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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
WISCONSIN ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
1-9057
(Commission file number)
Wisconsin 39-1391525
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
231 West Michigan Street, P.O. Box 2949, Milwaukee, Wisconsin 53201
(Address of principal executive offices) (Zip Code)
(414) 221-2345
(Registrant's telephone number, including area code)
NOT APPLICABLE
-------------------------------------------------------------
(Former name or former address, if changed since last report)
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FORM 8-K
WISCONSIN ENERGY CORPORATION
----------------------------
ITEM 5. OTHER EVENTS
MERGER AGREEMENT WITH NORTHERN STATES POWER COMPANY
Wisconsin Energy Corporation, a Wisconsin corporation ("WEC"), Northern States
Power Company, a Minnesota corporation ("NSP"), 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 subsidiary of WEC
("WEC Sub"), have entered into an Agreement and Plan of Merger, dated as of
April 28, 1995 (the "Merger Agreement"), which provides for a strategic
business combination involving NSP and WEC in a "merger-of-equals" transaction
(the "Transaction"). The Transaction, which was unanimously approved 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
approval process is expected to take approximately 12 to 18 months.
In the Transaction, the holding company of the combined 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 New NSP (which, for regulatory reasons, will
reincorporate in Wisconsin) and 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 ("WNG"),
which is anticipated to be merged into WEPCO by year-end 1995, pending
regulatory approval, as previously planned. It is anticipated that, following
the Transaction, NSP's Wisconsin utility subsidiary, Northern States Power
Company, a Wisconsin corporation, 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, par value $2.50 per share, of NSP will be cancelled and
converted 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
Agreement, 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
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(including dividend rights) and designations. WEPCO's outstanding preferred
stock will 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 dividend 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 conditions, 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
necessary 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") and the Nuclear Regulatory Commission, and the filing
of the requisite notification 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'
independent 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 registration statement to be filed by
WEC with the SEC with respect to shares of 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.)
Shareholder meetings to vote upon the Transaction will be convened 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. Generally, the parties must carry on their
businesses in the ordinary 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, acquisitions, dispositions, incurrence of indebtedness, certain
increases in employee compensation and benefits, and affiliate transactions.
(See Article VI of the Merger Agreement.)
The Merger Agreement provides that, after the effectiveness 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 Effective 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,
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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 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 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 Directors of the
other party shall withdraw or adversely modify its recommendation of the
Transaction or shall approve any competing transaction; or (7) by either party,
under certain circumstances, as a result of a third-party tender offer or
business combination proposal which such party, pursuant to its directors'
fiduciary duties, is, in the opinion of such party's counsel and after the other
party has first been given an opportunity to make concessions and adjustments in
the terms of the Merger Agreement, required to accept.
The Merger Agreement provides that if a breach described 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 withdrawn 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
combination with such third party, then such breaching party, upon the signing
of a definitive agreement relating to such a business 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, recommend the
Transaction to its shareholders; (ii) at the time of such termination or prior
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to the meeting of such party's shareholders there shall have been a third-party
tender offer or business combination proposal which shall not have been rejected
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 termination 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 irrevocable 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 of NSP common stock or $27.675 per share of WEC common stock, as the
case may be, 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
combination. Any party whose option becomes exercisable (the "Exercising
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).
Primergy is expected to be the tenth-largest investor-owned utility company in
the United States based on the $6.0 billion current combined market
capitalization of WEC and NSP. For the year-ended December 31, 1994, the
combined revenues of WEC and NSP were $4.2 billion, with total assets of more
than $10 billion. Primergy will serve approximately 2.3 million electric
customers and 750,000 natural gas customers. Its service territory will include
portions of Minnesota, Wisconsin, North Dakota, South Dakota and the Upper
Peninsula of Michigan. The business of Primergy will consist of utility
operations and various non-utility enterprises, including independent power
projects.
A preliminary estimate indicates that the Transaction will result in net savings
of approximately $2.0 billion in costs over 10 years. The synergies created by
the Transaction will allow the companies to implement a reduction in electric
retail rates followed by a rate freeze for electric retail customers through the
year 2000.
Following announcement of the Transaction, on May 1, 1995 Standard & Poor's
Corporation ("S&P") reported that it was placing on CreditWatch with negative
implications its AA+ senior secured debt and AA+ preferred stock ratings of
WEPCO
and its AA senior unsecured debt rating of Wisconsin Michigan Investment
Corporation (a non-utility subsidiary of WEC). In addition, S&P indicated that
while its AA senior secured debt rating of WNG would remain on CreditWatch,
where
it was placed on April 25, 1994, the implications were revised to negative from
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positive. S&P stated that if the Transaction is completed, the likely credit
rating for the senior secured debt of WEPCO is expected to be AA or AA-. As
part
of its ratings process, S&P intends to review the financial and operating plans
of the merged utilities. Also on May 1, 1995, citing WEPCO's continued
operation
as a separate utility subsidiary after the Transaction, its strength within its
rating category and its strong capital structure, Moody's Investors Service
confirmed its Aa2 first mortgage bond rating of WEPCO.
Both NSP and WEC recognize that the divestiture of their existing gas operations
and certain non-utility operations 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 historically
allowed companies sufficient time to accomplish divestitures in a manner that
protects shareholder value.
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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. (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 Energy Corporation and Northern States Power
Company.
4 Committees of the Board of Directors of Primergy Corporation.
5 Form of Employment Agreement of James J. Howard.
6 Form of Employment Agreement of Richard A. Abdoo.
7 Form of Amended and Restated Articles of Incorporation of
Northern Power Wisconsin Corp.
(99)-1 Press Release, dated May 1, 1995, of Wisconsin Energy
Corporation.
____________________
(1) The registrant agrees to furnish supplementally any omitted exhibits or
schedules to the Commission upon request.
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FORM 8-K
WISCONSIN ENERGY CORPORATION
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WISCONSIN ENERGY CORPORATION
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(Registrant)
/s/ J. G. Remmel
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Date: May 3, 1995 J. G. Remmel, Vice President, Treasurer
and Chief Financial Officer
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WISCONSIN ENERGY CORPORATION
____________________________
EXHIBIT INDEX
Current Report on Form 8-K
Report Dated April 28, 1995
Exhibit
Number
-------
(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.
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.
5 Form of Employment Agreement of James J. Howard.
6 Form of Employment Agreement of Richard A. Abdoo.
7 Form of Amended and Restated Articles of Incorporation of
Northern Power Wisconsin Corp.
(99)-1 Press Release, dated May 1, 1995, of Wisconsin Energy
Corporation.
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EXHIBIT (2)-1
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
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TABLE OF CONTENTS
Page
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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
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Page
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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
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Page
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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
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Page
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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
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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>
<PAGE> 7
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>
<PAGE> 8
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>
<PAGE> 9
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 Effective 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 approved 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 EXHIBIT 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 intended
that the parties hereto and their respective stockholders will
recognize no gain or loss for federal income tax purposes as a
result of the consummation of the Mergers;
NOW THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained
herein, the parties hereto, intending to be legally bound hereby,
agree as follows:
ARTICLE I
THE MERGERS
Section 1.1 THE MERGERS. Upon the terms and subject to
the conditions of this Agreement:
(i) At the Reincorporation Effective Time (as defined 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>
<PAGE> 10
NSP shall be the surviving corporation in the Reincorporation
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
SECTION 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 corporation in the
NSP Merger and shall continue its corporate 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 incorporation
of New NSP, as in effect immediately prior to the Reincorporation
Effective Time, shall be the articles of incorporation of the
surviving corporation in the Reincorporation Merger until
thereafter amended as provided by law and such articles of in-
corporation, and (ii) the by-laws of New NSP, as in effect im-
mediately 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 Minnesota 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 surviving 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
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<PAGE> 11
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 Secretary 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 Reincorporation Merger shall become
effective at the time specified in the articles of merger filed
with respect to the Reincorporation Merger (the "REINCORPORATION
EFFECTIVE TIME"). The NSP Merger shall become effective at the
time specified in the articles 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 cancelled 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 consideration 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>
<PAGE> 12
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 cancelled and
converted into the right to receive one fully paid and, sub-
ject to Section 180.0622(2)(b) of the WBCL, as judicially
interpreted, non-assessable share of Cumulative Preferred
Stock, par value $100.00 per share, of New NSP ("NSP PREFERRED
STOCK") with identical rights (including dividend rates) and
designations to the cancelled share of Old NSP Preferred
Stock. Upon such cancellation, 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 SECTION 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 subsidiaries 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 interpreted, 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 "COMPANY 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 thereto, 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
Section 2.3.
