
ship Plan and any other plans under which the delivery of Old
NSP Common Stock, WEC Common Stock or Company Common Stock is
required upon payment of benefits, grant of awards or exercise
of options (the "Stock Plans"), the Company shall take all
corporate action necessary or appropriate to (i) obtain share-
holder approval with respect to such Stock Plan to the extent
such approval is required for purposes of the Code or other
applicable law, or to enable such Stock Plan to comply with
Rule 16b-3 promulgated under the Exchange Act, (ii) reserve for
issuance under such plan or otherwise provide a sufficient
number of shares of Company Common Stock for delivery upon
payment of benefits, grant of awards or exercise of options
under such Stock Plan and (iii) as soon as practicable after
the Effective Time, file registration statements on Form S-3 or
Form S-8, as the case may be (or any successor or other appro-
priate forms), with respect to the shares of Company Common
Stock subject to such Stock Plan to the extent such registra-
tion statement is required under applicable law, and the Com-
pany shall use its best efforts to maintain the effectiveness
of such registration statements (and maintain the current sta-
tus 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 Mergers will be subject to the reporting requirements
under Section 16(a) of the Exchange Act, the Company shall ad-
minister the Stock Plans, where applicable, in a manner that
complies with Rule 16b-3 promulgated under the Exchange Act.
Section 7.12 No Solicitations. No party hereto
shall, and each such party shall cause its Direct Subsidiaries
not to, shall not permit any of its Representatives or subsid-
iaries that are not Direct Subsidiaries to, and shall use its
best efforts to cause such persons not to, directly or indi-
rectly: initiate, solicit or encourage, or take any action to
facilitate the making of any offer or proposal which consti-
tutes or is reasonably likely to lead to, any Business Combi-
nation Proposal (as defined below), or, in the event of an un-
solicited Business Combination Proposal, except to the extent
required by their fiduciary duties under applicable law if so
advised in a written opinion of outside counsel, engage in ne-
gotiations or provide any information or data to any person
relating to any Business Combination Proposal. Each party
hereto shall notify the other party orally and in writing of
any such inquiries, offers or proposals (including, without
limitation, the terms and conditions of any such proposal and
-56-<PAGE>
the identity of the person making it), within 24 hours of the
receipt thereof, shall keep the other party informed of the
status and details of any such inquiry, offer or proposal, and
shall give the other party five days' advance notice of any
agreement to be entered into with or any information to be
supplied to any person making such inquiry, offer or proposal.
Each party hereto shall immediately cease and cause to be ter-
minated all existing discussions and negotiations, if any, with
any parties conducted heretofore with respect to any Business
Combination Proposal. As used in this Section 7.12, "Business
Combination Proposal" shall mean any tender or exchange offer,
proposal for a merger, consolidation or other business combi-
nation involving any party to this Agreement or any of its ma-
terial subsidiaries, or any proposal or offer (in each case,
whether or not in writing and whether or not delivered to the
stockholders of a party generally) to acquire in any manner,
directly or indirectly, a substantial equity interest in or a
substantial portion of the assets of any party to this Agree-
ment or any of its material subsidiaries, other than pursuant
to the transactions contemplated by this Agreement or referred
to in Section 7.19(c) of this Agreement. Nothing contained
herein shall prohibit a party from taking and disclosing to its
stockholders a position contemplated by Rule 14e-2(a) under the
Exchange Act with respect to a Business Combination Proposal by
means of a tender offer.
Section 7.13 Company Board of Directors. NSP's and
WEC's respective Boards of Directors will take such action as
may be necessary to cause the number of directors comprising
the full Board of Directors of the Company at the Effective
Time to be 12 persons, six of whom shall be designated by NSP
prior to the Effective Time and six of whom shall be designated
by WEC prior to the Effective Time. The initial designation of
such directors among the three classes of the Board of Direc-
tors of the Company shall be agreed to by NSP and WEC, the
designees of each party to be divided equally among such
classes; provided, however, that if, prior to the Effective
Time, any of such designees shall decline or be unable to
serve, the party which designated such person shall designate
another person to serve in such person's stead. NSP's and
WEC's respective Boards of Directors will also take such action
as may be necessary to cause the committees of the Board of
Directors of the Company at the Effective Time to consist of
that number of NSP and WEC designees with such chairs as are
set forth on Exhibit 7.13.
Section 7.14 Company Officers. At the Effective
Time, pursuant to the terms hereof and of the employment con-
tracts referred to in Section 7.15: (a) Mr. Howard shall hold
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the positions of Chairman of the Board and Chief Executive Of-
ficer of the Company and shall be entitled to serve in such
capacities until the end of the Initial Period (as defined in
Mr. Howard's employment contract entered into pursuant to Sec-
tion 7.15), at which time he shall be entitled to continue to
hold the position of Chairman of the Board of the Company until
the end of the Secondary Period (as defined in Mr. Howard's
employment contract entered into pursuant to Section 7.15); and
(b) Mr. Abdoo shall hold the positions of Vice Chairman of the
Board, President and Chief Operating Officer of the Company and
shall be entitled to serve in such capacities until the end of
the Initial Period, at which time he shall be entitled to hold
the additional position of Chief Executive Officer of the Com-
pany and to serve in all such capacities until his successor is
elected or appointed and shall have qualified in accordance
with the WBCL and the Restated Articles of Incorporation (in-
cluding the WEC Article Amendments) and By-laws of the Company
(as the same shall be amended pursuant to Section 7.20). If
either of such persons is unable or unwilling to hold such of-
fices for the periods set forth above, his successor shall be
selected by the Board of Directors of the Company in accordance
with its By-laws.
Section 7.15 Employment Contracts. The Company
shall, as of or prior to the Effective Time, enter into em-
ployment contracts with Mr. Howard and Mr. Abdoo in the forms
set forth in Exhibit 7.15.1 and Exhibit 7.15.2, respectively.
Section 7.16 Post-Merger Operations. Following the
Effective Time, the Company shall conduct its operations in
accordance with the following:
(a) Principal Corporate Offices. The Company and
NSP shall maintain their principal corporate offices in
Minnesota in the city of Minneapolis and WEPCO shall
maintain its principal corporate offices in Wisconsin in
the city of Milwaukee.
(b) Maintenance of Separate Existence of New NSP and
WEPCO. WEPCO, on the one hand, and New NSP, on the other
hand, shall continue their separate corporate existences,
operating under the names of "WISCONSIN ENERGY COMPANY"
and "NORTHERN STATES POWER COMPANY", respectively. The
respective corporate officers of WEPCO, on the one hand,
and NSP, on the other hand, shall be entitled to maintain
their current titles and responsibilities as officers of
WEPCO and New NSP, respectively, unless and until other-
wise determined by the Board of Directors of WEPCO and New
NSP.
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(c) Charities. After the Effective Time, the Com-
pany shall provide charitable contributions and community
support within the service areas of the parties and each
of their respective subsidiaries at levels substantially
comparable to the levels of charitable contributions and
community support provided by the parties and their re-
spective subsidiaries within their service areas within
the two-year period immediately prior to the Effective
Time. The assets of The Wisconsin Energy Corporation
Foundation, Inc. (the "Foundation") shall be used for
charitable purposes in accordance with the articles and
by-laws of the Foundation in the service areas of WEPCO
(including the prior service area of NSP-W) unless changed
by the Board of Directors of the Company.
Section 7.17 Expenses. Subject to Section 9.3, all
costs and expenses incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the
party incurring such expenses, except that those expenses in-
curred in connection with printing the Joint Proxy/Registration
Statement, as well as the filing fee relating thereto, shall be
shared equally by NSP and WEC.
Section 7.18 Further Assurances. Each party will,
and will cause its Direct Subsidiaries to, execute such further
documents and instruments and take such further actions as may
reasonably be requested by any other party in order to consum-
mate the Mergers in accordance with the terms hereof. The
parties expressly acknowledge and agree that, although it is
their current intention to effect a business combination among
themselves in the form contemplated by this Agreement, it may
be preferable to effectuate such a business combination by
means of an alternative structure in light of the conditions
set forth in Section 8.1(e), Section 8.2(e), Section 8.2(f),
Section 8.3(e), and Section 8.3(f). Accordingly, if the only
conditions to the parties' obligations to consummate the Merg-
ers which are not satisfied or waived are receipt of any one or
more of the NSP Required Consents, NSP Required Statutory Ap-
provals, WEC Required Consents, WEC Required Statutory Approv-
als or the ruling referred to in Sections 8.2(e) and 8.3(e),
and the adoption of an alternative structure (that otherwise
substantially preserves for NSP and WEC the economic benefits
of the Merger) would result in such conditions being satisfied
or waived, then the parties shall use their respective best
efforts to effect a business combination among themselves by
means of a mutually agreed upon structure other than the Merg-
ers that so preserves such benefits; provided that, prior to
closing any such restructured transaction, all material third
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party and Governmental Authority declarations, filings, regis-
trations, notices, authorizations, consents or approvals nec-
essary for the effectuation of such alternative business com-
bination shall have been obtained and all other conditions to
the parties' obligations to consummate the Mergers, as applied
to such alternative business combination, shall have been sat-
isfied or waived.
Section 7.19 Utility Asset Transfer. In addition to
the transactions described in Article I and Article II, con-
temporaneously with the Reincorporation Effective Time, NSP-W
shall sell and transfer to New NSP certain utility assets lo-
cated in the State of Wisconsin such that, upon such transfer,
New NSP shall be a Wisconsin utility for purposes of consider-
ing its assets as assets of a public utility affiliate in the
determination made under Section 196.795(5)(p) of the Wisconsin
Statutes.
Section 7.20 Charter and By-Law Amendments. Prior
to the Closing: (a) WEC and NSP shall agree upon amendments to
be effected to the Restated Articles of Incorporation of WEC,
including to change the name of WEC to a name agreed upon by
NSP and WEC (which shall not be the name of, or a name sub-
stantially similar to, either NSP or WEC) (the "WEC Article
Amendments"), and the by-laws of WEC, and WEC shall take all
actions necessary so that the WEC Article Amendments and such
amendments to the WEC by-laws become effective no later than
the Effective Time; (b) NSP shall cause the articles of incor-
poration of New NSP to be amended and restated in substantially
the form attached hereto as Exhibit 7.20(b); (c) WEC shall
cause the articles of incorporation of WEC Sub to be amended
and restated in the form attached hereto as Exhibit 7.20(c) and
shall cause WEC Sub to issue to WEC additional fully paid
shares of WEC Sub's common stock so that, at the Effective
Time, the number of outstanding shares of common stock of WEC
Sub is equal to the number of outstanding shares of NSP Common
Stock at such time.
ARTICLE VIII
CONDITIONS
Section 8.1 Conditions to Each Party's Obligation to
Effect the Mergers. The respective obligations of each party
to effect the Mergers shall be subject to the satisfaction on
or prior to the Closing Date of the following conditions, ex-
cept, to the extent permitted by applicable law, that such
conditions may be waived in writing pursuant to Section 9.5 by
the joint action of the parties hereto:
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(a) Shareholder Approvals. The WEC Shareholders'
Approval and the NSP Shareholders' Approval shall have
been obtained.
(b) No Injunction. No temporary restraining order
or preliminary or permanent injunction or other order by
any federal or state court preventing consummation of the
Mergers shall have been issued and be continuing in ef-
fect, and the Mergers and the other transactions contem-
plated hereby shall not have been prohibited under any
applicable federal or state law or regulation.
(c) Registration Statement. The Registration
Statement shall have become effective in accordance with
the provisions of the Securities Act, and no stop order
suspending such effectiveness shall have been issued and
remain in effect.
(d) Listing of Shares. The shares of Company Common
Stock issuable in the Mergers pursuant to Article II shall
have been approved for listing on the NYSE upon official
notice of issuance.
(e) Statutory Approvals. The NSP Required Statutory
Approvals and the WEC Required Statutory Approvals shall
have been obtained at or prior to the Effective Time, such
approvals shall have become Final Orders (as defined be-
low) and such Final Orders do not impose terms or con-
ditions which, in the aggregate, would have, or insofar as
reasonably can be foreseen, could have, a material adverse
effect on the business, assets, financial condition or
results of operations of the Company and its prospective
subsidiaries taken as a whole or on the Company's pro-
spective utility subsidiaries located in the State of
Minnesota taken as a whole, or on its prospective utility
subsidiaries located in the State of Wisconsin taken as a
whole or which would be materially inconsistent with the
agreements of the parties contained herein. A "Final Or-
der" means action by the relevant regulatory authority
which has not been reversed, stayed, enjoined, set aside,
annulled or suspended, with respect to which any waiting
period prescribed by law before the transactions contem-
plated hereby may be consummated has expired, and as to
which all conditions to the consummation of such transac-
tions prescribed by law, regulation or order have been
satisfied.
(f) Dissenters' Rights. The number of NSP Dissent-
ing Shares shall not constitute more than 5% of the number
of issued and outstanding shares of Old NSP Common Stock
-61-<PAGE>
and Old NSP Preferred Stock, taken together as a single
class, for this purpose.
(g) Pooling. Each of NSP and WEC shall have re-
ceived a letter of its independent public accountants,
dated the Closing Date, in form and substance reasonably
satisfactory, in each case, to NSP and WEC, stating that
the transactions effected pursuant to this Agreement will
qualify as a pooling of interests transaction under GAAP
and applicable SEC regulations.
Section 8.2 Conditions to Obligation of WEC to Ef-
fect the Mergers. The obligation of WEC to effect the NSP
Merger shall be further subject to the satisfaction, on or
prior to the Closing Date, of the following conditions, except
as may be waived by WEC in writing pursuant to Section 9.5:
(a) Performance of Obligations of NSP. NSP (and/or
its appropriate subsidiaries) will have performed its
agreements and covenants contained in Sections 6.1(b) and
6.1(c) and Section 7.19 and will have performed in all
material respects its other agreements and covenants con-
tained in or contemplated by this Agreement and the NSP
Stock Option Agreement required to be performed by it at
or prior to the Effective Time.
(b) Representations and Warranties. The represen-
tations and warranties of NSP set forth in this Agreement
and the NSP Stock Option Agreement shall be true and cor-
rect (i) on and as of the date hereof and (ii) on and as
of the Closing Date with the same effect as though such
representations and warranties had been made on and as of
the Closing Date (except for representations and warran-
ties that expressly speak only as of a specific date or
time other than the date hereof or the Closing Date which
need only be true and correct as of such date or time)
except in each of cases (i) and (ii) for such failures of
representations or warranties to be true and correct
(without regard to any materiality qualifications con-
tained therein) which, individually or in the aggregate,
would not be reasonably likely to result in a NSP Material
Adverse Effect.
(c) Closing Certificates. WEC shall have received a
certificate signed by the chief financial officer of NSP,
dated the Closing Date, to the effect that, to the best of
such officer's knowledge, the conditions set forth in
Section 8.2(a) and Section 8.2(b) have been satisfied.
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(d) NSP Material Adverse Effect. No NSP Material
Adverse Effect shall have occurred and there shall exist
no fact or circumstance which is reasonably likely to have
a NSP Material Adverse Effect.
(e) Tax Ruling and Opinion. WEC shall have received
(i) a private letter ruling from the Internal Revenue
Service ("IRS") providing certain assurances regarding the
federal income tax consequences of the Mergers satisfac-
tory in form and substance to Skadden, Arps, Slate,
Meagher & Flom and Quarles & Brady and (ii) an opinion of
Skadden, Arps, Slate, Meagher & Flom or Quarles & Brady
based upon such ruling and satisfactory in form and
substance to WEC, dated as of the Closing Date, to the
effect that the Reincorporation Merger and the subsequent
NSP Merger will each be treated as a tax-free reorganiza-
tion under Section 368(a) of the Code.
(f) NSP Required Consents. The NSP Required Con-
sents the failure of which to obtain would have a NSP Ma-
terial Adverse Effect shall have been obtained.
(g) Affiliate Agreements. The Company shall have
received Affiliate Agreements, duly executed by each "af-
filiate" of NSP, substantially in the form of Exhibit 7.8,
as provided in Section 7.8.
Section 8.3 Conditions to Obligation of NSP to Ef-
fect the Mergers. The obligation of NSP to effect the NSP
Merger shall be further subject to the satisfaction, on or
prior to the Closing Date, of the following conditions, except
as may be waived by NSP in writing pursuant to Section 9.5:
(a) Performance of Obligations of WEC. WEC (and/or
its appropriate subsidiaries) will have performed its
agreements and covenants contained in Sections 6.1(b) and
6.1(c) and will have performed in all material respects
its other agreements and covenants contained in or con-
templated by this Agreement and the WEC Stock Option
Agreement required to be performed at or prior to the Ef-
fective Time.
(b) Representations and Warranties. The represen-
tations and warranties of WEC set forth in this Agreement
and the WEC Stock Option Agreement shall be true and cor-
rect (i) on and as of the date hereof and (ii) on and as
of the Closing Date with the same effect as though such
representations and warranties had been made on and as of
the Closing Date (except for representations and warran-
ties that expressly speak only as of a specific date or
-63-<PAGE>
time other than the date hereof or the Closing Date which
need only be true and correct as of such date or time)
except in each of cases (i) and (ii) for such failures of
representations or warranties to be true and correct
(without regard to any materiality qualifications con-
tained therein) which, individually or in the aggregate,
would not be reasonably likely to result in a WEC Material
Adverse Effect.
(c) Closing Certificates. NSP shall have received a
certificate signed by the chief financial officer of WEC,
dated the Closing Date, to the effect that, to the best of
such officer's knowledge, the conditions set forth in
Section 8.3(a) and Section 8.3(b) have been satisfied.
(d) WEC Material Adverse Effect. No WEC Material
Adverse Effect shall have occurred and there shall exist
no fact or circumstance which is reasonably likely to have
a WEC Material Adverse Effect.
(e) Tax Ruling and Opinion. NSP shall have received
(i) a private letter ruling from the IRS providing certain
assurances regarding the federal income tax consequences
of the Mergers satisfactory in form and substance to
Wachtell, Lipton, Rosen & Katz and (ii) an opinion of
Wachtell, Lipton, Rosen & Katz based upon such ruling and
satisfactory in form and substance to NSP, dated as of the
Closing Date, to the effect that the Reincorporation
Merger and the subsequent NSP Merger will each be treated
as a tax-free reorganization under Section 368(a) of the
Code.
(f) WEC Required Consents. The WEC Required Con-
sents the failure of which to obtain would have a WEC Ma-
terial Adverse Effect shall have been obtained.
(g) Affiliate Agreements. The Company shall have
received Affiliate Agreements, duly executed by each "af-
filiate" of WEC substantially in the form of Exhibit 7.8,
as provided in Section 7.8.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination. This Agreement may be
terminated at any time prior to the Closing Date, whether be-
fore or after approval by the shareholders of the respective
parties hereto contemplated by this Agreement:
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(a) by mutual written consent of the Boards of Di-
rectors of NSP and WEC;
(b) by any party hereto, by written notice to the
other parties, if the Effective Time shall not have oc-
curred on or before April 30, 1997 (the "Initial Termi-
nation Date"); provided, however, that the right to ter-
minate the Agreement under this Section 9.1(b) shall not
be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or
resulted in, the failure of the Effective Time to occur on
or before this date; and provided, further, that if on the
Initial Termination Date the conditions to the Closing set
forth in Sections 8.1(e), 8.2(f) and/or 8.3(f) shall not
have been fulfilled but all other conditions to the Clos-
ing shall be fulfilled or shall be capable of being ful-
filled, then the Initial Termination Date shall be ex-
tended to October 31, 1997;
(c) by any party hereto, by written notice to the
other parties, if the WEC Shareholders' Approval shall not
have been obtained at a duly held WEC Special Meeting,
including any adjournments thereof, or the NSP Sharehold-
ers' Approval shall not have been obtained at a duly held
NSP Special Meeting, including any adjournments thereof;
(d) by any party hereto, if any state or federal
law, order, rule or regulation is adopted or issued, which
has the effect, as supported by the written opinion of
outside counsel for such party, of prohibiting the NSP
Merger, or by any party hereto if any court of competent
jurisdiction in the United States or any State shall have
issued an order, judgment or decree permanently restrain-
ing, enjoining or otherwise prohibiting the NSP Merger,
and such order, judgment or decree shall have become final
and nonappealable;
(e) by WEC, upon two days' prior notice to NSP, if,
as a result of a tender offer by a party other than NSP or
any of its affiliates or any written offer or proposal
with respect to a merger, sale of a material portion of
its assets or other business combination (each, a "Busi-
ness Combination") by a party other than NSP or any of its
affiliates, the Board of Directors of WEC determines in
good faith that their fiduciary obligations under appli-
cable law require that such tender offer or other written
offer or proposal be accepted; provided, however, that (i)
the Board of Directors of WEC shall have been advised in a
written opinion of outside counsel that notwithstanding a
-65-<PAGE>
binding commitment to consummate an agreement of the na-
ture of this Agreement entered into in the proper exercise
of their applicable fiduciary duties, and notwithstanding
all concessions which may be offered by NSP in negotia-
tions entered into pursuant to clause (ii) below, such
fiduciary duties would also require the directors to re-
consider such commitment as a result of such tender offer
or other written offer or proposal; and (ii) prior to any
such termination, WEC shall, and shall cause its respec-
tive financial and legal advisors to, negotiate with NSP
to make such adjustments in the terms and conditions of
this Agreement as would enable WEC to proceed with the
transactions contemplated herein on such adjusted terms;
(f) by NSP, upon two days' prior notice to WEC, if,
as a result of a tender offer by a party other than WEC or
any of its affiliates or any written offer or proposal
with respect to a Business Combination by a party other
than WEC or any of its affiliates, the Board of Directors
of NSP determines in good faith that their fiduciary ob-
ligations under applicable law require that such tender
offer or other written offer or proposal be accepted;
provided, however, that (i) the Board of Directors of NSP
shall have been advised in a written opinion of outside
counsel that notwithstanding a binding commitment to con-
summate an agreement of the nature of this Agreement en-
tered into in the proper exercise of their applicable fi-
duciary duties, and notwithstanding all concessions which
may be offered by WEC in negotiations entered into pursu-
ant to clause (ii) below, such fiduciary duties would also
require the directors to reconsider such commitment as a
result of such tender offer or other written offer or
proposal; and (ii) prior to any such termination, NSP
shall, and shall cause its respective financial and legal
advisors to, negotiate with WEC to make such adjustments
in the terms and conditions of this Agreement as would
enable NSP to proceed with the transactions contemplated
herein on such adjusted terms;
(g) by NSP, by written notice to WEC, if (i) there
exist breaches of the representations and warranties of
WEC made herein as of the date hereof which breaches, in-
dividually or in the aggregate, would or would be rea-
sonably likely to result in an WEC Material Adverse Ef-
fect, and such breaches shall not have been remedied
within 20 days after receipt by WEC of notice in writing
-66-<PAGE>
from NSP, specifying the nature of such breaches and re-
questing that they be remedied, (ii) WEC (and/or its ap-
propriate subsidiaries) shall not have performed and com-
plied with its agreements and covenants contained in Sec-
tions 6.1(b) and 6.1(c) or shall have failed to perform
and comply with, in all material respects, its other
agreements and covenants hereunder or under the WEC Stock
Option Agreement and such failure to perform or comply
shall not have been remedied within 20 days after receipt
by WEC of notice in writing from NSP, specifying the na-
ture of such failure and requesting that it be remedied;
or (iii) the Board of Directors of WEC or any committee
thereof (A) shall withdraw or modify in any manner adverse
to NSP its approval or recommendation of this Agreement or
the NSP Merger, (B) shall fail to reaffirm such approval
or recommendation upon NSP's request, (C) shall approve or
recommend any acquisition of WEC or a material portion of
its assets or any tender offer for shares of capital stock
of WEC, in each case, by a party other than NSP or any of
its affiliates or (D) shall resolve to take any of the
actions specified in clause (A), (B) or (C); or
(h) by WEC, by written notice to NSP, if (i) there
exist material breaches of the representations and war-
ranties of NSP made herein as of the date hereof which
breaches, individually or in the aggregate, would or would
be reasonably likely to result in a NSP Material Adverse
Effect, and such breaches shall not have been remedied
within 20 days after receipt by NSP of notice in writing
from WEC, specifying the nature of such breaches and re-
questing that they be remedied, (ii) NSP (and/or its ap-
propriate subsidiaries) shall not have performed and com-
plied with its agreements and covenants contained in Sec-
tions 6.1(b) and 6.1(c) or shall have failed to perform
and comply with, in all material respects, its other
agreements and covenants hereunder or under the NSP Stock
Option Agreement, and such failure to perform or comply
shall not have been remedied within 20 days after receipt
by NSP of notice in writing from WEC, specifying the na-
ture of such failure and requesting that it be remedied;
or (iii) the Board of Directors of NSP or any committee
thereof (A) shall withdraw or modify in any manner adverse
to WEC its approval or recommendation of this Agreement or
the NSP Merger, (B) shall fail to reaffirm such approval
or recommendation upon WEC's request, (C) shall approve or
recommend any acquisition of NSP or a material portion of
its assets or any tender offer for the shares of capital
stock of NSP, in each case by a party other than WEC or
any of its affiliates or (D) shall resolve to take any of
the actions specified in clause (A), (B) or (C).
-67-<PAGE>
Section 9.2 Effect of Termination. Subject to Sec-
tion 10.1(b), in the event of termination of this Agreement by
either NSP or WEC pursuant to Section 9.1 there shall be no
liability on the part of either NSP or WEC or their respective
officers or directors hereunder, except that Section 7.17 and
Section 9.3, the agreement contained in the last sentence of
Section 7.1, Section 10.2 and Section 10.8 shall survive the
termination.
Section 9.3 Termination Fee; Expenses.
(a) Termination Fee upon Breach or Withdrawal of
Approval. If this Agreement is terminated at such time that
this Agreement is terminable pursuant to one (but not both) of
(x) Section 9.1(g)(i) or (ii) or (y) Section 9.1(h)(i) or (ii),
then: (i) the breaching party shall promptly (but not later
than five business days after receipt of notice from the non-
breaching party) pay to the non-breaching party in cash an
amount equal to all documented out-of-pocket expenses and fees
incurred by the non-breaching party (including, without limi-
tation, fees and expenses payable to all legal, accounting,
financial, public relations and other professional advisors
arising out of, in connection with or related to the Mergers or
the transactions contemplated by this Agreement) not in excess
of $10 million; provided, however, that, if this Agreement is
terminated by a party as a result of a willful breach by the
other party, the non-breaching party may pursue any remedies
available to it at law or in equity and shall, in addition to
its out-of-pocket expenses (which shall be paid as specified
above and shall not be limited to $10 million), be entitled to
retain such additional amounts as such non-breaching party may
be entitled to receive at law or in equity; and (ii) if (x) at
the time of the breaching party's willful breach of this
Agreement, there shall have been a third party tender offer for
shares of, or a third party offer or proposal with respect to a
Business Combination involving, such party or any of its af-
filiates which at the time of such termination shall not have
been rejected by such party and its board of directors and
withdrawn by the third party, and (y) within two and one-half
years of any termination by the non-breaching party, the
breaching party or an affiliate thereof becomes a subsidiary of
such offeror or a subsidiary of an affiliate of such offeror or
accepts a written offer to consummate or consummates a Business
Combination with such offeror or an affiliate thereof, then
such breaching party (jointly and severally with its affili-
ates), upon the signing of a definitive agreement relating to
such a Business Combination, or, if no such agreement is signed
then at the closing (and as a condition to the closing) of such
breaching party becoming such a subsidiary or of such Business
-68-<PAGE>
Combination, will pay to the non-breaching party an additional
fee equal to $75 million in cash.
(b) Additional Termination Fee. If (i) this Agree-
ment (x) is terminated by any party pursuant to Section 9.1(e)
or Section 9.1(f), (y) is terminated following a failure of the
shareholders of any one of the parties to grant the necessary
approvals described in Section 4.13 and Section 5.13 or (z) is
terminated as a result of such party's material breach of Sec-
tion 7.4, and (ii) at the time of such termination or prior to
the meeting of such party's shareholders there shall have been
a third-party tender offer for shares of, or a third-party of-
fer or proposal with respect to a Business Combination involv-
ing, such party or any of its affiliates which at the time of
such termination or of the meeting of such party's shareholders
shall not have been (A) rejected by such party and its board of
directors and (B) withdrawn by the third-party, and (iii)
within two and one-half years of any such termination described
in clause (i) above, the party or its affiliate which is the
subject of the tender offer or offer or proposal with respect
to a Business Combination (the "Target Party") becomes a sub-
sidiary of such offeror or a subsidiary of an affiliate of such
offeror or accepts a written offer to consummate or consummates
a Business Combination with such offeror or affiliate thereof,
then such Target Party (jointly and severally with its affil-
iates), upon the signing of a definitive agreement relating to
such a Business Combination, or, if no such agreement is
signed, then at the closing (and as a condition to the closing)
of such Target Party becoming such a subsidiary or of such
Business Combination, will pay to the other party a termination
fee equal to $75 million in cash plus the out-of-pocket fees
and expenses incurred by the non-breaching party (including,
without limitation, fees and expenses payable to all legal,
accounting, financial, public relations and other professional
advisors arising out of, in connection with or related to the
Mergers or the transactions contemplated by this Agreement).
(c) Expenses. The parties agree that the agreements
contained in this Section 9.3 are an integral part of the
transactions contemplated by the Agreement and constitute liq-
uidated damages and not a penalty. If one party fails to
promptly pay to the other any fee due hereunder, the defaulting
party shall pay the costs and expenses (including legal fees
and expenses) in connection with any action, including the
filing of any lawsuit or other legal action, taken to collect
payment, together with interest on the amount of any unpaid fee
at the publicly announced prime rate of Citibank, N.A. from the
date such fee was required to be paid.
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(d) Limitation of Termination Fees. Notwithstanding
anything herein to the contrary, the aggregate amount payable
to NSP and its affiliates pursuant to Section 9.3(a), Section
9.3(b) and the terms of the WEC Stock Option Agreement shall
not exceed $125 million and the aggregate amount payable to WEC
and its affiliates pursuant to Section 9.3(a), Section 9.3(b)
and the terms of the NSP Stock Option Agreement shall not ex-
ceed $125 million (including reimbursement for fees and ex-
penses payable pursuant to this Section 9.3). For purposes of
this Section 9.3(d), the amount payable pursuant to the terms
of the WEC Stock Option Agreement or the NSP Stock Option
Agreement, as the case may be, shall be the amount paid pursu-
ant to Section 7(a)(i) and 7(a)(ii) thereof.
Section 9.4 Amendment. This Agreement may be
amended by the Boards of Directors of the parties hereto, at
any time before or after approval hereof by the shareholders of
NSP and WEC and prior to the Effective Time, but after such
approvals, no such amendment shall (i) alter or change the
amount or kind of shares, rights or any of the proceedings of
the treatment of shares under Article II, (ii) alter or change
any of the terms and conditions of this Agreement if any of the
alterations or changes, alone or in the aggregate, would mate-
rially adversely affect the rights of holders of Old NSP Common
Stock or WEC Common Stock, or (iii) alter or change any term of
the Restated Articles of Incorporation of WEC (including the
WEC Article Amendments) as approved by the shareholders of WEC,
except for alterations or changes that could otherwise be
adopted by the Board of Directors of the Company, without the
further approval of such shareholders, as applicable. This
Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
Section 9.5 Waiver. At any time prior to the Ef-
fective Time, the parties hereto may (a) extend the time for
the performance of any of the obligations or other acts of the
other parties hereto, (b) waive any inaccuracies in the repre-
sentations and warranties contained herein or in any document
delivered pursuant hereto and (c) waive compliance with any of
the agreements or conditions contained herein, to the extent
permitted by applicable law. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid if
set forth in an instrument in writing signed on behalf of such
party.
