______________________________________________________________________________
______________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission Registrant; State of Incorporation; IRS Employer
File Number Address; and Telephone Number Identification No.
- ----------- ----------------------------------- ------------------
1-11337 WPS RESOURCES CORPORATION 39-1775292
(A Wisconsin Corporation)
700 North Adams Street
P. O. Box 19001
Green Bay, WI 54307-9001
920-433-4901
1-3016 WISCONSIN PUBLIC SERVICE CORPORATION 39-0715160
(A Wisconsin Corporation)
700 North Adams Street
P. O. Box 19001
Green Bay, WI 54307-9001
920-433-4901
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
WPS Resources Corporation Yes [x] No [ ]
Wisconsin Public Service Corporation Yes [x] No [ ]
Indicate the number of shares outstanding of each of the issuers' classes of
common stock, as of the latest practicable date:
WPS RESOURCES CORPORATION Common stock, $1 par value,
26,731,683 shares outstanding at
July 31, 1999
WISCONSIN PUBLIC SERVICE CORPORATION Common stock, $4 par value,
23,896,962 shares outstanding at
July 31, 1999
______________________________________________________________________________
______________________________________________________________________________
<PAGE>
WPS RESOURCES CORPORATION
AND
WISCONSIN PUBLIC SERVICE CORPORATION
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1999
CONTENTS
Page
FORWARD-LOOKING STATEMENTS 4
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
WPS RESOURCES CORPORATION
Consolidated Statements of Income, Comprehensive
Income, and Retained Earnings 5
Consolidated Balance Sheets 6
Consolidated Statements of Capitalization 7
Consolidated Statements of Cash Flows 8
WISCONSIN PUBLIC SERVICE CORPORATION
Consolidated Statements of Income and
Comprehensive Income 9
Consolidated Balance Sheets 10
Consolidated Statements of Capitalization 11
Consolidated Statements of Cash Flows 12
Consolidated Statements of Retained Earnings 13
CONDENSED NOTES TO FINANCIAL STATEMENTS OF
WPS Resources Corporation and
Wisconsin Public Service Corporation 14 - 16
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations for
WPS Resources Corporation 17 - 29
Wisconsin Public Service Corporation 30 - 34
Item 3. Quantitative and Qualitative Disclosures About
Market Risk 34
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 35
Item 5. Other Information 36 - 37
Item 6. Exhibits and Reports on Form 8-K 37
Signatures 38 - 39
-2-
<PAGE>
EXHIBIT INDEX 40
Exhibit 3B-1 By-laws of WPS Resources Corporation as Amended May 6, 1999
Exhibit 3B-2 By-laws of Wisconsin Public Service Corporation as Amended
May 6, 1999
Exhibit 10-1 Asset Purchase Agreement by and among PP&L, Inc., Lady Jane
Collieries, Inc. and Sunbury Holdings, LLC Dated as of May 1,
1999
Exhibit 10-2 WPS Resources Corporation 1999 Stock Option Plan
Exhibit 11 Statement Regarding Computation of Per Share
Earnings
WPS Resources Corporation
Exhibit 27 Financial Data Schedule
WPS Resources Corporation
Wisconsin Public Service Corporation
-3-
<PAGE>
FORWARD-LOOKING STATEMENTS
This report contains statements which are forward-looking. You can identify
these statements by the fact that they do not relate strictly to historical or
current facts and often include words such as "anticipate," "believe,"
"estimate," "expect," "intend," "plan," "project," and other similar words.
Although we believe we have been prudent in our plans and assumptions, there
can be no assurance that indicated results will be realized. Should known or
unknown risks or uncertainties materialize, or should underlying assumptions
prove inaccurate, actual results could vary materially from those anticipated.
We undertake no obligation to publicly update any forward-looking statements,
whether as a result of new information, future events, or otherwise. We
recommend that you consult any further disclosures we make on related subjects
in our 10-Q, 8-K, and 10-K reports to the Securities and Exchange Commission.
The following is a cautionary list of risks and uncertainties that may affect
the assumptions which form the basis of forward-looking statements relevant to
our business. These factors, and other factors not listed here, could cause
actual results to differ materially from expected and historical results.
- - General economic, business, and regulatory conditions
- - Legislative and regulatory initiatives regarding deregulation and
restructuring of the utility industry which could affect costs and
investment recovery
- - State and federal rate regulation
- - The extent and timing of new business development and additional
competition in the markets of subsidiary companies
- - The performance of projects undertaken by subsidiary companies
- - Business combinations among our competitors and customers
- - Energy supply and demand
- - Financial market conditions, including availability, terms, and use of
capital
- - Nuclear and environmental issues
- - Weather and other natural phenomena
- - Commodity price and interest rate risk
- - Year 2000 readiness.