-4-<PAGE>
<PAGE> 13
(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 represent 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 practicable
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 Reincorporation
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>
<PAGE> 14
Company Common Stock (the "COMPANY SHARES") pursuant to SECTION 2.1
and (y) to each holder of record of a certificate or certificates
(the "PREFERRED CERTIFICATES" and together with the Common Certifi-
cates, the "CERTIFICATES") which immediately prior to the
Reincorporation Effective Time represented outstanding 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 effected, and risk of loss and title to the
Certificates shall pass, only upon actual delivery of the
Certificates to the Exchange Agent) and (ii) instructions for use
in effecting the 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 pursuant 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, accompanied 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 Certificate 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
SECTION 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>
<PAGE> 15
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 surrender 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 therefor, 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 distributions 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 entitled 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 multiplied by the average of the last reported sales
price, regular 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 exchanged 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 exchanged
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
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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 immediately 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 mutually 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 organized, 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 authorized 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 properties 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
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<PAGE> 17
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 Section 4.2 of the NSP
Disclosure Schedule and (c) the term "DIRECT 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, including (a) the
name of each such entity and NSP's interest therein, 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 public 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, restrictions, arrangements,
rights or warrants, including any right of conversion or exchange
under any outstanding security, instrument 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 commitment. As used in this Agreement, (a) the
term "JOINT VENTURE" of a person shall mean any corporation or
other entity (including partnerships and other business asso-
ciations) 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
VENTURE" 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
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<PAGE> 18
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 Sub-
sidiary 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 contributions 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 invest-
ment in the NSP Unrestricted 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, contracts, voting trusts, proxies or other commitments,
understandings, restrictions, arrangements, rights or warrants, in-
cluding any right of conversion or exchange under any outstanding
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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<PAGE> 19
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 transactions
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, constitutes the valid and binding obligation of
NSP enforceable against it in accordance with its terms.
(b) NON-CONTRAVENTION. Except as set forth in Section
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 contemplated 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 termination or modification 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 result in the creation of any
material lien, security interest, charge or encumbrance upon any of
the properties 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 acceleration,
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, injunction, 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 respective properties or assets or
(iii) subject to obtaining the third-party consents set forth in
Section 4.4(b) of the NSP
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<PAGE> 20
Disclosure Schedule (the "NSP REQUIRED CONSENTS") any material
note, bond, mortgage, indenture, deed of trust, license, franchise,
permit, concession, contract, lease or other instrument, obligation
or agreement of any kind to which NSP or any of 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 "obtaining" such
NSP Required Statutory Approvals shall mean making such
declarations, filings or registrations; giving such notices;
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 investigation 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 environmental law, ordinance or regulation) of any
Governmental Authority. 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
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<PAGE> 21
articles of incorporation or by-laws or (ii) any material contract,
commitment, agreement, indenture, mortgage, loan agreement, 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 Federal 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 Regulatory Commission ("NRC") or the
appropriate state public utilities commission, as the case may be,
including all forms, statements, reports, agreements (oral or
written) and all documents, exhibits, amendments and supplements
appertaining thereto, and complied, as of their respective dates,
in all material respects with all applicable requirements of the
appropriate 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 amended, the "NSP SEC
REPORTS"). As of their respective dates, the NSP SEC Reports did
not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited consolidated
financial statements and unaudited interim financial statements of
NSP included in the NSP SEC Reports (collectively, the "NSP
FINANCIAL STATEMENTS") have been prepared in accordance with
generally accepted accounting 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
operations 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 complete 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 Disclosure
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 Disclosure
Schedule, (i) there are no material claims, suits, actions or
proceedings, pending or, to the knowledge of NSP, threatened, nor
are there, to the knowledge of NSP, any material investigations 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, instrumentality or authority or any arbitrator
applicable to NSP or any of the NSP Subsidiaries.
Section 4.8 REGISTRATION STATEMENT AND PROXY STATEMENT.
None of the information supplied or to be supplied by or on behalf
of NSP for inclusion or incorporation by reference in (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 STATEMENT") 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 misleading 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
regulations 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, estimated, stamp, custom
duties, severance or withholding taxes or charges imposed by any
governmental entity, and includes any interest and penalties (civil
or criminal) on or additions to any such taxes. "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 Disclosure
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, complete 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 prescribed
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 assets
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 outstanding
waivers or comparable consents regarding the application 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 examined 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 currently
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 legally 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 received from any taxing
authority relating to any Tax Return 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 allocating
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 transactions
contemplated hereunder, separately or in the aggregate, 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 employee
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 control 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 circumstances
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
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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 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 NSP Benefit Plans,
individually and in the aggregate, no event has occurred, 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 (including, without limitation,
any liability to any such plan or the Pension Benefit Guaranty
Corporation (the "PBGC")), or under 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 continuation 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 available to
WEC a true and correct copy of each collective bargaining 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 provider or investment management agreement
(including all amendments to each such document), (iv) the most
recent determination 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, employee, 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 accelerated, vested or payable
and (ii) neither NSP nor any of
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the NSP Subsidiaries is a party to (A) any management, employment,
deferred compensation, severance (including any payment, right or
benefit resulting from a change in control), bonus or other
contract for personal services with any officer, director or
employee, (B) any consulting contract with any person who prior to
entering into such contract was a director or officer of NSP, or
(C) any plan, agreement, arrangement or understanding similar to
any of the foregoing.
(h) LABOR AGREEMENTS. As of the date hereof, neither
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 Subsidiaries, 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 Section 4.10(h) of the NSP Disclosure
Schedule, (i) there is no unfair labor practice, employment
discrimination or other material 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 respect 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 Subsidiaries 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.
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(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 Environmental
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 operation of law.
(e) PREDECESSORS. NSP has no knowledge, with respect 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 believes
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 required 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 (including, without
limitation, potential responsibility for or liability for en-
forcement, investigatory costs, cleanup costs, governmental
response costs, removal costs, remedial costs, natural-
resources damages, property damages, personal injuries or
penalties) arising out of, based on or resulting from (A) the
presence, or Release or threatened Release into the
environment, of any Hazardous Materials 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 Ventures (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, indemnification, 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 subsurface 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 manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials.
(iii) "HAZARDOUS MATERIALS" means (a) any petroleum or
petroleum products, radioactive materials, asbestos in any
form that is or could become friable, urea formaldehyde 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", "restricted hazardous wastes",
"toxic substances", "toxic
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pollutants", or words of similar import, under any Envi-
ronmental Law; and (c) any other chemical, material, substance
or waste, exposure to which is now prohibited, limited or
regulated under any Environmental Law in a jurisdiction in
which NSP or any of 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, dispersal,
leaching or migration into the atmosphere, soil, surface
water, groundwater or property.
Section 4.12 REGULATION AS A UTILITY. NSP is regulated
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 company" or "affiliate" of NSP is
subject to regulation as a public utility or public service company
(or similar designation) by any other state in the United States 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' APPROVAL") 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 transactions 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
Subdivision 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", except where otherwise
defined herein, shall mean, as to any person, any other person
which directly or indirectly controls,
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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 partnership 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 provisions
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 January 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 Disclosure 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 purposes of
Section 13(d) of the Exchange Act) any shares of WEC Common Stock.
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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 organized, 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 authorized 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 properties 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 Section 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 Subsidiaries 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 issued and outstanding shares of
capital stock of each WEC Subsidiary are validly issued, fully
paid, nonassessable (subject to Section 180.0622(2)(b) of the WBCL,
as judicially interpreted) and free of preemptive rights, and are
owned directly or indirectly by WEC free and clear of any liens,
claims, encumbrances, 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, arrangements,
rights or warrants, including any right of conversion or
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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 obligations 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 guarantees or other
obligations with respect to, WEC Unrestricted Subsidiaries, except
for loans, capital contributions, guarantees 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 investment 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 issued, 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 Wisconsin 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%
Preferred 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 PREFERRED
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 Preferred 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, contracts,
voting trusts, proxies or other commitments, understandings,
restrictions, arrangements, rights or warrants, including any right
of conversion or exchange under any outstanding security,
instrument or other agreement, obligating 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 transactions
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, constitutes the valid and binding obligation of
WEC enforceable against it in accordance with its terms.