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ARTICLE X
GENERAL PROVISIONS
Section 10.1 Non-Survival; Effect of Representations
and Warranties. (a) All representations, warranties and
agreements in this Agreement shall not survive the Mergers,
except as otherwise provided in this Agreement and except for
the agreements contained in this Section 10.1 and in Article
II, Section 7.5, Section 7.9, Section 7.10, Section 7.11, Sec-
tion 7.14, Section 7.15, Section 7.16, Section 7.17 and Section
10.7.
(b) No party may assert a claim for breach of any
representation or warranty contained in this Agreement (whether
by direct claim or counterclaim) except in connection with the
cancellation of this Agreement pursuant to Section 9.1(g)(i) or
Section 9.1(h)(i) (or pursuant to any other subsection of Sec-
tion 9.1, if the terminating party would have been entitled to
terminate this Agreement pursuant to Section 9.1(g)(i) or Sec-
tion 9.1(h)(i)).
Section 10.2 Brokers. NSP represents and warrants
that, except for Goldman, Sachs & Co. whose fees have been
disclosed to WEC prior to the date hereof, no broker, finder or
investment banker is entitled to any brokerage, finder's or
other fee or commission in connection with the Mergers or the
transactions contemplated by this Agreement based upon ar-
rangements made by or on behalf of NSP. WEC represents and
warrants that, except for Barr Devlin Associates, whose fees
have been disclosed to NSP prior to the date hereof, no broker,
finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the
Mergers or the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of WEC.
Section 10.3 Notices. All notices and other commu-
nications hereunder shall be in writing and shall be deemed
given if (i) delivered personally, (ii) sent by reputable
overnight courier service, (iii) telecopied (which is con-
firmed), or (iv) five days after being mailed by registered or
certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as
shall be specified by like notice):
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(a) If to NSP, to:
Northern States Power Company
414 Nicollet Mall
Minneapolis, Minnesota 55401
Attention: Gary Johnson, Esq.
Telephone: (612) 330-7623
Telecopy: (612) 330-6222
with a copy to:
Gardner, Carton & Douglas
Quaker Tower, 31st Floor
321 North Clark Street
Chicago, Illinois 60610-4795
Attention: Peter Clarke, Esq.
Telephone: (312) 245-8685
Telecopy: (312) 644-3381
and a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attention: Barry A. Bryer, Esq.
Seth A. Kaplan, Esq.
Telephone: (212) 403-1000
Telecopy: (212) 403-2000
(b) If to WEC, to:
Wisconsin Energy Corporation
231 West Michigan Street
Milwaukee, WI 53201
Attention: Walter T. Woelfle, Esq.
Telephone: (414) 221-2765
Telecopy: (414) 221-2412
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with a copy to:
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: Patrick M. Ryan, Esq.
Telephone: (414) 277-5181
Telecopy: (414) 277-5174
and a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attention: Sheldon S. Adler, Esq.
Telephone: (212) 735-3000
Telecopy: (212) 735-2000
Section 10.4 Miscellaneous. This Agreement (in-
cluding the documents and instruments referred to herein) (i)
constitutes the entire agreement and supersedes all other prior
agreements and understandings, both written and oral, among the
parties, or any of them, with respect to the subject matter
hereof other than the Confidentiality Agreement; (ii) shall not
be assigned by operation of law or otherwise; and (iii) shall
be governed by and construed in accordance with the laws of the
State of New York applicable to contracts executed in and to be
fully performed in such State, without giving effect to its
conflicts of law, rules or principles and except to the extent
the provisions of this Agreement (including the documents or
instruments referred to herein) are expressly governed by or
derive their authority from the MBCA or the WBCL.
Section 10.5 Interpretation. When a reference is
made in this Agreement to Sections or Exhibits, such reference
shall be to a Section or Exhibit of this Agreement, respec-
tively, unless otherwise indicated. The table of contents and
headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpre-
tation of this Agreement. Whenever the words "include", "in-
cludes" or "including" are used in this Agreement, they shall
be deemed to be followed by the words "without limitation".
Section 10.6 Counterparts; Effect. This Agreement
may be executed in one or more counterparts, each of which
shall be deemed to be an original, but all of which shall con-
stitute one and the same agreement.
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Section 10.7 Parties in Interest. This Agreement
shall be binding upon and inure solely to the benefit of each
party hereto, and, except for rights of Indemnified Parties as
set forth in Section 7.5, nothing in this Agreement, express or
implied, is intended to confer upon any other person any rights
or remedies of any nature whatsoever under or by reason of this
Agreement. Notwithstanding the foregoing and any other provi-
sion of this Agreement, and in addition to any other required
action of the Board of Directors of the Company (a) a majority
of the WEC Directors (or their successors) serving on the Board
of Directors of the Company who are designated by WEC pursuant
to Section 7.13 shall be entitled during the three year period
commencing at the Effective Time (the "Three Year Period") to
enforce the provisions of Section 7.9, Section 7.10, Section
7.11 and Section 7.14 on behalf of the WEC officers, directors
and employees, as the case may be, and (b) a majority of the
NSP directors (or their successors) serving on the Board of
Directors of the Company who are designated by NSP pursuant to
Section 7.13 shall be entitled during the Three Year Period to
enforce the provisions of, Sections 7.9, Section 7.10, Section
7.11, and Section 7.14 on behalf of the NSP officers, directors
and employees, as the case may be. Such directors' rights and
remedies under the preceding sentence are cumulative and are in
addition to any other rights and remedies they may have at law
or in equity, but in no event shall this Section 10.7 be deemed
to impose any additional duties on any such directors. The
Company shall pay, at the time they are incurred, all costs,
fees and expenses of such directors incurred in connection with
the assertion of any rights on behalf of the persons set forth
above pursuant to this Section 10.7.
Section 10.8 Waiver of Jury Trial and Certain Dam-
ages. Each party to this Agreement waives, to the fullest ex-
tent permitted by applicable law, (i) any right it may have to
a trial by jury in respect of any action, suit or proceeding
arising out of or relating to this Agreement and (ii) without
limitation to Section 9.3, any right it may have to receive
damages from any other party based on any theory of liability
for any special, indirect, consequential (including lost prof-
its) or punitive damages.
Section 10.9 Enforcement. The parties agree that
irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance
with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions of this
Agreement in any court of the United States located in the
State of New York or in New York state court, this being in
-74-<PAGE>
addition to any other remedy to which they are entitled at law
or in equity. In addition, each of the parties hereto (a)
consents to submit itself to the personal jurisdiction of any
federal court located in the State of New York or any New York
state court in the event any dispute arises out of this Agree-
ment or any of the transactions contemplated by this Agreement,
(b) agrees that it will not attempt to deny such personal ju-
risdiction by motion or other request for leave from any such
court and (c) agrees that it will not bring any action relating
to this Agreement or any of the transactions contemplated by
this Agreement in any court other than a federal or state court
sitting in the State of New York.
-75-<PAGE>
IN WITNESS WHEREOF, NSP, WEC, New NSP and WEC Sub
have caused this Agreement to be signed by their respective
officers thereunto duly authorized as of the date first written
above.
NORTHERN STATES POWER COMPANY
By: /s/ JAMES J. HOWARD
Name: James J. Howard
Attest: /s/ GARY R. JOHNSON Title: Chairman and Chief
Secretary Executive Officer
WISCONSIN ENERGY CORPORATION
By: /s/ RICHARD A. ABDOO
Name: Richard A. Abdoo
Attest: /s/ JOHN H. GOETSCH__ Title: Chairman, President
Secretary and Chief Executive
Officer
NORTHERN POWER WISCONSIN CORP.
By: /s/ EDWARD J. McINTYRE
Name: Edward J. McIntyre
Attest: /s/ GARY R. JOHNSON Title: President
Secretary
WEC SUB CORP.
By: /s/ RICHARD A. ABDOO
Name: Richard A. Abdoo
Attest: /s/ ANN MARIE BRADY Title: Chairman, President
Secretary and Chief Executive
Officer
-76-
EXHIBIT 2 CONFORMED COPY
WEC STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of April 28, 1995 by
and among Northern States Power Company, a Minnesota corpora-
tion ("NSP"), and Wisconsin Energy Corporation, a Wisconsin
corporation (the "Company").
WHEREAS, concurrently with the execution and delivery
of this Agreement, (i) NSP, the Company, Northern Power Wis-
consin Corp., a Wisconsin corporation ("New NSP") and WEC Sub
Corp., a Wisconsin corporation ("WEC Sub"), are entering into
an Agreement and Plan of Merger, dated as of the date hereof
(the "Merger Agreement"), which provides, among other things,
upon the terms and subject to the conditions thereof, for the
merger of NSP with and into New NSP and the merger of WEC Sub
with and into New NSP (the "Mergers"), and (ii) the Company and
NSP are entering into a certain stock option agreement dated as
of the date hereof whereby NSP grants to the Company an option
with respect to certain shares of NSP's common stock on the
terms and subject to the conditions set forth therein (the "NSP
Stock Option Agreement"); and
WHEREAS, as a condition to NSP's willingness to enter
into the Merger Agreement, NSP has requested that the Company
agree, and the Company has so agreed, to grant to NSP an option
with respect to certain shares of the Company's common stock,
on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, to induce NSP to enter into the Mer-
ger Agreement, and in consideration of the mutual covenants and
agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. Grant of Option. The Company hereby grants NSP
an irrevocable option (the "Company Option") to purchase up to
21,773,726 shares, subject to adjustment as provided in Section
11 (such shares being referred to herein as the "Company
Shares") of common stock, par value $.01 per share, of the
Company (the "Company Common Stock") (being 19.9% of the number
of shares of Company Common Stock outstanding on the date
hereof) in the manner set forth below at a price (the "Exercise
Price") per Company Share of $27.675 (which is equal to the
Fair Market Value (as defined below) of a Company Share on the
date hereof) payable, at NSP's option, (a) in cash or (b) sub-
ject to the Company's having obtained the approvals of any
Governmental Authority required for the Company to acquire the
NSP Shares (as defined below) from NSP, which approvals the
Company shall use best efforts to obtain, in shares of common<PAGE>
stock, par value $2.50 per share, of NSP ("NSP Shares") in ei-
ther case in accordance with Section 4 hereof. Notwithstanding
the foregoing, in no event shall the number of Company Shares
for which the Company Option is exercisable exceed 19.9% of the
number of issued and outstanding shares of Company Common
Stock. As used herein, the "Fair Market Value" of any share
shall be the average of the daily closing sales price for such
share on the New York Stock Exchange (the "NYSE") during the 10
NYSE trading days prior to the fifth NYSE trading day preceding
the date such Fair Market Value is to be determined. Capital-
ized terms used herein but not defined herein shall have the
meanings set forth in the Merger Agreement.
2. Exercise of Option. The Company Option may be
exercised by NSP, in whole or in part, at any time or from time
to time after the Merger Agreement becomes terminable by NSP
under circumstances which could entitle NSP to termination fees
under either Section 9.3(a) of the Merger Agreement (provided
that the events specified in Section 9.3(a)(ii)(x) of the Mer-
ger Agreement shall have occurred, although the events speci-
fied in Section 9.3(a)(ii)(y) thereof need not have occurred)
or Section 9.3(b) of the Merger Agreement (regardless of
whether the Merger Agreement is actually terminated or whether
there occurs a closing of any Business Combination involving a
Target Party or a closing by which a Target Party becomes a
subsidiary), any such event by which the Merger Agreement be-
comes so terminable by NSP being referred to herein as a
"Trigger Event." The Company shall notify NSP promptly in
writing of the occurrence of any Trigger Event, it being un-
derstood that the giving of such notice by the Company shall
not be a condition to the right of NSP to exercise the Company
Option. In the event NSP wishes to exercise the Company Op-
tion, NSP shall deliver to the Company a written notice (an
"Exercise Notice") specifying the total number of Company
Shares it wishes to purchase. Each closing of a purchase of
Company Shares (a "Closing") shall occur at a place, on a date
and at a time designated by NSP in an Exercise Notice delivered
at least two business days prior to the date of the Closing.
The Company Option shall terminate upon the earlier of: (i)
the Effective Time; (ii) the termination of the Merger Agree-
ment pursuant to Section 9.1 thereof (other than upon or during
the continuance of a Trigger Event); or (iii) 180 days follow-
ing any termination of the Merger Agreement upon or during the
continuance of a Trigger Event (or if, at the expiration of
such 180 day period the Company Option cannot be exercised by
reason of any applicable judgment, decree, order, law or regu-
lation, 10 business days after such impediment to exercise
shall have been removed or shall have become final and not
subject to appeal, but in no event under this clause (iii)
later than October 31, 1997). Notwithstanding the foregoing,
-2-<PAGE>
the Company Option may not be exercised if NSP is in material
breach of any of its material representations or warranties, or
in material breach of any of its covenants or agreements, con-
tained in this Agreement or in the Merger Agreement. Upon the
giving by NSP to the Company of the Exercise Notice and the
tender of the applicable aggregate Exercise Price, NSP shall be
deemed to be the holder of record of the Company Shares issu-
able upon such exercise, notwithstanding that the stock trans-
fer books of the Company shall then be closed or that certifi-
cates representing such Company Shares shall not then be actu-
ally delivered to NSP.
3. Conditions to Closing. The obligation of the
Company to issue the Company Shares to NSP hereunder is subject
to the conditions, which (other than the conditions described
in clauses (i), (iii) and (iv) below) may be waived by the
Company in its sole discretion, that (i) all waiting periods,
if any, under the HSR Act, applicable to the issuance of the
Company Shares hereunder shall have expired or have been ter-
minated; (ii) the Company Shares, and any NSP Shares which are
issued in payment of the Exercise Price, shall have been ap-
proved for listing on the NYSE upon official notice of issu-
ance; (iii) all consents, approvals, orders or authorizations
of, or registrations, declarations or filings with, any fed-
eral, state or local administrative agency or commission or
other federal state or local Governmental Authority, if any,
required in connection with the issuance of the Company Shares
hereunder shall have been obtained or made, as the case may be,
including, without limitation, the approval of the SEC under
Section 10 of the 1935 Act of the acquisition of the Company
Shares by NSP and, if applicable, the acquisition by the Com-
pany of the NSP Shares constituting the Exercise Price here-
under; and (iv) no preliminary or permanent injunction or other
order by any court of competent jurisdiction prohibiting or
otherwise restraining such issuance shall be in effect.
4. Closing. At any Closing, (a) the Company will
deliver to NSP or its designee a single certificate in defini-
tive form representing the number of the Company Shares desig-
nated by NSP in its Exercise Notice, such certificate to be
registered in the name of NSP and to bear the legend set forth
in Section 12, and (b) NSP will deliver to the Company the ag-
gregate price for the Company Shares so designated and being
purchased by (i) wire transfer of immediately available funds
or certified check or bank check or (ii) subject to the condi-
tion in Section 1(b), a certificate or certificates represent-
ing the number of NSP Shares being issued by NSP in consider-
ation thereof, as the case may be. For the purposes of this
Agreement, the number of NSP Shares to be delivered to the
Company shall be equal to the quotient obtained by dividing (i)
-3-<PAGE>
the product of (x) the number of Company Shares with respect to
which the Company Option is being exercised and (y) the Exer-
cise Price by (ii) the Fair Market Value of the NSP Shares on
the date immediately preceding the date the Exercise Notice is
delivered to the Company. The Company shall pay all expenses,
and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the
preparation, issue and delivery of stock certificates under
this Section 4 in the name of NSP or its designee.
5. Representations and Warranties of the Company.
The Company represents and warrants to NSP that (a) except as
set forth in Section 5.1 of the WEC Disclosure Schedule, the
Company is a corporation duly organized, validly existing and
in active status under the laws of the State of Wisconsin and
has the corporate power and authority to enter into this
Agreement and, subject to obtaining the applicable approval of
shareholders of the Company for the repurchase of Company
Shares pursuant to Section 7(a) below under circumstances where
Section 180.1134(1) of the WBCL or Article III D.(1) of the
Company's Restated Articles of Incorporation ("Restated Arti-
cles") would be applicable (the "Buyback Approvals") and sub-
ject to any regulatory approvals referred to herein and to the
provisions of Section 180.0640 of the WBCL, if applicable, to
carry out its obligations hereunder, (b) the execution and de-
livery of this Agreement by the Company and the consummation by
the Company of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part
of the Company and no other corporate proceedings on the part
of the Company are necessary to authorize this Agreement or any
of the transactions contemplated hereby (other than any re-
quired Buyback Approvals), (c) such corporate action (including
the approval of the Board of Directors of the Company) is in-
tended to render inapplicable to this Agreement and the Merger
Agreement and the transactions contemplated hereby and thereby,
the provisions of the WBCL referred to in Section 5.15 of the
Merger Agreement, (d) this Agreement has been duly executed and
delivered by the Company, constitutes a valid and binding ob-
ligation of the Company and, assuming this Agreement consti-
tutes a valid and binding obligation of NSP, is enforceable
against the Company in accordance with its terms, (e) the Com-
pany has taken all necessary corporate action to authorize and
reserve for issuance and to permit it to issue, upon exercise
of the Company Option, and at all times from the date hereof
through the expiration of the Company Option will have re-
served, 21,773,726 authorized and unissued Company Shares, such
amount being subject to adjustment as provided in Section 11,
all of which, upon their issuance and delivery in accordance
with the terms of this Agreement, will be validly issued, fully
paid and nonassessable (subject to Section 180.0622(2)(b) of
-4-<PAGE>
the WBCL, as judicially interpreted), (f) upon delivery of the
Company Shares to NSP upon the exercise of the Company Option,
NSP will acquire the Company Shares free and clear of all
claims, liens, charges, encumbrances and security interests of
any nature whatsoever, (g) except as described in Section
5.4(b) of the Merger Agreement, the execution and delivery of
this Agreement by the Company does not, and the consummation by
the Company of the transactions contemplated hereby will not,
violate, conflict with, or result in a breach of any provision
of, or constitute a default (with or without notice or lapse of
time, or both) under, or result in the termination of, or ac-
celerate the performance required by, or result in a right of
termination, cancellation, or acceleration of any obligation or
the loss of a material benefit under, or the creation of a
lien, pledge, security interest or other encumbrance on assets
(any such conflict, violation, default, right of termination,
cancellation or acceleration, loss or creation, a "Violation")
of the Company or any of its subsidiaries, pursuant to, (A) any
provision of the Restated Articles or by-laws of the Company,
(B) any provisions of any loan or credit agreement, note,
mortgage, indenture, lease, Company benefit plan or other
agreement, obligation, instrument, permit, concession, fran-
chise, license or (C) any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to the Company or
its properties or assets, which Violation, in the case of each
of clauses (B) and (C), could reasonably be expected to have a
material adverse effect on the Company and its subsidiaries
taken as a whole, (h) except as described in Section 5.4(c) of
the Merger Agreement or Section 1(b) or Section 3 hereof, the
execution and delivery of this Agreement by the Company does
not, and the performance of this Agreement by the Company will
not, require any consent, approval, authorization or permit of,
or filing with or notification to, any Governmental Authority,
(i) none of the Company, any of its affiliates or anyone acting
on its or their behalf has issued, sold or offered any security
of the Company to any person under circumstances that would
cause the issuance and sale of the Company Shares, as contem-
plated by this Agreement, to be subject to the registration
requirements of the Securities Act as in effect on the date
hereof and, assuming the representations of NSP contained in
Section 6(h) are true and correct, the issuance, sale and de-
livery of the Company Shares hereunder would be exempt from the
registration and prospectus delivery requirements of the Secu-
rities Act, as in effect on the date hereof (and the Company
shall not take any action which would cause the issuance, sale
and delivery of the Company Shares hereunder not to be exempt
from such requirements), and (j) any NSP Shares acquired pur-
suant to this Agreement will be acquired for the Company's own
account, for investment purposes only and will not be acquired
-5-<PAGE>
by the Company with a view to the public distribution thereof
in violation of any applicable provision of the Securities Act.
6. Representations and Warranties of NSP. NSP rep-
resents and warrants to the Company that (a) NSP is a corpora-
tion duly organized, validly existing and in good standing un-
der the laws of the State of Minnesota and has the corporate
power and authority to enter into this Agreement and to carry
out its obligations hereunder, (b) the execution and delivery
of this Agreement by NSP and the consummation by NSP of the
transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of NSP and no other
corporate proceedings on the part of NSP are necessary to au-
thorize this Agreement or any of the transactions contemplated
hereby, (c) this Agreement has been duly executed and delivered
by NSP and constitutes a valid and binding obligation of NSP,
and, assuming this Agreement constitutes a valid and binding
obligation of the Company, is enforceable against NSP in ac-
cordance with its terms, (d) prior to any delivery of NSP
Shares in consideration of the purchase of Company Shares pur-
suant hereto, NSP will have taken all necessary corporate ac-
tion to authorize for issuance and to permit it to issue such
NSP Shares, all of which, upon their issuance and delivery in
accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable, and to render inappli-
cable to the receipt by the Company of the NSP Shares the pro-
visions of the MBCA referred to in Section 4.15 of the Merger
Agreement, (e) upon any delivery of such NSP Shares to the
Company in consideration of the purchase of Company Shares
pursuant hereto, the Company will acquire the NSP Shares free
and clear of all claims, liens, charges, encumbrances and se-
curity interests of any nature whatsoever, (f) except as de-
scribed in Section 4.4(b) of the Merger Agreement, the exe-
cution and delivery of this Agreement by NSP does not, and the
consummation by NSP of the transactions contemplated hereby
will not, violate, conflict with, or result in the breach of
any provision of, or constitute a default (with or without no-
tice or lapse of time, or both) under, or result in any Vio-
lation by NSP or any of its subsidiaries, pursuant to (A) any
provision of the Restated Articles of Incorporation or By-laws
of NSP, (B) any provisions of any loan or credit agreement,
note, mortgage, indenture, lease, NSP benefit plan or other
agreement, obligation, instrument, permit, concession, fran-
chise, license or (C) any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to NSP or its
properties or assets, which Violation, in the case of each of
clauses (B) and or (C), would have a material adverse effect on
NSP and its subsidiaries taken as a whole, (g) except as de-
scribed in Section 4.4(c) of the Merger Agreement or Section
1(b) or Section 3 hereof, the execution and delivery of this
-6-<PAGE>
Agreement by NSP does not, and the consummation by NSP of the
transactions contemplated hereby will not, require any consent,
approval, authorization or permit of, or filing with or noti-
fication to, any Governmental Authority and (h) any Company
Shares acquired upon exercise of the Company Option will be
acquired for NSP's own account, for investment purposes only
and will not be, and the Company Option is not being, acquired
by NSP with a view to the public distribution thereof in vio-
lation of any applicable provision of the Securities Act.
7. Certain Repurchases.
(a) NSP Put. At the request of NSP by written no-
tice at any time during which the Company Option is exercisable
pursuant to Section 2 (the "Repurchase Period"), the Company
(or any successor entity thereof) shall repurchase from NSP all
or any portion of the Company Option, at the price set forth in
subparagraph (i) below, or, at the request of NSP by written
notice at any time prior to April 30, 1997 (provided that such
date shall be extended to October 31, 1997 under the circum-
stances where the date after which either party may terminate
the Merger Agreement pursuant to Section 9.1(b) of the Merger
Agreement has been extended to October 31, 1997), the Company
(or any successor entity thereof) shall repurchase from NSP all
or any portion of the Company Shares purchased by NSP pursuant
to the Company Option, at the price set forth in subparagraph
(ii) below:
(i) the difference between the "Market/Offer Price"
for shares of Company Common Stock as of the date NSP
gives notice of its intent to exercise its rights under
this Section 7 (defined as the higher of (A) the price per
share offered as of such date pursuant to any tender or
exchange offer or other offer with respect to a Business
Combination which was made prior to such date and not
terminated or withdrawn as of such date (the "Offer
Price") and (B) the Fair Market Value of Company Common
Stock as of such date (the "Market Price")) and the Exer-
cise Price, multiplied by the number of Company Shares
purchasable pursuant to the Company Option (or portion
thereof with respect to which NSP is exercising its rights
under this Section 7), but only if the Market/Offer Price
is greater than the Exercise Price;
(ii) the product of (x) the sum of (A) the Exercise
Price paid by NSP per Company Share acquired pursuant to
the Company Option and (B) the difference between the
Market/Offer Price and the Exercise Price, but only if the
Market/Offer Price is greater than the Exercise Price, and
(y) the number of Company Shares so to be repurchased
-7-<PAGE>
pursuant to this Section 7. For purposes of this clause
(ii), the Offer Price shall be the highest price per share
offered pursuant to a tender or exchange offer or other
Business Combination offer during the Repurchase Period
prior to the delivery by NSP of a notice of repurchase.
(b) Redelivery of NSP Shares. If NSP elected to
purchase Company Shares pursuant to the exercise of the Company
Option by the issuance and delivery of NSP Shares, then the
Company shall, if so requested by NSP, in fulfillment of its
obligation pursuant to clause (A) of Section 7(a)(ii)(x) (that
is, with respect to the Exercise Price only and without limi-
tation to its obligation to pay additional consideration under
clause (B) of Section 7(a)(ii)(x)), redeliver the certificate
for such NSP Shares to NSP, free and clear of all liens,
claims, damages, charges and encumbrances of any kind or nature
whatsoever; provided, however, that if less than all of the
Company Shares purchased by NSP pursuant to the Company Option
are to be repurchased pursuant to this Section 7, then NSP
shall issue to the Company a new certificate representing those
NSP Shares which are not due to be redelivered to NSP pursuant
to this Section 7 as they constituted payment of the Exercise
Price for the Company Shares not being repurchased.
(c) Payment and Redelivery of Company Option or
Shares. In the event NSP exercises its rights under this Sec-
tion 7, the Company shall, within 10 business days thereafter,
pay the required amount to NSP in immediately available funds
and NSP shall surrender to the Company the Company Option or
the certificates evidencing the Company Shares purchased by NSP
pursuant thereto, and NSP shall warrant that it owns the Com-
pany Option or such shares and that the Company Option or such
shares are then free and clear of all liens, claims, damages,
charges and encumbrances of any kind or nature whatsoever.
(d) NSP Call. If NSP has elected to purchase Com-
pany Shares pursuant to the exercise of the Company Option by
the issuance and delivery of NSP Shares, notwithstanding that
NSP may no longer hold any such Company Shares or that NSP
elects not to exercise its other rights under this Section 7,
NSP may require, at any time or from time to time prior to
April 30, 1997 (provided that such date shall be extended to
October 31, 1997 under the circumstances where the date after
which either party may terminate the Merger Agreement pursuant
to Section 9.1(b) of the Merger Agreement has been extended to
October 31, 1997), the Company to sell to NSP any such NSP
Shares at the price attributed to such NSP Shares pursuant to
Section 4 plus interest at the rate of 6.5% per annum on such
amount from the Closing Date relating to the exchange of such
NSP Shares pursuant to Section 4 to the closing date under this
-8-<PAGE>
Section 7(d) less any dividends on such NSP Shares paid during
such period or declared and payable to stockholders of record
on a date during such period.
(e) Repurchase Price Reduced at NSP's Option. In
the event the repurchase price specified in Section 7(a) would
subject the purchase of the Company Option or the Company
Shares purchased by NSP pursuant to the Company Option to a
vote of the shareholders of the Company pursuant to Section
180.1134 of the WBCL or Section D(1) of Article III of the
Company's Restated Articles of Incorporation, then NSP may, at
its election, reduce the repurchase price to an amount which
would permit such repurchase without the necessity for such a
shareholder vote.
8. Voting of Shares. Following the date hereof and
prior to the fifth anniversary of the date hereof (the "Expi-
ration Date"), each party shall vote any shares of capital
stock of the other party acquired by such party pursuant to
this Agreement, including any NSP Shares issued pursuant to
Section 1(b) ("Restricted Shares") or otherwise beneficially
owned (within the meaning of Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")) by such party on each matter submitted to a vote of
shareholders of such other party for and against such matter in
the same proportion as the vote of all other shareholders of
such other party are voted (whether by proxy or otherwise) for
and against such matter.
9. Restrictions on Transfer.
(a) Restrictions on Transfer. Prior to the Expira-
tion Date, neither party shall, directly or indirectly, by op-
eration of law or otherwise, sell, assign, pledge, or otherwise
dispose of or transfer any Restricted Shares beneficially owned
by such party, other than (i) pursuant to Section 7, or (ii) in
accordance with Section 9(b) or Section 10.
(b) Permitted Sales. Following the termination of
the Merger Agreement, a party shall be permitted to sell any
Restricted Shares beneficially owned by it if such sale is made
pursuant to a tender or exchange offer that has been approved
or recommended, or otherwise determined to be fair to and in
the best interests of the shareholders of the other party, by a
majority of the members of the Board of Directors of such other
party which majority shall include a majority of directors who
were directors prior to the announcement of such tender or ex-
change offer.
-9-<PAGE>
10. Registration Rights. Following the termination
of the Merger Agreement, each party hereto (a "Designated
Holder") may by written notice (the "Registration Notice") to
the other party (the "Registrant") request the Registrant to
register under the Securities Act all or any part of the Re-
stricted Shares beneficially owned by such Designated Holder
(the "Registrable Securities") pursuant to a bona fide firm
commitment underwritten public offering in which the Designated
Holder and the underwriters shall effect as wide a distribution
of such Registrable Securities as is reasonably practicable and
shall use their best efforts to prevent any person (including
any Group (as used in Rule 13d-5 under the Exchange Act)) and
its affiliates from purchasing through such offering Restricted
Shares representing more than 1% of the outstanding shares of
common stock of the Registrant on a fully diluted basis (a
"Permitted Offering"). The Registration Notice shall include a
certificate executed by the Designated Holder and its proposed
managing underwriter, which underwriter shall be an investment
banking firm of nationally recognized standing (the "Manager"),
stating that (i) they have a good faith intention to commence
promptly a Permitted Offering and (ii) the Manager in good
faith believes that, based on the then prevailing market con-
ditions, it will be able to sell the Registrable Securities at
a per share price equal to at least 80% of the then Fair Market
Value of such shares. The Registrant (and/or any person des-
ignated by the Registrant) shall thereupon have the option ex-
ercisable by written notice delivered to the Designated Holder
within 10 business days after the receipt of the Registration
Notice, irrevocably to agree to purchase all or any part of the
Registrable Securities proposed to be so sold for cash at a
price (the "Option Price") equal to the product of (i) the
number of Registrable Securities to be so purchased by the
Registrant and (ii) the then Fair Market Value of such shares.
Any such purchase of Registrable Securities by the Registrant
(or its designee) hereunder shall take place at a closing to be
held at the principal executive offices of the Registrant or at
the offices of its counsel at any reasonable date and time
designated by the Registrant and/or such designee in such no-
tice within 20 business days after delivery of such notice.
Any payment for the shares to be purchased shall be made by
delivery at the time of such closing of the Option Price in
immediately available funds.