-4-
<PAGE>
<TABLE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
WPS RESOURCES CORPORATION
<CAPTION>
==========================================================================================================
CONSOLIDATED STATEMENTS OF INCOME, COMPREHENSIVE INCOME, Three Months Ended Six Months Ended
AND RETAINED EARNINGS (1) June 30 June 30
(Thousands, except per share amounts) 1999 1998 1999 1998
==========================================================================================================
<S> <C> <C> <C> <C>
Operating revenues
Electric utility $136,925 $137,491 $279,318 $264,714
Gas utility 34,556 24,388 102,855 89,872
Nonregulated energy and other 50,071 70,175 169,213 168,694
- ----------------------------------------------------------------------------------------------------------
Total operating revenues 221,552 232,054 551,386 523,280
==========================================================================================================
Operating expenses
Electric production fuels 26,582 26,905 53,115 52,553
Purchased power 16,579 15,230 34,451 27,577
Gas purchased for resale 20,687 12,989 60,971 55,999
Nonregulated energy cost of sales 46,978 68,207 163,001 164,695
Other operating expenses 45,482 41,377 89,862 81,093
Maintenance 16,229 16,348 30,845 26,946
Depreciation and decommissioning 20,536 21,256 40,755 42,915
Taxes other than income 8,400 8,112 16,861 16,369
- ----------------------------------------------------------------------------------------------------------
Total operating expenses 201,473 210,424 489,861 468,147
==========================================================================================================
Operating income 20,079 21,630 61,525 55,133
- ----------------------------------------------------------------------------------------------------------
Other income
Allowance for equity funds used during construction 306 39 502 68
Other, net 3,293 1,793 5,608 4,224
- ----------------------------------------------------------------------------------------------------------
Total other income 3,599 1,832 6,110 4,292
==========================================================================================================
Income before interest expense 23,678 23,462 67,635 59,425
- ----------------------------------------------------------------------------------------------------------
Interest on long-term debt 6,339 6,341 12,741 12,722
Other interest 1,062 1,002 1,981 1,953
Allowance for borrowed funds used during construction (248) (27) (425) (38)
- ----------------------------------------------------------------------------------------------------------
Total interest expense 7,153 7,316 14,297 14,637
==========================================================================================================
Distributions - preferred securities of subsidiary trust 875 - 1,750 -
==========================================================================================================
Income before income taxes 15,650 16,146 51,588 44,788
Income taxes 4,879 4,900 17,502 15,019
Minority interest (48) (3) (263) (215)
Preferred stock dividends of subsidiaries 778 784 1,556 1,567
- ----------------------------------------------------------------------------------------------------------
Net income 10,041 10,465 32,793 28,417
- ----------------------------------------------------------------------------------------------------------
Other comprehensive income - - - -
- ----------------------------------------------------------------------------------------------------------
Comprehensive income 10,041 10,465 32,793 28,417
==========================================================================================================
Retained earnings at beginning of period 344,749 344,926 335,154 339,508
Cash dividends on common stock 13,143 12,534 26,300 25,068
- ----------------------------------------------------------------------------------------------------------
Retained earnings at end of period $341,647 $342,857 $341,647 $342,857
==========================================================================================================
Average shares of common stock 26,601 26,512 26,561 26,514
Basic and diluted earnings per average share of common stock $0.38 $0.39 $1.23 $1.07
Dividend per share of common stock $0.495 $0.485 $0.990 $0.970
==========================================================================================================
</TABLE>
(1) The 1998 statements give effect to the merger with
Upper Peninsula Energy Corporation.
The accompanying notes are an integral part of these statements.
-5-
<PAGE>
<TABLE>
WPS RESOURCES CORPORATION
<CAPTION>
=================================================================================================
CONSOLIDATED BALANCE SHEETS June 30 December 31
(Thousands) 1999 1998
=================================================================================================
<S> <C> <C>
ASSETS
- -------------------------------------------------------------------------------------------------
Utility plant
Electric $1,756,722 $1,715,882
Gas 275,314 267,892
Property under capital lease 74,130 -
- -------------------------------------------------------------------------------------------------
Total 2,106,166 1,983,774
Less - Accumulated depreciation and decommissioning 1,248,161 1,206,123
- -------------------------------------------------------------------------------------------------
Total 858,005 777,651
Nuclear decommissioning trusts 184,313 171,442
Construction in progress 57,536 42,424
Nuclear fuel, less accumulated amortization 16,905 18,641
- -------------------------------------------------------------------------------------------------
Net utility plant 1,116,759 1,010,158
=================================================================================================
Current assets
Cash and equivalents 9,493 7,134
Customer and other receivables, net of reserves 88,333 117,206
Accrued utility revenues 23,628 34,175
Fossil fuel, at average cost 14,361 13,152
Gas in storage, at average cost 15,199 20,795
Materials and supplies, at average cost 23,944 21,788
Prepayments and other 30,282 26,462
- -------------------------------------------------------------------------------------------------
Total current assets 205,240 240,712
=================================================================================================
Regulatory assets 64,052 70,041
Net nonutility and nonregulated plant 76,806 41,235
Pension assets 63,102 60,018
Investments and other assets 76,574 88,223
=================================================================================================
Total $1,602,533 $1,510,387
=================================================================================================
CAPITALIZATION AND LIABILITIES
- -------------------------------------------------------------------------------------------------
Capitalization
Common stock equity $ 530,990 $ 517,190
Preferred stock of subsidiary with no mandatory redemption 51,198 51,200
Company-obligated mandatorily redeemable trust preferred
securities of subsidiary trust holding solely WPSR
7.00% subordinated debentures 50,000 50,000
Capital lease obligation 73,823 -
Long-term debt 340,883 343,037
- -------------------------------------------------------------------------------------------------
Total capitalization 1,046,894 961,427
=================================================================================================
Current liabilities
Current portion of long-term debt and capital lease obligation 1,069 884
Notes payable 10,100 12,703
Commercial paper 65,813 47,590
Accounts payable 83,267 115,490
Accrued taxes 8,685 2,838
Accrued interest 7,588 7,594
Other 23,874 9,095
- -------------------------------------------------------------------------------------------------
Total current liabilities 200,396 196,194