(b) NON-CONTRAVENTION. Except as set forth in Section
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 contemplated 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, injunction, 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
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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, concession, contract, lease or
other instrument, obligation or agreement of any kind to which WEC
or any of the WEC Subsidiaries 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 Option
Agreement by WEC or the consummation by WEC of the transactions
contemplated hereby or thereby, except as described in Section
5.4(c) of the WEC Disclosure Schedule (the "WEC REQUIRED STATUTORY
APPROVALS", it being understood that references in this Agreement
to "obtaining" such WEC Required Statutory Approvals shall mean
making such declarations, filings or registrations; giving such
notices; 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 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 investigation 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 environmental 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 contract, commitment,
agreement, indenture, mortgage, loan agreement, note, lease, bond,
license, approval or other instrument
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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 utilities commission, as the
case may be, including all forms, statements, reports, agreements
(oral or written) and all documents, exhibits, amendments and
supplements appertaining thereto, and complied, as of their
respective dates, in all material respects with all applicable
requirements of the appropriate 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
amended, the "WEC SEC REPORTS"). As of their respective dates, the
WEC SEC Reports did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The
audited consolidated financial statements and unaudited interim
financial statements of 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 respect 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 unaudited interim financial statements,
to normal, recurring audit adjustments. True, accurate and
complete copies of the Restated Articles of Incorporation and by-
laws of WEC, as in effect on the date hereof, are included (or
incorporated by reference) 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 Disclosure
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 Disclosure
Schedule, (i) there are no material claims, suits, actions or
proceedings, pending or, to the knowledge of WEC, threatened, nor
are there, to the knowledge of WEC, any material investigations 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, instrumentality or authority or any arbitrator
applicable to WEC or any of the WEC Subsidiaries.
Section 5.7 REGISTRATION STATEMENT AND PROXY STATEMENT.
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 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 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
regulations 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, complete 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 prescribed
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 assets
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 outstanding
waivers or comparable consents regarding the application 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 examined 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 currently
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 received from any taxing
authority relating to any Tax Return 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 allocating
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 transactions
contemplated hereunder, separately or in the aggregate, 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, including,
but not limited to, any employee benefit plans within the
meaning of Section 3(3) of ERISA and any severance 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 meaning 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 determination. 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 applicable 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 indemnity agreement to which WEC is a
party, excluding liability 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 available to
NSP a true and correct copy of each collective bargaining
agreement to which WEC or any of the WEC Subsidiaries 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, insurance contract, service provider
or investment management
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agreement (including all amendments to each such document),
(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 occurrence
of any additional or further acts or events) result in any (A)
payment (whether of severance pay or otherwise) becoming due
from WEC or any of the WEC Subsidiaries to any officer,
employee, former employee or director thereof or to the
trustee under any "rabbi trust" or similar arrangement, or (B)
benefit under any WEC Benefit Plan being established or
becoming accelerated, vested 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), 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 WEC, or (C) any
plan, agreement, arrangement or understanding similar to any
of the foregoing.
(h) LABOR AGREEMENTS. As of the date hereof, neither
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 knowledge 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 representative
thereof) or employee group to organize any such employees.
Except as disclosed in the WEC SEC Reports filed prior to the
date hereof or in Section 5.10(h) of the WEC Disclosure Sched-
ule, (i) there is no unfair labor practice, employment
discrimination or other material 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, slowdown 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 investigation 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 indemnifi-
cation 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 Subsidiaries is
in material compliance with all applicable Environmental Laws;
and neither WEC nor any of the WEC Subsidiaries has received
any communication (written or oral), from any person or
Governmental Authority that alleges 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 liability 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 reasonably
likely to form the basis of any material Environmental Claim
against WEC or any of the WEC Subsidiaries, or against any
person or entity whose liability for any material En-
vironmental Claim WEC or any of the WEC Subsidiaries has or
may have retained or assumed either contractually or by
operation of law.
(e) PREDECESSORS. WEC has no knowledge, with respect to
any predecessor of WEC or any of the WEC Subsidiaries, 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 material
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 equipment
currently required or known to be required in the future; (ii)
current WEC remediation costs or WEC remediation 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 regulated
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 Wisconsin 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 designation) 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 Articles 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 Agreement, including the granting
or exercise of the WEC Stock Option 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 Common 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 January 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 Disclosure 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 termination 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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<PAGE> 45
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 heretofore
conducted and use all commercially reasonable efforts to
preserve intact their present business organizations and
goodwill, preserve the goodwill and relationships with
customers, suppliers and others having business dealings with
them and, subject to prudent management of workforce needs and
ongoing 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 respect 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 respective 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,
combine or reclassify any of their capital stock or issue or
authorize or propose the issuance of any other securities in
respect of, in lieu of, or in substitution for, shares of
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
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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 determines such course of action will
facilitate the transactions 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, dispose 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 Subsidiaries (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 issued for general corporate purposes, including
issuances in connection 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; and (ii), in the
case of NSP and the NSP Subsidiaries (x) in connection with
refunding of Old NSP 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 2,900,000 shares of NSP Common
Stock to be issued for general corporate purposes, including
issuances in connection 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
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shall promptly furnish to each other such information as may
be reasonably requested including financial information 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 Securities Act and other
documents necessary in connection with issuance of securities
as contemplated by this SECTION 6.1(c), subject to obtaining
customary indemnities.
(d) CHARTER DOCUMENTS. Except as set forth in Section
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 contemplated herein.
(e) NO ACQUISITIONS. Except as set forth in Section
6.1(e) of the NSP Disclosure Schedule or the WEC Disclosure
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 expenditures, as set
forth in such Section 6.1(e) of the NSP Disclosure Schedule or
the WEC Disclosure Schedule, singularly 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, partnership, 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 ordinary 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 Disclosure
Schedule or the WEC Disclosure Schedule or as required by law,
no party shall, nor shall any party permit any of its Direct
Subsidiaries to, (i) make capital expenditures in excess of
$100 million over the amount budgeted 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 Disclosure
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 assets, other than
encumbrances or dispositions in the ordinary course of its
business consistent with past practice.
(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 issuance
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 contract, agreement, com-
mitment, arrangement, plan or policy maintained by, con-
tributed to or entered into by such party or any of its Direct
Subsidiaries, or increase, or enter into any contract,
agreement, commitment or arrangement to increase in any
manner, the compensation or fringe benefits, or otherwise to
extend, expand or enhance the engagement, employment or any
related rights, of any director, officer or other employee of
such party or any of
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its Direct Subsidiaries, except for normal increases in the
ordinary course of business consistent with past practice
that, in the aggregate, do not result in a material increase
in benefits or compensation expense to 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 director or officer or other
employee other than in the ordinary 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 Direct
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 contemplated by this Agreement for approval
to the extent required 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 additional
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 additional
generating, transmission or delivery capacity except 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, regulation or GAAP.
(m) POOLING. No party shall, nor shall any party permit
any of its subsidiaries to, take any action which
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would, or would be reasonably likely to, 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, 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 subsidiaries) 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 representatives 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, properties, 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 reasonably 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 filings 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
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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 effecting 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 prospective 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 result in a
material breach of any provision of this Agreement, the NSP
Stock Option Agreement or the WEC Stock Option Agreement, as
the case may be, or in any of its representations 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 Richard
A. Abdoo ("MR. ABDOO"). The Task Force shall examine 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 contemplated 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 Disclosure 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 controversy 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 December 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, discharge 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 financial statements (or the
notes thereto) of such party included in such party's reports
filed with the SEC, or incurred in the ordinary course of
business consistent with past practice.
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(y) CONTRACTS. No party shall, except in the ordinary
course of business consistent with past practice, modify,
amend, terminate, renew or fail to use reasonable business
efforts to renew any material contract or agreement 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 responsible
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 contributions to, or to
undertake any guarantees or other obligations 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 referenced in SECTION 6.1(e)) in the
aggregate to all NSP Unrestricted Subsidiaries; and WEC will
not make, and will not permit any WEC Subsidiary to make, any
additional investments 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 ag-
gregate 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 Subsidiaries
to, afford to the officers, directors, employees, accountants,
counsel, investment bankers, financial advisors and other rep-
resentatives of the other (collectively, "REPRESENTATIVES")
reasonable access, during normal business hours throughout the
period prior to the Effective Time, to all of its properties,
books, contracts, commitments and records (including, but not
limited to, Tax Returns) and, during such period, each party shall,
and shall cause its 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,
directors, 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 information 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 confidence all documents and information
concerning the other furnished 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
AGREEMENT").
Section 7.2 JOINT PROXY STATEMENT AND REGISTRATION
STATEMENT.