If the Registrant does not elect to exercise its op-
tion pursuant to this Section 10 with respect to all Regis-
trable Securities, it shall use its best efforts to effect, as
promptly as practicable, the registration under the Securities
Act of the unpurchased Registrable Securities proposed to be so
sold; provided, however, that (i) neither party shall be en-
titled to more than an aggregate of two effective registration
-10-<PAGE>
statements hereunder and (ii) the Registrant will not be re-
quired to file any such registration statement during any pe-
riod of time (not to exceed 40 days after such request in the
case of clause (A) below or 90 days in the case of clauses (B)
and (C) below) when (A) the Registrant is in possession of ma-
terial non-public information which it reasonably believes
would be detrimental to be disclosed at such time and, in the
opinion of counsel to the Registrant, such information would
have to be disclosed if a registration statement were filed at
that time; (B) the Registrant is required under the Securities
Act to include audited financial statements for any period in
such registration statement and such financial statements are
not yet available for inclusion in such registration statement;
or (C) the Registrant determines, in its reasonable judgment,
that such registration would interfere with any financing, ac-
quisition or other material transaction involving the Regis-
trant or any of its affiliates. The Registrant shall use its
reasonable best efforts to cause any Registrable Securities
registered pursuant to this Section 10 to be qualified for sale
under the securities or Blue-Sky laws of such jurisdictions as
the Designated Holder may reasonably request and shall continue
such registration or qualification in effect in such jurisdic-
tion; provided, however, that the Registrant shall not be re-
quired to qualify to do business in, or consent to general
service of process in, any jurisdiction by reason of this pro-
vision.
The registration rights set forth in this Section 10
are subject to the condition that the Designated Holder shall
provide the Registrant with such information with respect to
such holder's Registrable Securities, the plans for the dis-
tribution thereof, and such other information with respect to
such holder as, in the reasonable judgment of counsel for the
Registrant, is necessary to enable the Registrant to include in
such registration statement all material facts required to be
disclosed with respect to a registration thereunder.
A registration effected under this Section 10 shall
be effected at the Registrant's expense, except for underwrit-
ing discounts and commissions and the fees and the expenses of
counsel to the Designated Holder, and the Registrant shall
provide to the underwriters such documentation (including cer-
tificates, opinions of counsel and "comfort" letters from au-
ditors) as are customary in connection with underwritten public
offerings as such underwriters may reasonably require. In
connection with any such registration, the parties agree (i) to
indemnify each other and the underwriters in the customary
manner, (ii) to enter into an underwriting agreement in form
and substance customary for transactions of such type with the
-11-<PAGE>
Manager and the other underwriters participating in such of-
fering and (iii) to take all further actions which shall be
reasonably necessary to effect such registration and sale (in-
cluding, if the Manager deems it necessary, participating in
road-show presentations).
The Registrant shall be entitled to include (at its
expense) additional shares of its common stock in a registra-
tion effected pursuant to this Section 10 only if and to the
extent the Manager determines that such inclusion will not ad-
versely affect the prospects for success of such offering.
11. Adjustment Upon Changes in Capitalization.
Without limitation to any restriction on the Company contained
in this Agreement or in the Merger Agreement, in the event of
any change in Company Common Stock by reason of stock divi-
dends, splitups, mergers (other than the Mergers), recapital-
izations, combinations, exchange of shares or the like, the
type and number of shares or securities subject to the Company
Option, and the purchase price per share provided in Section 1,
shall be adjusted appropriately to restore to NSP its rights
hereunder, including the right to purchase from the Company (or
its successors) shares of Company Common Stock representing
19.9% of the outstanding Company Common Stock for the aggregate
Exercise Price calculated as of the date of this Agreement as
provided in Section 1.
12. Restrictive Legends. Each certificate repre-
senting shares of Company Common Stock issued to NSP hereunder,
and NSP Shares, if any, delivered to the Company at a Closing,
shall include a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD ONLY
IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGIS-
TRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO SUB-
JECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET
FORTH IN THE STOCK OPTION AGREEMENT, DATED AS OF
APRIL 28, 1995, A COPY OF WHICH MAY BE OBTAINED FROM
THE ISSUER UPON REQUEST.
It is understood and agreed that: (i) the reference to the
resale restrictions of the Securities Act in the above legend
shall be removed by delivery of substitute certificate(s)
without such reference if NSP or the Company, as the case may
be, shall have delivered to the other party a copy of a letter
from the staff of the Securities and Exchange Commission, or an
opinion of counsel, in form and substance satisfactory to the
other party, to the effect that such legend is not required for
-12-<PAGE>
purposes of the Securities Act; (ii) the reference to the pro-
visions to this Agreement in the above legend shall be removed
by delivery of substitute certificate(s) without such reference
if the shares have been sold or transferred in compliance with
the provisions of this Agreement and under circumstances that
do not require the retention of such reference; and (iii) the
legend shall be removed in its entirety if the conditions in
the preceding clauses (i) and (ii) are both satisfied. In ad-
dition, such certificates shall bear any other legend as may be
required by law. Certificates representing shares sold in a
registered public offering pursuant to Section 10 shall not be
required to bear the legend set forth in this Section 12.
13. Binding Effect; No Assignment; No Third Party
Beneficiaries. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective suc-
cessors and permitted assigns. Except as expressly provided
for in this Agreement, neither this Agreement nor the rights or
the obligations of either party hereto are assignable, except
by operation of law, or with the written consent of the other
party. Nothing contained in this Agreement, express or im-
plied, is intended to confer upon any person other than the
parties hereto and their respective permitted assigns any
rights or remedies of any nature whatsoever by reason of this
Agreement. Any Restricted Shares sold by a party in compliance
with the provisions of Section 10 shall, upon consummation of
such sale, be free of the restrictions imposed with respect to
such shares by this Agreement, unless and until such party
shall repurchase or otherwise become the beneficial owner of
such shares, and any transferee of such shares shall not be
entitled to the registration rights of such party.
14. Specific Performance. The parties recognize and
agree that if for any reason any of the provisions of this
Agreement are not performed in accordance with their specific
terms or are otherwise breached, immediate and irreparable harm
or injury would be caused for which money damages would not be
an adequate remedy. Accordingly, each party agrees that, in
addition to other remedies, the other party shall be entitled
to an injunction restraining any violation or threatened vio-
lation of the provisions of this Agreement. In the event that
any action should be brought in equity to enforce the provi-
sions of the Agreement, neither party will allege, and each
party hereby waives the defense, that there is adequate remedy
at law.
15. Entire Agreement. This Agreement, the NSP Stock
Option Agreement, the Confidentiality Agreement and the Merger
Agreement (including the exhibits and schedules thereto) con-
stitute the entire agreement among the parties with respect to
-13-<PAGE>
the subject matter hereof and thereof and supersede all other
prior agreements and understandings, both written and oral,
among the parties or any of them with respect to the subject
matter hereof and thereof.
16. Further Assurances. Each party will execute and
deliver all such further documents and instruments and take all
such further action as may be necessary in order to consummate
the transactions contemplated hereby.
17. Validity. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity
or enforceability of the other provisions of this Agreement,
which shall remain in full force and effect. In the event any
court or other competent authority holds any provisions of this
Agreement to be null, void or unenforceable, the parties hereto
shall negotiate in good faith the execution and delivery of an
amendment to this Agreement in order, as nearly as possible, to
effectuate, to the extent permitted by law, the intent of the
parties hereto with respect to such provision and the economic
effects thereof. If for any reason any such court or regula-
tory agency determines that NSP is not permitted to acquire, or
the Company is not permitted to repurchase pursuant to Section
7, the full number of shares of Company Common Stock provided
in Section 1 hereof (as the same may be adjusted), it is the
express intention of the Company to allow NSP to acquire or to
require the Company to repurchase such lesser number of shares
as may be permissible, without any amendment or modification
hereof. Each party agrees that, should any court or other
competent authority hold any provision of this Agreement or
part hereof to be null, void or unenforceable, or order any
party to take any action inconsistent herewith, or not take any
action required herein, the other party shall not be entitled
to specific performance of such provision or part hereof or to
any other remedy, including but not limited to money damages,
for breach hereof or of any other provision of this Agreement
or part hereof as the result of such holding or order.
18. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if (i)
delivered personally, or (ii) sent by reputable overnight cou-
rier service, or (iii) telecopied (which is confirmed), or (iv)
five days after being mailed by registered or certified mail
(return receipt requested) to the parties at the following ad-
dresses (or at such other address for a party as shall be
specified by like notice):
-14-<PAGE>
A. If to NSP, to:
Northern States Power Company
4 Nicollet Mall
Minneapolis, MN 55401
Attention: Gary R. Johnson, Esq.
Telephone: (612) 330-7623
Telecopy: (612) 330-6222
with a copy to:
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street, 31st Floor
Chicago, IL 60610
Attention: Peter Clarke, Esq.
Telephone: (312) 245-8685
Telecopy: (312) 644-3381
and a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attention: Barry A. Bryer, Esq.
Seth A. Kaplan, Esq.
Telephone: (212) 403-1000
Telecopy: (212) 403-2000
B. If to the Company, to:
Wisconsin Energy Corporation
231 West Michigan Street
Milwaukee, WI 53201
Attention: Walter T. Woelfle, Esq.
Telephone: (414) 221-2765
Telecopy: (414) 221-2412
-15-<PAGE>
with a copy to:
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, WI 53202
Attention: Patrick M. Ryan, Esq.
Telephone: (414) 277-5181
Telecopy: (414) 277-5174
and a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
Attention: Sheldon S. Adler, Esq.
Telephone: (212) 735-3000
Telecopy: (212) 735-2000
19. Governing Law; Choice of Forum. This Agreement
shall be governed by and construed in accordance with the laws
of the State of New York applicable to agreements made and to
be performed entirely within such State and without regard to
its choice of law principles. Each of the parties hereto (a)
consents to submit itself to the personal jurisdiction of any
federal court located in the State of New York or any New York
state court in the event any dispute arises out of this Agree-
ment or any of the transactions contemplated by this Agreement,
(b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from
any such court and (c) agrees that it will not bring any action
relating to this Agreement or any of the transactions contem-
plated by this Agreement in any court other than a federal
court sitting in the state of New York or a New York state
court.
20. Interpretation. When a reference is made in
this Agreement to a Section such reference shall be to a Sec-
tion of this Agreement unless otherwise indicated. Whenever
the words "include", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words
"without limitation". The descriptive headings herein are in-
serted for convenience of reference only and are not intended
to be part of or to affect the meaning or interpretation of
this Agreement.
-16-<PAGE>
21. Counterparts. This Agreement may be executed in
two counterparts, each of which shall be deemed to be an orig-
inal, but both of which, taken together, shall constitute one
and the same instrument.
22. Expenses. Except as otherwise expressly pro-
vided herein or in the Merger Agreement, all costs and expenses
incurred in connection with the transactions contemplated by
this Agreement shall be paid by the party incurring such ex-
penses.
23. Amendments; Waiver. This Agreement may be
amended by the parties hereto and the terms and conditions
hereof may be waived only by an instrument in writing signed on
behalf of each of the parties hereto, or, in the case of a
waiver, by an instrument signed on behalf of the party waiving
compliance.
24. Extension of Time Periods. The time periods for
exercise of certain rights under Sections 2, 6 and 7 shall be
extended: (i) to the extent necessary to obtain all regulatory
approvals for the exercise of such rights, and for the expira-
tion of all statutory waiting periods; and (ii) to the extent
necessary to avoid any liability under Section 16(b) of the
Exchange Act by reason of such exercise.
25. Replacement of Company Option. Upon receipt by
the Company of evidence reasonably satisfactory to it of the
loss, theft, destruction or mutilation of this Agreement, and
(in the case of loss, theft or destruction) of reasonably sat-
isfactory indemnification, and upon surrender and cancellation
of this Agreement, if mutilated, the Company will execute and
deliver a new Agreement of like tenor and date.
-17-<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective duly autho-
rized officers as of the date first above written.
NORTHERN STATES POWER COMPANY
By: /s/ JAMES J. HOWARD
Name: James J. Howard
Title: Chairman and Chief
Executive Officer
WISCONSIN ENERGY CORPORATION
By: /s/ RICHARD A. ABDOO
Name: Richard A. Abdoo
Title: Chairman, President and
Chief Executive Officer
-18-
EXHIBIT 3 CONFORMED COPY
NSP STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of April 28, 1995 by
and among Wisconsin Energy Corporation, a Wisconsin corporation
("WEC"), and Northern States Power Company, a Minnesota corpo-
ration (the "Company").
WHEREAS, concurrently with the execution and delivery
of this Agreement, (i) the Company, WEC, Northern Power Wis-
consin Corp., a Wisconsin corporation ("New NSP") and WEC Sub
Corp., a Wisconsin corporation ("Sub"), are entering into an
Agreement and Plan of Merger, dated as of the date hereof (the
"Merger Agreement"), which provides, among other things, upon
the terms and subject to the conditions thereof, for the merger
of the Company with and into New NSP and the merger of Sub with
and into New NSP (the "Mergers"), and (ii) WEC and the Company
are entering into a certain stock option agreement dated as of
the date hereof whereby WEC grants to the Company an option
with respect to certain shares of WEC's common stock on the
terms and subject to the conditions set forth therein (the "WEC
Stock Option Agreement"); and
WHEREAS, as a condition to WEC's willingness to enter
into the Merger Agreement, WEC has requested that the Company
agree, and the Company has so agreed, to grant to WEC an option
with respect to certain shares of the Company's common stock,
on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, to induce WEC to enter into the Mer-
ger Agreement, and in consideration of the mutual covenants and
agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. Grant of Option. The Company hereby grants WEC
an irrevocable option (the "Company Option") to purchase up to
13,387,772 shares, subject to adjustment as provided in Section
11 (such shares being referred to herein as the "Company
Shares") of common stock, par value $2.50 per share, of the
Company (the "Company Common Stock") (being 19.9% of the number
of shares of Company Common Stock outstanding on the date
hereof) in the manner set forth below at a price (the "Exercise
Price") per Company Share of 44.075 (which is equal to the Fair
Market Value (as defined below) of a Company Share on the date
hereof) payable, at WEC's option, (a) in cash or (b) subject to
the Company's having obtained the approvals of any Governmental
Authority required for the Company to acquire the WEC Shares
(as defined below) from WEC, which approvals the Company shall
use best efforts to obtain, in shares of common<PAGE>
stock, par value $.01 per share, of WEC ("WEC Shares") in ei-
ther case in accordance with Section 4 hereof. Notwithstanding
the foregoing, in no event shall the number of Company Shares
for which the Company Option is exercisable exceed 19.9% of the
number of issued and outstanding shares of Company Common
Stock. As used herein, the "Fair Market Value" of any share
shall be the average of the daily closing sales price for such
share on the New York Stock Exchange (the "NYSE") during the 10
NYSE trading days prior to the fifth NYSE trading day preceding
the date such Fair Market Value is to be determined. Capital-
ized terms used herein but not defined herein shall have the
meanings set forth in the Merger Agreement.
2. Exercise of Option. The Company Option may be
exercised by WEC, in whole or in part, at any time or from time
to time after the Merger Agreement becomes terminable by WEC
under circumstances which could entitle WEC to termination fees
under either Section 9.3(a) of the Merger Agreement (provided
that the events specified in Section 9.3(a)(ii)(x) of the Mer-
ger Agreement shall have occurred, although the events speci-
fied in Section 9.3(a)(ii)(y) thereof need not have occurred)
or Section 9.3(b) of the Merger Agreement (regardless of
whether the Merger Agreement is actually terminated or whether
there occurs a closing of any Business Combination involving a
Target Party or a closing by which a Target Party becomes a
subsidiary), any such event by which the Merger Agreement be-
comes so terminable by WEC being referred to herein as a
"Trigger Event." The Company shall notify WEC promptly in
writing of the occurrence of any Trigger Event, it being un-
derstood that the giving of such notice by the Company shall
not be a condition to the right of WEC to exercise the Company
Option. In the event WEC wishes to exercise the Company Op-
tion, WEC shall deliver to the Company a written notice (an
"Exercise Notice") specifying the total number of Company
Shares it wishes to purchase. Each closing of a purchase of
Company Shares (a "Closing") shall occur at a place, on a date
and at a time designated by WEC in an Exercise Notice delivered
at least two business days prior to the date of the Closing.
The Company Option shall terminate upon the earlier of: (i)
the Effective Time; (ii) the termination of the Merger Agree-
ment pursuant to Section 9.1 thereof (other than upon or during
the continuance of a Trigger Event); or (iii) 180 days follow-
ing any termination of the Merger Agreement upon or during the
continuance of a Trigger Event (or if, at the expiration of
such 180 day period the Company Option cannot be exercised by
reason of any applicable judgment, decree, order, law or regu-
lation, 10 business days after such impediment to exercise
shall have been removed or shall have become final and not
subject to appeal, but in no event under this clause (iii)
later than October 31, 1997). Notwithstanding the foregoing,
-2-<PAGE>
the Company Option may not be exercised if WEC is in material
breach of any of its material representations or warranties, or
in material breach of any of its covenants or agreements, con-
tained in this Agreement or in the Merger Agreement. Upon the
giving by WEC to the Company of the Exercise Notice and the
tender of the applicable aggregate Exercise Price, WEC shall be
deemed to be the holder of record of the Company Shares issu-
able upon such exercise, notwithstanding that the stock trans-
fer books of the Company shall then be closed or that certifi-
cates representing such Company Shares shall not then be actu-
ally delivered to WEC.
3. Conditions to Closing. The obligation of the
Company to issue the Company Shares to WEC hereunder is subject
to the conditions, which (other than the conditions described
in clauses (i), (iii) and (iv) below) may be waived by the
Company in its sole discretion, that (i) all waiting periods,
if any, under the HSR Act, applicable to the issuance of the
Company Shares hereunder shall have expired or have been ter-
minated; (ii) the Company Shares, and any WEC Shares which are
issued in payment of the Exercise Price, shall have been ap-
proved for listing on the NYSE upon official notice of issu-
ance; (iii) all consents, approvals, orders or authorizations
of, or registrations, declarations or filings with, any fed-
eral, state or local administrative agency or commission or
other federal state or local Governmental Authority, if any,
required in connection with the issuance of the Company Shares
hereunder shall have been obtained or made, as the case may be,
including, without limitation, the approval of the SEC under
Section 10 of the 1935 Act of the acquisition of the Company
Shares by WEC and, if applicable, the acquisition by the Com-
pany of the WEC Shares constituting the Exercise Price here-
under; and (iv) no preliminary or permanent injunction or other
order by any court of competent jurisdiction prohibiting or
otherwise restraining such issuance shall be in effect.
4. Closing. At any Closing, (a) the Company will
deliver to WEC or its designee a single certificate in defini-
tive form representing the number of the Company Shares desig-
nated by WEC in its Exercise Notice, such certificate to be
registered in the name of WEC and to bear the legend set forth
in Section 12, and (b) WEC will deliver to the Company the ag-
gregate price for the Company Shares so designated and being
purchased by (i) wire transfer of immediately available funds
or certified check or bank check or (ii) subject to the condi-
tion in Section 1(b), a certificate or certificates represent-
ing the number of WEC Shares being issued by WEC in consider-
ation thereof, as the case may be. For the purposes of this
Agreement, the number of WEC Shares to be delivered to the
Company shall be equal to the quotient obtained by dividing (i)
-3-<PAGE>
the product of (x) the number of Company Shares with respect to
which the Company Option is being exercised and (y) the Exer-
cise Price by (ii) the Fair Market Value of the WEC Shares on
the date immediately preceding the date the Exercise Notice is
delivered to the Company. The Company shall pay all expenses,
and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the
preparation, issue and delivery of stock certificates under
this Section 4 in the name of WEC or its designee.
5. Representations and Warranties of the Company.
The Company represents and warrants to WEC that (a) except as
set forth in Section 4.1 of the NSP Disclosure Schedule, the
Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Minnesota and
has the corporate power and authority to enter into this
Agreement and, subject to obtaining the applicable approval of
shareholders of the Company for the repurchase of Company
Shares pursuant to Section 7(a) below under circumstances where
Subdivision 3 of Section 302A.553 of the MBCA would be appli-
cable (the "Buyback Approvals") and subject to any regulatory
approvals referred to herein and to the provisions of Section
302A.551 of the MBCA, if applicable, to carry out its obliga-
tions hereunder, (b) the execution and delivery of this Agree-
ment by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of the Company and
no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or any of the transac-
tions contemplated hereby (other than any required Buyback Ap-
provals), (c) such corporate action (including the approval of
the Board of Directors of the Company) is intended to render
inapplicable to this Agreement and the Merger Agreement and the
transactions contemplated hereby and thereby, the provisions of
the MBCA referred to in Section 4.15 of the Merger Agreement,
(d) this Agreement has been duly executed and delivered by the
Company, constitutes a valid and binding obligation of the
Company and, assuming this Agreement constitutes a valid and
binding obligation of WEC, is enforceable against the Company
in accordance with its terms, (e) the Company has taken all
necessary corporate action to authorize and reserve for issu-
ance and to permit it to issue, upon exercise of the Company
Option, and at all times from the date hereof through the ex-
piration of the Company Option will have reserved, 13,387,772
authorized and unissued Company Shares, such amount being sub-
ject to adjustment as provided in Section 11, all of which,
upon their issuance and delivery in accordance with the terms
of this Agreement, will be validly issued, fully paid and non-
assessable, (f) upon delivery of the Company Shares to WEC upon
-4-<PAGE>
the exercise of the Company Option, WEC will acquire the Com-
pany Shares free and clear of all claims, liens, charges, en-
cumbrances and security interests of any nature whatsoever, (g)
except as described in Section 4.4(b) of the Merger Agreement,
the execution and delivery of this Agreement by the Company
does not, and the consummation by the Company of the transac-
tions contemplated hereby will not, violate, conflict with, or
result in a breach of any provision of, or constitute a default
(with or without notice or lapse of time, or both) under, or
result in the termination of, or accelerate the performance
required by, or result in a right of termination, cancellation,
or acceleration of any obligation or the loss of a material
benefit under, or the creation of a lien, pledge, security in-
terest or other encumbrance on assets (any such conflict, vio-
lation, default, right of termination, cancellation or ac-
celeration, loss or creation, a "Violation") of the Company or
any of its subsidiaries, pursuant to, (A) any provision of the
Restated Articles of Incorporation or by-laws of the Company,
(B) any provisions of any loan or credit agreement, note,
mortgage, indenture, lease, Company benefit plan or other
agreement, obligation, instrument, permit, concession, fran-
chise, license or (C) any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to the Company or
its properties or assets, which Violation, in the case of each
of clauses (B) and (C), could reasonably be expected to have a
material adverse effect on the Company and its subsidiaries
taken as a whole, (h) except as described in Section 4.4(c) of
the Merger Agreement or Section 1(b) or Section 3 hereof, the
execution and delivery of this Agreement by the Company does
not, and the performance of this Agreement by the Company will
not, require any consent, approval, authorization or permit of,
or filing with or notification to, any Governmental Authority,
(i) none of the Company, any of its affiliates or anyone acting
on its or their behalf has issued, sold or offered any security
of the Company to any person under circumstances that would
cause the issuance and sale of the Company Shares, as contem-
plated by this Agreement, to be subject to the registration
requirements of the Securities Act as in effect on the date
hereof and, assuming the representations of WEC contained in
Section 6(h) are true and correct, the issuance, sale and de-
livery of the Company Shares hereunder would be exempt from the
registration and prospectus delivery requirements of the Secu-
rities Act, as in effect on the date hereof (and the Company
shall not take any action which would cause the issuance, sale
and delivery of the Company Shares hereunder not to be exempt
from such requirements), and (j) any WEC Shares acquired pur-
suant to this Agreement will be acquired for the Company's own
account, for investment purposes only and will not be acquired
by the Company with a view to the public distribution thereof
in violation of any applicable provision of the Securities Act.
-5-<PAGE>
6. Representations and Warranties of WEC. WEC rep-
resents and warrants to the Company that (a) WEC is a corpora-
tion duly organized, validly existing and in good standing un-
der the laws of the State of Wisconsin and has the corporate
power and authority to enter into this Agreement and to carry
out its obligations hereunder, (b) the execution and delivery
of this Agreement by WEC and the consummation by WEC of the
transactions contemplated hereby have been duly authorized by
all necessary corporate action on the part of WEC and no other
corporate proceedings on the part of WEC are necessary to au-
thorize this Agreement or any of the transactions contemplated
hereby, (c) this Agreement has been duly executed and delivered
by WEC and constitutes a valid and binding obligation of WEC,
and, assuming this Agreement constitutes a valid and binding
obligation of the Company, is enforceable against WEC in ac-
cordance with its terms, (d) prior to any delivery of WEC
Shares in consideration of the purchase of Company Shares pur-
suant hereto, WEC will have taken all necessary corporate ac-
tion to authorize for issuance and to permit it to issue such
WEC Shares, all of which, upon their issuance and delivery in
accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable (subject to Section
180.0622(2)(b) of the WBCL, as judicially determined), and to
render inapplicable to the receipt by the Company of the WEC
Shares the provisions of the WBCL referred to in Section 5.15
of the Merger Agreement, (e) upon any delivery of such WEC
Shares to the Company in consideration of the purchase of Com-
pany Shares pursuant hereto, the Company will acquire the WEC
Shares free and clear of all claims, liens, charges, encum-
brances and security interests of any nature whatsoever, (f)
except as described in Section 5.4(b) of the Merger Agreement,
the execution and delivery of this Agreement by WEC does not,
and the consummation by WEC of the transactions contemplated
hereby will not, violate, conflict with, or result in the
breach of any provision of, or constitute a default (with or
without notice or lapse of time, or both) under, or result in
any Violation by WEC or any of its subsidiaries, pursuant to
(A) any provision of the Restated Articles of Incorporation or
By-laws of WEC, (B) any provisions of any loan or credit
agreement, note, mortgage, indenture, lease, WEC benefit plan
or other agreement, obligation, instrument, permit, concession,
franchise, license or (C) any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to WEC or its
properties or assets, which Violation, in the case of each of
clauses (B) and or (C), would have a material adverse effect on
WEC and its subsidiaries taken as a whole, (g) except as de-
scribed in Section 5.4(c) of the Merger Agreement or Section
1(b) or Section 3 hereof, the execution and delivery of this
Agreement by WEC does not, and the consummation by WEC of the
transactions contemplated hereby will not, require any consent,
-6-<PAGE>
approval, authorization or permit of, or filing with or noti-
fication to, any Governmental Authority and (h) any Company
Shares acquired upon exercise of the Company Option will be
acquired for WEC's own account, for investment purposes only
and will not be, and the Company Option is not being, acquired
by WEC with a view to the public distribution thereof in vio-
lation of any applicable provision of the Securities Act.
7. Certain Repurchases.
(a) WEC Put. At the request of WEC by written no-
tice at any time during which the Company Option is exercisable
pursuant to Section 2 (the "Repurchase Period"), the Company
(or any successor entity thereof) shall repurchase from WEC all
or any portion of the Company Option, at the price set forth in
subparagraph (i) below, or, at the request of WEC by written
notice at any time prior to April 30, 1997 (provided that such
date shall be extended to October 31, 1997 under the circum-
stances where the date after which either party may terminate
the Merger Agreement pursuant to Section 9.1(b) of the Merger
Agreement has been extended to October 31, 1997), the Company
(or any successor entity thereof) shall repurchase from WEC all
or any portion of the Company Shares purchased by WEC pursuant
to the Company Option, at the price set forth in subparagraph
(ii) below:
(i) the difference between the "Market/Offer Price"
for shares of Company Common Stock as of the date WEC
gives notice of its intent to exercise its rights under
this Section 7 (defined as the higher of (A) the price per
share offered as of such date pursuant to any tender or
exchange offer or other offer with respect to a Business
Combination which was made prior to such date and not
terminated or withdrawn as of such date (the "Offer
Price") and (B) the Fair Market Value of Company Common
Stock as of such date (the "Market Price")) and the Exer-
cise Price, multiplied by the number of Company Shares
purchasable pursuant to the Company Option (or portion
thereof with respect to which WEC is exercising its rights
under this Section 7), but only if the Market/Offer Price
is greater than the Exercise Price;
(ii) the product of (x) the sum of (A) the Exercise
Price paid by WEC per Company Share acquired pursuant to
the Company Option and (B) the difference between the
Market/Offer Price and the Exercise Price, but only if the
Market/Offer Price is greater than the Exercise Price, and
(y) the number of Company Shares so to be repurchased
pursuant to this Section 7. For purposes of this clause
(ii), the Offer Price shall be the highest price per share
-7-<PAGE>
offered pursuant to a tender or exchange offer or other
Business Combination offer during the Repurchase Period
prior to the delivery by WEC of a notice of repurchase.
(b) Redelivery of WEC Shares. If WEC elected to
purchase Company Shares pursuant to the exercise of the Company
Option by the issuance and delivery of WEC Shares, then the
Company shall, if so requested by WEC, in fulfillment of its
obligation pursuant to clause (A) of Section 7(a)(ii)(x) (that
is, with respect to the Exercise Price only and without limi-
tation to its obligation to pay additional consideration under
clause (B) of Section 7(a)(ii)(x)), redeliver the certificate
for such WEC Shares to WEC, free and clear of all liens,
claims, damages, charges and encumbrances of any kind or nature
whatsoever; provided, however, that if less than all of the
Company Shares purchased by WEC pursuant to the Company Option
are to be repurchased pursuant to this Section 7, then WEC
shall issue to the Company a new certificate representing those
WEC Shares which are not due to be redelivered to WEC pursuant
to this Section 7 as they constituted payment of the Exercise
Price for the Company Shares not being repurchased.
(c) Payment and Redelivery of Company Option or
Shares. In the event WEC exercises its rights under this Sec-
tion 7, the Company shall, within 10 business days thereafter,
pay the required amount to WEC in immediately available funds
and WEC shall surrender to the Company the Company Option or
the certificates evidencing the Company Shares purchased by WEC
pursuant thereto, and WEC shall warrant that it owns the Com-
pany Option or such shares and that the Company Option or such
shares are then free and clear of all liens, claims, damages,
charges and encumbrances of any kind or nature whatsoever.
(d) WEC Call. If WEC has elected to purchase Com-
pany Shares pursuant to the exercise of the Company Option by
the issuance and delivery of WEC Shares, notwithstanding that
WEC may no longer hold any such Company Shares or that WEC
elects not to exercise its other rights under this Section 7,
WEC may require, at any time or from time to time prior to
April 30, 1997 (provided that such date shall be extended to
October 31, 1997 under the circumstances where the date after
which either party may terminate the Merger Agreement pursuant
to Section 9.1(b) of the Merger Agreement has been extended to
October 31, 1997), the Company to sell to WEC any such WEC
Shares at the price attributed to such WEC Shares pursuant to
Section 4 plus interest at the rate of 6.5% per annum on such
amount from the Closing Date relating to the exchange of such
WEC Shares pursuant to Section 4 to the closing date under this
Section 7(d) less any dividends on such WEC Shares paid during
-8-<PAGE>
such period or declared and payable to stockholders of record
on a date during such period.
(e) Repurchase Price Reduced at WEC's Option. In
the event the repurchase price specified in Section 7(a) would
subject the repurchase of the Company Option or the Company
Shares purchased by WEC pursuant to the Company Option to a
vote of the shareholders of the Company pursuant to Section
302A.553, Subd. 3 of the MBCA, then WEC may, at its election,
reduce the repurchase price to an amount which would permit
such repurchase without the necessity for such a shareholder
vote.
8. Voting of Shares. Following the date hereof and
prior to the fifth anniversary of the date hereof (the "Expi-
ration Date"), each party shall vote any shares of capital
stock of the other party acquired by such party pursuant to
this Agreement, including any WEC Shares issued pursuant to
Section 1(b) ("Restricted Shares") or otherwise beneficially
owned (within the meaning of Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")) by such party on each matter submitted to a vote of
shareholders of such other party for and against such matter in
the same proportion as the vote of all other shareholders of
such other party are voted (whether by proxy or otherwise) for
and against such matter.