=================================================================================================
Long-term liabilities and deferred credits
Accumulated deferred income taxes 122,032 122,642
Accumulated deferred investment tax credits 26,642 27,150
Regulatory liabilities 52,519 50,474
Environmental remediation liabilities 40,065 40,478
Other long-term liabilities 113,985 112,022
- -------------------------------------------------------------------------------------------------
Total long-term liabilities and deferred credits 355,243 352,766
=================================================================================================
Total $1,602,533 $1,510,387
=================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
-6-
<PAGE>
<TABLE>
WPS RESOURCES CORPORATION
<CAPTION>
=============================================================================================
CONSOLIDATED STATEMENTS OF CAPITALIZATION June 30 December 31
(Thousands, except share amounts) 1999 1998
=============================================================================================
<S> <C> <C>
Common stock equity
Common stock, $1 par value, 100,000,000 shares authorized;
26,659,174 and 26,551,405 shares outstanding
at June 30, 1999 and December 31, 1998, respectively $ 26,659 $ 26,551
Premium on capital stock 168,465 163,438
Retained earnings 341,647 335,154
Shares in deferred compensation trust, 58,300 and 49,477 shares
at average cost of $30.62 and $30.42 per share at
June 30, 1999 and December 31, 1998, respectively (1,785) (1,505)
ESOP loan guarantees (3,996) (6,448)
- ---------------------------------------------------------------------------------------------
Total common stock equity 530,990 517,190
=============================================================================================
Preferred stock - Wisconsin Public Service Corporation
Cumulative, $100 par value, 1,000,000 shares authorized;
with no mandatory redemption
Series Shares Outstanding
------ ------------------
5.00% 131,980 13,198 13,200
5.04% 30,000 3,000 3,000
5.08% 50,000 5,000 5,000
6.76% 150,000 15,000 15,000
6.88% 150,000 15,000 15,000
- ---------------------------------------------------------------------------------------------
Total preferred stock with no mandatory redemption 51,198 51,200
=============================================================================================
Company-obligated mandatorily redeemable trust
preferred securities of subsidiary trust
holding solely WPSR 7.00% subordinated debentures 50,000 50,000
=============================================================================================
Capital lease obligation - Wisconsin Public Service Corporation 74,120 -
Less current portion (297) -
- ---------------------------------------------------------------------------------------------
Net capital lease obligation 73,823 -
=============================================================================================
Long-term debt
First mortgage bonds - Wisconsin Public Service Corporation
Series Year Due
------ --------
7.30% 2002 50,000 50,000
6.80% 2003 50,000 50,000
6-1/8% 2005 9,075 9,075
6.90% 2013 22,000 22,000
8.80% 2021 53,100 53,100
7-1/8% 2023 50,000 50,000
6.08% 2028 50,000 50,000
First mortgage bonds - Upper Peninsula Power Company
Series Year Due
------ --------
7.94% 2003 15,000 15,000
10.0% 2008 6,000 6,000
9.32% 2021 18,000 18,000
Installment sales contract for air pollution control
equipment - Upper Peninsula Power Company
Term Bonds Year Due
---------- --------
6.90% 1999 - 120
- ---------------------------------------------------------------------------------------------
Total 323,175 323,295
Unamortized discount and premium on bonds, net (788) (817)
- ---------------------------------------------------------------------------------------------
Total first mortgage bonds 322,387 322,478
- ---------------------------------------------------------------------------------------------
ESOP loan guarantees 3,996 6,448
Notes payable to bank, secured by nonregulated plant 11,301 10,943
Senior secured note 3,806 3,886
Other long-term debt 165 166
- ---------------------------------------------------------------------------------------------
Total long-term debt 341,655 343,921
Less amounts due within one year (772) (884)
- ---------------------------------------------------------------------------------------------
Net long-term debt 340,883 343,037
=============================================================================================
Total capitalization $1,046,894 $961,427
=============================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
-7-
<PAGE>
<TABLE>
WPS RESOURCES CORPORATION
<CAPTION>
=========================================================================================
CONSOLIDATED STATEMENTS OF CASH FLOWS (1) Six Months Ended
(Thousands) June 30
1999 1998
=========================================================================================
<S> <C> <C>
Cash flows from operating activities
Net income $ 32,793 $ 28,417
Adjustments to reconcile net income to net cash from
operating activities
Depreciation and decommissioning 40,755 42,915
Amortization of nuclear fuel and other 7,394 8,589
Deferred income taxes (1,484) (3,526)
Investment tax credit restored (508) (871)
Allowance for equity funds used during construction (500) (68)
Pension income (3,084) (4,597)
Postretirement funding 2,463 1,745
Other, net 4,298 (1,616)
Changes in
Customer and other receivables 28,873 4,851
Accrued utility revenues 10,547 11,929
Fossil fuel inventory (1,209) (2,642)
Gas in storage 5,596 9,390
Accounts payable (32,223) (13,573)
Miscellaneous current and accrued liabilities 14,779 8,231
Accrued taxes 5,847 (2,457)
Gas refunds - 959
- -----------------------------------------------------------------------------------------
Net cash from operating activities 114,337 87,676
=========================================================================================
Cash flows from (used for) investing activities
Construction of utility plant and nuclear fuel expenditures (65,756) (31,989)
Purchase of other property and equipment (38,515) (10,216)
Decommissioning funding (4,552) (7,883)
Other 2,121 1,707
- -----------------------------------------------------------------------------------------
Net cash used for investing activities (106,702) (48,381)
=========================================================================================
Cash flows from (used for) financing activities
Issuance of notes payable 34,250 54,461
Redemptions of notes payable (36,853) (52,200)
Issuance of other long-term debt 761 420
Redemptions of other long-term debt (200) (74)
Issuance of commercial paper 786,408 733,488
Redemptions of commercial paper (768,185) (698,526)
Cash dividends on common stock (26,300) (25,078)
Issuance of common stock 5,135 -
Other (292) (265)
- -----------------------------------------------------------------------------------------
Net cash from (used for) financing activities (5,276) 12,226
=========================================================================================
Net decrease in cash and equivalents 2,359 51,521
Cash and equivalents at beginning of period 7,134 8,495
=========================================================================================
Cash and equivalents at end of period $ 9,493 $ 60,016
=========================================================================================
Cash paid during period for
Interest, less amount capitalized $ 15,413 $ 13,586
Income taxes 15,640 16,096
Preferred stock dividends of subsidiaries 1,556 1,567
=========================================================================================
</TABLE>
Supplemental schedule of noncash investing and financing activities:
A capital lease obligation of $74,130,000 was incurred when
Wisconsin Public Service entered into a long-term lease agreement
for utility plant assets.