(a) PREPARATION AND FILING. The parties will prepare
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 reasonably
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 corporation 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 Statement. 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 issuance. The information provided by any party
hereto for use in the Joint Proxy/Registration Statement shall be
true and correct 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/Registration
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 reasonably
satisfactory to WEC and customary in scope and substance for "cold
comfort" letters delivered by independent public accountants 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 Common 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 hereby. 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 consummate the transactions
contemplated by this Agreement, including, 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 Directors, 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 Directors,
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 Shareholders'
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' INDEMNIFICATION.
(a) INDEMNIFICATION. To the extent, if any, not
provided by an existing right of indemnification or other agreement
or policy, from and after the Effective Time, 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 PARTIES") 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 asserted 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 Effective
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 affirmation 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 Restated 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 significant
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 favorable than the terms
of such current insurance coverage; PROVIDED, HOWEVER, that the
Company shall not be required to expend in any year an amount in
excess of 200% of the annual aggregate premiums currently paid by
NSP and WEC for such insurance; 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 available, 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 respective 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 DISCLOSURE
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 collectively referred to herein as
the "DISCLOSURE SCHEDULES". The Disclosure Schedules constitute an
integral part of this Agreement and modify the respective
representations, warranties, covenants or agreements of the parties
hereto contained herein to the extent that such representations,
warranties, covenants or agreements expressly refer to the
Disclosure Schedules. 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 contemplated
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 withheld).
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Section 7.8 RULE 145 AFFILIATES. Within 30 days after
the date of this Agreement, NSP shall identify in a letter 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, respectively, 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 referred 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 MATTERS.
(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 intended 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 collective
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 objectives 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 terminated or jobs are eliminated by the
Company or any of its subsidiaries during such period shall be
entitled to participate on a fair and equitable basis in the job
opportunity and employment placement programs offered by the
Company or any of its subsidiaries. Any workforce reductions
carried out following 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 Notifi-
cation 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. Subject
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 Direct 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, HOWEVER, 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 period of
not less than one year following the Effective Time benefits, other
than with respect to plans referred to in SECTION 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 limitation 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 eligibility to receive benefits under
any benefit plan of the Company or any of its subsidiaries or af-
filiates 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 par-
ticipant 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 subsidiary, 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 INCENTIVE 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
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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 supersede 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 annual 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 "COMMITTEE"). 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 requirements 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
compensation 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 approval
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 approval 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 Supplemental Executive Re-
tirement 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 Compensation 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 arrangements, 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 severance
plans substantially in the forms attached hereto as Exhibits
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 conditions 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 exercise 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 pursuant to the NSP Merger in
accordance with ARTICLE II had such holder been the absolute owner,
immediately before the Effective Time, of the shares of NSP Common
Stock on which such NSP Stock Award is based, and otherwise on the
same terms and conditions as governed such NSP Stock Award
immediately before the Effective Time. At the Effective Time, the
Company shall assume 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
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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 Ownership
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 shareholder 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 appropriate
forms), with respect to the shares of Company Common Stock subject
to such Stock Plan to the extent such registration statement is
required under applicable law, and the Company shall use its best
efforts to maintain the effectiveness of such registration
statements (and maintain the current status of the prospectuses
contained therein) for so long as such benefits and grants remain
payable and such options remain outstanding. With respect to those
individuals who subsequent to the Mergers will be subject to the
reporting requirements under Section 16(a) of the Exchange Act, the
Company shall administer 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 subsidiaries that
are not Direct Subsidiaries to, and shall use its best efforts to
cause such persons not to, directly or indirectly: initiate,
solicit or encourage, or take any action to facilitate the making
of any offer or proposal which constitutes or is reasonably likely
to lead to, any Business Combination Proposal (as defined below),
or, in the event of an unsolicited 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 negotiations 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
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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 terminated 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 combination involving any party to
this Agreement or any of its material 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 Agreement 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 Directors 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 contracts
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 Officer
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 SECTION 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 Company 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 (including 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 offices 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 employment
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 otherwise determined by the
Board of Directors of WEPCO and New NSP.
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(c) CHARITIES. After the Effective Time, the Company
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 respective 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 incurred 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 consummate
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 Mergers which are not satisfied or waived are
receipt of any one or more of the NSP Required Consents, NSP
Required Statutory Approvals, WEC Required Consents, WEC Required
Statutory Approvals 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 Mergers
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 necessary
for the effectuation of such alternative business combination 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 satisfied 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 located in the
State of Wisconsin such that, upon such transfer, New NSP shall be
a Wisconsin utility for purposes of considering its assets as
assets of a public utility affiliate in the determination made un-
der 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 substantially
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 incorporation 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, except, 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 effect, and the
Mergers and the other transactions contemplated hereby shall
not have been prohibited under any applicable federal or state
law or regulation.
(c) REGISTRATION STATEMENT. The Registration Statement
shall have become effective in accordance with the provisions
of the Securities Act, and no stop order suspending such
effectiveness shall have been issued and remain in effect.
(d) LISTING OF SHARES. The shares of 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 below)
and such Final Orders do not impose terms or conditions 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 prospective 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 ORDER" 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 contemplated hereby may be consummated has
expired, and as to which all conditions to the consummation of
such transactions prescribed by law, regulation or order have
been satisfied.
(f) DISSENTERS' RIGHTS. The number of NSP Dissenting
Shares shall not constitute more than 5% of the number of
issued and outstanding shares of Old NSP Common Stock
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and Old NSP Preferred Stock, taken together as a single class,
for this purpose.
(g) POOLING. Each of NSP and WEC shall have received 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 regu-
lations.
Section 8.2 CONDITIONS TO OBLIGATION OF WEC TO EFFECT
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 contained 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 representations
and warranties of NSP set forth in this Agreement and the NSP
Stock Option Agreement shall be true and correct (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 warranties 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 satisfactory 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 reorganization under Section 368(a) of the Code.
(f) NSP REQUIRED CONSENTS. The NSP Required Consents
the failure of which to obtain would have a NSP Material
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 EFFECT
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 contemplated by this Agreement
and the WEC Stock Option Agreement required to be performed at
or prior to the Effective Time.
(b) REPRESENTATIONS AND WARRANTIES. The representations
and warranties of WEC set forth in this Agreement and the WEC
Stock Option Agreement shall be true and correct (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 warranties that expressly speak only as of
a specific date or
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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 contained 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 Consents
the failure of which to obtain would have a WEC Material
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 before 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 Directors
of NSP and WEC;
(b) by any party hereto, by written notice to the other
parties, if the Effective Time shall not have occurred on or
before April 30, 1997 (the "INITIAL TERMINATION DATE");
PROVIDED, HOWEVER, that the right to terminate 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 Closing shall be fulfilled or shall be
capable of being fulfilled, then the Initial Termination Date
shall be extended 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 Shareholders' 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 restraining, 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 "BUSINESS 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 applicable 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
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binding commitment to consummate an agreement of the nature of
this Agreement entered into in the proper exercise of their
applicable fiduciary duties, and notwithstanding all
concessions which may be offered by NSP in negotiations
entered into pursuant to CLAUSE (ii) below, such fiduciary
duties would also require the directors to reconsider such
commitment as a result of such tender offer or other written
offer or proposal; and (ii) prior to any such termination, WEC
shall, and shall cause its respective financial and legal
advisors to, negotiate with NSP to make such adjustments in
the terms and conditions of this Agreement as would enable 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 obligations 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 consummate 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 pursuant to
clause (ii) below, such fiduciary duties would also require
the directors to reconsider such commitment as a result of
such tender offer or 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, individually or
in the aggregate, would or would be reasonably likely to
result in an WEC Material Adverse Effect, and such breaches
shall not have been remedied within 20 days after receipt by
WEC of notice in writing
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from NSP, specifying the nature of such breaches and requesting
that they be remedied, (ii) WEC (and/or its appropriate
subsidiaries) shall not have performed and complied with its
agreements and covenants contained in SECTIONS 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 nature 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 ap-
proval 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 warranties of NSP
made herein as of the date hereof which breaches, individually
or in the aggregate, would or would be reasonably likely to
result in a NSP Material Adverse Effect, and such breaches
shall not have been remedied within 20 days after receipt by
NSP of notice in writing from WEC, specifying the nature of
such breaches and requesting that they be remedied, (ii) NSP
(and/or its appropriate subsidiaries) shall not have performed
and complied with its agreements and covenants contained in
SECTIONS 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 nature 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).
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Section 9.2 EFFECT OF TERMINATION. Subject to SECTION
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 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) 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 affiliates 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 affiliates), 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
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<PAGE> 77
Combination, will pay to the non-breaching party an additional fee
equal to $75 million in cash.