9. Restrictions on Transfer.
(a) Restrictions on Transfer. Prior to the Expira-
tion Date, neither party shall, directly or indirectly, by op-
eration of law or otherwise, sell, assign, pledge, or otherwise
dispose of or transfer any Restricted Shares beneficially owned
by such party, other than (i) pursuant to Section 7, or (ii) in
accordance with Section 9(b) or Section 10.
(b) Permitted Sales. Following the termination of
the Merger Agreement, a party shall be permitted to sell any
Restricted Shares beneficially owned by it if such sale is made
pursuant to a tender or exchange offer that has been approved
or recommended, or otherwise determined to be fair to and in
the best interests of the shareholders of the other party, by a
majority of the members of the Board of Directors of such other
party which majority shall include a majority of directors who
were directors prior to the announcement of such tender or ex-
change offer.
10. Registration Rights. Following the termination
of the Merger Agreement, each party hereto (a "Designated
Holder") may by written notice (the "Registration Notice") to
-9-<PAGE>
the other party (the "Registrant") request the Registrant to
register under the Securities Act all or any part of the Re-
stricted Shares beneficially owned by such Designated Holder
(the "Registrable Securities") pursuant to a bona fide firm
commitment underwritten public offering in which the Designated
Holder and the underwriters shall effect as wide a distribution
of such Registrable Securities as is reasonably practicable and
shall use their best efforts to prevent any person (including
any Group (as used in Rule 13d-5 under the Exchange Act)) and
its affiliates from purchasing through such offering Restricted
Shares representing more than 1% of the outstanding shares of
common stock of the Registrant on a fully diluted basis (a
"Permitted Offering"). The Registration Notice shall include a
certificate executed by the Designated Holder and its proposed
managing underwriter, which underwriter shall be an investment
banking firm of nationally recognized standing (the "Manager"),
stating that (i) they have a good faith intention to commence
promptly a Permitted Offering and (ii) the Manager in good
faith believes that, based on the then prevailing market con-
ditions, it will be able to sell the Registrable Securities at
a per share price equal to at least 80% of the then Fair Market
Value of such shares. The Registrant (and/or any person des-
ignated by the Registrant) shall thereupon have the option ex-
ercisable by written notice delivered to the Designated Holder
within 10 business days after the receipt of the Registration
Notice, irrevocably to agree to purchase all or any part of the
Registrable Securities proposed to be so sold for cash at a
price (the "Option Price") equal to the product of (i) the
number of Registrable Securities to be so purchased by the
Registrant and (ii) the then Fair Market Value of such shares.
Any such purchase of Registrable Securities by the Registrant
(or its designee) hereunder shall take place at a closing to be
held at the principal executive offices of the Registrant or at
the offices of its counsel at any reasonable date and time
designated by the Registrant and/or such designee in such no-
tice within 20 business days after delivery of such notice.
Any payment for the shares to be purchased shall be made by
delivery at the time of such closing of the Option Price in
immediately available funds.
If the Registrant does not elect to exercise its op-
tion pursuant to this Section 10 with respect to all Regis-
trable Securities, it shall use its best efforts to effect, as
promptly as practicable, the registration under the Securities
Act of the unpurchased Registrable Securities proposed to be so
sold; provided, however, that (i) neither party shall be en-
titled to more than an aggregate of two effective registration
statements hereunder and (ii) the Registrant will not be re-
quired to file any such registration statement during any pe-
riod of time (not to exceed 40 days after such request in the
-10-<PAGE>
case of clause (A) below or 90 days in the case of clauses (B)
and (C) below) when (A) the Registrant is in possession of ma-
terial non-public information which it reasonably believes
would be detrimental to be disclosed at such time and, in the
opinion of counsel to the Registrant, such information would
have to be disclosed if a registration statement were filed at
that time; (B) the Registrant is required under the Securities
Act to include audited financial statements for any period in
such registration statement and such financial statements are
not yet available for inclusion in such registration statement;
or (C) the Registrant determines, in its reasonable judgment,
that such registration would interfere with any financing, ac-
quisition or other material transaction involving the Regis-
trant or any of its affiliates. The Registrant shall use its
reasonable best efforts to cause any Registrable Securities
registered pursuant to this Section 10 to be qualified for sale
under the securities or Blue-Sky laws of such jurisdictions as
the Designated Holder may reasonably request and shall continue
such registration or qualification in effect in such jurisdic-
tion; provided, however, that the Registrant shall not be re-
quired to qualify to do business in, or consent to general
service of process in, any jurisdiction by reason of this pro-
vision.
The registration rights set forth in this Section 10
are subject to the condition that the Designated Holder shall
provide the Registrant with such information with respect to
such holder's Registrable Securities, the plans for the dis-
tribution thereof, and such other information with respect to
such holder as, in the reasonable judgment of counsel for the
Registrant, is necessary to enable the Registrant to include in
such registration statement all material facts required to be
disclosed with respect to a registration thereunder.
A registration effected under this Section 10 shall
be effected at the Registrant's expense, except for underwrit-
ing discounts and commissions and the fees and the expenses of
counsel to the Designated Holder, and the Registrant shall
provide to the underwriters such documentation (including cer-
tificates, opinions of counsel and "comfort" letters from au-
ditors) as are customary in connection with underwritten public
offerings as such underwriters may reasonably require. In
connection with any such registration, the parties agree (i) to
indemnify each other and the underwriters in the customary
manner, (ii) to enter into an underwriting agreement in form
and substance customary for transactions of such type with the
Manager and the other underwriters participating in such of-
fering and (iii) to take all further actions which shall be
-11-<PAGE>
reasonably necessary to effect such registration and sale (in-
cluding, if the Manager deems it necessary, participating in
road-show presentations).
The Registrant shall be entitled to include (at its
expense) additional shares of its common stock in a registra-
tion effected pursuant to this Section 10 only if and to the
extent the Manager determines that such inclusion will not ad-
versely affect the prospects for success of such offering.
11. Adjustment Upon Changes in Capitalization.
Without limitation to any restriction on the Company contained
in this Agreement or in the Merger Agreement, in the event of
any change in Company Common Stock by reason of stock divi-
dends, splitups, mergers (other than the Mergers), recapital-
izations, combinations, exchange of shares or the like, the
type and number of shares or securities subject to the Company
Option, and the purchase price per share provided in Section 1,
shall be adjusted appropriately to restore to WEC its rights
hereunder, including the right to purchase from the Company (or
its successors) shares of Company Common Stock representing
19.9% of the outstanding Company Common Stock for the aggregate
Exercise Price calculated as of the date of this Agreement as
provided in Section 1.
12. Restrictive Legends. Each certificate repre-
senting shares of Company Common Stock issued to WEC hereunder,
and WEC Shares, if any, delivered to the Company at a Closing,
shall include a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD ONLY
IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGIS-
TRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO SUB-
JECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET
FORTH IN THE STOCK OPTION AGREEMENT, DATED AS OF
APRIL 28, 1995, A COPY OF WHICH MAY BE OBTAINED FROM
THE ISSUER UPON REQUEST.
It is understood and agreed that: (i) the reference to the
resale restrictions of the Securities Act in the above legend
shall be removed by delivery of substitute certificate(s)
without such reference if WEC or the Company, as the case may
be, shall have delivered to the other party a copy of a letter
from the staff of the Securities and Exchange Commission, or an
opinion of counsel, in form and substance satisfactory to the
other party, to the effect that such legend is not required for
purposes of the Securities Act; (ii) the reference to the pro-
visions to this Agreement in the above legend shall be removed
-12-<PAGE>
by delivery of substitute certificate(s) without such reference
if the shares have been sold or transferred in compliance with
the provisions of this Agreement and under circumstances that
do not require the retention of such reference; and (iii) the
legend shall be removed in its entirety if the conditions in
the preceding clauses (i) and (ii) are both satisfied. In ad-
dition, such certificates shall bear any other legend as may be
required by law. Certificates representing shares sold in a
registered public offering pursuant to Section 10 shall not be
required to bear the legend set forth in this Section 12.
13. Binding Effect; No Assignment; No Third Party
Beneficiaries. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective suc-
cessors and permitted assigns. Except as expressly provided
for in this Agreement, neither this Agreement nor the rights or
the obligations of either party hereto are assignable, except
by operation of law, or with the written consent of the other
party. Nothing contained in this Agreement, express or im-
plied, is intended to confer upon any person other than the
parties hereto and their respective permitted assigns any
rights or remedies of any nature whatsoever by reason of this
Agreement. Any Restricted Shares sold by a party in compliance
with the provisions of Section 10 shall, upon consummation of
such sale, be free of the restrictions imposed with respect to
such shares by this Agreement, unless and until such party
shall repurchase or otherwise become the beneficial owner of
such shares, and any transferee of such shares shall not be
entitled to the registration rights of such party.
14. Specific Performance. The parties recognize and
agree that if for any reason any of the provisions of this
Agreement are not performed in accordance with their specific
terms or are otherwise breached, immediate and irreparable harm
or injury would be caused for which money damages would not be
an adequate remedy. Accordingly, each party agrees that, in
addition to other remedies, the other party shall be entitled
to an injunction restraining any violation or threatened vio-
lation of the provisions of this Agreement. In the event that
any action should be brought in equity to enforce the provi-
sions of the Agreement, neither party will allege, and each
party hereby waives the defense, that there is adequate remedy
at law.
15. Entire Agreement. This Agreement, the WEC Stock
Option Agreement, the Confidentiality Agreement and the Merger
Agreement (including the exhibits and schedules thereto) con-
stitute the entire agreement among the parties with respect to
the subject matter hereof and thereof and supersede all other
prior agreements and understandings, both written and oral,
-13-<PAGE>
among the parties or any of them with respect to the subject
matter hereof and thereof.
16. Further Assurances. Each party will execute and
deliver all such further documents and instruments and take all
such further action as may be necessary in order to consummate
the transactions contemplated hereby.
17. Validity. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity
or enforceability of the other provisions of this Agreement,
which shall remain in full force and effect. In the event any
court or other competent authority holds any provisions of this
Agreement to be null, void or unenforceable, the parties hereto
shall negotiate in good faith the execution and delivery of an
amendment to this Agreement in order, as nearly as possible, to
effectuate, to the extent permitted by law, the intent of the
parties hereto with respect to such provision and the economic
effects thereof. If for any reason any such court or regula-
tory agency determines that WEC is not permitted to acquire, or
the Company is not permitted to repurchase pursuant to Section
7, the full number of shares of Company Common Stock provided
in Section 1 hereof (as the same may be adjusted), it is the
express intention of the Company to allow WEC to acquire or to
require the Company to repurchase such lesser number of shares
as may be permissible, without any amendment or modification
hereof. Each party agrees that, should any court or other
competent authority hold any provision of this Agreement or
part hereof to be null, void or unenforceable, or order any
party to take any action inconsistent herewith, or not take any
action required herein, the other party shall not be entitled
to specific performance of such provision or part hereof or to
any other remedy, including but not limited to money damages,
for breach hereof or of any other provision of this Agreement
or part hereof as the result of such holding or order.
18. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given if (i)
delivered personally, or (ii) sent by reputable overnight cou-
rier service, or (iii) telecopied (which is confirmed), or (iv)
five days after being mailed by registered or certified mail
(return receipt requested) to the parties at the following ad-
dresses (or at such other address for a party as shall be
specified by like notice):
-14-<PAGE>
A. If to WEC, to:
Wisconsin Energy Corporation
231 West Michigan Street
Milwaukee, WI 53201
Attention: Walter T. Woelfle, Esq.
Telephone: (414) 221-2765
Telecopy: (414) 221-2412
with a copy to:
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, WI 53202
Attention: Patrick M. Ryan, Esq.
Telephone: (414) 277-5181
Telecopy: (414) 277-5174
and a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
Attention: Sheldon S. Adler, Esq.
Telephone: (212) 735-3000
Telecopy: (212) 735-2000
B. If to the Company, to:
Northern States Power Company
4 Nicollet Mall
Minneapolis, MN 55401
Attention: Gary R. Johnson, Esq.
Telephone: (612) 330-7623
Telecopy: (612) 330-6222
with a copy to:
Gardner, Carton & Douglas
Quaker Tower
321 North Clark Street, 31st Floor
Chicago, IL 60610
Attention: Peter Clarke, Esq.
Telephone: (312) 245-8685
Telecopy: (312) 644-3381
-15-<PAGE>
and a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attention: Barry A. Bryer, Esq.
Seth A. Kaplan, Esq.
Telephone: (212) 403-1000
Telecopy: (212) 403-2000
19. Governing Law; Choice of Forum. This Agreement
shall be governed by and construed in accordance with the laws
of the State of New York applicable to agreements made and to
be performed entirely within such State and without regard to
its choice of law principles. Each of the parties hereto (a)
consents to submit itself to the personal jurisdiction of any
federal court located in the State of New York or any New York
state court in the event any dispute arises out of this Agree-
ment or any of the transactions contemplated by this Agreement,
(b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from
any such court and (c) agrees that it will not bring any action
relating to this Agreement or any of the transactions contem-
plated by this Agreement in any court other than a federal
court sitting in the state of New York or a New York state
court.
20. Interpretation. When a reference is made in
this Agreement to a Section such reference shall be to a Sec-
tion of this Agreement unless otherwise indicated. Whenever
the words "include", "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words
"without limitation". The descriptive headings herein are in-
serted for convenience of reference only and are not intended
to be part of or to affect the meaning or interpretation of
this Agreement.
21. Counterparts. This Agreement may be executed in
two counterparts, each of which shall be deemed to be an orig-
inal, but both of which, taken together, shall constitute one
and the same instrument.
22. Expenses. Except as otherwise expressly pro-
vided herein or in the Merger Agreement, all costs and expenses
incurred in connection with the transactions contemplated by
this Agreement shall be paid by the party incurring such ex-
penses.
-16-<PAGE>
23. Amendments; Waiver. This Agreement may be
amended by the parties hereto and the terms and conditions
hereof may be waived only by an instrument in writing signed on
behalf of each of the parties hereto, or, in the case of a
waiver, by an instrument signed on behalf of the party waiving
compliance.
24. Extension of Time Periods. The time periods for
exercise of certain rights under Sections 2, 6 and 7 shall be
extended: (i) to the extent necessary to obtain all regulatory
approvals for the exercise of such rights, and for the expira-
tion of all statutory waiting periods; and (ii) to the extent
necessary to avoid any liability under Section 16(b) of the
Exchange Act by reason of such exercise.
25. Replacement of Company Option. Upon receipt by
the Company of evidence reasonably satisfactory to it of the
loss, theft, destruction or mutilation of this Agreement, and
(in the case of loss, theft or destruction) of reasonably sat-
isfactory indemnification, and upon surrender and cancellation
of this Agreement, if mutilated, the Company will execute and
deliver a new Agreement of like tenor and date.
-17-<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed by their respective duly autho-
rized officers as of the date first above written.
WISCONSIN ENERGY CORPORATION
By: /s/ RICHARD A. ABDOO
Name: Richard A. Abdoo
Title: Chairman, President and
Chief Executive Officer
NORTHERN STATES POWER COMPANY
By: /s/ JAMES J. HOWARD
Name: James J. Howard
Title: Chairman and Chief
Executive Officer
-18-
EXHIBIT 4
Exhibit 7.13
BOARD COMMITTEES
The Board of Directors of the Company shall have the
following committees. Each of such committees will have four
(4) members, with WEC selecting two (2) members of each such
committee and NSP selecting two (2) members of each such com-
mittee. The chair of each such committee shall be selected by
the party set forth below:
Committee Chair Selected By
Executive Committee NSP
Nominating Committee WEC
Compensation Committee NSP
Audit Committee NSP
Finance Committee WEC
Nuclear Oversight Committee WEC
Exhibit 5
EMPLOYMENT AGREEMENT
THIS AGREEMENT by and between [
], a Wisconsin corporation (the "Company"), and
James J. Howard (the "Executive"), dated as of the ___ day of
_______, 199_.
W I T N E S S E T H T H A T
WHEREAS, Northern States Power Company, a Minnesota
corporation ("NSP") and Wisconsin Energy Corporation, a Wis-
consin corporation ("WEC") have entered into an Agreement and
Plan of Merger dated as of April 28, 1995 (the "Merger
Agreement"), whereby the NSP and WEC organizations will
merge, with the Company as the surviving parent; and
WHEREAS, NSP and WEC wish to provide for the or-
derly succession of management of the Company following the
Effective Time (as defined in the Merger Agreement); and
WHEREAS, NSP and WEC further wish to provide for
the employment by the Company of the Executive, and the
Executive wishes to serve the Company, in the capacities and
on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, it is hereby agreed as follows:
1. Employment Period. The Company shall employ
the Executive, and the Executive shall serve the Company, on<PAGE>
the terms and conditions set forth in this Agreement, for an
initial period (the "Initial Period") and a further period
(the "Secondary Period") (the Initial Period and the Second-
ary Period are hereinafter referred to in the aggregate as
the "Employment Period"). The Initial Period shall begin at
the Effective Time (as defined in the Merger Agreement), and
end on the later of (i) the date of the annual meeting of
shareholders of the Company that occurs in 1998, and (ii) the
last day of the sixteenth full month following the Effective
Time. The Secondary Period shall begin at the end of the
Initial Period and end on the later of July 1, 2000 and the
second anniversary of the last day of the Initial Period.
2. Position and Duties. (a) During the Initial
Period, the Executive shall serve as Chairman of the Board of
Directors of the Company (the "Board") and Chief Executive
Officer of the Company, and during the Secondary Period, the
Executive shall serve as Chairman of the Board, in each case
as an employee of the Company and with such duties and re-
sponsibilities as are customarily assigned to such positions,
and such other duties and responsibilities not inconsistent
therewith as may from time to time be assigned to him by the
Board. The Executive shall be a member of the Board on the
first day of the Employment Period, and the Board shall pro-
pose the Executive for re-election to the Board throughout
the Employment Period.
-2-<PAGE>
(b) During the Initial Period: (i) as is
customary, the Chief Operating Officer of the Company shall
report to the Executive in his capacity as Chief Executive
Officer; (ii) the subsidiary of the Company that provides
administrative and other services to the Company's utility
company subsidiaries (the "Service Company"), as well as the
Company's subsidiary NRG Energy, Inc. ("NRG"), and their
respective chief executive officers, shall report to the
Executive; and (iii) the subsidiaries of the Company (other
than the Service Company and NRG) that are operating
companies, and their respective chief executive officers,
shall report to the Chief Operating Officer of the Company.
(c) During the Employment Period, and exclud-
ing any periods of vacation and sick leave to which the
Executive is entitled, the Executive shall devote reasonable
attention and time during normal business hours to the busi-
ness and affairs of the Company and, to the extent necessary
to discharge the responsibilities assigned to the Executive
under this Agreement, use the Executive's reasonable best
efforts to carry out such responsibilities faithfully and
efficiently. It shall not be considered a violation of the
foregoing for the Executive to serve on corporate, industry,
civic or charitable boards or committees, so long as such
-3-<PAGE>
activities do not significantly interfere with the perfor-
mance of the Executive's responsibilities as an employee of
the Company in accordance with this Agreement.
(d) The Executive's services shall be per-
formed primarily at the Company's headquarters in Min-
neapolis, Minnesota.
3. Compensation. (a) Base Salary. The Execu-
tive's compensation during the Employment Period shall be de-
termined by the Board upon the recommendation of the Compen-
sation Committee of the Board, subject to the next sentence
and Section 3(b). During the Employment Period, the Execu-
tive shall receive an annual base salary ("Annual Base Sal-
ary") of not less than his annual base salary from NSP as in
effect immediately before the Effective Time. The Annual
Base Salary shall be payable in accordance with the Company's
regular payroll practice for its senior executives, as in
effect from time to time. During the Employment Period, the
Annual Base Salary shall be reviewed for possible increase at
least annually. Any increase in the Annual Base Salary shall
not limit or reduce any other obligation of the Company under
this Agreement. The Annual Base Salary shall not be reduced
after any such increase, and the term "Annual Base Salary"
shall thereafter refer to the Annual Base Salary as so in-
creased.
-4-<PAGE>
(b) Incentive Compensation. During the Em-
ployment Period, the Executive shall participate in short-
term incentive compensation plans and long-term incentive
compensation plans (the latter to consist of plans offering
stock options, restricted stock and other long-term incentive
compensation) providing him with the opportunity to earn, on
a year-by-year basis, short-term and long-term incentive
compensation (the "Incentive Compensation") at least equal to
the amounts that he had the opportunity to earn under the
comparable plans of NSP as in effect immediately before the
Effective Time.
(c) Other Benefits. (i) Supplemental Ex-
ecutive Retirement Plan. During the Employment Period, the
Executive shall participate in a supplemental executive re-
tirement plan ("SERP") such that the aggregate value of the
retirement benefits that he and his spouse will receive at
the end of the Employment Period under all defined benefit
plans of the Company and its affiliates (whether qualified or
not) will be not less than the aggregate value of the ben-
efits he would have received had he continued, through the
end of the Employment Period, to accrue the supplemental re-
tirement benefits provided by the terms of his employment
agreement with NSP as in effect immediately before the
Effective Time], and to participate in the NSP Deferred
-5-<PAGE>
Compensation Plan, the NSP Excess Benefit Plan, and the NSP
Pension Plan, all as in effect immediately before the
Effective Time; provided, that notwithstanding the terms of
the foregoing agreement and plans, in determining benefits
under the SERP, benefits pursuant to the foregoing plans
shall be computed as if they were based upon the Executive's
average compensation for the three consecutive years in which
his compensation was the highest. In addition, the SERP
shall offer the Executive the option to receive his benefits
thereunder in a single lump sum payment on terms and
conditions no less favorable than those in effect with
respect to the supplemental retirement benefits of Richard A.
Abdoo pursuant to the letter agreement dated November 21,
1994 regarding supplemental benefits from WEC to Richard A.
Abdoo or otherwise, as in effect immediately before the
Effective Time; provided, that such lump sum payment option
shall be subject to the consent of the Board in its sole
discretion. Finally, if the Executive dies while employed,
or deemed pursuant to paragraph (a) of Section 5 to be
employed, by the Company, his surviving spouse (or, if he has
no surviving spouse, his estate) shall be entitled to receive
a SERP benefit equal in value to the SERP benefit that the
Executive would have received under the SERP if he had
retired (rather than died) on the date of his death and
received a lump sum SERP benefit; provided, that in the case
-6-<PAGE>
where the Executive has no surviving spouse, the benefit
pursuant to this sentence shall be paid in a lump sum; and
provided, further, that in the case where the Executive has a
surviving spouse, the benefit pursuant to this sentence shall
be paid in the form of a single life annuity for her life
unless she elects a single lump sum payment and the Board, in
its sole discretion, consents to the lump sum payment. The
Company shall maintain and fund one or more grantor trusts
(the "Trusts"), or such other funding mechanism as may be
satisfactory to the Executive, which shall comply with the
following sentence and which shall at all times be adequate
to provide for the payment of all benefits under the SERP to
the Executive and his spouse, as well as any elective defer-
rals of Annual Cash Incentives by the Executive (with such
adequacy being determined by an independent consulting firm
acceptable to the Executive, whose fees shall be paid by the
Company). The assets of the Trusts (if any) shall be subject
to the claims of the Company's creditors, and the Trusts (if
any) shall in all other respects be designed to prevent the
Executive and his spouse from being taxed on the assets or
income thereof, except as and when such assets or income are
paid to them.
-7-<PAGE>
(ii) During the Employment Period, the
Company shall provide the Executive with life insurance cov-
erage (the "Life Insurance Coverage") providing a death ben-
efit to such beneficiary or beneficiaries as the Executive
may designate of not less than three times his Annual Base
Salary. Following the Employment Period, the Company shall
provide the Executive with a life insurance benefit at least
equal to the benefit that would have been provided to the
Executive after termination of employment under the Northern
States Power Company Officer Survivor Benefit Plan as in
effect immediately before the Effective Time.
(iii) In addition, and without limiting
the generality of the foregoing, during the Employment Period
and thereafter: (A) the Executive shall be entitled to
participate in all applicable incentive, savings and
retirement plans, practices, policies and programs of the
Company to the same extent as other senior executives (or,
where applicable, retired senior executives) of the Company;
and (B) the Executive and/or the Executive's family, as the
case may be, shall be eligible for participation in, and
shall receive all benefits under, all applicable welfare
benefit plans, practices, policies and programs provided by
the Company, other than severance plans, practices, policies
and programs but including, without limitation, medical, pre-
scription, dental, disability, salary continuance, employee
-8-<PAGE>
life insurance, group life insurance, accidental death and
travel accident insurance plans and programs, to the same
extent as other senior executives (or, where applicable,
retired senior executives) of the Company.
(d) Fringe Benefits. During the Employment
Period, the Executive shall be entitled to receive fringe
benefits on the same terms and conditions as he received such
fringe benefits from NSP immediately before the Effective
Time or, if more favorable, the terms and conditions that
fringe benefits were available to Richard A. Abdoo from WEC
immediately before the Effective Time.
4. Termination of Employment. (a) Death or Dis-
ability. The Executive's employment shall terminate auto-
matically upon the Executive's death during the Employment
Period. The Company shall be entitled to terminate the Exe-
cutive's employment because of the Executive's Disability
during the Employment Period. "Disability" means that
(i) the Executive has been unable, for a period of 180 con-
secutive business days, to perform the Executive's duties
under this Agreement, as a result of physical or mental ill-
ness or injury, and (ii) a physician selected by the Company
or its insurers, and acceptable to the Executive or the
Executive's legal representative, has determined that the
Executive's incapacity is total and permanent. A termination
-9-<PAGE>
of the Executive's employment by the Company for Disability
shall be communicated to the Executive by written notice, and
shall be effective on the 30th day after receipt of such no-
tice by the Executive (the "Disability Effective Date"), un-
less the Executive returns to full-time performance of the
Executive's duties before the Disability Effective Date.
(b) By the Company. (i) The Company may
terminate the Executive's employment during the Employment
Period for Cause or without Cause. "Cause" means:
A. the willful and continued failure of the
Executive substantially to perform the Executive's
duties under this Agreement (other than as a result
of physical or mental illness or injury), after the
Board of the Company delivers to the Executive a
written demand for substantial performance that
specifically identifies the manner in which the
Board believes that the Executive has not substan-
tially performed the Executive's duties; or
B. illegal conduct or gross misconduct by
the Executive, in either case that is willful and
results in material and demonstrable damage to the
business or reputation of the Company.
No act or failure to act on the part of the Executive shall
be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable
belief that the Executive's action or omission was in the
best interests of the Company. Any act or failure to act
that is based upon authority given pursuant to a resolution
duly adopted by the Board, or the advice of counsel for the
-10-<PAGE>
Company, shall be conclusively presumed to be done, or omit-
ted to be done, by the Executive in good faith and in the
best interests of the Company.
(ii) A termination of the Executive's
employment for Cause shall be effected in accordance with the
following procedures. The Company shall give the Executive
written notice ("Notice of Termination for Cause") of its
intention to terminate the Executive's employment for Cause,
setting forth in reasonable detail the specific conduct of
the Executive that it considers to constitute Cause and the
specific provision(s) of this Agreement on which it relies,
and stating the date, time and place of the Special Board
Meeting for Cause. The "Special Board Meeting for Cause"
means a meeting of the Board called and held specifically for
the purpose of considering the Executive's termination for
Cause, that takes place not less than ten and not more than
twenty business days after the Executive receives the Notice
of Termination for Cause. The Executive shall be given an
opportunity, together with counsel, to be heard at the
Special Board Meeting for Cause. The Executive's termination
for Cause shall be effective when and if a resolution is duly
adopted at the Special Board Meeting for Cause by affirmative
vote of a majority of the entire membership of the Board,
excluding employee directors, stating that in the good faith
opinion of the Board, the Executive is guilty of the conduct
-11-<PAGE>
described in the Notice of Termination for Cause, and that
conduct constitutes Cause under this Agreement.
(iii) A termination of the Executive's
employment without Cause shall be effected in accordance with
the following procedures. The Company shall give the
Executive written notice ("Notice of Termination without
Cause") of its intention to terminate the Executive's
employment without Cause, stating the date, time and place of
the Special Board Meeting without Cause. The "Special Board
Meeting without Cause" means a meeting of the Board called
and held specifically for the purpose of considering the
Executive's termination without Cause, that takes place not
less than ten and not more than twenty business days after
the Executive receives the Notice of Termination without
Cause. The Executive shall be given an opportunity, together
with counsel, to be heard at the Special Board Meeting
without Cause. The Executive's termination without Cause
shall be effective when and if a resolution is duly adopted
at the Special Board Meeting without Cause by affirmative
vote of a majority of the entire membership of the Board,
excluding employee directors, stating that the Executive is
terminated without Cause.
-12-<PAGE>
(c) Good Reason. (i) The Executive may
terminate employment for Good Reason or without Good Reason.
"Good Reason" means:
A. the assignment to the Executive of any
duties inconsistent in any respect with paragraph
(a) of Section 2 of this Agreement, or any other
action by the Company that results in a diminution
in the Executive's position, authority, duties or
responsibilities, other than an isolated, insub-
stantial and inadvertent action that is not taken
in bad faith and is remedied by the Company promp-
tly after receipt of notice thereof from the Ex-
ecutive;
B. any failure by the Company to comply with
any provision of Section 3 of this Agreement, other
than an isolated, insubstantial and inadvertent
failure that is not taken in bad faith and is rem-
edied by the Company promptly after receipt of no-
tice thereof from the Executive;
C. any requirement by the Company that the
Executive's services be rendered primarily at a
location or locations other than that provided for
in paragraph (d) of Section 2 of this Agreement;
D. any purported termination of the Execut-
ive's employment by the Company for a reason or in
a manner not expressly permitted by this Agreement;
E. any failure by the Company to comply with
paragraph (c) of Section 11 of this Agreement; or
F. any other substantial breach of this
Agreement by the Company that either is not taken
in good faith or is not remedied by the Company
promptly after receipt of notice thereof from the
Executive.
(ii) A termination of employment by the
Executive for Good Reason shall be effectuated by giving the
-13-<PAGE>
Company written notice ("Notice of Termination for Good Rea-
son") of the termination, setting forth in reasonable detail
the specific conduct of the Company that constitutes Good
Reason and the specific provision(s) of this Agreement on
which the Executive relies. A termination of employment by
the Executive for Good Reason shall be effective on the fifth
business day following the date when the Notice of Termina-
tion for Good Reason is given, unless the notice sets forth a
later date (which date shall in no event be later than 30
days after the notice is given).
(iii) A termination of the Executive's
employment by the Executive without Good Reason shall be ef-
fected by giving the Company written notice of the termi-
nation.
(d) No Waiver. The failure to set forth any
fact or circumstance in a Notice of Termination for Cause, a
Notice of Termination without Cause or a Notice of
Termination for Good Reason shall not constitute a waiver of
the right to assert, and shall not preclude the party giving
notice from asserting, such fact or circumstance in an
attempt to enforce any right under or provision of this
Agreement.
-14-<PAGE>
(e) Date of Termination. The "Date of Ter-
mination" means the date of the Executive's death, the Dis-
ability Effective Date, the date on which the termination of
the Executive's employment by the Company for Cause or
without Cause or by the Executive for Good Reason is
effective, or the date on which the Executive gives the
Company notice of a termination of employment without Good
Reason, as the case may be.