(1) The 1998 statement gives effect to the merger with
Upper Peninsula Energy Corporation.
The accompanying notes are an integral part of these statements.
-8-
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
<CAPTION>
========================================================================================================
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME Three Months Ended Six Months Ended
(Thousands) June 30 June 30
1999 1998 1999 1998
========================================================================================================
<S> <C> <C> <C> <C>
Operating revenues
Electric $124,640 $125,058 $252,177 $237,864
Gas 34,556 24,388 102,855 89,872
- --------------------------------------------------------------------------------------------------------
Total operating revenues 159,196 149,446 355,032 327,736
========================================================================================================
Operating expenses
Electric production fuels 26,480 26,771 52,967 52,389
Purchased power 13,209 11,991 26,496 20,156
Gas purchased for resale 20,906 12,940 60,777 55,334
Other operating expenses 37,809 34,708 73,855 67,223
Maintenance 15,388 15,596 29,451 25,534
Depreciation and decommissioning 18,198 19,316 36,175 38,958
Federal income taxes 4,612 4,425 15,446 12,721
Investment tax credit restored (402) (435) (804) (871)
State income taxes 1,377 1,560 4,023 3,817
Gross receipts tax and other 6,800 6,737 13,787 13,523
- --------------------------------------------------------------------------------------------------------
Total operating expenses 144,377 133,609 312,173 288,784
========================================================================================================
Operating income 14,819 15,837 42,859 38,952
- --------------------------------------------------------------------------------------------------------
Other income and (deductions)
Allowance for equity funds used during construction 304 39 500 68
Other, net 2,534 2,426 4,829 4,246
Income taxes (67) (153) (448) (434)
- --------------------------------------------------------------------------------------------------------
Total other income 2,771 2,312 4,881 3,880
========================================================================================================
Income before interest expense 17,590 18,149 47,740 42,832
- --------------------------------------------------------------------------------------------------------
Interest expense
Interest on long-term debt 5,465 5,430 10,930 10,910
Other interest 943 545 1,650 1,090
Allowance for borrowed funds used during construction (241) (27) (418) (38)
- --------------------------------------------------------------------------------------------------------
Total interest expense 6,167 5,948 12,162 11,962
========================================================================================================
Net income 11,423 12,201 35,578 30,870
Preferred stock dividend requirements 778 778 1,556 1,556
- --------------------------------------------------------------------------------------------------------
Earnings on common stock 10,645 11,423 34,022 29,314
========================================================================================================
Other comprehensive income - - - -
Comprehensive income $ 10,645 $ 11,423 $ 34,022 $ 29,314
========================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
-9-
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
<CAPTION>
==============================================================================================
CONSOLIDATED BALANCE SHEETS June 30 December 31
(Thousands) 1999 1998
==============================================================================================
<S> <C> <C>
ASSETS
- ----------------------------------------------------------------------------------------------
Utility plant
Electric $1,575,863 $1,534,711
Gas $275,314 $267,892
Property under capital lease 74,130 -
- ----------------------------------------------------------------------------------------------
Total 1,925,307 1,802,603
Less - Accumulated depreciation and decommissioning 1,159,576 1,120,058
- ----------------------------------------------------------------------------------------------
Total 765,731 682,545
Nuclear decommissioning trusts 184,313 171,442
Construction in progress 48,915 35,996
Nuclear fuel, less accumulated amortization 16,905 18,641
- ----------------------------------------------------------------------------------------------
Net utility plant 1,015,864 908,624
==============================================================================================
Current assets
Cash and equivalents 5,616 1,882
Customer and other receivables, net of reserves 58,804 63,193
Accrued utility revenues 21,322 30,877
Fossil fuel, at average cost 13,816 12,433
Gas in storage, at average cost 11,085 14,855
Materials and supplies, at average cost 22,045 20,054
Prepayments and other 22,272 19,491
- ----------------------------------------------------------------------------------------------
Total current assets 154,960 162,785
==============================================================================================
Regulatory assets 62,346 68,335
Net nonutility plant 1,457 2,888
Pension assets 63,102 60,018
Investments and other assets 61,437 64,932
==============================================================================================
Total $1,359,166 $1,267,582
==============================================================================================
CAPITALIZATION AND LIABILITIES
- ----------------------------------------------------------------------------------------------
Capitalization
Common stock equity $ 488,182 $ 481,708
Preferred stock with no mandatory redemption 51,198 51,200
Capital lease obligation 73,823 -
Long-term debt to parent 13,924 14,061
Long-term debt 287,548 289,972
- ----------------------------------------------------------------------------------------------
Total capitalization 914,675 836,941
==============================================================================================
Current liabilities
Current portion of capital lease obligation 297 -
Note payable 10,000 10,000
Commercial paper 21,000 25,000
Accounts payable 57,718 60,680
Accrued interest and taxes 9,593 2,590
Other 18,420 6,564
- ----------------------------------------------------------------------------------------------
Total current liabilities 117,028 104,834
==============================================================================================
Long-term liabilities and deferred credits
Accumulated deferred income taxes 117,819 118,476