(b) ADDITIONAL TERMINATION FEE. If (i) this Agreement
(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 SECTION
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 offer or
proposal with respect to a Business Combination involving, 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 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 affiliate thereof, then such Target Party (jointly and
severally with its affiliates), 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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<PAGE> 78
(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 exceed $125 million
(including reimbursement for fees and expenses 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 pursuant 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 materially 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 Effective
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 representations
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, SECTION 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 SECTION
9.1, if the terminating party would have been entitled to terminate
this Agreement pursuant to SECTION 9.1(g)(i) or SECTION 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 arrangements 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 confirmed), 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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<PAGE> 81
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 (including
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, respectively, 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 interpretation of this Agreement.
Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words
"without limitation".
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 constitute one and
the same agreement.
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<PAGE> 82
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 provision 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 DAMAGES.
Each party to this Agreement waives, to the fullest extent
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 profits) 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
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<PAGE> 83
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 Agreement or any of the
transactions contemplated by this Agreement, (b) agrees that it
will not attempt to deny such personal jurisdiction by motion or
other request for leave from any such court and (c) agrees that it
will not bring any action relating to this Agreement or any of the
transactions contemplated by this Agreement in any court other than
a federal or state court sitting in the State of New York.
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<PAGE> 84
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
Title: Chairman and Chief
Executive Officer
Attest: /s/ GARY R. JOHNSON
---------------------
Secretary
WISCONSIN ENERGY CORPORATION
By: /s/ RICHARD A. ABDOO
--------------------------
Name: Richard A. Abdoo
Title: Chairman, President
and Chief Executive
Officer
Attest: /s/ JOHN H. GOETSCH
--------------------
Secretary
NORTHERN POWER WISCONSIN CORP.
By: /s/ EDWARD J. McINTYRE
---------------------------
Name: Edward J. McIntyre
Title: President
Attest: /s/ GARY R. JOHNSON
--------------------
Secretary
WEC SUB CORP.
By: /s/ RICHARD A. ABDOO
---------------------------
Name: Richard A. Abdoo
Title: Chairman, President
and Chief Executive
Officer
Attest: /s/ ANN MARIE BRADY
-------------------
Secretary
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<PAGE>
<PAGE> 1
EXHIBIT (2)-2
WEC STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of April 28, 1995
by and among Northern States Power Company, a Minnesota corporation
("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
Wisconsin 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) subject 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>
<PAGE> 2
stock, par value $2.50 per share, of NSP ("NSP SHARES") in either
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. Capitalized 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 Merger Agreement
shall have occurred, although the events specified 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 becomes 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 Option, 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 Agreement pursuant to Section 9.1
thereof (other than upon or during the continuance of a Trigger
Event); or (iii) 180 days following 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 regulation, 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>
<PAGE> 3
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, contained 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 issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such Company
Shares shall not then be actually 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 terminated; (ii) the
Company Shares, and any NSP Shares which are issued in payment of
the Exercise Price, shall have been approved for listing on the
NYSE upon official notice of issuance; (iii) all consents,
approvals, orders or authorizations of, or registrations,
declarations or filings with, any federal, 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 Company of the NSP Shares constituting the
Exercise Price hereunder; 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 definitive
form representing the number of the Company Shares designated 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 aggregate 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 condition in SECTION 1(b), a
certificate or certificates representing the number of NSP Shares
being issued by NSP in consideration 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)
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<PAGE> 4
the product of (x) the number of Company Shares with respect to
which the Company Option is being exercised and (y) the Exercise
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 ARTICLES") would be applicable (the
"BUYBACK APPROVALS") and subject 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 delivery 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 required Buy-
back Approvals), (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
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 obligation of the Company and,
assuming this Agreement constitutes a valid and binding obligation
of NSP, is enforceable against the Company in accordance with its
terms, (e) the Company 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>
<PAGE> 5
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 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 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, franchise,
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 Com-
pany, 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 contemplated 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 delivery of the Company Shares hereunder would be exempt
from the registration and prospectus delivery requirements of the
Securities 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 pursuant to this
Agreement will be acquired for the Company's own account, for
investment purposes only and will not be acquired
-5-<PAGE>
<PAGE> 6
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 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 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 authorize 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 accordance with its terms,
(d) prior to any delivery of NSP Shares in consideration of the
purchase of Company Shares pursuant hereto, NSP will have taken all
necessary corporate action 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
inapplicable to the receipt by the Company of the NSP Shares the
provisions 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 security interests of any
nature whatsoever, (f) except as described in Section 4.4(b) of the
Merger Agreement, the execution 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 notice or lapse of time, or both) under, or result in any
Violation 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, franchise, 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 described 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>
<PAGE> 7
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 violation 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 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 (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 Exercise 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>
<PAGE> 8
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 limitation 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 SECTION 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 Company 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 Company
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>
<PAGE> 9
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 "EXPIRATION
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 Expiration
Date, neither party shall, directly or indirectly, by operation 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 exchange offer.
-9-<PAGE>
<PAGE> 10
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 Restricted 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 designated by
the Registrant) shall thereupon have the option exercisable 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 notice 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 option
pursuant to this SECTION 10 with respect to all Registrable
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 entitled to more
than an aggregate of two effective registration
-10-<PAGE>
<PAGE> 11
statements hereunder and (ii) the Registrant will not be required
to file any such registration statement during any period 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 material 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, acquisition
or other material transaction involving the Registrant 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 jurisdiction; PROVIDED, HOWEVER,
that the Registrant shall not be required to qualify to do business
in, or consent to general service of process in, any jurisdiction
by reason of this provision.
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 distribution 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 underwriting
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 certificates, opinions
of counsel and "comfort" letters from auditors) 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>
<PAGE> 12
Manager and the other underwriters participating in such offering
and (iii) to take all further actions which shall be reasonably
necessary to effect such registration and sale (including, 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 registration
effected pursuant to this SECTION 10 only if and to the extent the
Manager determines that such inclusion will not adversely 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 dividends, splitups,
mergers (other than the Mergers), recapitalizations, 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 representing
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>
<PAGE> 13
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 addition,
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 implied,
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 violation
of the provisions of this Agreement. In the event that any
action should be brought in equity to enforce the provisions 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>
<PAGE> 14
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 regulatory
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):
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<PAGE> 15
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<PAGE>
<PAGE> 16
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 Section of
this Agreement unless otherwise indicated. Whenever the words
"include", "includes" or "including" are used in this Agreement,
they shall be deemed to be followed by the words "without
limitation". The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of
or to affect the meaning or interpretation of this Agreement.
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<PAGE> 17
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 provided
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
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<PAGE> 18
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.
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
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<PAGE>
<PAGE> 1
EXHIBIT (2)-3
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 corporation
(the "COMPANY").
WHEREAS, concurrently with the execution and
delivery of this Agreement, (i) the Company, WEC, Northern Power
Wisconsin 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>
<PAGE> 2
stock, par value $.01 per share, of WEC ("WEC SHARES") in either
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. Capitalized 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 Merger Agreement
shall have occurred, although the events specified 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 becomes 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 Option, 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 Agreement pursuant to Section 9.1
thereof (other than upon or during the continuance of a Trigger
Event); or (iii) 180 days following 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 regulation, 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,
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<PAGE> 3
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, contained 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 issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall
then be closed or that certificates representing such Company
Shares shall not then be actually 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 terminated; (ii) the
Company Shares, and any WEC Shares which are issued in payment of
the Exercise Price, shall have been approved for listing on the
NYSE upon official notice of issuance; (iii) all consents,
approvals, orders or authorizations of, or registrations,
declarations or filings with, any federal, 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 Company of the WEC Shares constituting the
Exercise Price hereunder; 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 definitive
form representing the number of the Company Shares designated 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 aggregate 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 condition in SECTION 1(b), a
certificate or certificates representing the number of WEC Shares
being issued by WEC in consideration 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)
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<PAGE> 4
the product of (x) the number of Company Shares with respect to
which the Company Option is being exercised and (y) the Exercise
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 applicable (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
obligations hereunder, (b) the execution and delivery 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 required Buyback Approvals), (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 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
reserved, 13,387,772 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, (f) upon delivery of the Company Shares to WEC upon
-4-<PAGE>
<PAGE> 5
the exercise of the Company Option, WEC 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 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 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
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 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 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, ob-
ligation, instrument, permit, concession, franchise, 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 delivery of the
Company Shares hereunder would be exempt from the registration and
prospectus delivery requirements of the Securities 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 pursuant 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.