5. Obligations of the Company upon Termination.
(a) By the Company Other Than for Cause or Disability; By
the Executive for Good Reason. If, during the Employment
Period, the Company terminates the Executive's employment,
other than for Cause or Disability, or the Executive termi-
nates employment for Good Reason, the Company shall continue
to provide the Executive with the compensation and benefits
set forth in paragraphs (a), (b) and (c) of Section 3 as if
he had remained employed by the Company pursuant to this
Agreement through the end of the Employment Period and then
retire (at which time he will be treated as eligible for all
retiree welfare benefits and other benefits provided to
retired senior executives, as set forth in Section 3(c)(ii)
and (iii)); provided, that the Incentive Compensation for
such period shall be equal to the maximum Incentive
Compensation that the Executive would have been eligible to
earn for such period; provided, further, that in lieu of
-15-<PAGE>
stock options, restricted stock and other stock-based awards,
the Executive shall be paid cash equal to the fair market
value (without regard to any restrictions) of the stock
options, restricted stock and other stock-based awards that
would otherwise have been granted; provided, further, that to
the extent any benefits described in paragraph (c) of Section
3 cannot be provided pursuant to the plan or program main-
tained by the Company for its executives, the Company shall
provide such benefits outside such plan or program at no
additional cost (including without limitation tax cost) to
the Executive and his family; and provided, finally, that
during any period when the Executive is eligible to receive
benefits of the type described in clause (B) of paragraph
(c)(iii) of Section 3 under another employer-provided plan,
the benefits provided by the Company under this paragraph (a)
of Section 5 may be made secondary to those provided under
such other plan. In addition to the foregoing, any re-
stricted stock outstanding on the Date of Termination shall
be fully vested as of the Date of Termination and all options
outstanding on the Date of Termination shall be fully vested
and exercisable and shall remain in effect and exercisable
through the end of their respective terms, without regard to
the termination of the Executive's employment. The payments
and benefits provided pursuant to this paragraph (a) of
-16-<PAGE>
Section 5 are intended as liquidated damages for a termi-
nation of the Executive's employment by the Company other
than for Cause or Disability or for the actions of the Com-
pany leading to a termination of the Executive's employment
by the Executive for Good Reason, and shall be the sole and
exclusive remedy therefor.
(b) Death or Disability. If the Executive's
employment is terminated by reason of the Executive's death
or Disability during the Employment Period, the Company shall
pay to the Executive or, in the case of the Executive's
death, to the Executive's designated beneficiaries (or, if
there is no such beneficiary, to the Executive's estate or
legal representative), in a lump sum in cash within 30 days
after the Date of Termination, the sum of the following
amounts (the "Accrued Obligations"): (1) any portion of the
Executive's Annual Base Salary through the Date of Termina-
tion that has not yet been paid; (2) an amount representing
the Incentive Compensation for the period that includes the
Date of Termination, computed by assuming that the amount of
all such Incentive Compensation would be equal to the maximum
amount of such Incentive Compensation that the Executive
would have been eligible to earn for such period, and
multiplying that amount by a fraction, the numerator of which
is the number of days in such period through the Date of
Termination, and the denominator of which is the total number
-17-<PAGE>
of days in the relevant period; (3) any compensation previ-
ously deferred by the Executive (together with any accrued
interest or earnings thereon) that has not yet been paid; and
(4) any accrued but unpaid Incentive Compensation and vaca-
tion pay; and the Company shall have no further obligations
under this Agreement, except as specified in Section 6 below.
(c) By the Company for Cause; By the Execu-
tive Other than for Good Reason. If the Executive's employ-
ment is terminated by the Company for Cause during the Em-
ployment Period, the Company shall pay the Executive the An-
nual Base Salary through the Date of Termination and the
amount of any compensation previously deferred by the Execu-
tive (together with any accrued interest or earnings there-
on), in each case to the extent not yet paid, and the Company
shall have no further obligations under this Agreement, ex-
cept as specified in Section 6 below. If the Executive vol-
untarily terminates employment during the Employment Period,
other than for Good Reason, the Company shall pay the Accrued
Obligations to the Executive in a lump sum in cash within 30
days of the Date of Termination, and the Company shall have
no further obligations under this Agreement, except as spec-
ified in Section 6 below.
6. Non-exclusivity of Rights. Nothing in this
Agreement shall prevent or limit the Executive's continuing
-18-<PAGE>
or future participation in any plan, program, policy or prac-
tice provided by the Company or any of its affiliated compa-
nies for which the Executive may qualify, nor, subject to
paragraph (f) of Section 12, shall anything in this Agreement
limit or otherwise affect such rights as the Executive may
have under any contract or agreement with the Company or any
of its affiliated companies. Vested benefits and other
amounts that the Executive is otherwise entitled to receive
under the Incentive Compensation, the SERP, the Life
Insurance Coverage, or any other plan, policy, practice or
program of, or any contract or agreement with, the Company or
any of its affiliated companies on or after the Date of Ter-
mination shall be payable in accordance with the terms of
each such plan, policy, practice, program, contract or agree-
ment, as the case may be, except as explicitly modified by
this Agreement.
7. Full Settlement. The Company's obligation to
make the payments provided for in, and otherwise to perform
its obligations under, this Agreement shall not be affected
by any set-off, counterclaim, recoupment, defense or other
claim, right or action that the Company may have against the
Executive or others. In no event shall the Executive be ob-
ligated to seek other employment or take any other action by
way of mitigation of the amounts payable to the Executive
under any of the provisions of this Agreement and, except as
-19-<PAGE>
specifically provided in paragraph (a) of Section 5 with re-
spect to benefits described in clause (B) of paragraph
(c)(iii) of Section 3, such amounts shall not be reduced, re-
gardless of whether the Executive obtains other employment.
8. Confidential Information. The Executive shall
hold in a fiduciary capacity for the benefit of the Company
all secret or confidential information, knowledge or data
relating to the Company or any of its affiliated companies
and their respective businesses that the Executive obtains
during the Executive's employment by the Company or any of
its affiliated companies and that is not public knowledge
(other than as a result of the Executive's violation of this
Section 8) ("Confidential Information"). The Executive shall
not communicate, divulge or disseminate Confidential Informa-
tion at any time during or after the Executive's employment
with the Company, except with the prior written consent of
the Company or as otherwise required by law or legal process.
In no event shall any asserted violation of the provisions of
this Section 8 constitute a basis for deferring or withhold-
ing any amounts otherwise payable to the Executive under this
Agreement.
-20-<PAGE>
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary notwith-
standing, in the event it shall be determined that any pay-
ment or distribution by the Company to or for the benefit of
the Executive (whether paid or payable or distributed or
distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional
payments required under this Section 9) (a "Payment") would
be subject to the excise tax imposed by Section 4999 of the
Internal Revenue Code of 1986, as amended (the "Code") or any
interest or penalties are incurred by the Executive with re-
spect to such excise tax (such excise tax, together with any
such interest and penalties, are hereinafter collectively
referred to as the "Excise Tax"), then the Executive shall be
entitled to receive an additional payment (a "Gross-Up Pay-
ment") in an amount such that after payment by the Executive
of all taxes (including any interest or penalties imposed
with respect to such taxes), including, without limitation,
any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up
Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payments.
(b) Subject to the provisions of paragraph
(c) of this Section 9, all determinations required to be made
under this Section 9, including whether and when a Gross-Up
-21-<PAGE>
Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such de-
termination, shall be made by a certified public accounting
firm designated by the Executive (the "Accounting Firm"),
which shall provide detailed supporting calculations both to
the Company and the Executive within 15 business days of the
receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by the Company.
In the event that the Accounting Firm is serving as accoun-
tant or auditor for the individual, entity or group effecting
the change of control, the Executive shall appoint another
nationally recognized accounting firm to make the determina-
tions required hereunder (which accounting firm shall then be
referred to as the Accounting Firm hereunder). All fees and
expenses of the Accounting Firm shall be borne solely by the
Company. Any Gross-Up Payment, as determined pursuant to
this Section 9, shall be paid by the Company to the Executive
within five days of the receipt of the Accounting Firm's de-
termination. Any determination by the Accounting Firm shall
be binding upon the Company and the Executive. As a result
of the uncertainty in the application of Section 4999 of the
Code at the time of the initial determination by the Ac-
counting Firm hereunder, it is possible that Gross-Up Pay-
ments which will not have been made by the Company should
-22-<PAGE>
have been made ("Underpayment"), consistent with the calcula-
tions required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to paragraph (c) of
this Section 9 and the Executive thereafter is required to
make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Com-
pany to or for the benefit of the Executive.
(c) The Executive shall notify the Company in
writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of the
Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten business days after the
Executive is informed in writing of such claim and shall ap-
prise the Company of the nature of such claim and the date on
which such claim is requested to be paid. The Executive
shall not pay such claim prior to the expiration of the
30-day period following the date on which it gives such no-
tice to the Company (or such shorter period ending on the
date that any payment of taxes with respect to such claim is
due). If the Company notifies the Executive in writing prior
to the expiration of such period that it desires to contest
such claim, the Executive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
-23-<PAGE>
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in
writing from time to time, including, without limita-
tion, accepting legal representation with respect to
such claim by an attorney reasonably selected by the
Company,
(iii) cooperate with the Company in good faith in
order effectively to contest such claim, and
(iv) permit the Company to participate in any pro-
ceedings relating to such claim;
provided, however, that the Company shall bear and pay di-
rectly all costs and expenses (including additional interest
and penalties) incurred in connection with such contest and
shall indemnify and hold the Executive harmless, on an afte-
r-tax basis, for any Excise Tax or income tax (including in-
terest and penalties with respect thereto) imposed as a re-
sult of such representation and payment of costs and ex-
penses. Without limitation on the foregoing provisions of
this paragraph (c) of Section 9, the Company shall control
all proceedings taken in connection with such contest and, at
its sole option, may pursue or forego any and all administra-
tive appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its
sole option, either direct the Executive to pay the tax
claimed and sue for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute
such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or
-24-<PAGE>
more appellate courts, as the Company shall determine; pro-
vided, however, that if the Company directs the Executive to
pay such claim and sue for a refund, the Company shall ad-
vance the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold the Execu-
tive harmless, on an after-tax basis, from any Excise Tax or
income tax (including interest or penalties with respect
thereto) imposed with respect to such advance or with respect
to any imputed income with respect to such advance; and pro-
vided, further, that any extension of the statute of limita-
tions relating to payment of taxes for the taxable year of
the Executive with respect to which such contested amount is
claimed to be due is limited solely to such contested amount.
Furthermore, the Company's control of the contest shall be
limited to issues with respect to which a Gross-Up Payment
would be payable hereunder and the Executive shall be enti-
tled to settle or contest, as the case may be, any other is-
sue raised by the Internal Revenue Service or any other tax-
ing authority.
(d) If, after the receipt by the Executive of
an amount advanced by the Company pursuant to paragraph (c)
of this Section 9, the Executive becomes entitled to receive
any refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements of
paragraph (c) of this Section 9) promptly pay to the Company
-25-<PAGE>
the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after
the receipt by the Executive of an amount advanced by the
Company pursuant to paragraph (c) of this Section 9, a de-
termination is made that the Executive shall not be entitled
to any refund with respect to such claim and the Company does
not notify the Executive in writing of its intent to contest
such denial of refund prior to the expiration of 30 days af-
ter such determination, then such advance shall be forgiven
and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of
Gross-Up Payment required to be paid.
10. Attorneys' Fees. The Company agrees to pay,
as incurred, to the fullest extent permitted by law, all le-
gal fees and expenses that the Executive may reasonably incur
as a result of any contest (regardless of the outcome) by the
Company, the Executive or others of the validity or enforce-
ability of or liability under, or otherwise involving, any
provision of this Agreement, together with interest on any
delayed payment at the applicable federal rate provided for
in Section 7872(f)(2)(A) of the Code.
11. Successors. (a) This Agreement is personal
to the Executive and, without the prior written consent of
-26-<PAGE>
the Company, shall not be assignable by the Executive other-
wise than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforce-
able by the Executive's legal representatives.
(b) This Agreement shall inure to the benefit
of and be binding upon the Company and its successors and as-
signs.
(c) The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolida-
tion or otherwise) to all or substantially all of the busi-
ness and/or assets of the Company expressly to assume and
agree to perform this Agreement in the same manner and to the
same extent that the Company would have been required to
perform it if no such succession had taken place. As used in
this Agreement, "Company" shall mean both the Company as de-
fined above and any such successor that assumes and agrees to
perform this Agreement, by operation of law or otherwise.
12. Miscellaneous. (a) This Agreement shall be
governed by, and construed in accordance with, the laws of
the State of Minnesota, without reference to principles of
conflict of laws. The captions of this Agreement are not
part of the provisions hereof and shall have no force or ef-
fect. This Agreement may not be amended or modified except
-27-<PAGE>
by a written agreement executed by the parties hereto or
their respective successors and legal representatives.
(b) All notices and other communications un-
der this Agreement shall be in writing and shall be given by
hand delivery to the other party or by registered or certi-
fied mail, return receipt requested, postage prepaid, ad-
dressed as follows:
If to the Executive:
If to the Company:
Attention: General Counsel
or to such other address as either party furnishes to the
other in writing in accordance with this paragraph (b) of
Section 12. Notices and communications shall be effective
when actually received by the addressee.
(c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement. If
any provision of this Agreement shall be held invalid or un-
enforceable in part, the remaining portion of such provision,
-28-<PAGE>
together with all other provisions of this Agreement, shall
remain valid and enforceable and continue in full force and
effect to the fullest extent consistent with law.
(d) Notwithstanding any other provision of
this Agreement, the Company may withhold from amounts payable
under this Agreement all federal, state, local and foreign
taxes that are required to be withheld by applicable laws or
regulations.
(e) The Executive's or the Company's failure
to insist upon strict compliance with any provision of, or to
assert any right under, this Agreement (including, without
limitation, the right of the Executive to terminate employ-
ment for Good Reason pursuant to paragraph (c) of Section 4
of this Agreement) shall not be deemed to be a waiver of such
provision or right or of any other provision of or right
under this Agreement.
(f) The Executive and the Company acknowledge
that this Agreement supersedes any other agreement between
them concerning the subject matter hereof.
(g) The rights and benefits of the Executive
under this Agreement may not be anticipated, assigned, alien-
ated or subject to attachment, garnishment, levy, execution
or other legal or equitable process except as required by
-29-<PAGE>
law. Any attempt by the Executive to anticipate, alienate,
assign, sell, transfer, pledge, encumber or charge the same
shall be void. Payments hereunder shall not be considered
assets of the Executive in the event of insolvency or
bankruptcy.
(h) This Agreement may be executed in several
counterparts, each of which shall be deemed an original, and
said counterparts shall constitute but one and the same in-
strument.
IN WITNESS WHEREOF, the Executive has hereunto set
the Executive's hand and, pursuant to the authorization of
its Board of Directors, the Company has caused this Agreement
to be executed in its name on its behalf, all as of the day
and year first above written.
James J. Howard
[COMPANY]
By
-30-
EXHIBIT 6
EMPLOYMENT AGREEMENT
THIS AGREEMENT by and between _____________________,
a Wisconsin corporation (the "Company"), and Richard A. Abdoo
(the "Executive"), dated as of the ___ day of _________, 199_.
W I T N E S S E T H T H A T
WHEREAS, Northern States Power Company, a Minnesota
corporation ("NSP") and Wisconsin Energy Corporation, a Wis-
consin corporation ("WEC") have entered into an Agreement and
Plan of Merger dated as of April 28, 1995 (the "Merger Agree-
ment"), whereby the NSP and WEC organizations will merge, with
the Company as the surviving parent; and
WHEREAS, NSP and WEC wish to provide for the orderly
succession of management of the Company following the Effective
Time (as defined in the Merger Agreement); and
WHEREAS, NSP and WEC further wish to provide for the
employment by the Company of the Executive, and the Executive
wishes to serve the Company, in the capacities and on the terms
and conditions set forth in this Agreement;
NOW, THEREFORE, it is hereby agreed as follows:
1. Employment Period. The Company shall employ the
Executive, and the Executive shall serve the Company, on the
terms and conditions set forth in this Agreement, for an ini-
tial period (the "Initial Period") and a further period (the
"Secondary Period") (the Initial Period and the Secondary<PAGE>
Period are hereinafter referred to in the aggregate as the
"Employment Period"). The Initial Period shall begin at the
Effective Time (as defined in the Merger Agreement), and end on
the earlier of: (i) such date as James J. Howard ceases to be
Chief Executive Officer of the Company for any reason; or (ii)
the later of (a) the date of the annual meeting of shareholders
of the Company that occurs in 1998, and (b) the last day of the
sixteenth full month following the Effective Time. The Sec-
ondary Period shall begin at the end of the Initial Period and
end on that date which is the later of: (x) January 31, 2002;
or (y) five (5) years after the first day of the Initial
Period; except that on the third, fourth and fifth anniver-
saries of the first day of the Employment Period, the Secondary
Period shall be extended by one year unless either party gives
written notice to the other, at least 60 days before the Sec-
ondary Period would otherwise be so extended, that the Second-
ary Period shall not be so extended.
2. Position and Duties. (a) During the Initial
Period, the Executive shall serve as Vice Chairman of the Board
of Directors of the Company (the "Board"), President and Chief
Operating Officer of the Company; during the Secondary Period,
the Executive shall serve as Vice Chairman of the Board, Pres-
ident and Chief Executive Officer of the Company; and on and
after any date during the Employment Period as of which
James J. Howard ceases to be Chairman of the Board, the Execu-
tive shall serve as the Chairman of the Board; in each case
with such duties and responsibilities as are customarily
-2-<PAGE>
assigned to such positions, and such other duties and respon-
sibilities not inconsistent therewith as may from time to time
be assigned to him by the Board. The Executive shall be a
member of the Board on the first day of the Employment Period,
and the Board shall propose the Executive for re-election to
the Board throughout the Employment Period.
(b) During the Initial Period: (i) as is cus-
tomary, the Executive shall report to the Chief Executive
Officer of the Company; (ii) the subsidiary of the Company that
provides administrative and other services to the Company's
utility company subsidiaries (the "Service Company"), as well
as the Company's subsidiary NRG Energy Inc. ("NRG"), and their
respective chief executive officers, shall report to the Chief
Executive Officer of the Company; and (iii) all other subsid-
iaries of the Company (other than the Service Company and NRG),
and their respective chief executive officers, shall report to
the Executive.
(c) During the Employment Period, and excluding
any periods of vacation and sick leave to which the Executive
is entitled, the Executive shall devote reasonable attention
and time during normal business hours to the business and
affairs of the Company and, to the extent necessary to dis-
charge the responsibilities assigned to the Executive under
this Agreement, use the Executive's reasonable best efforts to
carry out such responsibilities faithfully and efficiently. It
shall not be considered a violation of the foregoing for the
-3-<PAGE>
Executive to serve on corporate, industry, civic or charitable
boards or committees, so long as such activities do not sig-
nificantly interfere with the performance of the Executive's
responsibilities as an employee of the Company in accordance
with this Agreement.
(d) The Company's headquarters shall be located
in Minneapolis, Minnesota and the Executive shall reside in the
general area of the Twin Cities of Minneapolis and St. Paul,
Minnesota. The Company shall assure that the Executive suffers
no financial loss on the sale of Executive's Milwaukee resi-
dence (including the value of loss of tax deferrals which may
occur if Executive does not reinvest all of the proceeds of the
sale of such residence in accordance with the provisions of
Section 1034 of the Internal Revenue Code of 1986, as amended
and a gross up payment for the additional income taxes payable
by the Executive as a result of such payment). The Company
shall reimburse the Executive for all of his moving expenses
incurred in relocating Executive's residence to the Twin Cities
area. During the period from the first day of the Employment
Period through the earlier of the end of the last day of the
sixth full calendar month of the Employment Period and the date
of such relocation, the Company shall provide the Executive
with an apartment in the Twin Cities area and reimburse him for
reasonable expenses while in the Twin Cities area and travel
between the Twin Cities area and his principal residence, pro-
vided in each case that the Executive complies with the poli-
cies, practices and procedures of the Company for submission of
-4-<PAGE>
expense reports, receipts, or similar documentation of such
expenses.
3. Compensation. (a) Base Salary. The Execu-
tive's compensation during the Employment Period shall be
determined by the Board upon the recommendation of the Compen-
sation Committee of the Board, subject to the next sentence and
Section 3(b). During the Employment Period, the Executive
shall receive an annual base salary ("Annual Base Salary") of
not less than his annual base salary from WEC as in effect
immediately before the Effective Time. The Annual Base Salary
shall be payable in accordance with the Company's regular pay-
roll practice for its senior executives, as in effect from time
to time. During the Employment Period, the Annual Base Salary
shall be reviewed for possible increase at least annually. Any
increase in the Annual Base Salary shall not limit or reduce
any other obligation of the Company under this Agreement. The
Annual Base Salary shall not be reduced after any such in-
crease, and the term "Annual Base Salary" shall thereafter
refer to the Annual Base Salary as so increased.
(b) Incentive Compensation. During the
Employment Period, the Executive shall participate in short-
term incentive compensation plans and long-term incentive com-
pensation plans (the latter to consist of plans offering stock
options, restricted stock and other long-term incentive com-
pensation) providing him with the opportunity to earn, on a
-5-<PAGE>
year-by-year basis, short-term and long-term incentive compen-
sation (the "Incentive Compensation") at least equal to the
amounts that he had the opportunity to earn under the compa-
rable plans of WEC as in effect immediately before the Effec-
tive Time.
(c) Other Benefits. (i) Supplemental Execu-
tive Retirement Plan. During the Employment Period, the Exec-
utive shall participate in a supplemental executive retirement
plan ("SERP") such that the aggregate value of the retirement
benefits that he and his spouse will receive at the end of the
Employment Period under all defined benefit plans of the Com-
pany and its affiliates (whether qualified or not) will be not
less than the benefits he would have received had he continued,
through the end of the Employment Period, to participate in the
WEC Defined Benefit Pension Plan, Supplemental Executive
Retirement Plan A, Supplemental Executive Retirement Plan B,
the special supplemental benefits letter dated November 21,
1994 as amended on April 26, 1995 between WEC and the Execu-
tive, and Executive Deferred Compensation Plan (collectively,
the "WEC Plans"), as in effect immediately before the Effective
Time. The Company shall maintain and fund one or more grantor
trusts (the "Trusts"), the assets of which shall at all times
be adequate to provide for the payment of all benefits under
the SERP to the Executive and his spouse, as well as any elec-
tive deferrals of Incentive Compensation by the Executive (with
such adequacy being determined by an independent consulting
firm acceptable to the Executive, whose fees shall be paid by
-6-<PAGE>
the Company). The assets of the Trusts shall be subject to the
claims of the Company's creditors, and the Trusts shall in all
other respects be designed to prevent the Executive and his
spouse from being taxed on the assets or income thereof, except
as and when such assets or income are paid to them.
(ii) During the Employment Period, the
Company shall provide the Executive with life insurance cover-
age (the "Life Insurance Coverage") providing a death benefit
to such beneficiary or beneficiaries as the Executive may des-
ignate of not less than three times his Annual Base Salary.
(iii) In addition, and without limiting the
generality of the foregoing, during the Employment Period and
thereafter: (A) the Executive shall be entitled to participate
in all applicable incentive, savings and retirement plans,
practices, policies and programs of the Company to the same
extent as other senior executives (or, where applicable,
retired senior executives) of the Company, and (B) the Execu-
tive and/or the Executive's family, as the case may be, shall
be eligible for participation in, and shall receive all bene-
fits under, all applicable welfare benefit plans, practices,
policies and programs provided by the Company, other than sev-
erance plans, practices, policies and programs but including,
without limitation, medical, prescription, dental, disability,
salary continuance, employee life insurance, group life insur-
ance, accidental death and travel accident insurance plans and
-7-<PAGE>
programs, to the same extent as other senior executives (or,
where applicable, retired senior executives) of the Company.
(d) Fringe Benefits. During the Employment
Period, the Executive shall be entitled to receive fringe ben-
efits on the same terms and conditions as he received such
fringe benefits from WEC immediately before the Effective Time.
4. Termination of Employment. (a) Death or Dis-
ability. The Executive's employment shall terminate automati-
cally upon the Executive's death during the Employment Period.
The Company shall be entitled to terminate the Executive's
employment because of the Executive's Disability during the
Employment Period. "Disability" means that (i) the Executive
has been unable, for a period of 180 consecutive business days,
to perform the Executive's duties under this Agreement, as a
result of physical or mental illness or injury, and (ii) a
physician selected by the Company or its insurers, and accept-
able to the Executive or the Executive's legal representative,
has determined that the Executive's incapacity is total and
permanent. A termination of the Executive's employment by the
Company for Disability shall be communicated to the Executive
by written notice, and shall be effective on the 30th day after
receipt of such notice by the Executive (the "Disability
Effective Date"), unless the Executive returns to full-time
performance of the Executive's duties before the Disability
Effective Date.
-8-<PAGE>
(b) By the Company. (i) The Company may ter-
minate the Executive's employment during the Employment Period
for Cause or without Cause. "Cause" means:
A. the willful and continued failure of
Executive substantially to perform the Executive's
duties under this Agreement (other than as a
result of physical or mental illness or injury),
after the Board of the Company delivers to the
Executive a written demand for substantial per-
formance that specifically identifies the manner
in which the Board believes that the Executive has
not substantially performed the Executive's
duties; or
B. illegal conduct or gross misconduct by
the Executive, in either case that is willful and
results in material and demonstrable damage to the
business or reputation of the Company.
No act or failure to act on the part of the Executive shall be
considered "willful" unless it is done, or omitted to be done,
by the Executive in bad faith or without reasonable belief that
the Executive's action or omission was in the best interests of
the Company. Any act or failure to act that is based upon
authority given pursuant to a resolution duly adopted by the
Board, or the advice of counsel for the Company, shall be con-
clusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Com-
pany.
(ii) A termination of the Executive's
employment for Cause shall be effected in accordance with the
following procedures. The Company shall give the Executive
written notice ("Notice of Termination for Cause") of its
intention to terminate the Executive's employment for Cause,
-9-<PAGE>
setting forth in reasonable detail the specific conduct of the
Executive that it considers to constitute Cause and the spe-
cific provision(s) of this Agreement on which it relies, and
stating the date, time and place of the Special Board Meeting
for Cause. The "Special Board Meeting for Cause" means a meet-
ing of the Board called and held specifically for the purpose
of considering the Executive's termination for Cause, that
takes place not less than ten and not more than twenty business
days after the Executive receives the Notice of Termination for
Cause. The Executive shall be given an opportunity, together
with counsel, to be heard at the Special Board Meeting for
Cause. The Executive's termination for Cause shall be effec-
tive when and if a resolution is duly adopted at the Special
Board Meeting for Cause by affirmative vote of a majority of
the entire membership of the Board, excluding employee direc-
tors, stating that in the good faith opinion of the Board, the
Executive is guilty of the conduct described in the Notice of
Termination for Cause, and that conduct constitutes Cause under
this Agreement.
(iii) A termination of the Executive's
employment without Cause shall be effected in accordance with
the following procedures. The Company shall give the Executive
written notice ("Notice of Termination without Cause") of its
intention to terminate the Executive's employment without
Cause, stating the date, time and place of the Special Board
Meeting without Cause. The "Special Board Meeting without
-10-<PAGE>
Cause" means a meeting of the Board called and held specifi-
cally for the purpose of considering the Executive's termina-
tion without Cause, that takes place not less than ten and not
more than twenty business days after the Executive receives the
Notice of Termination without Cause. The Executive shall be
given an opportunity, together with counsel, to be heard at the
Special Board Meeting without Cause. The Executive's termina-
tion without Cause shall be effective when and if a resolution
is duly adopted at the Special Board Meeting without Cause by
affirmative vote of a majority of the entire membership of the
Board, excluding employee directors, stating that the Executive
is terminated without Cause.
(c) Good Reason. (i) The Executive may ter-
minate employment for Good Reason or without Good Reason.
"Good Reason" means:
A. the assignment to the Executive of any
duties inconsistent in any respect with para-
graph (a) of Section 2 of this Agreement, or any
other action by the Company that results in a
diminution in the Executive's position, author-
ity, duties or responsibilities, other than an
isolated, insubstantial and inadvertent action
that is not taken in bad faith and is remedied
by the Company promptly after receipt of notice
thereof from the Executive;
B. any failure by the Company to comply
with any provision of Section 3 of this Agree-
ment, other than an isolated, insubstantial and
inadvertent failure that is not taken in bad
faith and is remedied by the Company promptly
after receipt of notice thereof from the Execu-
tive;
C. any requirement by the Company that
the Executive's services be rendered primarily
-11-<PAGE>
at a location or locations other than that pro-
vided for in paragraph (d) of Section 2 of this
Agreement;
D. any purported termination of the
Executive's employment by the Company for a
reason or in a manner not expressly permitted by
this Agreement; or
E. any failure by the Company to comply
with paragraph (c) of Section 11 of this Agree-
ment; or
F. any other substantial breach of this
Agreement by the Company that either is not
taken in good faith or is not remedied by the
Company promptly after receipt of notice thereof
from the Executive.
(ii) A termination of employment by the
Executive for Good Reason shall be effectuated by giving the
Company written notice ("Notice of Termination for Good Rea-
son") of the termination, setting forth in reasonable detail
the specific conduct of the Company that constitutes Good Rea-
son and the specific provision(s) of this Agreement on which
the Executive relies. A termination of employment by the
Executive for Good Reason shall be effective on the fifth
business day following the date when the Notice of Termination
for Good Reason is given, unless the notice sets forth a later
date (which date shall in no event be later than 30 days after
the notice is given).
(iii) A termination of the Executive's
employment by the Executive without Good Reason shall be
effected by giving the Company written notice of the termina-
tion.
-12-<PAGE>
(d) No Waiver. The failure to set forth any
fact or circumstance in a Notice of Termination for Cause, a
Notice of Termination without Cause or a Notice of Termination
for Good Reason shall not constitute a waiver of the right to
assert, and shall not preclude the party giving notice from
asserting, such fact or circumstance in an attempt to enforce
any right under or provision of this Agreement.
(e) Date of Termination. The "Date of Termina-
tion" means the date of the Executive's death, the Disability
Effective Date, the date on which the termination of the Exec-
utive's employment by the Company for Cause or without Cause or
by the Executive for Good Reason is effective, or the date on
which the Executive gives the Company notice of a termination
of employment without Good Reason, as the case may be.
5. Obligations of the Company upon Termination.
(a) Other Than for Cause, Death or Disability; Good Reason.
If, during the Employment Period, the Company terminates the
Executive's employment, other than for Cause or Disability, or
the Executive terminates employment for Good Reason, the Com-
pany shall continue to provide the Executive with the compen-
sation and benefits set forth in paragraphs (a), (b) and (c) of
Section 3 as if he had remained employed by the Company pursu-
ant to this Agreement through the end of the Employment Period
and then retired [at which time he will be treated as eligible
for all retiree welfare benefits and other benefits provided to
retired senior executives, as set forth in Section 3(c)(iii)];
-13-<PAGE>
provided, that the Incentive Compensation for such period shall
be equal to the maximum Incentive Compensation that the Execu-
tive would have been eligible to earn for such period; pro-
vided, further that in lieu of stock options, restricted stock
and other stock-based awards, the Executive shall be paid cash
equal to the fair market value (without regard to any restric-
tions) of the stock options, restricted stock and other stock-
based awards that would otherwise have been granted; and pro-
vided, further, that to the extent any benefits described in
paragraph (c) of Section 3 cannot be provided pursuant to the
plan or program maintained by the Company for its executives,
the Company shall provide such benefits outside such plan or
program at no additional cost (including without limitation tax
cost) to the Executive and his family; and provided, finally,
that during any period when the Executive is eligible to
receive benefits of the type described in clause (B) of para-
graph (c)(iii) of Section 3 under another employer-provided
plan, the benefits provided by the Company under this paragraph
(a) of Section 5 may be made secondary to those provided under
such other plan. In addition to the foregoing, any restricted
stock outstanding on the Date of Termination shall be fully
vested as of the Date of Termination and all options outstand-
ing on the Date of Termination shall be fully vested and exer-
cisable and shall remain in effect and exercisable through the
end of their respective terms, without regard to the termina-
tion of the Executive's employment. The payments and benefits
provided pursuant to this paragraph (a) of Section 5 are
-14-<PAGE>
intended as liquidated damages for a termination of the Execu-
tive's employment by the Company other than for Cause or Dis-
ability or for the actions of the Company leading to a termi-
nation of the Executive's employment by the Executive for Good
Reason, and shall be the sole and exclusive remedy therefor.