Accumulated deferred investment tax credits 24,355 24,772
Regulatory liabilities 45,518 43,591
Environmental remediation liabilities 38,748 39,028
Other long-term liabilities 101,023 99,940
- ----------------------------------------------------------------------------------------------
Total long-term liabilities and deferred credits 327,463 325,807
==============================================================================================
Total $1,359,166 $1,267,582
==============================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
-10-
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
<CAPTION>
===================================================================================================
CONSOLIDATED STATEMENTS OF CAPITALIZATION June 30 December 31
(Thousands, except share amounts) 1999 1998
===================================================================================================
<S> <C> <C>
Common stock equity
Common stock $ 95,588 $ 95,588
Premium on capital stock 127,842 107,842
Retained earnings 268,748 284,726
ESOP loan guarantees (3,996) (6,448)
- ---------------------------------------------------------------------------------------------------
Total common stock equity 488,182 481,708
===================================================================================================
Preferred stock
Cumulative, $100 par value, 1,000,000 shares authorized;
with no mandatory redemption
Series Shares Outstanding
------ ------------------
5.00% 131,980 13,198 13,200
5.04% 30,000 3,000 3,000
5.08% 50,000 5,000 5,000
6.76% 150,000 15,000 15,000
6.88% 150,000 15,000 15,000
- ---------------------------------------------------------------------------------------------------
Total preferred stock 51,198 51,200
===================================================================================================
Capital lease obligation 74,120 -
Less current portion (297) -
- ---------------------------------------------------------------------------------------------------
Net capital lease obligation 73,823 -
===================================================================================================
Long-term debt to parent
Series Year Due
------ --------
8.76% 2015 5,752 5,808
7.35% 2016 8,172 8,253
- ---------------------------------------------------------------------------------------------------
Total long-term debt to parent 13,924 14,061
===================================================================================================
Long-term debt
First mortgage bonds
Series Year Due
------ --------
7.30% 2002 50,000 50,000
6.80% 2003 50,000 50,000
6-1/8% 2005 9,075 9,075
6.90% 2013 22,000 22,000
8.80% 2021 53,100 53,100
7-1/8% 2023 50,000 50,000
6.08% 2028 50,000 50,000
- ---------------------------------------------------------------------------------------------------
Total 284,175 284,175
Unamortized discount and premium on bonds, net (788) (817)
- ---------------------------------------------------------------------------------------------------
Total first mortgage bonds 283,387 283,358
- ---------------------------------------------------------------------------------------------------
ESOP loan guarantees 3,996 6,448
Other long-term debt 165 166
- ---------------------------------------------------------------------------------------------------
Total long-term debt 287,548 289,972
===================================================================================================
Total capitalization $914,675 $836,941
===================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
-11-
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
<CAPTION>
======================================================================================
CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended
(Thousands) June 30
1999 1998
======================================================================================
<S> <C> <C>
Cash flows from operating activities
Net income $ 35,578 $ 30,870
Adjustments to reconcile net income to net cash from
operating activities
Depreciation and decommissioning 36,175 38,958
Amortization of nuclear fuel and other 7,065 8,478
Deferred income taxes (1,531) (2,791)
Investment tax credit restored (417) (871)
Allowance for equity funds used during construction (500) (68)
Pension income (3,084) (4,597)
Postretirement funding 2,463 1,997
Other, net (124) 898
Changes in
Customer and other receivables 4,389 2,525
Accrued utility revenues 9,555 11,929
Fossil fuel inventory (1,383) (2,863)
Gas in storage 3,770 6,544
Accounts payable (2,962) 615
Miscellaneous current and accrued liabilities 9,275 2,755
Accrued taxes 7,003 (2,167)
Gas refunds - 959
- --------------------------------------------------------------------------------------
Net cash from operating activities 105,272 93,171
======================================================================================
Cash flows from (used for) investing activities
Construction of utility plant and nuclear fuel expenditures (63,361) (29,393)
Decommissioning funding (4,552) (7,883)
Purchase of other property and equipment (85) -
Other 2,028 1,732
- --------------------------------------------------------------------------------------
Net cash used for investing activities (65,970) (35,544)
======================================================================================
Cash flows from (used for) financing activities
Proceeds from issuance of commercial paper 158,000 47,000
Redemptions of commercial paper (162,000) (62,500)
Equity infusion from parent 20,000 34,000
Dividend to parent (50,000) (23,180)
Preferred stock dividends (1,556) (1,556)
Other (12) -
- --------------------------------------------------------------------------------------
Net cash used for financing activities (35,568) (6,236)
======================================================================================
Net decrease in cash and equivalents 3,734 51,391
Cash and equivalents at beginning of period 1,882 3,921
======================================================================================
Cash and equivalents at end of period $ 5,616 $ 55,312
======================================================================================
Cash paid during period for
Interest, less amount capitalized $ 11,436 $ 10,684
Income taxes 17,959 15,937
======================================================================================
</TABLE>
Supplemental schedule of noncash investing and financing activities:
A capital lease obligation of $74,130,000 was incurred when
Wisconsin Public Service entered into a long-term lease agreement
for utility plant assets.
The accompanying notes are an integral part of these statements.