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<PAGE> 6
6. REPRESENTATIONS AND WARRANTIES OF WEC. WEC rep-
resents and warrants to the Company that (a) WEC is a corporation
duly organized, validly existing and in good standing under 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 authorize 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 accordance with its terms,
(d) prior to any delivery of WEC Shares in consideration of the
purchase of Company Shares pursuant hereto, WEC will have taken all
necessary corporate action 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 Company Shares pursuant
hereto, the Company will acquire the WEC Shares free and clear of
all claims, liens, charges, encumbrances 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 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 WEC does not, and the consummation by
WEC of the transactions contemplated hereby will not, require any
consent,
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<PAGE> 7
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 violation 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 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 (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 Exercise 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
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<PAGE> 8
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 limitation 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 SECTION 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 Company 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 Company
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
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<PAGE> 9
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 "EXPIRATION
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 Expiration
Date, neither party shall, directly or indirectly, by operation 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 exchange 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
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<PAGE> 10
the other party (the "REGISTRANT") request the Registrant to
register under the Securities Act all or any part of the Restricted
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 conditions, it will be able to sell the Reg-
istrable 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 designated by the Registrant) shall thereupon have the
option exercisable 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 notice 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 option
pursuant to this SECTION 10 with respect to all Registrable
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 entitled to more
than an aggregate of two effective registration statements
hereunder and (ii) the Registrant will not be required to file any
such registration statement during any period of time (not to
exceed 40 days after such request in the
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<PAGE> 11
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 material
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 de-
termines, in its reasonable judgment, that such registration would
interfere with any financing, acquisition or other material
transaction involving the Registrant 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
jurisdiction; PROVIDED, HOWEVER, that the Registrant shall not be
required 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 distribution 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 underwriting
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 certificates, opinions
of counsel and "comfort" letters from auditors) 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 offering and (iii) to take all further actions which shall be
-11-<PAGE>
<PAGE> 12
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 registration
effected pursuant to this SECTION 10 only if and to the extent the
Manager determines that such inclusion will not adversely 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 dividends, splitups,
mergers (other than the Mergers), recapitalizations, 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 representing
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>
<PAGE> 13
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 addition,
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 implied,
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 violation
of the provisions of this Agreement. In the event that any
action should be brought in equity to enforce the provisions 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>
<PAGE> 14
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 regulatory
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>
<PAGE> 15
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>
<PAGE> 16
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 Section of
this Agreement unless otherwise indicated. Whenever the words
"include", "includes" or "including" are used in this Agreement,
they shall be deemed to be followed by the words "without
limitation". The descriptive headings herein are inserted for
convenience of reference only and are not intended to be part of
or to affect the meaning or interpretation of this Agreement.
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 provided
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>
<PAGE> 17
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>
<PAGE> 18
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-<PAGE>
<PAGE>
<PAGE> 1
Exhibit (2)-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
committee. 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
<PAGE>
<PAGE>
<PAGE> 1
Exhibit (2)-5
Exhibit 7.15.1
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 Wisconsin 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 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<PAGE>
<PAGE> 2
the terms and conditions set forth in this Agreement, for an initial
period (the "Initial Period") and a further period (the "Secondary Pe-
riod") (the Initial Period and the Secondary 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 responsibilities 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 propose the Executive for re-
election to the Board throughout the Employment Period.
-2-<PAGE>
<PAGE> 3
(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 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 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>
<PAGE> 4
activities do not significantly interfere with the performance of the
Executive's responsibilities as an employee of the Company in accordance
with this Agreement.
(d) The Executive's services shall be performed
primarily at the Company's headquarters in Minneapolis, Minnesota.
3. COMPENSATION. (a) BASE SALARY. The Executive's
compensation during the Employment Period shall be determined by the
Board upon the recommendation of the Compensation 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 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 increased.
-4-<PAGE>
<PAGE> 5
(b) INCENTIVE COMPENSATION. During the Employment
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 EXECUTIVE
RETIREMENT PLAN. During the Employment Period, the Executive 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 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 retirement 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>
<PAGE> 6
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 ef-
fect 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>
<PAGE> 7
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 deferrals 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>
<PAGE> 8
(ii) During the Employment Period, the Company
shall provide the Executive with life insurance coverage (the "Life
Insurance Coverage") providing a death benefit 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 limita-
tion, medical, prescription, dental, disability, salary continuance,
employee
-8-<PAGE>
<PAGE> 9
life insurance, group life insurance, accidental death and travel ac-
cident 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 DISABILITY.
The Executive's employment shall terminate automatically 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 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>
<PAGE> 10
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.
(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 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 reputa-
tion 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>
<PAGE> 11
Company, shall be conclusively presumed to be done, or omitted to be
done, by the Executive in good faith and in the best interests of the
Company.
(ii) A termination of the Executive's employ-
ment 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 op-
portunity, together with counsel, to be heard at the Special Board Meet-
ing 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>
<PAGE> 12
described in the Notice of Termination for Cause, and that conduct
constitutes Cause under this Agreement.
(iii) A termination of the Executive's employ-
ment 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 Termina-
tion without Cause. The Executive shall be given an opportunity, to-
gether 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>
<PAGE> 13
(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, 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 Agreement, 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 Executive;
C. any requirement by the Company that the Execu-
tive'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 Executive'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
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<PAGE> 14
Company written notice ("Notice of Termination for Good Reason") 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 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 termination.
(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>
<PAGE> 15
(e) DATE OF TERMINATION. The "Date of Termination"
means the date of the Executive's death, the Disability 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 terminates 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
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<PAGE> 16
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 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
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 restricted 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
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<PAGE> 17
Section 5 are intended as liquidated damages for a termination of the
Executive's employment by the Company other than for Cause or Disability
or for the actions of the Company 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 em-
ployment 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 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 Compensation that the Executive would have been
eligible to earn for such period, and multiplying that amount by a frac-
tion, the numerator of which is the number of days in such period
through the Date of Termination, and the denominator of which is the to-
tal number
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<PAGE> 18
of days in the relevant period; (3) any compensation 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 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 Section 6
below. If the Executive voluntarily 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 specified in Section 6
below.
6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement
shall prevent or limit the Executive's continuing
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<PAGE> 19
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 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 Termination shall be payable in accordance with the terms of
each such plan, policy, practice, 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 mitigation of the amounts payable to the Executive
under any of the provisions of this Agreement and, except as
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<PAGE> 20
specifically provided 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 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 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.
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<PAGE> 21
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 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 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 payment (a "Gross-Up Payment") 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
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<PAGE> 22
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 determination by the Account-
ing 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
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<PAGE> 23
have been made ("Underpayment"), consistent 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 writ-
ing 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 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,
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<PAGE> 24
(ii) take such action in connection with contesting 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 penalties)
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 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 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 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
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<PAGE> 25
more appellate courts, as the Company shall determine; PROVIDED,
however, that if the Company directs the Executive 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 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 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
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<PAGE> 26
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 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
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 legal 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 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
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<PAGE> 27
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.
(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 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 defined 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 effect. This Agreement may not be amended or
modified except
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<PAGE> 28
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 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 pro-
vision 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 unenforceable in part, the remaining
portion of such provision,
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<PAGE> 29
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 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, alienated or subject to
attachment, garnishment, levy, execution or other legal or equitable
process except as required by
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<PAGE> 30
law. Any attempt by the Executive to anticipate, alienate, assign,
sell, transfer, pledge, encumber or charge the same shall be void. Pay-
ments 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.
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__________________________________
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<PAGE>
<PAGE> 1
Exhibit (2)-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 Wisconsin 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 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 initial period (the "Initial Period") and a
further period (the <PAGE>
<PAGE> 2
"Secondary Period") (the Initial Period and the Secondary 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 Secondary 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 anniversaries 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 Secondary Period would otherwise be so extended, that the Secondary
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, President 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 Executive shall serve as the Chairman of the Board;
in each case with such
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<PAGE> 3
duties and responsibilities 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
propose the Executive for re-election to the Board throughout the Employment
Period.
(b) During the Initial Period: (i) as is customary, 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 subsidiaries 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 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
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<PAGE> 4
considered a violation of the foregoing for the Executive to serve on
corporate, industry, civic or charitable boards or committees, so long as such
activities do not significantly 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 residence (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, provided in each case that the Executive
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<PAGE> 5
complies with the policies, practices and procedures of the Company for
submission of expense reports, receipts, or similar documentation of such
expenses.
3. COMPENSATION. (a) BASE SALARY. The Executive's
compensation during the Employment Period shall be determined by the Board
upon the recommendation of the Compensation 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 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 increased.