(b) Death and Disability. If the Executive's
employment is terminated by reason of the Executive's death or
Disability during the Employment Period, the Company shall pay
to the Executive or, in the case of the Executive's death, to
the Executive's designated beneficiaries (or, if there is no
such beneficiary, to the Executive's estate or legal represen-
tative), in a lump sum in cash within 30 days after the Date of
Termination, the sum of the following amounts (the "Accrued
Obligations"): (1) any portion of the Executive's Annual Base
Salary through the Date of Termination that has not yet been
paid; (2) an amount representing the Incentive Compensation for
the period that includes the Date of Termination, computed by
assuming that the amount of all such Incentive Compensation
would be equal to the maximum amount of such Incentive Compen-
sation that the Executive would have been eligible to earn for
such period, and multiplying that amount by a fraction, the
numerator of which is the number of days in such period through
the Date of Termination, and the denominator of which is the
total number of days in the relevant period; (3) any compensa-
tion previously deferred by the Executive (together with any
accrued interest or earnings thereon) that has not yet been
paid; and (4) any accrued but unpaid Incentive Compensation and
-15-<PAGE>
vacation pay; and the Company shall have no further obligations
under this Agreement, except as specified in Section 6 below.
(c) By the Company for Cause; By the Executive
Other than for Good Reason. If the Executive's employment is
terminated by the Company for Cause during the Employment
Period, the Company shall pay the Executive the Annual Base
Salary through the Date of Termination and the amount of any
compensation previously deferred by the Executive (together
with any accrued interest or earnings thereon), in each case to
the extent not yet paid, and the Company shall have no further
obligations under this Agreement, except as specified in Sec-
tion 6 below. If the Executive voluntarily terminates employ-
ment during the Employment Period, other than for Good Reason,
the Company shall pay the Accrued Obligations to the Executive
in a lump sum in cash within 30 days of the Date of Termina-
tion, and the Company shall have no further obligations under
this Agreement, except as specified in Section 6 below.
6. Non-exclusivity of Rights. Nothing in this
Agreement shall prevent or limit the Executive's continuing or
future participation in any plan, program, policy or practice
provided by the Company or any of its affiliated companies for
which the Executive may qualify, nor, subject to paragraph (f)
of Section 12, shall anything in this Agreement limit or
otherwise affect such rights as the Executive may have under
any contract or agreement with the Company or any of its
affiliated companies. Vested benefits and other amounts that
-16-<PAGE>
the Executive is otherwise entitled to receive under the
Incentive Compensation, the SERP, the Life Insurance Coverage,
or any other plan, policy, practice or program of, or any con-
tract or agreement with, the Company or any of its affiliated
companies on or after the Date of Termination shall be payable
in accordance with the terms of each such plan, policy, prac-
tice, program, contract or agreement, as the case may be,
except as explicitly modified by this Agreement.
7. Full Settlement. The Company's obligation to
make the payments provided for in, and otherwise to perform its
obligations under, this Agreement shall not be affected by any
set-off, counterclaim, recoupment, defense or other claim,
right or action that the Company may have against the Executive
or others. In no event shall the Executive be obligated to
seek other employment or take any other action by way of miti-
gation of the amounts payable to the Executive under any of the
provisions of this Agreement and, except as specifically pro-
vided in paragraph (a) of Section 5 with respect to benefits
described in clause (B) of paragraph (c)(iii) of Section 3,
such amounts shall not be reduced, regardless of whether the
Executive obtains other employment.
8. Confidential Information. The Executive shall
hold in a fiduciary capacity for the benefit of the Company all
secret or confidential information, knowledge or data relating
to the Company or any of its affiliated companies and their
respective businesses that the Executive obtains during the
-17-<PAGE>
Executive's employment by the Company or any of its affiliated
companies and that is not public knowledge (other than as a
result of the Executive's violation of this Section 8) ("Con-
fidential Information"). The Executive shall not communicate,
divulge or disseminate Confidential Information at any time
during or after the Executive's employment with the Company,
except with the prior written consent of the Company or as
otherwise required by law or legal process. In no event shall
any asserted violation of the provisions of this Section 8
constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement.
9. Certain Additional Payments by the Company. (a)
Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribu-
tion by the Company to or for the benefit of the Executive
(whether paid or payable or distributed or distributable pur-
suant to the terms of this Agreement or otherwise, but deter-
mined without regard to any additional payments required under
this Section 9) (a "Payment") would be subject to the excise
tax imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "Code") or any interest or penalties are
incurred by the Executive with respect to such excise tax (such
excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then
the Executive shall be entitled to receive an additional pay-
ment (a "Gross-Up Payment") in an amount such that after pay-
ment by the Executive of all taxes (including any interest or
-18-<PAGE>
penalties imposed with respect to such taxes), including,
without limitation, any income taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax imposed
upon the Gross-Up Payment, the Executive retains an amount of
the Gross-Up Payment equal to the Excise Tax imposed upon the
Payments.
(b) Subject to the provisions of paragraph (c)
of this Section 9, all determinations required to be made under
this Section 9, including whether and when a Gross-Up Payment
is required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination,
shall be made by a certified public accounting firm designated
by the Executive (the "Accounting Firm"), which shall provide
detailed supporting calculations both to the Company and the
Executive within 15 business days of the receipt of notice from
the Executive that there has been a Payment, or such earlier
time as is requested by the Company. In the event that the
Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the change of control,
the Executive shall appoint another nationally recognized
accounting firm to make the determinations required hereunder
(which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, as determined pursuant to this Section 9,
shall be paid by the Company to the Executive within five days
of the receipt of the Accounting Firm's determination. Any
-19-<PAGE>
determination by the Accounting Firm shall be binding upon the
Company and the Executive. As a result of the uncertainty in
the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made
by the Company should have been made ("Underpayment"), consis-
tent with the calculations required to be made hereunder. In
the event that the Company exhausts its remedies pursuant to
paragraph (c) of this Section 9 and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting
Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by
the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in
writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by the Company of the
Gross-Up Payment. Such notification shall be given as soon as
practicable but no later than ten business days after the
Executive is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date on
which such claim is requested to be paid. The Executive shall
not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company
(or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Company
notifies the Executive in writing prior to the expiration of
-20-<PAGE>
such period that it desires to contest such claim, the Execu-
tive shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with con-
testing such claim as the Company shall reasonably
request in writing from time to time, including,
without limitation, accepting legal representation
with respect to such claim by an attorney reasonably
selected by the Company,
(iii) cooperate with the Company in good faith in
order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly
all costs and expenses (including additional interest and pen-
alties) incurred in connection with such contest and shall
indemnify and hold the Executive harmless, on an after-tax
basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this paragraph (c) of
Section 9, the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pur-
sue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect
of such claim and may, at its sole option, either direct the
Executive to pay the tax claimed and sue for a refund or con-
test the claim in any permissible manner, and the Executive
agrees to prosecute such contest to a determination before any
-21-<PAGE>
administrative tribunal, in a court of initial jurisdiction and
in one or more appellate courts, as the Company shall deter-
mine; provided, however, that if the Company directs the Exec-
utive to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or income
tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and provided,
further, that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Exec-
utive with respect to which such contested amount is claimed to
be due is limited solely to such contested amount. Further-
more, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be pay-
able hereunder and the Executive shall be entitled to settle or
contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
(d) If, after the receipt by the Executive of
an amount advanced by the Company pursuant to paragraph (c) of
this Section 9, the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject
to the Company's complying with the requirements of paragraph
(c) of this Section 9) promptly pay to the Company the amount
of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If after the receipt
-22-<PAGE>
by the Executive of an amount advanced by the Company pursuant
to paragraph (c) of this Section 9, a determination is made
that the Executive shall not be entitled to any refund with
respect to such claim and the Company does not notify the
Executive in writing of its intent to contest such denial of
refund prior to the expiration of 30 days after such determi-
nation, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall
offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.
10. Attorneys' Fees. The Company agrees to pay, as
incurred, to the fullest extent permitted by law, all legal
fees and expenses that the Executive may reasonably incur as a
result of any contest (regardless of the outcome) by the Com-
pany, the Executive or others of the validity or enforceability
of or liability under, or otherwise involving, any provision of
this Agreement, together with interest on any delayed payment
at the applicable federal rate provided for in Section
7872(f)(2)(A) of the Code.
11. Successors. (a) This Agreement is personal to
the Executive and, without the prior written consent of the
Company, shall not be assignable by the Executive otherwise
than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.
-23-<PAGE>
(b) This Agreement shall inure to the benefit
of and be binding upon the Company and its successors and
assigns.
(c) The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the business and/
or assets of the Company expressly to assume and agree to per-
form this Agreement in the same manner and to the same extent
that the Company would have been required to perform it if no
such succession had taken place. As used in this Agreement,
"Company" shall mean both the Company as defined above and any
such successor that assumes and agrees to perform this Agree-
ment, by operation of law or otherwise.
12. Miscellaneous. (a) This Agreement shall be
governed by, and construed in accordance with, the laws of the
State of Minnesota, without reference to principles of conflict
of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified except by a written
agreement executed by the parties hereto or their respective
successors and legal representatives.
(b) All notices and other communications under
this Agreement shall be in writing and shall be given by hand
delivery to the other party or by registered or certified mail,
return receipt requested, postage prepaid, addressed as fol-
lows:
-24-<PAGE>
If to the Executive:
If to the Company:
Attention: General Counsel
or to such other address as either party furnishes to the other
in writing in accordance with this paragraph (b) of Section 12.
Notices and communications shall be effective when actually
received by the addressee.
(c) The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement. If
any provision of this Agreement shall be held invalid or unen-
forceable in part, the remaining portion of such provision,
together with all other provisions of this Agreement, shall
remain valid and enforceable and continue in full force and
effect to the fullest extent consistent with law.
(d) Notwithstanding any other provision of this
Agreement, the Company may withhold from amounts payable under
this Agreement all federal, state, local and foreign taxes that
are required to be withheld by applicable laws or regulations.
(e) The Executive's or the Company's failure to
insist upon strict compliance with any provisions of, or to
assert any right under, this Agreement (including, without
-25-<PAGE>
limitation, the right of the Executive to terminate employment
for Good Reason pursuant to paragraph (c) of Section 4 of this
Agreement) shall not be deemed to be a waiver of such provision
or right or of any other provision of or right under this
Agreement.
(f) The Executive and the Company acknowledge
that this Agreement supersedes any other agreement between them
concerning the subject matter hereof.
(g) The rights and benefits of the Executive
under this Agreement may not be anticipated, assigned, alien-
ated or subject to attachment, garnishment, levy, execution or
other legal or equitable process except as required by law.
Any attempt by the Executive to anticipate, alienate, assign,
sell, transfer, pledge, encumber or charge the same shall be
void. Payments hereunder shall not be considered assets of the
Executive in the event of insolvency or bankruptcy.
(h) This Agreement may be executed in several
counterparts, each of which shall be deemed an original, and
said counterparts shall constitute but one and the same
instrument.
-26-<PAGE>
IN WITNESS WHEREOF, the Executive has hereunto set
the Executive's hand and, pursuant to the authorization of its
Board of Directors, the Company has caused this Agreement to be
executed in its name on its behalf, all as of the day and year
first above written.
Richard A. Abdoo
By
-27-
Exhibit 7
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
NORTHERN POWER WISCONSIN CORP.
(a Wisconsin corporation)
These Restated Articles of Incorporation supersede
and take the place of the existing Articles of Incorporation
and all prior amendments thereto and restatements thereof.
ARTICLE I. NAME, REGISTERED OFFICE AND AGENT
The name of this corporation shall be NORTHERN POWER
WISCONSIN CORP. At the time of the adoption of these Articles,
the address of the registered office of the Corporation is 44
East Mifflin Street, Madison, Wisconsin 53703 and its regis-
tered agent at such address is C T CORPORATION SYSTEM.
ARTICLE II. PURPOSE
The corporation is organized to engage in any lawful
activity within the purposes for which a corporation may be
organized under the WBCL, including but not limited to acquir-
ing, maintaining and operating facilities by or through which
the corporation can provide communication, transportation, wa-
ter, light, heat, or power to the public and to acquire and
hold rights and franchises for the occupation and use of prop-
erty for providing public utility services.
ARTICLE III. DURATION
The period of duration of this Corporation shall be
perpetual.
ARTICLE IV. DIRECTORS
1. Board of Directors
The management of this Corporation shall be vested in
a Board of Directors composed of not less than three (3) and
not more than seventeen (17) members, who shall be elected by
the stockholders of the Corporation in the manner provided by
the Bylaws. It shall not be necessary that directors be
stockholders in the Corporation. The number of directors shall
be fixed from time to time by the Bylaws, and such number may
be increased or decreased within the above limits in such man-
ner as may be provided by the Bylaws. Vacancies in the Board
caused by an increase in the number of directors or by death,
-1-<PAGE>
resignation, disqualification, or other cause, may be filled by
the remaining directors or by the stockholders at an annual or
special meeting, as may be provided by the Bylaws.
ARTICLE V. DESCRIPTION OF CAPITAL STOCK
The total authorized number of shares that may be
issued by the Corporation and that the Corporation will hence-
forth be authorized to have is one hundred sixty-seven million
(167,000,000) of the par value per share hereinafter set forth.
A description of the classes of shares and a state-
ment of the number of shares in each class and the relative
rights, voting power, and preferences granted to and restric-
tions imposed upon the shares of each class are as follows:
1. Authorized Number and Classes of Shares.
Such shares shall be divided into two classes to be
designated, respectively, Preferred Stock and Common Stock.
The total authorized number of shares of Preferred Stock is
seven million (7,000,000) having a par value of one hundred
dollars ($100) per share, and the total authorized number of
shares of Common Stock is one hundred sixty million
(160,000,000) having a par value of two dollars and fifty cents
($2.50) per share.
2. Issuance and Terms of Preferred Stock
The Preferred Stock may be issued in series, each of
which series shall have such distinctive designation as may be
fixed by the Board of Directors prior to the issuance or al-
lotment of any share of such series, provided that such des-
ignation shall in each case include the words "Preferred
Stock". The Board of Directors is hereby authorized, within
the limitations and restrictions hereinafter stated and within
the limits of the WBCL, to fix from time to time, in respect of
shares of Preferred Stock at the time unallotted, the dividend
rates and times of payment, the redemption price, and liquida-
tion price or preference as to assets in voluntary liquidation
of the shares of any series of Preferred Stock (except the se-
ries designated "Cumulative Preferred Stock, $3.60 Series," in
respect of which such provisions are hereinafter set forth) and
the number of shares constituting any series of Preferred
Stock.
-2-<PAGE>
3. Preferences of Preferred Stock
a. Dividends
The holders of shares of Preferred Stock, irrespec-
tive of the series thereof, shall be entitled to receive in
preference to the Common Stock, when and as declared by the
Board of Directors of the Corporation, out of its net earnings
or surplus, cumulative dividends at such rate as shall have
been fixed for the series of which such shares are a part, and
no more, payable to shareholders of record on such dates and
for such dividend periods as shall be fixed by the Board of
Directors of the Corporation. So long as dividends are in de-
fault in whole or in part on a series of Preferred Stock for
any prior dividend period for such series of Preferred Stock,
any dividends on the Preferred Stock shall be divided among the
outstanding series of Preferred Stock for which dividends are
accumulated and unpaid for any prior dividend period applicable
thereto in proportion to the aggregate amounts that then would
be distributable to the holders of Preferred Stock of each such
series if all dividends accumulated thereon and unpaid for all
prior dividend periods applicable thereto were paid and de-
clared thereon. Dividends on each share of Preferred Stock
shall begin to accrue on the first day of the dividend period
during which the original issue of a certificate for such share
shall occur; provided, however, that, in the case of any series
of Preferred Stock issued in exchange for a series of preferred
stock, par value $2.50 per share of Northern States Power Com-
pany, a Minnesota corporation, which was created after May 6,
1970, the Board of Directors, in its discretion, may fix the
date of original issue of the shares of such series as the date
from which dividends shall accrue.
b. Liquidation and Dissolution
In the event of any distribution of assets of the
Corporation other than by dividends from net earnings or sur-
plus, whether upon voluntary liquidation or dissolution or upon
involuntary liquidation or dissolution of the Corporation, the
holders of the shares of Preferred Stock shall be entitled, in
preference to the Common Stock, to one hundred dollars ($100)
per share in the case of involuntary liquidation or dissolution
and to such amount per share in the case of voluntary liquida-
tion or dissolution (which may differ from that payable in in-
voluntary liquidation or dissolution) as shall have been fixed
by the Board of Directors for the shares of the series of which
they are a part, plus in each case an amount equal to all div-
idends accumulated and unpaid thereon, and no more. The con-
solidation or merger of this Corporation with or into any other
-3-<PAGE>
corporation or corporations shall not be deemed to be distri-
bution of assets or liquidation or dissolution of the Corpora-
tion within the meaning of any provisions hereof.
If upon any such distribution of assets of the Cor-
poration the assets distributable among the holders of the
Preferred Stock of all series shall be insufficient to pay in
full the amounts to which the holders of Preferred Stock of all
series are entitled under the foregoing provisions, the amount
distributable to the holders of all shares of Preferred Stock
of all series shall be apportioned among them ratably in pro-
portion to the amounts to which they are, respectively, enti-
tled in accordance with such foregoing provisions.
c. Dividend Arrearages
Dividends may be paid upon the Common Stock only when
dividends have been paid, or declared and set apart for payment
in full, on the Preferred Stock of all series from the date on
which dividends thereon began to accrue to the beginning of the
current dividend periods, but whenever all such dividends have
been paid, or declared and funds set apart for the payment
thereof in full, upon the Preferred Stock of all series then
dividends upon the Common Stock may be declared, payable then
or thereafter out of any net earnings or surplus then remain-
ing. The holders of Preferred Stock shall not be entitled to
receive any amounts upon any distribution of the assets of the
Corporation other than by dividends from net earnings or sur-
plus in excess of the amount to which they are, respectively,
entitled in accordance with the foregoing provisions hereof,
but after the payment of such amounts in accordance with the
provisions hereinabove set forth, the holders of Common Stock,
subject to the rights of holders of stock of any other class
hereafter authorized, shall receive all further amounts in
distribution of such assets of the Corporation.
4. Redemption of Preferred Stock
The Corporation, at its option, may at any time and
from time to time redeem the whole or any part of the Preferred
Stock of any series or all series, upon at least thirty days'
previous notice by mail or publication given to the holders of
record of the shares to be redeemed or upon such other period
and form of notice as shall be fixed by the Board of Directors
in the resolution establishing such series, by paying for each
share to be redeemed the redemption price which shall have been
fixed, as herein provided, for the shares of the series of
which it is a part plus in each case an amount equal to the
dividends upon such shares so to be redeemed at the rate or
rates fixed with respect to such shares from the date or dates
-4-<PAGE>
on which dividends on such shares began to accrue to the date
fixed for the redemption thereof less the amount of dividends
theretofore paid thereon, such payment to be made only on pre-
sentation and surrender for cancellation of the certificate or
certificates representing the share or shares so called for
redemption properly endorsed or assigned by the owner of record
thereof. If less than all the outstanding shares of the Pre-
ferred Stock are to be redeemed, the shares to be redeemed
shall be determined by the Board of Directors of the Corpora-
tion, either by lot, or by redemption pro rata, as the Board of
Directors see fit. If the notice of redemption hereinabove
provided for shall have been given as hereinabove provided and
if on or before the redemption date specified in such notice
funds necessary for the redemption of the share or shares to be
redeemed shall have been set apart, as a trust fund, so as to
be available therefor, then notwithstanding that any certifi-
cate for the shares of Preferred Stock so to be redeemed shall
not have been surrendered for cancellation, the shares repre-
sented thereby from and after the date of redemption so speci-
fied shall no longer be deemed outstanding and the right to
receive dividends thereon shall cease to accrue and all rights
of the holders of the shares to be redeemed as shareholders of
the Corporation, except the right to receive the redemption
price without interest upon endorsement and surrender of the
certificates for said shares so redeemed, shall cease and ter-
minate.
5. Voting Rights
a. Number of Votes
The holders of the Preferred Stock (other than Pre-
ferred Stock of the series designated "Cumulative Preferred
Stock, $3.60 Series") shall be entitled to one vote for each
share thereof held by them, the holders of Preferred Stock
heretofore or hereafter issued of the series designated "Cumu-
lative Preferred Stock, $3.60 Series" shall be entitled to
three votes for each share thereof held by them, and the hold-
ers of the Common Stock shall be entitled to one vote for each
share thereof held by them; provided, however, that:
(i) If and when dividends payable on the Pre-
ferred Stock of any series at the time outstanding
are in default in an amount equivalent to the amount
payable thereon during the immediately preceding
twelve month period, and until such default shall
have been remedied as hereinafter provided, the pre-
ferred shareholders, voting as a class and without
regard to series, shall be entitled to elect the
smallest number of directors necessary to constitute
-5-<PAGE>
a majority of the full Board of Directors, and the
common shareholders, voting separately as a class,
shall be entitled to elect the remaining directors of
the Corporation. Upon accrual of such special right
of the Preferred Stock, a meeting of the preferred
and the common shareholders for the election of di-
rectors shall be held upon notice promptly given as
provided in the Bylaws for a special meeting by the
President or the Secretary of the Corporation. If
within fifteen days after the accrual of such special
right of the Preferred Stock the President and the
Secretary of the Corporation shall fail to call such
meeting, then such meeting shall be held upon notice,
as provided in the Bylaws for a special meeting,
given by the holders of not less than 1,000 shares of
the Preferred Stock after filing with the Corporation
of notice of their intention to do so. The terms of
office of all persons who may be directors of the
Corporation at the time shall terminate upon the
election of a majority of the Board of Directors by
the preferred shareholders, whether or not the common
shareholders shall at the time of such termination
have elected the remaining directors of the Corpora-
tion; thereafter during the continuance of such spe-
cial right of the Preferred Stock to elect a majority
of the Board of Directors, the holders of such stock,
voting as a class, shall be entitled to elect a ma-
jority of the Board of Directors and the holders of
the Common Stock, voting separately as a class, shall
be entitled to elect the remaining directors of the
corporation; and all directors so elected, whether at
such special meeting or any adjournment thereof, or
at any subsequent annual meeting for the election of
directors, held during the continuance of such spe-
cial right, shall hold office until the next suc-
ceeding annual election and until their respective
successors, elected by the preferred shareholders,
voting as a class, and the common shareholders, vot-
ing as a class, are elected and qualified, unless
their terms of office shall be sooner terminated as
hereinafter provided. However, if and when all div-
idends then in default on the Preferred Stock shall
thereafter be paid (and such dividends shall be de-
clared and paid out of any funds legally available
therefor as soon as reasonably practicable), the
Preferred Stock shall thereupon be divested of such
special right herein provided for to elect a majority
of the Board of Directors, but subject always to the
same provisions for the vesting of such special right
-6-<PAGE>
in such stock in the case of any similar future de-
fault or defaults, and the election of directors by
the preferred and common shareholders, voting without
regard to class, shall take place at the next suc-
ceeding annual meeting for the election of directors,
or at any adjournment thereof. The terms of office
of all persons who may be directors of the Corpora-
tion at the time of such divestment shall terminate
upon the election of the directors at such annual
meeting or adjournment thereof.
b. First Meeting for Election of Directors
At the first meeting for the election of directors
after any accrual of the special right of the preferred share-
holders to elect a majority of the Board of Directors, as pro-
vided above, and at any subsequent annual meeting for the
election of directors held during the continuance of such spe-
cial right, the presence in person or by proxy of the holders
of record of a majority of the outstanding shares of Preferred
Stock without regard to series shall be necessary to constitute
a quorum for the election of the directors whom the preferred
shareholders are entitled to elect, and the presence in person
or by proxy of the holders of record of a majority of the out-
standing shares of Common Stock shall be necessary to consti-
tute a quorum for the election of the directors whom the common
shareholders are entitled to elect. If at any such meeting
there shall not be such a quorum of the preferred shareholders,
the meeting shall be adjourned from time to time without notice
other than announcement at the meeting until such quorum shall
have been obtained; provided that, if such quorum shall not
have been obtained within ninety (90) days from the date of
such meeting as originally called (or, in the case of any an-
nual meeting held during the continuance of such special right,
from the date for such annual meeting), the presence in person
or by proxy of the holders of record of one-third of the out-
standing shares of the Preferred Stock, without regard to se-
ries, shall then be sufficient to constitute a quorum for the
election of the directors whom such shareholders are then en-
titled to elect. The absence of a quorum of the preferred
shareholders as a class or of the common shareholders as a
class shall not, except as hereinafter provided for, prevent or
invalidate the election by the other class of shareholders of
the directors whom they are entitled to elect, if the necessary
quorum of shareholders of such other class is present in person
or represented by proxy at any such meeting or any adjournment
thereof. However, at the first meeting for the election of
directors after any accrual of the special right of the pre-
ferred shareholders to elect a majority of the Board of Direc-
tors, the absence of a quorum of the preferred shareholders
-7-<PAGE>
shall prevent the election of directors by the common share-
holders, until a quorum of the preferred shareholders shall be
obtained.
c. Cumulative Voting
The holders of shares of stock of any class entitled
to vote at a meeting for the election of directors shall have
the right to cumulate their votes at such election in the man-
ner provided by the WBCL.
6. Special Voting Rights of Preferred Stock
a. Act Requiring Majority Vote of Preferred Stock
So long as any of the Preferred Stock is outstanding,
the Corporation shall not, without the consent (given in writ-
ing or by vote at a meeting duly called for the purpose in ac-
cordance with the provisions of the Bylaws) of the holders of a
majority of the total number of shares of such stock, without
regard to series, present or represented by proxy at such
meeting, at which meeting a quorum as hereinafter provided
shall be present or represented by proxy;
(i) Issue any unsecured notes, debentures, or
other securities representing unsecured indebtedness,
or assume any such unsecured securities, for purposes
other than the refunding of outstanding unsecured
securities theretofore issued or assumed by the Cor-
poration or the redemption or other retirement of
outstanding shares of one or more series of the Pre-
ferred Stock, if, immediately after such issue or
assumption, the total principal amount of all unse-
cured notes, debentures, or other securities repre-
senting unsecured indebtedness issued or assumed by
the Corporation and then outstanding (including un-
secured securities then to be issued or assumed)
would exceed twenty percent (20%) of the aggregate of
(a) the total principal amount of all bonds or other
securities representing secured indebtedness issued
or assumed by the Corporation and then to be out-
standing, and (b) the capital and surplus of the
Corporation (including all earned surplus, paid-in
surplus, capital surplus, or other surplus of the
Corporation) as then to be stated on the books of
account of the Corporation; or
(ii) merge or consolidate with or into any other
corporation or corporations, unless such merger or
consolidation, or the issuance of assumption of all
-8-<PAGE>
securities to be issued or assumed in connection with
any such merger or consolidation, shall have been
ordered, approved, or permitted by the Securities and
Exchange Commission under the provisions of the Pub-
lic Utility Holding Company Act of 1935 or by any
successor commission or regulatory authority of the
United States of America having jurisdiction in the
premises; provided that the provisions of this clause
(ii) shall not apply to a purchase or other acquisi-
tion by the Corporation of the franchises or other
assets of another corporation, or otherwise apply in
any matter which does not involve a merger or con-
solidation.
b. Quorum of Preferred Stockholders
For the purpose of this Section 6, the presence in
person or by proxy of the holders or record of a majority of
the outstanding shares of Preferred Stock, without regard to
series, shall be necessary to constitute a quorum; provided,
that if such quorum shall not have been obtained at such meet-
ing or at any adjournment thereof within thirty (30) days from
the date of such meeting as originally called, the presence in
person or by proxy of the holders of record of one-third (1/3)
of the outstanding shares of such stock, without regard to se-
ries, shall then be sufficient to constitute a quorum; and
provided further that in the absence of a quorum, such meeting
or any adjournment thereof may be adjourned from time to time
by the officer or officers of the Corporation who shall have
called the meeting (but at intervals of not less than seven
days unless all shareholders present or represented by proxy
shall agree to a shorter interval) without notice other than
announcement at the meeting until a quorum as above provided
shall be obtained.
c. Acts which Include Redemption of Preferred Stock
No vote or consent of the holders of any series of
the Preferred Stock shall be required, however, if, at or prior
to the issue of any such securities representing unsecured in-
debtedness, or such consolidation, merger, or sale, provision
is made for the redemption or other retirement of all shares of
such series then outstanding.
d. Additional to Other Voting Requirements
The provisions set forth in this Section 6 are in
addition to any other vote required by any provision of the
Articles of Incorporation of the Corporation, as amended, or
applicable statute, and shall be so construed.
-9-<PAGE>
7. Issuance in Amount of Preferred Stock
So long as any of the Preferred Stock is outstanding,
the Corporation shall not, without the consent (given by vote
at a meeting duly called for the purpose in accordance with the
provisions of the Bylaws) of the holders of a majority of the
total number of shares of such stock then outstanding, without
regard to class or series, present or represented by proxy at
such meeting, increase the total authorized amount of Preferred
Stock (other than as authorized by this Article V) or authorize
any other preferred stock ranking on a parity with the Prefer-
red Stock as to assets or dividends (other than through the
reclassification of then authorized but unissued shares of
Preferred Stock into shares of such other preferred stock).
8. Issuance of Stock Preferred over Preferred Stock
So long as any of the Preferred Stock is outstanding,
the Corporation shall not, without the consent (given by vote
at a meeting duly called for the purpose in accordance with the
provisions of the Bylaws) of the holders of at least sixty-six
and two-thirds per cent (66-2/3%) of the total number of shares
of Preferred Stock, without regard to series, then outstanding,
present or represented by proxy at such meeting, authorize any
class of stock which shall be preferred as to assets or divi-
dends over the Preferred Stock; or, without the consent of the
holders of at least sixty-six and two-thirds percent (66-2/3%)
of the total number of shares of Preferred Stock then out-
standing, given as above provided in this Section 8, amend the
Articles of Incorporation, to change the express terms and
provisions of the Preferred Stock in any manner substantially
prejudicial to the holders thereof.