-12-
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
<CAPTION>
========================================================================================
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS Six Months Ended
(Thousands) June 30
1999 1998
========================================================================================
<S> <C> <C>
Balance at beginning of period $284,726 $297,489
Add Net income 35,578 30,870
- ----------------------------------------------------------------------------------------
320,304 328,359
- ----------------------------------------------------------------------------------------
Deduct
Cash dividends declared on preferred stock 1,556 1,556
Dividend to parent 50,000 23,180
- ----------------------------------------------------------------------------------------
51,556 24,736
- ----------------------------------------------------------------------------------------
Balance at end of period $268,748 $303,623
========================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
-13-
<PAGE>
WPS RESOURCES CORPORATION AND SUBSIDIARIES
WISCONSIN PUBLIC SERVICE CORPORATION
CONDENSED NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1999
NOTE 1. FINANCIAL INFORMATION
______________________________
We have prepared the consolidated financial statements of WPS Resources
Corporation and Wisconsin Public Service Corporation under the rules and
regulations of the Securities and Exchange Commission. These financial
statements have not been audited. Management believes that these financial
statements include all normal recurring adjustments which are necessary for a
fair presentation of the financial results for each period shown. We have
condensed or omitted certain information and footnote disclosures normally
included in financial statements prepared under generally accepted accounting
principles. We believe that the disclosures made are adequate to make the
information presented not misleading. These financial statements should be
read along with the financial statements and notes included with our latest
annual Form 10-K report.
We have restated the second quarter and six-months-ended 1998 financial
statements due to the merger between WPS Resources and Upper Peninsula Energy
Corporation. This merger occurred in September 1998 and was accounted for as
a pooling of interests.
Because of the seasonal nature of utility operations, the results reported for
the quarter and six-months ended may not be representative of annual results.
NOTE 2. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
______________________________________________________
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." This statement requires all derivatives to be
measured at fair value and recognized as either assets or liabilities in the
statement of financial position. The accounting for changes in the fair value
of a derivative is dependent upon the use of the derivative and its resulting
designation. Unless specific hedge accounting criteria are met, changes in
the derivative's fair value must be recognized currently in earnings. In
June 1999, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 137 which delays the effective date of
Standard No. 133 to fiscal periods beginning after June 15, 2000.
Accordingly, we will be adopting the requirements of this statement on
January 1, 2001, and have not yet determined its impact on our financial
statements. However, the requirements of this statement could increase
volatility in earnings and other comprehensive income.
NOTE 3. SEGMENTS OF BUSINESS
_____________________________
Effective December 31, 1998, we adopted Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
-14-
<PAGE>
Information." We manage our reportable segments separately due to their
different operating and regulatory environments. Our principal business
segments are the regulated electric utility operations of Wisconsin Public
Service Corporation and Upper Peninsula Power Company and the regulated gas
utility operations of Wisconsin Public Service. The other reportable business
segment, WPS Energy Services, Inc., participates in nonregulated energy
marketing operations. Reconciling eliminations represent intercompany
transactions.
The table below presents summary information pertaining to our operations
segmented by lines of business.
<TABLE>
<CAPTION>
Nonutility and
Regulated Utilities Nonregulated Operations
------------------- -----------------------
WPS
WPS Power WPS
Segments of Business Energy Development Reconciling Resources
(Thousands) Electric Gas Services and Other Eliminations Consolidated
- -------------------- -------- --- -------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Quarter Ended
June 30, 1999
- -------------
Operating revenues $138,699 $ 34,556 $ 46,917 $ 5,076 $(3,696) $221,552
Net income (loss) 10,851 (437) 29 (402) - 10,041
Quarter Ended
June 30, 1998
- -------------
Operating revenues 138,958 24,388 70,023 1,861 (3,176) 232,054
Net income (loss) 12,551 (1,337) (998) 249 - 10,465
Six Months Ended
June 30, 1999
- ----------------
Operating revenues 282,839 102,855 162,339 10,280 (6,927) 551,386
Net income (loss) 26,213 8,908 (805) (1,523) - 32,793
Six Months Ended
June 30, 1998
- ----------------
Operating revenues 267,362 89,872 168,545 2,732 (5,231) 523,280
Net income (loss) 25,050 5,234 (2,513) 646 - 28,417
</TABLE>
NOTE 4. POWER SUPPLY
_____________________
The De Pere Energy Center cogeneration facility became operational on
June 14, 1999. Wisconsin Public Service's agreement to purchase electricity
from this facility is accounted for as a capital lease and has been
capitalized at $74.1 million.
-15-
<PAGE>
NOTE 5. ASSET ACQUISITION
__________________________
On June 8, 1999 WPS Power Development purchased generation assets from
Maine Public Service Company for $37.5 million. The purchase included
hydroelectric, steam, and diesel units in the State of Maine and in the
Canadian Province of New Brunswick with a total capacity of 91.7 megawatts.
NOTE 6. STOCK OPTION PLAN
__________________________
Effective May 6, 1999 WPS Resources granted stock options under our 1999 Stock
Option Plan. The stock option plan is accounted for under Accounting
Principles Board Opinion No. 25. As a result, the plan grants fixed stock
options and no compensation expense is recognized.
-16-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS - WPS RESOURCES CORPORATION
WPS Resources Corporation is a holding company. Our wholly-owned subsidiaries
include two regulated utilities, Wisconsin Public Service Corporation and
Upper Peninsula Power Company, and WPS Resources Capital Corporation, a
holding company for our nonregulated businesses including WPS Energy Services,
Inc. and WPS Power Development, Inc. Approximately 85% of our assets at
June 30, 1999, and approximately 64% of our revenues for the first six months
of 1999 were derived from Wisconsin Public Service, an electric and gas
utility. Substantially all of our net income for the first six months of 1999
was derived from Wisconsin Public Service and Upper Peninsula Power, an
electric utility.