(b) INCENTIVE COMPENSATION. During the Employment 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)
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<PAGE> 6
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 WEC as in effect immediately before the Effective Time.
(c) OTHER BENEFITS. (i) SUPPLEMENTAL EXECUTIVE RETIREMENT
PLAN. During the Employment Period, the Executive 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 Company 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 Executive, 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 elective deferrals of Incentive
Compensation by the Executive (with such adequacy being determined by an
independent consulting firm acceptable to the
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<PAGE> 7
Executive, whose fees shall be paid by 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 coverage (the "Life Insurance
Coverage") providing a death benefit to such beneficiary or beneficiaries as
the Executive may designate 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 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, prescription, dental, disability, salary continuance,
employee life insurance, group life insurance,
-7-<PAGE>
<PAGE> 8
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 WEC immediately before
the Effective Time.
4. TERMINATION OF EMPLOYMENT. (a) DEATH OR DISABILITY.
The Executive's employment shall terminate automatically 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 acceptable 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
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<PAGE> 9
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
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 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 conclusively presumed to be
done, or omitted 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
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<PAGE> 10
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
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,
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<PAGE> 11
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.
(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, 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 Agreement, other than an
isolated, insubstantial and inadvertent failure that is not
taken in bad faith
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and is remedied by the Company promptly after receipt of
notice 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 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 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 Company written notice ("Notice
of Termination for Good Reason") 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
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).
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(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 termination.
(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 Termination"
means the date of the Executive's death, the Disability 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) 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 Company shall continue to provide the Executive with the compensation and
benefits set forth in paragraphs (a), (b) and (c) of Section 3 as
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<PAGE> 14
if he had remained employed by the Company pursuant 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)];
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 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; and provided, 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
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 restricted stock outstanding on the Date of Termination shall
be fully vested as of the Date of Termination
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<PAGE> 15
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 Section 5 are intended as liquidated damages for a termination of the
Executive's employment by the Company other than for Cause or Disability or
for the actions of the Company 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 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
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
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 Compensation that the
Executive would have been eligible to earn for such period, and multiplying
that amount by a fraction, the numerator
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<PAGE> 16
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 compensation 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 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 Section 6 below. If the Executive voluntarily 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 specified in Section 6
below.
6. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall
prevent or limit the Executive's continuing or
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<PAGE> 17
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 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 Termination shall be payable in accordance with the terms
of each such plan, policy, practice, 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 mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement and,
except as specifically provided in paragraph (a) of Section 5 with respect to
benefits described in clause (B) of paragraph (c)(iii) of Section 3, such
amounts shall
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<PAGE> 18
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 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
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 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
-18-<PAGE>
<PAGE> 19
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
payment (a "Gross-Up Payment") 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 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
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<PAGE> 20
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 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"), consistent 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
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<PAGE> 21
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 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,
(ii) take such action in connection with contesting 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 penalties) 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
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<PAGE> 22
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 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 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 more appellate courts, as the Company shall
determine; PROVIDED, however, that if the Company directs the Executive 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 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 entitled to settle or
contest, as the case may be, any other
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<PAGE> 23
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 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 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 legal 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
enforceability of or liability under, or otherwise involving, any provision of
this
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<PAGE> 24
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.
(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 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 defined 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
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<PAGE> 25
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 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 unenforceable in part, the remaining portion of such provision,
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<PAGE> 26
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 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, alienated 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.
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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.
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__________________________________
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<PAGE>
<PAGE> 1
Exhibit (2)-7
Exhibit 7.20(b)
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 registered
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 acquiring,
maintaining and operating facilities by or through which the
corporation can provide communication, transportation, water,
light, heat, or power to the public and to acquire and hold
rights and franchises for the occupation and use of property 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 manner as may be
provided by the Bylaws. Vacancies in the Board caused by an
increase in the number of directors or by death,
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<PAGE> 2
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 statement
of the number of shares in each class and the relative rights,
voting power, and preferences granted to and restrictions 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 liquidation
price or preference as to assets in voluntary liquidation of the
shares of any series of Preferred Stock (except the series
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.
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<PAGE> 3
3. Preferences of Preferred Stock
a. Dividends
The holders of shares of Preferred Stock, irrespective
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 default 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 declared 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 Company, 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 surplus,
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 liquidation or
dissolution (which may differ from that payable in involuntary
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 dividends
accumulated and unpaid thereon, and no more. The consolidation
or merger of this Corporation with or into any other
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<PAGE> 4
corporation or corporations shall not be deemed to be distri-
bution of assets or liquidation or dissolution of the Corporation
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 proportion
to the amounts to which they are, respectively, entitled 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 remaining.
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 surplus
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
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<PAGE> 5
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 Corporation,
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 certificate for
the shares of Preferred Stock so to be redeemed shall not have
been surrendered for cancellation, the shares represented thereby
from and after the date of redemption so specified 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 terminate.
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 holders 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 preferred share-
holders, voting as a class and without regard to
series, shall be entitled to elect the smallest number
of directors necessary to constitute
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<PAGE> 6
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 directors 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 Corporation; thereafter during the
continuance of such special 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 majority 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 special right, shall hold office
until the next succeeding annual election and until
their respective successors, elected by the preferred
shareholders, voting as a class, and the common
shareholders, voting as a class, are elected and
qualified, unless their terms of office shall be sooner
terminated as hereinafter provided. However, if and
when all dividends then in default on the Preferred
Stock shall thereafter be paid (and such dividends
shall be declared 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
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<PAGE> 7
in such stock in the case of any similar future default
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 Corporation 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 special
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 constitute
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 annual 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 outstanding shares of the
Preferred Stock, without regard to series, shall then be
sufficient to constitute a quorum for the election of the
directors whom such shareholders are then entitled 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 preferred shareholders to elect a
majority of the Board of Directors, the absence of a quorum of
the preferred shareholders
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<PAGE> 8
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 manner
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 writing
or 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, 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 unsecured
notes, debentures, or other securities representing
unsecured indebtedness issued or assumed by the
Corporation and then outstanding (including unsecured
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 outstanding, 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
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<PAGE> 9
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 Public
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 acquisition 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 consolidation.
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 meeting 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 series, 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.
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<PAGE> 10
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 Preferred
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 dividends
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 outstanding, 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 security convertible
into stock, of any class ranking on a parity with the Preferred
Stock, unless
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<PAGE> 11
(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
Corporation 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 proposed to be issued but excluding any
such indebtedness 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 dividend 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 dividend 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 interest
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
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<PAGE> 12
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 period,
there shall be deducted the provisions for depreciation
and depletion as recorded on such books or the minimum
amount required therefor under the provisions 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 acquisition of properties or
to any redemption, acquisition, 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 computation
all indebtedness and stock to be retired through such
proposed issue. No portion of the surplus of the
Corporation utilized to satisfy the foregoing
requirements shall be available for dividends (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 convertible
into stock, ranking on a parity with the Preferred
Stocks are retired or until and to the extent that the
capital applicable to such junior stock shall have been
increased.
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<PAGE> 13
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 declaration 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 "capitalization ratio") of the sum of
(1) the capital represented 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 Corporation for the period consisting of
the twelve consecutive 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 income, 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
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<PAGE> 14
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
excluded in determining total capital. Surplus ac-
counts shall be deemed to include all earned
surplus, paid-in surplus, capital surplus, or any
other surplus 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
dividends embodied in the indentures and
supplemental indentures securing the mortgage bonds
of the Corporation) 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 Corporation 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 estimated, 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, capital stock discount
and expense, and the excess, if any, of the
aggregate amount payable on involuntary dissolution,
liquidation, or winding up of the Corporation 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
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<PAGE> 15
(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
recorded 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 mentioned 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
additional 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, debentures, or other securities convertible into
shares of stock,
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<PAGE> 16
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 Directors 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 existing, 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)
consecutive 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 assets 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>
<PAGE> 17
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 assets, other than by dividends from net
earnings or surplus, upon any involuntary liquidation or
dissolution of the Corporation is hereby fixed at One Hundred
Dollars ($100) Dollars 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>
<PAGE> 18
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>
<PAGE> 19
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 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.
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>
<PAGE> 20
(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 subsequent to December 31, 1966 and on or
prior to December 31, 1971; and $103.75 per share in
case of redemption 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 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,
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>
<PAGE> 21
(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 subsequent to December 31, 1974 and on or
prior to December 31, 1979; and $102.47 per share in
case of redemption 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 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.
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>
<PAGE> 22
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
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.