9. Effecting and Validating Additional Stock or Securities
Convertible into Stock
So long as any shares of Preferred Stock are out-
standing, the consent of the holders of at least two-thirds
(2/3) of the Preferred Stock at the time outstanding, voting as
a class and without regard to series, given in person or by
proxy, either in writing or by vote at any meeting called for
the purpose, shall be necessary for effecting or validating the
issue of any additional shares of Preferred Stock (other than
and not exceeding 275,000 shares of the Cumulative Preferred
Stock, $3.60 Series), or any shares of stock, or of any secu-
rity convertible into stock, of any class ranking on a parity
with the Preferred Stock, unless
-10-<PAGE>
(i) the net income of the Corporation (deter-
mined as hereinafter provided) for any twelve con-
secutive calendar months within the fifteen calendar
months immediately preceding the month within which
the issuance of such additional shares is authorized
by the Board of Directors of the Corporation shall
have been in the aggregate not less than one and one-
half times the sum of the interest requirements for
one year on all of the indebtedness of the Corpora-
tion to be outstanding at the date of such proposed
issue and the full dividend requirements for one year
on all shares of Preferred Stock, and all other
stock, if any, ranking prior to or on a parity with
the Preferred Stock, to be outstanding at the date of
such proposed issue, including the shares then pro-
posed to be issued but excluding any such indebted-
ness and any such shares proposed to be retired in
connection with such proposed issue. For purposes of
calculating the dividend requirements for one year
applicable to any series of Preferred Stock proposed
to be issued which will have dividends determined
according to an adjustable, floating or variable
rate, the dividend rate used shall be the higher of
(A) the dividend rate applicable to such series of
Preferred Stock on the date of such calculation, or
(B) the average dividend rate payable on all series
of Preferred Stock outstanding during the twelve
month period immediately preceding the date of such
calculation. For purposes of calculating the divi-
dend or interest requirements for one year applicable
to any series of Preferred Stock or indebtedness
outstanding at the date of such proposed issue and
having dividends or interest determined according to
an adjustable, floating or variable rate, the divi-
dend or interest rate used shall be: (A) if such
series of Preferred Stock or indebtedness has been
outstanding for at least twelve months, the actual
amount of dividends or interest paid on account of
such series of Preferred Stock or indebtedness for
the twelve month period immediately preceding the
date of such calculation, or (B) if such series of
Preferred Stock or indebtedness has been outstanding
for less than twelve months, the higher of (1) the
dividend or interest rate applicable to such series
of Preferred Stock or indebtedness on the date of
such calculation or (2) the average dividend or in-
terest rate payable on all series of Preferred Stock
or indebtedness outstanding during the twelve month
period immediately preceding the date of such calcu-
lation. "Net income" for any period for the purpose
-11-<PAGE>
of this Section 9 shall be computed by adding to the
net income of the Corporation for said period, de-
termined in accordance with generally accepted ac-
counting practices, as adjusted by action of the
Board of Directors of the Corporation as hereinafter
provided, the amount deducted for interest before
arriving at such net income (adjusted as above pro-
vided). In determining such net income for any pe-
riod, there shall be deducted the provisions for de-
preciation and depletion as recorded on such books or
the minimum amount required therefor under the pro-
visions of any then existing trust indenture or
supplements thereto of the Corporation, whichever is
larger. In the determination of such net income, the
Board of Directors of the Corporation may, in the
exercise of due discretion, make adjustments by way
of increase or decrease in such net income to give
effect to changes therein resulting from any acqui-
sition of properties or to any redemption, acqui-
sition, purchase, sale, or exchange of securities by
the Corporation either prior to the issuance of any
shares of Preferred Stock, or stock, or securities
convertible into stock, ranking on a parity therewith
then to be issued or in connection therewith; and
(ii) the aggregate of the capital of the Corpo-
ration applicable to all stock of any class ranking
junior to the Preferred Stock, plus the surplus of
the Corporation, shall be not less than the aggregate
amount payable upon involuntary liquidation, dis-
solution, or winding up of the affairs of the Corpo-
ration to the holders of all shares of Preferred
Stock and of any shares of stock of any class ranking
on a parity therewith to be outstanding immediately
after such proposed issue, excluding from such com-
putation all indebtedness and stock to be retired
through such proposed issue. No portion of the sur-
plus of the Corporation utilized to satisfy the
foregoing requirements shall be available for divi-
dends (other than dividends payable in stock of any
class ranking junior to the Preferred Stock) or other
distributions upon or in respect of shares of stock
of the Corporation of any class ranking junior to the
Preferred Stock for the purchase of shares of such
junior stock until such number of additional shares
of Preferred Stock or of stock, or securities con-
vertible into stock, ranking on a parity with the
Preferred Stocks are retired or until and to the ex-
tent that the capital applicable to such junior stock
shall have been increased.
-12-<PAGE>
10. Dividends on Common Stock
So long as any shares of the Preferred Stock are
outstanding, the Corporation shall not pay any dividends on its
Common Stock (other than dividends payable in Common Stock) or
make any distribution on or purchase or otherwise acquire for
value any of its Common Stock (each such payment, distribution,
purchase and/or acquisition being herein referred to as a
"Common Stock dividend"), except to the extent permitted by the
following provisions of this Section 10.
a. No Common Stock dividend shall be declared or paid in
an amount which, together with all other Common Stock
dividends declared in the year ending on (and including)
the date of the declaration of such Common Stock dividend,
would in the aggregate exceed fifty per cent (50%) of the
net income of the Corporation for the period consisting of
the twelve consecutive calendar months ending on the last
day of the second calendar month next preceding the dec-
laration of such Common Stock dividend after deducting
from such net income, dividends accruing on any preferred
stock of the Corporation during such period, if at the end
of such period the ratio (herein referred to as the "cap-
italization ratio") of the sum of (1) the capital repre-
sented by the Common Stock (including premiums on capital
stock) and (2) the surplus accounts, of the Corporation,
to the sum of (1) the total capital and (2) the surplus
accounts, of the Corporation (after adjustment of the
surplus accounts to reflect payment of such Common Stock
dividend) would be less than twenty per cent (20%).
b. If such capitalization ratio, determined as aforesaid
shall be twenty per cent (20%) or more, but less than
twenty-five per cent (25%) no Common Stock dividend shall
be declared or paid in an amount which, together with all
other Common Stock dividends declared in the year ending
on [and including] the date of the declaration of such
Common Stock dividend, would in the aggregate exceed
seventy-five per cent (75%) of the net income of the Cor-
poration for the period consisting of the twelve consecu-
tive calendar months ending on the last day of the second
calendar month next preceding the declaration of such
Common Stock dividend after deducting from such net in-
come, dividends accruing on any preferred stock of the
Corporation during such period; and
c. If such capitalization ratio, determined as afore-
said, shall be in excess of twenty-five per cent (25%), no
Common Stock dividend shall be declared or paid which
would reduce such capitalization ratio to less than
-13-<PAGE>
twenty-five per cent (25%) except to the extent permitted
by the next preceding paragraphs (a) and (b) hereof. For
the purpose of this condition:
(i) The total capital of the Corporation shall
be deemed to consist of the aggregate of (1) the
principal amount of all outstanding indebtedness of
the Corporation maturing more than one year after the
date of issue thereof and (2) the par value of or the
stated capital applicable to all outstanding capital
stock (including premiums on capital stock) of all
classes of the Corporation. All indebtedness and
capital stock owned by the Corporation shall be ex-
cluded in determining total capital. Surplus ac-
counts shall be deemed to include all earned surplus,
paid-in surplus, capital surplus, or any other sur-
plus of the Corporation.
(ii) Such surplus accounts upon which capitali-
zation ratios are computed shall be adjusted to
eliminate (1) the amount, if any, by which fifteen
per cent (15%) of the gross operating revenues of the
Corporation (calculated in the manner provided in the
covenants relating to payment of Common Stock divi-
dends embodied in the indentures and supplemental
indentures securing the mortgage bonds of the Corpo-
ration) for the entire period from July 1, 1946, to
the end of the second calendar month immediately
preceding the date of the proposed payment of Common
Stock dividends exceeds the total amount expended by
the Corporation during such period for maintenance
and repairs and the total provision made by the Cor-
poration during such period for depreciation, all as
shown by the books of the Corporation, and (2) any
amounts on the books of the Corporation known or es-
timated, if not known, to represent the excess, if
any, of recorded value over original cost of used and
useful utility plant and other property, and any item
set forth on the asset side of the balance sheet of
the Corporation as a result of accounting convention,
such as unamortized debt discount and expense, capi-
tal stock discount and expense, and the excess, if
any, of the aggregate amount payable on involuntary
dissolution, liquidation, or winding up of the Cor-
poration upon all outstanding shares of preferred
stock of all series over the aggregate stated or par
value of such shares, unless any such amount or item,
as the case may be, is being amortized or is being
provided for by a reserve; and
-14-<PAGE>
(iii) In computing net income of the Corporation
applicable to the Common Stock of the Corporation for
any particular twelve (12) months' period for the
purposes of this condition, operating expenses, among
other things, shall include the greater of (1) the
provision for depreciation for such period as re-
corded on the books of the Corporation or (2) the
amount by which fifteen percent (15%) of the gross
operating revenues of the Corporation for such period
(calculated in the manner provided in the above men-
tioned covenants relating to payment of Common Stock
dividends) exceeds the total amount expended by the
Corporation during such periods for maintenance and
repairs as shown by the books of the Corporation.
11. Acceptance of Shares
In consideration of the issue by the Corporation, and
the acceptance by the holders thereof, of shares of the capital
stock of the Corporation, each and every present and future
holder of shares of the Preferred Stock, the Common Stock and
of any stock hereafter authorized by the Corporation shall be
conclusively deemed, by acquiring or holding such shares, to
have expressly consented to all and singular the terms and
provisions of this Article V and to have agreed that the voting
rights of such holder and the restrictions and qualifications
thereof shall be as set forth in this Article.
12. Outstanding Stock or Evidence of Indebtedness
No share of stock or evidence of indebtedness shall
be deemed to be "outstanding," as that term is used in this
Article V, if, prior to or concurrently with the event in ref-
erence to which a determination as to the amount thereof out-
standing is to be made, the requisite funds for the redemption
thereof shall be deposited in trust for that purpose and the
requisite notice for the redemption thereof shall be given or
the depositary of such funds shall be irrevocably authorized
and directed to give or complete such notice of redemption.
13. Right of Unissued Stock or Other Securities
No holder of any stock of the Corporation shall be
entitled, as of right, to purchase or subscribe for any part of
any unissued shares of stock of the Corporation or for any ad-
ditional shares of stock, of any class or series, which may at
any time be issued, whether now or hereafter authorized, or for
any rights, options, or warrants to purchase or receive shares
of stock or for any bonds, certificates of indebtedness, de-
bentures, or other securities convertible into shares of stock,
-15-<PAGE>
or any class or series thereof; but any such unissued or addi-
tional shares, rights, options, or warrants or convertible se-
curities of the Corporation may, from time to time, be issued
and disposed of by the Board of Directors to such persons,
firms, corporations, or associations, and upon such terms, as
the Board of Directors may, in its discretion, determine,
without offering any part thereof to any shareholders of any
class or series then of record; and any shares, rights, options
or warrants or convertible securities which the Board of Di-
rectors may at any time determine to offer to shareholders for
subscription may be offered to holders of shares of any class
or series at the time existing, to the exclusion of holders of
shares of any or all other classes or series at the time ex-
isting, in each case as the Board of Directors may, in its
discretion, determine.
14. Series of Preferred Stock
a. Cumulative Preferred Stock, $3.60 Series
Anything herein to the contrary notwithstanding,
there shall be and is hereby created a series of preferred
stock which is hereby designated "Cumulative Preferred Stock,
$3.60 Series," dividends on which shares of Cumulative Prefer-
red Stock, $3.60 Series, shall be payable, if declared, on the
15th days of January, April, July and October of each year;
which dividends shall be cumulative from the first day of the
respective quarter-yearly period in which the respective shares
of such series shall have been originally issued, the term
"quarter-yearly period" as used herein referred to the period
from July 1, 1946, to and including September 30, 1946, and
thereafter to each quarterly-yearly period of three (3) con-
secutive months, beginning with October 1, 1946; the dividend
rate of which series is hereby fixed at Three Dollars and Sixty
Cents ($3.60) per share per annum; the redemption price of the
shares of which series is hereby fixed at One Hundred and Five
Dollars and Seventy-Five Cents ($105.75) per share in case of
redemption on or prior to September 30, 1951; One Hundred and
Four Dollars and Seventy-Five Cents ($104.75) per share in case
of redemption subsequent to September 30, 1951, and on or prior
to September 30, 1956; and One Hundred and Three Dollars and
Seventy-Five Cents ($103.75) per share in case of redemption
subsequent to September 30, 1956, in each case plus the amount
payable thereon in accordance with the provisions hereof equal
to the cumulative dividends accrued and unpaid thereon; the
amount which the shares of such series are entitled to receive
in preference to the Common Stock upon any distribution of as-
sets other than by dividends from net earnings or surplus upon
voluntary liquidation or dissolution of the Corporation is
hereby fixed at the then redemption price thereof, plus the
-16-<PAGE>
amount payable thereon in accordance with the provisions hereof
equal to the cumulative dividends accrued and unpaid thereon;
the amount which the shares of such series are entitled to re-
ceive in preference to the Common Stock upon any distribution
of assets, other than by dividends from net earnings or sur-
plus, upon any involuntary liquidation or dissolution of the
Corporation is hereby fixed at One Hundred Dollars ($100) Dol-
lars per share, plus the amount payable thereon in accordance
with the provisions hereof equal to the cumulative dividends
accrued and unpaid thereon.
b. Cumulative Preferred Stock, $4.10 Series
(i) There be and there hereby is created from
the authorized and unallotted shares of Preferred
Stock of the Company, a new series of Preferred Stock
of the Company which is hereby designated "Cumulative
Preferred Stock, $4.10 Series," and the number of
shares constituting said new series is hereby fixed
at 175,000 shares.
(ii) The dividend rate of the shares of said new
series is hereby fixed at $4.10 per share per annum;
dividends on said shares shall be payable on the 15th
day of January, April, July and October for the
quarter-yearly period ending with the last day of the
preceding month, when and as declared by the Board of
Directors.
(iii) The redemption price of the shares of said
new series is hereby fixed at $105.50 per share in
case of redemption on or prior to December 31, 1955;
$104.50 per share in case of redemption subsequent to
December 31, 1955 and on or prior to December 31,
1960; $103.50 per share in case of redemption subse-
quent to December 31, 1960 and on or prior to Decem-
ber 31, 1965; and $102.50 per share in case of re-
demption subsequent to December 31, 1965; plus in
each case an amount equal to the dividends at the
rate of $4.10 per share per annum from the date div-
idends on the shares to be redeemed began to accrue
to the date fixed for redemption thereof less the
amount of dividends theretofore paid thereon.
(iv) The amount which the shares of said new
series are entitled to receive in preference to the
Common Stock upon any distribution of assets, other
than by dividends from net earnings or surplus, upon
any involuntary liquidation or dissolution of the
corporation is hereby fixed at $100 per share plus an
-17-<PAGE>
amount equal to all dividends accumulated and unpaid
thereon and the amount which the shares of said new
series are entitled to receive in preference to the
Common Stock upon any distribution of assets, other
than by dividends from net earnings or surplus, upon
voluntary liquidation or dissolution of the Corpora-
tion is hereby fixed as the then redemption price,
including an amount equal to all dividends accumu-
lated and unpaid thereon.
c. Cumulative Preferred Stock, $4.08 Series
(i) There be and there hereby is created from
the authorized and unallotted shares of Preferred
Stock of the Company, a new series of Preferred Stock
of the Company which is hereby designated "Cumulative
Preferred Stock, $4.08 Series," and the number of
shares constituting said new series is hereby fixed
at 150,000 shares.
(ii) The dividend rate of the shares of said new
series is hereby fixed at $4.08 per share per annum;
dividends on said shares shall be payable on the 15th
day of January, April, July and October for the
quarter-yearly period ending with the last day of the
preceding month, when and as declared by the Board of
Directors.
(iii) The redemption price of the shares of said
new series is hereby fixed at $105 per share in case
of redemption on or prior to December 31, 1959; $104
per share in case of redemption subsequent to Decem-
ber 31, 1959 and on or prior to December 31, 1964;
$103 per share in case of redemption subsequent to
December 31, 1964 and on or prior to December 31,
1969; plus in each case an amount equal to the divi-
dends at the rate of $4.08 per share per annum from
the date dividends on the shares to be redeemed began
to accrue to the date fixed for redemption thereof
less the amount of dividends theretofore paid
thereon.
(iv) The amount which the shares of said new
series are entitled to receive in preference to the
Common Stock upon any distribution of assets, other
than by dividends from net earnings or surplus, upon
voluntary liquidation or dissolution of the corpora-
tion is hereby fixed as the then redemption price,
including an amount equal to all dividends ac-
cumulated and unpaid thereon.
-18-<PAGE>
d. Cumulative Preferred Stock, $4.11 Series
(i) There be and there hereby is created from
the authorized and unallotted shares of Preferred
Stock of the Company, a new series of Preferred Stock
of the Company which is hereby designated "Cumulative
Preferred Stock, $4.11 Series," and the number of
shares constituting said new series is hereby fixed
at 200,000 shares.
(ii) The dividend rate of the shares of said new
series is hereby fixed at $4.11 per share per annum;
dividends on said shares shall be payable on the 15th
day of January, April, July and October for the
quarter-yearly period ending with the last day of the
preceding month, when and as declared by the Board of
Directors.
(iii) The redemption prices of the shares of said
new series are hereby fixed at $105.732 per share in
case of redemption on or prior to December 31, 1959;
$104.732 per share in case of redemption subsequent
to December 31, 1959 and on or prior to December 31,
1964; and $103.732 per share in case of redemption
subsequent to December 31, 1964; plus in each case an
amount equal to the dividends at the rate of $4.11
per share per annum from the date dividends on the
shares to be redeemed began to accrue to the date
fixed for redemption thereof less the amount of div-
idends theretofore paid thereon.
(iv) The amount which the shares of said new
series are entitled to receive in preference to the
Common Stock upon any distribution of assets, other
than by dividends from net earnings or surplus, upon
voluntary liquidation or dissolution of the corpora-
tion is hereby fixed as the then redemption price,
plus an amount equal to all dividends accumulated and
unpaid thereon.
e. Cumulative Preferred Stock, $4.16 Series
(i) There be and there hereby is created from
the authorized and unallotted shares of Preferred
Stock of the Company, a new series of Preferred Stock
of the Company which is hereby designated "Cumulative
Preferred Stock, $4.16 Series," and the number of
shares constituting said new series is hereby fixed
at 100,000 shares.
-19-<PAGE>
(ii) The dividend rate of the shares of said new
series is hereby fixed at $4.16 per share per annum;
dividends on said shares shall be payable on the 15th
day of January, April, July and October for the
quarter-yearly period ending with the last day of the
preceding month, when and as declared by the Board of
Directors.
(iii) The redemption prices of the shares of said
new series are hereby fixed at $106.25 per share in
case of redemption on or prior to December 31, 1961;
$105.75 per share in case of redemption subsequent to
December 31, 1961 and on or prior to December 31,
1966; $104.75 per share in case of redemption subse-
quent to December 31, 1966 and on or prior to Decem-
ber 31, 1971; and $103.75 per share in case of re-
demption subsequent to December 31, 1972; plus in
each case an amount equal to the dividends at the
rate of $4.16 per share per annum from the date div-
idends on the shares to be redeemed began to accrue
to the date fixed for redemption thereof, less the
amount of dividends theretofore paid thereon.
(iv) The amount which the shares of said new
series are entitled to receive in preference to the
Common Stock upon any distribution of assets, other
than by dividends from net earnings or surplus, upon
voluntary liquidation or dissolution of the corpora-
tion is hereby fixed as the then redemption price,
plus an amount equal to all dividends accumulated and
unpaid thereon.
f. Cumulative Preferred Stock $4.56 Series
(i) There be and there hereby is created from
the authorized and unallotted shares of Preferred
Stock of the Company, a new series of Preferred Stock
of the Company which is hereby designated "Cumulative
Preferred Stock, $4.56 Series," and the number of
shares constituting said new series is hereby fixed
at 150,000 shares.
(ii) The dividend rate of the shares of said new
series is hereby fixed at $4.56 per share per annum;
dividends on said shares shall be payable on the 15th
day of January, April, July and October for the
quarter-yearly period ending with the last day of the
preceding month, when and as declared by the Board of
Directors.
-20-<PAGE>
(iii) The redemption prices of the shares of said
new series are hereby fixed at $105.89 per share in
case of redemption on or prior to December 31, 1969;
$104.75 per share in case of redemption subsequent to
December 31, 1969 and on or prior to December 31,
1974; $103.61 per share in case of redemption subse-
quent to December 31, 1974 and on or prior to Decem-
ber 31, 1979; and $102.47 per share in case of re-
demption subsequent to December 31, 1979; plus in
each case an amount equal to the dividends at the
rate of $4.56 per share per annum from the date div-
idends on the shares to be redeemed began to accrue
to the date fixed for redemption thereof, less the
amount of dividends theretofore paid thereon.
(iv) The amount which the shares of said new
series are entitled to receive in preference to the
Common Stock upon any distribution of assets, other
than by dividends from net earnings or surplus, upon
voluntary liquidation or dissolution of the corpora-
tion is hereby fixed as the then redemption price,
including an amount equal to all dividends ac-
cumulated and unpaid thereon.
g. Cumulative Preferred Stock, $6.80 Series
(i) There be and there hereby is created from
the authorized and unallotted shares of Preferred
Stock of the Company, a new series of Preferred Stock
of the Company which is hereby designated "Cumulative
Preferred Stock, $6.80 Series," and the number of
shares constituting said new series is hereby fixed
at 200,000 shares.
(ii) The dividend rate of the shares of said new
series is hereby fixed at $6.80 per share per annum;
dividends on said shares shall be payable on the 15th
day of January, April, July and October for the
quarter-yearly period ending with the last day of the
preceding month, when and as declared by the Board of
Directors.
(iii) The redemption prices of the shares of said
new series are hereby fixed at $106.29 per share in
case of redemption on or prior to December 31, 1973;
$105.59 per share in case of redemption subsequent to
December 31, 1973 and on or prior to December 31,
-21-<PAGE>
1978; $104.89 per share in case of redemption subse-
quent to December 31, 1978 and on or prior to Decem-
ber 31, 1983; and $103.19 per share in case of re-
demption subsequent to December 31, 1983; plus in
each case an amount equal to the dividends at the
rate of $6.80 per share per annum from the date div-
idends on the shares to be redeemed begin to accrue
to the date fixed for redemption thereof, less the
amount of dividends theretofore paid thereon; pro-
vided, however, that the shares of said new series
shall not be redeemable prior to May 1, 1973 from the
proceeds of any refunding of shares of said new se-
ries through the incurring of debt, or through the
issuance of preferred stock ranking equally with or
prior to the shares of said new series as to divi-
dends or on liquidation, if such debt has an effec-
tive interest cost or such preferred stock has an
effective dividend cost to the Company of less than
the effective dividend cost to the Company of the
said new series.
(iv) The amount which the shares of said new
series are entitled to receive in preference to the
Common Stock upon any distribution of assets, other
than by dividends from net earnings or surplus, upon
voluntary liquidation or dissolution of the corpora-
tion is hereby fixed as the then redemption price,
plus an amount equal to all dividends accumulated and
unpaid thereon.
h. Cumulative Preferred Stock, $7.00 Series
(i) There be and there hereby is created from
the authorized and unallotted shares of Preferred
Stock of the Company, a new series of Preferred Stock
of the Company which is hereby designated "Cumulative
Preferred Stock $7.00 Series," and the number of
shares constituting said new series is hereby fixed
at 200,000 shares.
(ii) The dividend rate of the shares of said new
series is hereby fixed at $7.00 per share per annum;
dividends on said shares shall be payable on the 15th
day of January, April, July and October for the
quarter-yearly period ending with the last day of the
preceding month, when and as declared by the Board of
Directors.
(iii) The redemption prices of the shares of said
new series are hereby fixed at $108.45 per share in
-22-<PAGE>
case of redemption on or prior to December 31, 1974;
$106.79 per share in case of redemption subsequent to
December 31, 1974 and on or prior to December 31,
1979; $104.95 per share in case of redemption subse-
quent to December 31, 1979 and on or prior to Decem-
ber 31, 1984; and $103.20 per share in case of re-
demption subsequent to December 31, 1984; plus in
each case an amount equal to the dividends at the
rate of $7.00 per share per annum from the date div-
idends on the shares to be redeemed begin to accrue
to the date fixed for redemption thereof less the
amount of dividends theretofore paid thereon; pro-
vided, however, that the shares of said new series
shall not be redeemable prior to January 1, 1974 from
the proceeds of any refunding of shares of said new
series through the incurring of debt, or through the
issuance of preferred stock ranking equally with or
prior to the shares of said new series as to divi-
dends or on liquidation, if such debt has an effec-
tive interest cost or such preferred stock has an
effective dividend cost to the Company of less than
the effective dividend cost to the Company of the
said new series.
(iv) The amount which the shares of said new
series are entitled to receive in preference to the
Common Stock upon any distribution of assets, other
than by dividends from net earnings or surplus, upon
voluntary liquidation or dissolution of the corpora-
tion is hereby fixed as the then redemption price,
plus an amount equal to all dividends accumulated and
unpaid thereon.
i. Cumulative Preferred Stock, Adjustable Rate Series A
(i) There be and there hereby is created from
the authorized and unallocated shares of Cumulative
Preferred Stock of the Company, a new series of Cu-
mulative Preferred Stock of the Company which is
hereby designated "Cumulative Preferred Stock, Ad-
justable Rate Series A" and the number of shares
constituting said new series is hereby fixed at
300,000 shares.
(ii) The dividend rate of the shares of said new
series of Cumulative Preferred Stock is hereby fixed
at: (A) 6.15% per annum for the initial dividend
period from and including the date of original issu-
ance through June 30, 1986 and (B) the Applicable
Rate, as hereinafter defined, from time to time in
-23-<PAGE>
effect, for each subsequent dividend period; divi-
dends on said shares, when and as declared by the
Board of Directors, shall be payable on the 15th day
of January, April, July and October for the quarter-
yearly period ending with the last day of the pre-
ceding month; except that the dividend period for the
first such dividend shall begin with and include the
date of original issuance; the dividends payable on
said new series of Cumulative Preferred Stock for the
period from and including the date of original issu-
ance of said new series of Cumulative Preferred Stock
to and including June 30, 1986 and for any period
less than a full quarterly dividend period shall be
computed on the basis of a 360-day year of twelve 30-
day months and the actual number of days elapsed in
the period for which the dividends are payable; the
dividends payable for each full quarterly dividend
period commencing after June 30, 1986 shall be com-
puted by dividing the Applicable Rate for such divi-
dend period by four (rounded to the nearest one-
hundredth of a percent) and applying such computed
rate against the par value per share of said new se-
ries of Cumulative Preferred Stock.
The Applicable Rate with respect to each divi-
dend period will be calculated as promptly as prac-
ticable by the Company according to the appropriate
method described herein. The Company will cause no-
tice of such Applicable Rate to be enclosed with, or
mailed concurrently with, the dividend payment checks
next mailed to the holders of shares of said new se-
ries of Cumulative Preferred Stock.
Applicable Rate. Except as provided below in
this paragraph, the "Applicable Rate" for any divi-
dend period will be equal to 76% of the highest of:
(A) the Treasury Bill Rate, (B) the Ten Year Constant
Maturity Rate and (C) the Thirty Year Constant Matu-
rity Rate (each as hereinafter defined) for such
dividend period. If the Company determines, in good
faith, that for any reason one or more of (A) the
Treasury Bill Rate, (B) the Ten Year Constant Matu-
rity Rate, and (C) the Thirty Year Constant Maturity
Rate cannot be determined for any dividend period,
then the Applicable Rate for such dividend period
shall be based on the higher of whichever such rates
can be so determined. If the Company determines, in
good faith, that neither (A) the Treasury Bill Rate,
(B) the Ten Year Constant Maturity Rate nor (C) the
Thirty Year Constant Maturity Rate can be determined
-24-<PAGE>
for any dividend period, then the Applicable Rate in
effect for the preceding dividend period shall be
continued for such dividend period. Notwithstanding
anything to the contrary herein, the Applicable Rate
for any dividend shall not be less than 5.50% per
annum or greater than 10.25% per annum.
Treasury Bill Rate. Except as provided below in
this paragraph, the "Treasury Bill Rate" for each
dividend period will be the arithmetic average of the
two most recently weekly per annum market discount
rates (or the one weekly per annum market discount
rate, if only one such rate shall be published during
the relevant Calendar Period, as defined below) for
three-month U.S. Treasury Bills, published by the
Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") during the Calendar Period
immediately prior to the last ten calendar days of
the June, September, December or March, next pre-
ceding the dividend period for which the dividend
rate on the shares of the new series of Cumulative
Preferred Stock is being determined. If the Federal
Reserve Board does not publish such a weekly per an-
num market discount rate during such Calendar Period,
then the Treasury Bill Rate for such dividend period
shall be the arithmetic average of the two most re-
cent weekly per annum market discount rates (or the
one weekly per annum market discount rate, if only
one such rate shall be published during such Calender
Period) for three-month U.S. Treasury Bills, pub-
lished during such Calendar Period by any Federal
Reserve Bank or by any U.S. Government department or
agency selected by the Company. If a per annum mar-
ket discount rate for three-month U.S. Treasury Bills
shall not be published by the Federal Reserve Board
or by any Federal Reserve Bank or by any U.S. Gov-
ernment department or agency during such Calendar
Period, then the Treasury Bill Rate for such dividend
period shall be the arithmetic average of the two
most recent weekly per annum market discount rates
(or the one weekly per annum market discount rate, if
only one such rate shall be published during such
Calendar Period) for all of the U.S. Treasury Bills
then having maturities of not less than 80 days nor
more than 100 days, published during such Calendar
Period by the Federal Reserve Board or, if the Fed-
eral Reserve Board shall not publish such rates, by
any Federal Reserve Bank or by any U.S. Government
department or agency selected by the Company. If the
Company determines, in good faith, that no such U.S.
-25-<PAGE>
Treasury Bill rates are published as provided above
during such Calendar Period, then the Treasury Bill
Rate for such dividend period shall be the arithmetic
average of the per annum market discount rates based
upon the closing bids during such Calendar Period for
each of the issues of marketable non-interest bearing
U.S. Treasury securities with a maturity of not less
than 80 days nor more than 100 days from the date of
each such quotation, as chosen and quoted daily, for
each business day in New York City (or less fre-
quently if daily quotations shall not be generally
available), to the Company by at least three recog-
nized dealers in U.S. Government securities selected
by the Company. If the Company determines, in good
faith, that for any reason the Company cannot deter-
mine the Treasury Bill Rate for any dividend period
as provided above in this paragraph, then the Trea-
sury Bill Rate for such dividend period shall be the
arithmetic average of the per annum market discount
rates based upon the closing bids during such Calen-
dar Period for each of the issues of marketable
interest-bearing U.S. Treasury securities with a ma-
turity of not less than 80 days nor more than 100
days from the date of each such quotation, as chosen
and quoted daily for each business day in New York
City (or less frequently if daily quotations shall
not be generally available) to the Company by at
least three recognized dealers in U.S. Government
securities selected by the Company. The weekly per
annum market discount rate for three-month U.S.
Treasury Bills shall be the secondary market rate.