SECOND QUARTER 1999 COMPARED WITH SECOND QUARTER 1998
WPS RESOURCES CORPORATION OVERVIEW
WPS Resources consolidated operating revenues were $221.6 million in the
second quarter of 1999 compared with $232.1 million in the second quarter of
1998, a decrease of 4.5%. Net income was $10.0 million in the second quarter
of 1999 and $10.5 million in the second quarter of 1998, a decrease of 4.8%.
Basic and diluted earnings per share were $0.38 in the second quarter of 1999
compared with $0.39 in the second quarter of 1998, a decrease of 2.6%. The
reasons for the decrease in earnings, as explained below, were an increase in
other operating expenses and lower electric utility margins. Partially
offsetting these factors were increases in the gas utility margin, the
nonregulated gas margin, and other income.
OVERVIEW OF UTILITY OPERATIONS (WISCONSIN PUBLIC SERVICE AND UPPER PENINSULA
POWER)
Revenues at Wisconsin Public Service were $159.2 million in the second quarter
of 1999 compared with $149.4 million in the second quarter of 1998, an
increase of 6.6%. Earnings were $10.6 million in the second quarter of 1999
and $11.4 million in the second quarter of 1998, a decrease of 7.0%. The
primary reasons for the decrease in earnings were higher other operating
expenses and a decrease in the electric utility margin. Partially offsetting
these factors were a higher gas utility margin and an increase in other
income.
Revenues at Upper Peninsula Power were $14.1 million in the second quarter of
1999 compared with $13.9 million in the second quarter of 1998, an increase of
1.4%. Earnings were $0.6 million in the second quarter of 1999 and
$0.6 million in the second quarter of 1998.
ELECTRIC UTILITY OPERATIONS (WISCONSIN PUBLIC SERVICE AND UPPER PENINSULA
POWER)
WPS Resources consolidated electric utility margin decreased $1.6 million, or
1.7%, primarily due to surcharge revenues collected in 1998 and increased
power purchases in 1999 at Wisconsin Public Service.
-17-
<PAGE>
Second Quarter
WPS Resources Consolidated ------------------------------
Electric Utility Margins (Thousands) 1999 1998
- ------------------------------------ ---- ----
Revenues $136,925 $137,491
Fuel and purchased power 43,161 42,135
------- -------
Margin $ 93,764 $ 95,356
======= =======
Sales in kilowatt-hours (Thousands) 2,988,834 2,936,966
Our consolidated electric utility revenues remained fairly stable. Revenues
at Wisconsin Public Service in the second quarter of 1998 included
$3.8 million of surcharge revenues related to the recovery of the deferred
costs of the 1997 steam generator repairs at the Kewaunee Nuclear Power Plant.
Wisconsin Public Service is the operator and 41.2% owner of the
Kewaunee Plant. Absent the 1998 surcharge revenue, electric revenues
increased $3.2 million, or 2.4%, in the second quarter of 1999. Second
quarter 1999 electric revenues at Wisconsin Public Service included a 6.3%
increase in Wisconsin retail electric rates; however, kilowatt-hour sales to
wholesale customers decreased 5.9%.
Our consolidated purchased power expense increased $1.3 million, or 8.9%,
primarily due to additional purchase requirements at Wisconsin Public Service.
These purchases supplemented Wisconsin Public Service's generation during
scheduled maintenance outages at its fossil-fueled generation plants.
The Public Service Commission of Wisconsin allows Wisconsin Public Service to
prospectively adjust the amount billed to Wisconsin retail customers for fuel
and purchased power if costs fall outside a specified range. Wisconsin Public
Service is required to file an application to adjust rates either higher or
lower when costs are plus or minus 2.0% from forecasted costs on an annualized
basis. Forecasted annual 1999 fuel costs at June 30, 1999 are expected to be
within this 2.0% window.
GAS UTILITY OPERATIONS (WISCONSIN PUBLIC SERVICE)
WPS Resources consolidated gas margin increased $2.5 million in the second
quarter of 1999, or 21.7%, primarily due to the implementation of a
Public Service Commission of Wisconsin rate order which authorized a 5.1%
increase in Wisconsin retail gas rates.
-18-
<PAGE>
Second Quarter
WPS Resources Consolidated -----------------------------
Gas Utility Margins (Thousands) 1999 1998
- ------------------------------- ---- ----
Revenues $34,556 $24,388
Purchase costs 20,687 12,989
------ ------
Margin $13,869 $11,399
====== ======
Volume in therms (Thousands) 121,195 113,925
Our consolidated gas revenues increased $10.2 million, or 41.7%. This
increase was due to the implementation of new Wisconsin retail gas rates and a
6.4% increase in overall therm sales as a result of colder weather in the
second quarter of 1999. Although weather was 7.9% colder in the second
quarter of 1999 than in the second quarter of 1998, it was still 13.1% warmer
than normal. In addition, gas revenues at Wisconsin Public Service in the
second quarter of 1998 were reduced by $7.5 million for refunds from
ANR Pipeline Company which were passed on to its customers.
Our consolidated gas purchase costs increased $7.7 million, or 59.3%. This
increase was largely due to the $7.5 million refund from ANR Pipeline Company
which was credited to gas expense in the second quarter of 1998. Under
current regulatory practice, the Public Service Commission of Wisconsin and
the Michigan Public Service Commission allow Wisconsin Public Service to pass
changes in the cost of gas on to customers through a purchased gas adjustment
clause.