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>
<PAGE> 23
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
dividends or on liquidation, if such debt has an
effective 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 issuance through June 30, 1986 and (B) the
Applicable Rate, as hereinafter defined, from time
to time in
-23-<PAGE>
<PAGE> 24
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
issuance 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 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 series 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 series 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 Maturity 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 Maturity 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>
<PAGE> 25
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 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 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 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
three-month U.S. Treasury Bills, 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 market 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. Government
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>
<PAGE> 26
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 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. If the Company
determines, in good faith, that for any reason the
Company cannot determine the Treasury Bill Rate for
any dividend period as provided above in this
paragraph, 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 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 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>
<PAGE> 27
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 average 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 Com-
pany. If the Company determines in good faith that
for any reason the Company 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 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
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>
<PAGE> 28
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 dividend 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 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 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 average of
the two most recent weekly per annum average 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 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 Company. 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 para-
graph, 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 securi-
ties (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 busi-
ness day in New York City
-28-<PAGE>
<PAGE> 29
(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 actively traded marketable U.S. Treasury fixed
interest rate securities (adjusted to constant matu-
rities of ten years); and (D) the term "Thirty Year
Average Yield" means the average yield to maturity
for actively traded marketable U.S. Treasury fixed
interest rate securities (adjusted to constant matu-
rities 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 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, however, that the shares of said
new series of Cumulative Preferred Stock shall not
be redeemable, directly 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 practice, 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>
<PAGE> 30
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 issuance through June 30, 1987 and (B) the
Applicable Rate, as hereinafter defined, from time
to time in effect, for each subsequent dividend
period; dividends 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 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, 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>
<PAGE> 31
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 series 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 Maturity 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 Maturity 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 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 market discount rate
during such Calendar Period,
-31-<PAGE>
<PAGE> 32
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 Cal-
endar Period) for three-month U.S. Treasury Bills,
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 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.
Government 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 dur-
ing 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 Federal 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 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. If the Company determines, in good faith,
that for any reason the Company cannot determine the
Treasury Bill Rate for any dividend period as
provided above in this paragraph, 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 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>
<PAGE> 33
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 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 average 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>
<PAGE> 34
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 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 eight years nor
more than twelve years from the date of each such
quotation, as chosen and quoted daily for each busi-
ness 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 dividend period shall be the arithmetic av-
erage of the two most recent weekly per annum Thirty
Year Average Yields (or the one weekly per annum
Thirty 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
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>
<PAGE> 35
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 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) 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 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. 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 securi-
ties 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 actively traded marketable U.S. Treasury fixed
interest rate securities (adjusted to constant matu-
rities of ten years); and (D) the term "Thirty Year
Average Yield" means the average yield to maturity
for actively traded marketable U.S. Treasury fixed
interest rate securities (adjusted to constant matu-
rities of thirty years).
-35-<PAGE>
<PAGE> 36
(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, however, that the shares of said
new series of Cumulative Preferred Stock shall not
be redeemable, directly 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 practice, 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 violation of law; (iii) liability
based on the payment of an improper dividend or an improper
repurchase of the Corporation's stock under Section 180.0833
of the Wisconsin Business Corporation 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>
<PAGE> 37
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
repeal 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 exist-
ing 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, qualifications, classifications or term of office.
-37-<PAGE>
<PAGE>
<PAGE> 1
EXHIBIT (99)-1
FOR IMMEDIATE RELEASE
May 1, 1995
WISCONSIN ENERGY, NORTHERN STATES POWER
ANNOUNCE STRATEGIC BUSINESS COMBINATION
Milwaukee, Wis. and Minneapolis, Minn. -- Wisconsin Energy Corporation (NYSE:
WEC) of Milwaukee, and Northern States Power Company (NYSE: NSP) of
Minneapolis, two of the nation'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 unanimously 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 (electric/gas) utility company in the United States
based on current market capitalization. For the year ended Dec. 31, 1994, the
combined revenues of Wisconsin Energy and Northern States Power were $4.2
billion, with total assets of more than
$10.0 billion.
The management teams of both companies believe the transaction will create 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
enhance value for the shareholders of both companies.
A preliminary estimate indicates that the merger will result in net savings of
approximately $2.0 billion over 10 years. The synergies created by the merger
will allow the companies to implement a reduction in electric retail rates
followed by a rate freeze for retail electric customers through the year 2000.
The transaction will result in a registered public utility holding company
known as Primergy Corporation (Primergy), which will become the parent of both
NSP and the current operating subsidiaries of WEC. 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 Michigan. The business of Primergy will consist of utility
operations and various non-utility enterprises, including independent power
projects.
At the effective time of 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. <PAGE>
<PAGE> 2
As of April 20, 1995, Wisconsin Energy had 109.4 million shares outstanding,
and Northern States Power had 67.3 million shares outstanding. 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 Corporation common shareholders. The holders of
preferred stock of Northern States
Power will receive preferred stock in a successor corporation with identical
terms. The preferred stock of Wisconsin Electric Power Company will remain
outstanding after the transaction. As a condition of closing, the parties
must receive an Internal Revenue Service ruling that the exchange of stock
qualifies as a tax-free transaction, and obtain appropriate 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 dividend 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 regulatory constraints.
Richard A. Abdoo, chairman, president and chief executive officer of Wisconsin
Energy Corporation, said: "This merger gets us in front of the changing energy
marketplace. We are initiating a thoughtful combination of resources and
talents to manage successfully in the much more demanding times ahead. Our
common goal is to be a premier investor-owned energy company -- in meeting
customer needs, having competitive rates and creating shareholder value."
James J. Howard, chairman, president and chief executive officer of NSP, said:
"This transaction is the best and most financially conservative way to ensure
continued competitive rates over the long term for the customers of both
companies. 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 also are customers."
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 operating 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 retirement date in July 2000, at
which time Abdoo will become chairman.
<PAGE>
<PAGE> 3
After the merger, Wisconsin Energy Company (the new name for the consolidated
operations of Wisconsin Energy's existing utility subsidiaries, Wisconsin
Electric Power Company and Wisconsin Natural Gas Company) and Northern States
Power Company will continue to operate under those names as the principal
subsidiaries of Primergy Corp. Following the merger, NSP-Wisconsin will merge
into Wisconsin Energy Company. The headquarters of the two utilities will
remain in their current locations, Wisconsin Energy's in Milwaukee and NSP's
in Minneapolis. The headquarters of Primergy, which will be incorporated in
the state of Wisconsin, will be in Minneapolis. The board of directors of
Primergy will be composed of six current directors of WEC and six current
directors of NSP.
"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."
"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 professional,
productive attitudes of both employee groups will combine to enhance solid
traditions of quality customer service."
According to Howard and Abdoo, an additional benefit of the merger is that it
will leverage the complementary environmental expertise and leadership of both
companies. The combined entity will utilize the most efficient, least-
polluting 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 operations is a possibility under the new
registered holding company structure, but will seek approval from the
Securities and Exchange Commission to maintain such businesses. If
divestiture is ultimately required, the SEC has historically allowed companies
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 Regulatory Commission; state regulators in Minnesota,
Wisconsin and in certain other states where the companies conduct business;
and the Nuclear Regulatory Commission. The merger also is subject to the
termination or expiration of the applicable waiting period under the Hart-
Scott-Rodino Antitrust Improvements Act. The preliminary proxy materials are
expected to 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.
# # #<PAGE>
<PAGE> 4
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 downtown
Milwaukee to both space heating and manufacturing customers.
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 southeastern 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.
WEC's non-regulated subsidiaries -- Wispark Corp., Witech Corp., Wisvest
Corp., Badger Service Co., and Wisconsin Michigan Investment Corp. -- are
devoted primarily to stimulating economic growth in the utilities' service
territories and to capitalizing on diversified investment opportunities for
shareholders.
Northern States Power Company
- -----------------------------
Northern States Power Company (NSP), headquartered 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 operating 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.
<PAGE>
<PAGE> 5
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 electricity.
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 transportation services and has direct access to four major
interstate and international pipelines linked to the majority of natural gas
supplies in North America.
CONTACTS
- --------
For Northern States Power Company For Wisconsin Energy Corporation
Investor inquiries: Investor inquiries:
Jim McIntyre Cal Baker
612/330-7712 414/221-2126
Jackie Currier Jeff West
612/330-6020 414/221-2590
Dick Kolkmann
612/330-6622
Media inquiries: Media inquiries:
John Bousquet Rick James
612/337-2167 414/221-4444 (Mon., 5/1)
414/221-3818 (Tues., 5/2
and following)
<PAGE>