Ten Year Constant Maturity Rate. Except as
provided below in this paragraph, the "Ten Year Con-
stant Maturity Rate" for each dividend period shall
be the arithmetic average of the two most recent
weekly per annum Ten Year Average Yields as herein-
after defined (or the one weekly per annum Ten Year
Average Yield, if only one such Yield shall be pub-
lished during the relevant Calendar Period as defined
below), published by the Federal Reserve Board during
the Calendar Period immediately prior to the last ten
calendar days of the June, September, December or
March, next preceding the dividend period for which
the dividend rate on the shares of the new series of
Cumulative Preferred Stock is being determined. If
the Federal Reserve Board does not publish such a
weekly per annum Ten year Average Yield during such
Calendar Period, then the Ten Year Constant Maturity
Rate for such dividend period shall be the arithmetic
-26-<PAGE>
average of the two most recent weekly per annum Ten
Year Average Yields (or the one weekly per annum Ten
Year Average Yield, if only one such Yield shall be
published during such Calendar Period), published
during such Calendar Period by any Federal Reserve
Bank or by any U.S. Government department or agency
selected by the Company. If a per annum Ten Year
Average Yield shall not be published by the Federal
Reserve Board or by any Federal Reserve Bank or by
any U.S. Government department or agency during such
Calendar Period, then the Ten Year Constant Maturity
rate for such dividend period shall be the arithmetic
average of the two most recent weekly per annum av-
erage yields to maturity (or the one weekly per annum
average yield to maturity, if only one such yield
shall be published during such Calendar Period) for
all of the actively traded marketable U.S. Treasury
fixed interest rate securities (other than Special
Securities, as defined below) then having maturities
of not less than eight years nor more than twelve
years, published during such Calendar Period by the
Federal Reserve Board or, if the Federal Reserve
Board shall not publish such yield, by any Federal
Reserve Bank or by any U.S. Government department or
agency selected by the Company. If the Company de-
termines in good faith that for any reason the Com-
pany cannot determine the Ten Year Constant Maturity
Rate for any dividend period as provided above in
this paragraph, then the Ten Year Constant Maturity
Rate for such dividend period shall be the arithmetic
average of the per annum average yields to maturity
based upon the closing bids during such Calendar Pe-
riod for each of the issues of actively traded mar-
ketable U.S. Treasury fixed interest rate securities
(other than Special Securities) with a final maturity
date not less than eight years nor more than twelve
years from the date of each such quotation, as chosen
and quoted daily for each business day in New York
City (or less frequently if daily quotations shall
not be generally available) to the Company by at
least three recognized dealers in U.S. Government
securities selected by the Company.
Thirty Year Constant Maturity Rate. Except as
provided below in this paragraph, the "Thirty Year
Constant Maturity Rate" for each dividend period
shall be the arithmetic average of the two most re-
cent weekly per annum Thirty Year Average Yields as
hereinafter defined (or the one weekly per annum
Thirty Year Average Yield, if only one such Yield
-27-<PAGE>
shall be published during the relevant Calendar Pe-
riod as defined below), published by the Federal Re-
serve Board during the Calendar Period immediately
prior to the last ten calendar days of the June,
September, December or March, next preceding the
dividend period for which the dividend rate on the
shares of the new series of Cumulative Preferred
Stock is being determined. If the Federal Reserve
Board does not publish such a weekly per annum Thirty
Year Average Yield during such Calendar Period, then
the Thirty Year Constant Maturity Rate for such div-
idend period shall be the arithmetic average of the
two most recent weekly per annum Thirty Year Average
Yields (or the one weekly per annum Thirty Year Av-
erage Yield, if only one such Yield shall be pub-
lished during such Calendar Period), published during
such Calendar Period by any Federal Reserve Bank or
by any U.S. Government department or agency selected
by the Company. If a per annum Thirty Year Average
Yield shall not be published by the Federal Reserve
Board or by any Federal Reserve Bank or by any U.S.
Government department or agency during such Calendar
Period, then the Thirty Year Constant Maturity Rate
for such dividend period shall be the arithmetic av-
erage of the two most recent weekly per annum average
yields to maturity (or the one weekly per annum av-
erage yield to maturity, if only one such Yield shall
be published during such Calendar Period) for all of
the actively traded marketable U.S. Treasury fixed
interest rate securities (other than Special Securi-
ties) than having maturities of not less than twenty-
eight nor more than thirty years, published during
such Calendar Period by the Federal Reserve Board or,
if the Federal Reserve Board shall not publish such
yields, by any Federal Reserve Bank or by a U.S.
Government department or agency selected by the Com-
pany. If the Company determines in good faith that
for any reason the Company cannot determine the
Thirty Year Constant Maturity Rate for any dividend
period as provided above in this paragraph, then the
Thirty Year Constant Maturity Rate for such dividend
period shall be the arithmetic average of the per
annum average yields to maturity based upon the
closing bids during such Calendar Period for each of
the issues of actively traded marketable U.S. Trea-
sury fixed interest rate securities (other than Spe-
cial Securities) with a final maturity date not less
than twenty-eight years nor more than thirty years
from the date of each such quotation, as chosen and
quoted daily for each business day in New York City
-28-<PAGE>
(or less frequently if daily quotations shall not be
generally available) to the Company by at least three
recognized dealers in U.S. Government securities se-
lected by the Company.
Certain Definitions. As used herein: (A) the
term "Calendar Period" means a period of fourteen
calendar days; (B) the term "Special Securities"
means securities which can, at the option of the
holder, be surrendered at face value in payment of
any Federal estate tax or which provide tax benefits
to the holder and are priced to reflect such tax
benefits or which were originally issued at a deep or
substantial discount; (C) the term "Ten Year Average
Yield" means the average yield to maturity for ac-
tively traded marketable U.S. Treasury fixed interest
rate securities (adjusted to constant maturities of
ten years); and (D) the term "Thirty Year Average
Yield" means the average yield to maturity for ac-
tively traded marketable U.S. Treasury fixed interest
rate securities (adjusted to constant maturities of
thirty years).
(iii) The redemption prices of the shares of said
new series of Cumulative Preferred Stock are hereby
fixed at (A) $106.15 per share in case of redemption
on or prior to June 30, 1991; (B) $103.00 per share
in case of redemption subsequent to June 30, 1991,
and on or prior to June 30, 1996; and (C) $100.00 per
share in case of redemption subsequent to June 30,
1996, plus in each case an amount equal to the divi-
dends at the respective Applicable Rates (as defined
above) per share per annum from the date dividends on
the shares of the new series of Cumulative Preferred
Stock to be redeemed began to accrue to the date
fixed for redemption thereof, less the amount of
dividends theretofore paid thereon; provided, how-
ever, that the shares of said new series of Cumula-
tive Preferred Stock shall not be redeemable, di-
rectly or indirectly, prior to July 1, 1991 with the
proceeds from borrowed funds, or from the issuance of
any preferred stock ranking prior to or on a parity
with the shares of said new series of Cumulative
Preferred Stock as to dividends or on liquidation,
having an effective cost to the Company, computed in
accordance with generally accepted financial prac-
tice, of less than 6.15% per annum.
(iv) The amount which the shares of said new
series of Cumulative Preferred Stock are entitled to
-29-<PAGE>
receive in preference to the Common Stock upon any
distribution of assets, other than by dividends from
net earnings or surplus, upon voluntary liquidation
or dissolution of the Company is hereby fixed as the
then redemption price, plus an amount equal to all
dividends accumulated and unpaid thereon.
j. Cumulative Preferred Stock, Adjustable Rate Series B
(i) There be and there hereby is created from
the authorized and unallotted shares of Cumulative
Preferred Stock of the Company, a new series of Cu-
mulative Preferred Stock of the Company which is
hereby designated "Cumulative Preferred Stock, Ad-
justable Rate Series B" and the numbered of shares
constituting said new series is hereby fixed at
650,000 shares.
(ii) The dividend rate of the shares of said new
series of Cumulative Preferred Stock is hereby fixed
at: (A) 6.80% per annum for the initial dividend
period from and including the date of original issu-
ance through June 30, 1987 and (B) the Applicable
Rate, as hereinafter defined, from time to time in
effect, for each subsequent dividend period; divi-
dends on said shares, when and as declared by the
Board of Directors, shall be payable on the 15th day
of January, April, July and October of each year for
the quarterly period ending with the last day of the
preceding month; except that the dividend period for
the first such dividend shall begin with and include
the date of original issuance; the dividends payable
on said new series of Cumulative Preferred Stock for
the period from and including the date of original
issuance of said new series of Cumulative Preferred
Stock to and including June 30, 1987 and for any pe-
riod less than a full quarterly dividend period shall
be computed on the basis of a 360-day year of twelve
30-day months and the actual number of days elapsed
in the period for which the dividends are payable;
the dividends payable for each full quarterly divi-
dend period commencing after June 30, 1987 shall be
computed by dividing the Applicable Rate for such
dividend period by four (rounded to the nearest one-
hundredth of a percent) and applying such computed
rate against the par value per share of said new se-
ries of Cumulative Preferred Stock.
-30-<PAGE>
The Applicable Rate with respect to each divi-
dend period will be calculated as promptly as prac-
ticable by the Company according to the appropriate
method described herein. The Company will cause no-
tice of such Applicable Rate to be enclosed with, or
mailed concurrently with, the dividend payment checks
next mailed to the holders of shares of said new se-
ries of Cumulative Preferred Stock.
Applicable Rate. Except as provided below in
this paragraph, the "Applicable Rate" for any divi-
dend period will be equal to 78% of the highest of:
(A) the Treasury Bill Rate, (B) the Ten Year Constant
Maturity Rate and (C) the Thirty Year Constant Matu-
rity Rate (each as hereinafter defined) for such
dividend period. If the Company determines, in good
faith, that for any reason one or more of (A) the
Treasury Bill Rate, (B) the Ten Year Constant Matu-
rity Rate, and (C) the Thirty Year Constant Maturity
Rate cannot be determined for any dividend period,
then the Applicable Rate for such dividend period
shall be based on the higher of whichever such rates
can be so determined. If the Company determines, in
good faith, that neither (A) the Treasury Bill Rate,
(B) the Ten Year Constant Maturity Rate nor (C) the
Thirty Year Constant Maturity Rate can be determined
for any dividend period, then the Applicable Rate in
effect for the preceding dividend period shall be
continued for such dividend period. Notwithstanding
anything to the contrary herein, the Applicable Rate
for any dividend period shall not be less than 5.50%
per annum or greater than 11.00% per annum.
Treasury Bill Rate. Except as provided below in
this paragraph, the "Treasury Bill Rate" for each
dividend period will be the arithmetic average of the
two most recent weekly per annum market discount
rates (or the one weekly per annum market discount
rate, if only one such rate shall be published during
the relevant Calendar Period, as defined below) for
three-month U.S. Treasury Bills, published by the
Board of Governors of the Federal Reserve System (the
"Federal Reserve Board") during the Calendar Period
immediately prior to the last ten calendar days of
the June, September, December or March, next pre-
ceding the dividend period for which the dividend
rate on the shares of the new series of Cumulative
Preferred Stock is being determined. If the Federal
Reserve Board does not publish such a weekly per an-
num market discount rate during such Calendar Period,
-31-<PAGE>
then the Treasury Bill Rate for such dividend period
shall be the arithmetic average of the two most re-
cent weekly per annum market discount rates (or the
one weekly per annum market discount rate, if only
one such rate shall be published during such Calendar
Period) for three-month U.S. Treasury Bills, pub-
lished during such Calendar Period by any Federal
Reserve Bank or by any U.S. Government department or
agency selected by the Company. If a per annum mar-
ket discount rate for three-month U.S. Treasury Bills
shall not be published by the Federal Reserve Board
or by any Federal Reserve Bank or by any U.S. Gov-
ernment department or agency during such Calendar
Period, then the Treasury Bill Rate for such dividend
period shall be the arithmetic average of the two
most recent weekly per annum market discount rates
(or the one weekly per annum market discount rate, if
only one such rate shall be published during such
Calendar Period) for all of the U.S. Treasury Bills
then having maturities of not less than 80 days nor
more than 100 days, published during such Calendar
Period by the Federal Reserve Board or, if the Fed-
eral Reserve Board shall not publish such rates, by
any Federal Reserve Bank or by any U.S. Government
department or agency selected by the Company. If the
Company determines, in good faith, that no such U.S.
Treasury Bill rates are published as provided above
during such Calendar Period, then the Treasury Bill
Rate for such dividend period shall be the arithmetic
average of the per annum market discount rates based
upon the closing bids during such Calendar Period for
each of the issues of marketable non-interest bearing
U.S. Treasury securities with a maturity of not less
than 80 days nor more than 100 days from the date of
each such quotation, as chosen and quoted daily, for
each business day in New York City (or less fre-
quently if daily quotations shall not be generally
available), to the Company by at least three recog-
nized dealers in U.S. Government securities selected
by the Company. If the Company determines, in good
faith, that for any reason the Company cannot deter-
mine the Treasury Bill Rate for any dividend period
as provided above in this paragraph, then the Trea-
sury Bill Rate for such dividend period shall be the
arithmetic average of the per annum market discount
rates based upon the closing bids during such Calen-
dar Period for each of the issues of marketable
interest-bearing U.S. Treasury securities with a ma-
turity of not less than 80 days nor more than 100
days from the date of each such quotation, as chosen
-32-<PAGE>
and quoted daily for each business day in New York
City (or less frequently if daily quotations shall
not be generally available) to the Company by at
least three recognized dealers in U.S. Government se-
curities selected by the Company. The weekly per
annum market discount rate for three-month U.S.
Treasury Bills shall be the secondary market rate.
Ten Year Constant Maturity Rate. Except as
provided below in this paragraph, the "Ten Year Con-
stant Maturity Rate" for each dividend period shall
be the arithmetic average of the two most recent
weekly per annum Ten Year Average Yields as herein-
after defined (or the one weekly per annum Ten Year
Average Yield, if only one such Yield shall be pub-
lished during the relevant Calendar Period as defined
below), published by the Federal Reserve Board during
the Calendar Period immediately prior to the last ten
calendar days of the June, September, December or
March next preceding the dividend period for which
the dividend rate on the shares of the new series of
Cumulative Preferred Stock is being determined. If
the Federal Reserve Board does not publish such a
weekly per annum Ten Year Average Yield during such
Calendar Period, then the Ten Year Constant Maturity
Rate for such dividend period shall be the arithmetic
average of the two most recent weekly per annum Ten
Year Average Yields (or the one weekly per annum Ten
Year Average Yield, if only one such Yield shall be
published during such Calendar Period), published
during such Calendar Period by any Federal Reserve
Bank or by any U.S. Government department or agency
selected by the Company. If a per annum Ten Year
Average Yield shall not be published by the Federal
Reserve Board or by any Federal Reserve Bank or by
any U.S. Government department or agency during such
Calendar Period, then the Ten Year Constant Maturity
Rate for such dividend period shall be the arithmetic
average of the two most recent weekly per annum av-
erage yields to maturity (or the one weekly per annum
average yield to maturity, if only one such yield
shall be published during such Calendar Period) for
all of the actively traded marketable U.S. Treasury
fixed interest rate securities (other than Special
Securities, as defined below) then having maturities
of not less than eight years nor more than twelve
years, published during such Calendar Period by the
Federal Reserve Board or, if the Federal Reserve
Board shall not publish such yields, by any Federal
Reserve Bank or by any U.S. Government department or
-33-<PAGE>
agency selected by the Company. If the Company de-
termines in good faith that for any reason the Com-
pany cannot determine the Ten Year Constant Maturity
Rate for any dividend period as provided above in
this paragraph, then the Ten Year Constant Maturity
Rate for such dividend period shall be the arithmetic
average of the per annum average yields to maturity
based upon the closing bids during such Calendar Pe-
riod for each of the issues of actively traded mar-
ketable U.S. Treasury fixed interest rate securities
(other than Special Securities) with a final maturity
date not less than eight years nor more than twelve
years from the date of each such quotation, as chosen
and quoted daily for each business day in New York
City (or less frequently if daily quotations shall
not be generally available) to the Company by at
least three recognized dealers in U.S. Government
securities selected by the Company.
Thirty Year Constant Maturity Rate. Except as
provided below in this paragraph, the "Thirty Year
Constant Maturity Rate" for each dividend period
shall be the arithmetic average of the two most re-
cent weekly per annum Thirty Year Average Yields as
hereinafter defined (or the one weekly per annum
Thirty Year Average Yield, if only one such Yield
shall be published during the relevant Calendar Pe-
riod as defined below), published by the Federal Re-
serve Board during the Calendar Period immediately
prior to the last ten calendar days of the June,
September, December or March next preceding the
dividend period for which the dividend rate on the
shares of the new series of Cumulative Preferred
Stock is being determined. If the Federal Reserve
Board does not publish such a weekly per annum Thirty
Year Average Yield during such Calendar Period, then
the Thirty Year Constant Maturity Rate for such div-
idend period shall be the arithmetic average of the
two most recent weekly per annum Thirty Year Average
Yields (or the one weekly per annum Thirty Year Av-
erage Yield, if only one such Yield shall be pub-
lished during such Calendar Period), published during
such Calendar Period by any Federal Reserve Bank or
by any U.S. Government department or agency selected
by the Company. If a per annum Thirty Year Average
Yield shall not be published by the Federal Reserve
Board or by any Federal Reserve Bank or by any U.S.
Government department or agency during such Calendar
Period, then the Thirty Year Constant Maturity Rate
-34-<PAGE>
for such dividend period shall be the arithmetic av-
erage of the two most recent weekly per annum average
yields to maturity (or the one weekly per annum av-
erage yield to maturity, if only one such Yield shall
be published during such Calendar Period) for all of
the actively traded marketable U.S. Treasury fixed
interest rate securities (other than Special Securi-
ties) then having maturities of not less than twenty-
eight years nor more than thirty years, published
during such Calendar Period by the Federal Reserve
Board or, if the Federal Reserve Board shall not
publish such yields, by any Federal Reserve Bank or
by any U.S. Government department or agency selected
by the Company. If the Company determines in good
faith that for any reason the Company cannot deter-
mine the Thirty Year Constant Maturity Rate for any
dividend period as provided above in this paragraph,
then the Thirty Year Constant Maturity Rate for such
dividend period shall be the arithmetic average of
the per annum average yields to maturity based upon
the closing bids during such Calendar Period for each
of the issues of actively traded marketable U.S.
Treasury fixed interest rate securities (other than
Special Securities) with a final maturity date not
less than twenty-eight years nor more than thirty
years from the date of each such quotation, as chosen
and quoted daily for each business day in New York
City (or less frequently if daily quotations shall
not be generally available) to the Company by at
least three recognized dealers in U.S. Government
securities selected by the Company.
Certain Definitions. As used herein: (A) the
term "Calendar Period" means a period of fourteen
calendar days; (B) the term "Special Securities"
means securities which can, at the option of the
holder, be surrendered at face value in payment of
any Federal estate tax or which provide tax benefits
to the holder and are priced to reflect such tax
benefits or which were originally issued at a deep or
substantial discount; (C) the term "Ten Year Average
Yield" means the average yield to maturity for ac-
tively traded marketable U.S. Treasury fixed interest
rate securities (adjusted to constant maturities of
ten years); and (D) the term "Thirty Year Average
Yield" means the average yield to maturity for ac-
tively traded marketable U.S. Treasury fixed interest
rate securities (adjusted to constant maturities of
thirty years).
-35-<PAGE>
(iii) The redemption prices of the shares of said
new series of Cumulative Preferred Stock are hereby
fixed at (A) $106.80 per share in case of redemption
on or before May 31, 1992; (B) $103.00 per share in
case of redemption subsequent to May 31, 1992, and on
or prior to May 31, 1995; and (C) $100.00 per share
in case of redemption subsequent to May 31, 1995,
plus in each case an amount equal to the dividends at
the respective Applicable Rates (as defined above)
per share per annum from the date dividends on the
shares of the new series of Cumulative Preferred
Stock to be redeemed began to accrue to the date
fixed for redemption thereof, less the amount of
dividends theretofore paid thereon; provided, how-
ever, that the shares of said new series of Cumula-
tive Preferred Stock shall not be redeemable, di-
rectly or indirectly, prior to May 31, 1992 with the
proceeds from borrowed funds, or from the issuance of
any preferred stock ranking prior to or on a parity
with the shares of said new series of Cumulative
Preferred Stock as to dividends or on liquidation,
having an effective cost to the Company, computed in
accordance with generally accepted financial prac-
tice, of less than 6.80% per annum.
(iv) The amount which the shares of said new
series of Cumulative Preferred Stock are entitled to
receive in preference to the Common Stock upon any
distribution of assets, other than by dividends from
net earnings or surplus, upon voluntary liquidation
or dissolution of the Company is hereby fixed as the
then redemption price, plus an amount equal to all
dividends accumulated and unpaid thereon.
ARTICLE VI. LIMITATION OF DIRECTOR LIABILITY
A director of the Corporation shall not be personally
liable to the Corporation or its shareholders for monetary
damages for breach of fiduciary duty as a director, except to
the extent provided by applicable law for (i) liability based
on a breach of the duty of loyalty to the Corporation or the
shareholders; (ii) liability for acts or omissions not in good
faith or that involve intentional misconduct or a knowing vio-
lation of law; (iii) liability based on the payment of an im-
proper dividend or an improper repurchase of the Corporation's
stock under Section 180.0833 of the Wisconsin Business Corpo-
ration Law or for liability arising under Section 551.59 of the
Wisconsin Statutes for the unlawful sale of securities; (iv)
liability for any transaction from which the director derived
an improper personal benefit; or (v) liability for any act or
-36-<PAGE>
omission occurring prior to May 28, 1987. If the Wisconsin
Business Corporation Law is further amended to authorize the
further elimination or limitation of the liability of direc-
tors, then the liability of a director of the Corporation in
addition to the limitation on personal liability provided
herein, shall be limited to the fullest extent permitted by any
amendment to the Wisconsin Business Corporation Law. Any re-
peal or modification of this Article by the shareholders of the
Corporation shall not adversely affect any limitation on the
personal liability of a director of the Corporation existing at
the time of such repeal or modification.
ARTICLE VII. AMENDMENT OF BYLAWS
Authority to make and alter the Bylaws of the Corpo-
ration is hereby vested in the Board of Directors of the Cor-
poration, subject to the power of the stockholders to change or
repeal such Bylaws; provided, however, the Board of Directors
shall not make or alter any bylaw fixing their number, quali-
fications, classifications or term of office.
-37-
EXHIBIT (99)-1
[LETTERHEAD OF NORTHERN STATES POWER]
May 1, 1995
NORTHERN STATES POWER, WISCONSIN ENERGY
ANNOUNCE STRATEGIC BUSINESS COMBINATION
Minneapolis, Minn., and Milwaukee, Wis. -- Northern
States Power Company (NYSE: NSP) of Minneapolis, and Wisconsin
Energy Corporation (NYSE: WEC) of Milwaukee, two of the na-
tion's leading utility companies, today announced that they
have signed a definitive agreement to engage in a strategic
business combination.
The merger-of-equals transaction, which was unani-
mously approved by both companies' Boards of Directors, will
join two companies whose current combined market capitalization
is approximately $6.0 billion, and will create the tenth-
largest investor-owned utility company in the United States,
based on market capitalization. For the year ended December
31, 1994, the combined revenues of Wisconsin Energy and North-
ern States Power were $4.2 billion, with assets of more than
$10.0 billion.
In view of both companies' management teams, this
transaction creates a combined enterprise well-positioned for
an increasingly competitive energy industry environment. It is
designed to achieve continued competitive energy rates over the
long term for the companies' respective customers and to en-
hance value for the shareholders of both companies. A pre-
liminary estimate indicates that the merger will result in net
savings of approximately $2.0 billion over 10 years.
Upon completion of the merger, the synergies created
will allow the companies to implement a modest retail electric
rate reduction followed by a rate freeze for retail electric
customers through the year 2000.
As a result of the transaction, a registered public
utility holding company, which will be known as Primergy Cor-
poration (Primergy), will be the parent of both NSP and the
current operating subsidiaries of Wisconsin Energy. Primergy
will serve 2.3 million electric customers and 750,000 natural
gas customers, and its service territory will include portions
of Minnesota, Wisconsin, North Dakota, South Dakota and the
Upper Peninsula of Michigan. The business of Primergy will<PAGE>
consist of utility operations and various non-utility enter-
prises, including independent power projects.
After giving effect to the transaction, holders of
Northern States Power (NSP) common stock will own 1.626 shares
of stock of Primergy for each share of NSP stock they own, and
Wisconsin Energy (WEC) shareholders will own one share of
Primergy common stock for each share of Wisconsin Energy common
stock they own. As of April 20, 1995, Wisconsin Energy had
109.4 million shares outstanding, and Northern States Power had
67.3 million shares outstanding. Accordingly, based on the
number of outstanding common shares, 50% of the common equity
of Primergy would be held by existing Northern States Power
Company shareholders and 50% by existing Wisconsin Energy com-
mon shareholders. The holders of preferred stock of Northern
States Power will receive preferred stock in a successor cor-
poration with identical terms. The preferred stock of Wiscon-
sin Electric Power Company will remain outstanding after the
transaction. It is a condition of closing that the parties
receive an Internal Revenue Service ruling that the exchange of
stock qualifies as a tax-free transaction, and obtain appro-
priate accounting assurances that the transaction will be
accounted for as a pooling of interests.
It is anticipated that Primergy will adopt NSP's
dividend payment level adjusted for the exchange ratio. NSP
currently pays $2.64 per share annually, and WEC's annual div-
idend rate is currently $1.47 per share. Based on the exchange
ratio and NSP's current dividend rate, the pro forma dividend
rate for Primergy would be $1.62 per share. Both companies
have historically increased their dividends consistently, and
anticipate that such policies will continue, both before and
after the merger, subject to earnings performance and regula-
tory constraints.
James J. Howard, chairman, president and chief exec-
utive officer of NSP, said: "This transaction is the best and
most financially conservative way to ensure continued competi-
tive rates over the long term for the customers of both compa-
nies. By doing that, we will help our communities attract new
business, add jobs and strengthen the economy in our combined
service territory. That, in turn, will position the combined
company to build long-term value for all its shareholders --
many of whom are also customers."
Richard A. Abdoo, chairman, president and chief ex-
ecutive officer of Wisconsin Energy Corporation, said: "This
merger gets us in front of the changing energy marketplace. We
are initiating a thoughtful combining of resources and talents
to manage successfully in the much more demanding times ahead.<PAGE>
Our common goal is to be a premier investor-owned energy com-
pany -- in meeting customer needs, having competitive rates and
creating shareholder value."
Following completion of the merger, Howard, 59, will
serve as chairman and chief executive officer of Primergy.
Abdoo, 51, will become vice chairman, president and chief op-
erating officer of Primergy. Abdoo will become chief executive
officer of Primergy in May 1998. Howard will continue as
chairman of the new company until his expected normal retire-
ment date in July 2000, at which time Abdoo will become chair-
man.
After the merger, Northern States Power Company and
Wisconsin Energy Company (a consolidation of Wisconsin Energy's
existing utility subsidiaries Wisconsin Electric Power Company
and Wisconsin Natural Gas Company) will continue to operate
under those names as the principal subsidiaries of Primergy.
It is anticipated that, following the merger, NSP-Wisconsin
will merge into Wisconsin Energy. The headquarters of the two
utilities will remain in their current locations, NSP's in
Minneapolis and Wisconsin Energy's in Milwaukee. The head-
quarters of Primergy, a Wisconsin corporation, will be in Min-
neapolis. The Board of Directors of Primergy will be composed
of six current directors of NSP and six current directors of
WEC.
"The benefits of this strategic combination for
shareholders are expected to be substantial," Howard said.
"Value will be obtained from the strengthening and improved
cost-efficiency of our combined product lines. The profes-
sional, productive attitudes of both employee groups will com-
bine to enhance solid traditions of quality customer service."
"We intend to be a winner in the new market ahead,"
Abdoo stated, "and that means first and foremost a clear focus
on customers. Knowing what our customers want, and meeting
those needs quickly, efficiently and with quality is what this
merger of two great companies is all about."
According to Howard and Abdoo, an additional benefit
of the merger is that it will leverage the complementary envi-
ronmental expertise and leadership of both companies. The
combined entity will utilize the most efficient, least-pol-
luting generation sources available to provide customers with
reliable electricity systemwide.
Both NSP and WEC recognize that the divestiture of
their existing gas operations and certain non-utility opera-
tions is a possibility under the new registered holding company<PAGE>
structure, but will seek approval from the Securities and Ex-
change Commission to maintain such businesses. If divestiture
is ultimately required, the SEC has historically allowed com-
panies sufficient time to accomplish divestitures in a manner
that protects shareholder values.
The merger is subject to approval by the shareholders
of both companies and various regulatory agencies including the
Securities and Exchange Commission; the Federal Energy Regula-
tory Commission; state regulators in Minnesota, Wisconsin and
certain other states where the companies conduct business; and
the Nuclear Regulatory Commission. The merger is also subject
to the termination or expiration of the applicable waiting pe-
riod under the Hart-Scott-Rodino Antitrust Improvements Act.
It is expected that preliminary proxy materials will be filed
with the Securities and Exchange Commission in the near future.
While the timing of the regulatory process cannot be predicted
with certainty, the parties currently expect completion of the
transaction in the fourth quarter of 1996.
# # #
Wisconsin Energy Corporation
Wisconsin Energy (WEC), headquartered in Milwaukee,
is a holding company with seven wholly owned subsidiaries and
approximately 5,000 employees. The utility subsidiaries are
Wisconsin Electric Power Company (WEPCO) and Wisconsin Natural
Gas Company (WNG).
WEPCO serves about 945,000 electric customers in
three non-contiguous areas which include southeastern Wisconsin
(including the Milwaukee area), eastern Wisconsin (including
Appleton), and northeastern Wisconsin and the Upper Peninsula
of Michigan. WEPCO also sells steam utility service in down-
town Milwaukee to both space heating and manufacturing cus-
tomers.
WEC's electric energy mix is 64% coal, 27% nuclear,
7% purchased power and 2% other. The Point Beach nuclear units
1 and 2 provide 19% of company-owned generating capability.
WNG services about 350,000 gas customers in south-
eastern Wisconsin, the Fox Valley, and in the Prairie du Chien
area. In 1994, WNG acquired Wisconsin Southern Gas Company,
Inc. If regulatory approvals are obtained, WNG will merge with
WEPCO December 31, 1995.
Wisconsin Energy's non-utility subsidiaries --
WisPark Corp., Witech Corp., Wisvest Corp., Badger Service Co.,<PAGE>
and Wisconsin Michigan Investment Corp. -- are devoted prima-
rily to stimulating economic growth in the utilities' service
territories and to capitalizing on diversified investment op-
portunities for shareholders.
Northern States Power Company
Northern States Power Company (NSP), with headquar-
ters in Minneapolis, serves customers in Minnesota, Wisconsin,
North Dakota, South Dakota and Michigan. NSP generates,
transmits and distributes electricity to about 1.4 million
customers and distributes natural gas to approximately 400,000
customers. The company employs approximately 7,000 people.
NSP-Minnesota operates in Minnesota, North Dakota and
South Dakota. NSP-Wisconsin is a wholly owned subsidiary op-
erating in Wisconsin and the Upper Peninsula of Michigan.
NSP's electric energy mix is 48% coal, 28% nuclear,
20% purchased power and 4% hydro and renewables. NSP's Prairie
Island and Monticello nuclear plants provide 22% of company-
owned generating capability.
NRG Energy, Inc., with headquarters in Minneapolis,
is a wholly owned subsidiary operating non-regulated energy
business activities.
Cenergy, Inc., a wholly owned subsidiary of NSP,
markets natural gas and energy-related services throughout the
United States. In December 1994, the Federal Energy Regulatory
Commission granted the company a license to also market elec-
tricity.
Viking Gas Transmission Company, also a wholly owned
subsidiary, owns and operates a 500-mile natural gas pipeline
serving the Upper Midwest. The pipeline provides transporta-
tion services and has direct access to four major interstate
and international pipelines linked to the majority of natural
gas supplies in North America. <PAGE>
CONTACTS
For Northern States Power Company For Wisconsin Energy Corporation
Investor inquiries: Investor inquiries:
Dick Kolkmann Cal Baker
612/330-6622 414/221-2126
Jackie Currier Jeff West
612/330-6020 414/221-2590
Jim McIntyre
612/330-7712
Media inquiries: Media inquiries:
Margaret Papin Rick James
612/337-2167 414/221-4444 (Monday, 5/1)
414/221-3818 (Tuesday, 5/2 and
following)