OTHER UTILITY EXPENSES/INCOME (WISCONSIN PUBLIC SERVICE AND UPPER PENINSULA
POWER)
Other operating expenses at Wisconsin Public Service increased $3.1 million,
or 8.9%, primarily due to higher miscellaneous electric distribution expense
of $0.9 million, higher customer service expense of $0.7 million, higher
pension costs of $0.6 million, and higher contracted services expense of
$0.4 million in the second quarter of 1999.
Maintenance expense at Wisconsin Public Service's fossil-fueled generation
plants increased $2.0 million due to additional costs for scheduled and
unscheduled maintenance activities. Offsetting this increase was a decrease
in nuclear maintenance expense. This decrease was due to the second quarter
of 1998 recognition of the 1997 deferred expenses for the Kewaunee Nuclear
Power Plant's steam generator repairs. The Public Service Commission of
Wisconsin approved deferral of the costs associated with 1997 repairs. The
cost of the repairs was collected in the second quarter of 1998 through a
$3.8 million electric revenue surcharge.
OVERVIEW OF NONREGULATED OPERATIONS
Nonregulated operations primarily consist of the gas and electric sales at
WPS Energy Services, an energy marketing subsidiary. Nonregulated operations
also include those of WPS Resources as a holding company (primarily
-19-
<PAGE>
investments, borrowings, and certain unallocated corporate costs) and those of
WPS Power Development which develops electric generation projects, invests in
generating facilities, and provides services to the electric power generation
industry.
Nonregulated operations experienced a loss of $1.2 million in the second
quarter of 1999 compared with a loss of $1.5 million in the second quarter of
1998. Although margins on nonregulated energy sales continue to grow, losses
are being experienced primarily due to operating expenses associated with
additional projects.
OVERVIEW OF WPS ENERGY SERVICES
Revenues at WPS Energy Services were $46.9 million in the second quarter of
1999 compared with $70.0 million in the second quarter of 1998, a decrease of
33.0%. WPS Energy Services experienced a small positive income in the second
quarter of 1999 compared with a loss of $1.0 million in the second quarter of
1998. The primary reasons for the increase in earnings at WPS Energy Services
were gas trading gains due to improved trading activities in 1999 and an
increase in the gas margin due to improved gas procurement operations and
processes including a reduced emphasis on lower margin wholesale sales.
NONREGULATED MARGINS (WPS ENERGY SERVICES)
Gas margins at WPS Energy Services were $1.9 million in the second quarter of
1999 compared with $1.2 million in the second quarter of 1998, an increase of
58.3%. Electric margins at WPS Energy Services remained fairly stable. Gas
revenues at WPS Energy Services were $45.5 million in the second quarter of
1999 compared with $65.9 million in the second quarter of 1998, a decrease of
31.0%. The decrease was the result of an emphasis on higher margin activity
in the wholesale area and less involvement with lower margin activities.
Electric revenues at WPS Energy Services were $1.1 million in the second
quarter of 1999 and $4.0 million in the second quarter of 1998, a decrease of
72.5%. This decrease was the result of WPS Energy Services' effort to reduce
participation in the wholesale electric markets.
WPS Energy Services' cost of sales were $44.7 million in the second quarter of
1999 and $68.6 million in the second quarter of 1998, a decrease of 34.8%.
This decrease was due to fewer gas purchases of $21.1 million and fewer
electric purchases of $2.9 million, both due to decreased sales.
OTHER NONREGULATED EXPENSES/INCOME (WPS ENERGY SERVICES)
Improved processes and strategies emphasizing reduced risk at WPS Energy
Services resulted in gas trading gains of $0.2 million in the second quarter
of 1999 compared with gas trading losses of $1.2 million in the second quarter
of 1998. In addition, the volume of instruments traded has decreased.
PRICE RISK MANAGEMENT ACTIVITIES (WPS ENERGY SERVICES)
WPS Resources has minimal price risk management activities at its utility
operations. Much of the utility price risk exposure is recoverable through
customer rates. (See pages 18 and 19 for descriptions of electric and gas
retail price adjustment mechanisms.) More price risk exposure is experienced
-20-
<PAGE>
at WPS Energy Services, and WPS Energy Services actively engages in price risk
management activities.
WPS Energy Services uses derivative financial and commodity instruments
including futures and forward contracts. These derivatives reduce the market
risk associated with changes in the price of natural gas and electricity sold
under firm commitments with certain customers. WPS Energy Services also uses
price swap agreements, call and put option contracts, and futures and forward
contracts. These derivatives manage the risk associated with a portion of the
anticipated supply requirements. WPS Energy Services uses derivatives, within
specified guidelines, for trading purposes.
The notional amount of derivatives outstanding at June 30, 1999, decreased
from December 31, 1998, due to the end of the 1999 winter heating season.
This includes a decrease of approximately 35.0% for hedging activities and
107.0% for trading activities. Although wholesale activity has decreased, as
WPS Energy Services enters into supply commitments for the 1999-2000 winter
season, it expects that the notional amount of derivatives outstanding will
increase accordingly.
OTHER NONREGULATED OPERATIONS
Losses at WPS Power Development were $0.9 million in the second quarter of
1999 compared with $0.4 million in the second quarter of 1998. The increase
in losses at WPS Power Development was due to additional costs incurred in the
second quarter of 1999 for the operation of new projects. Other operating
expenses at WPS Power Development increased $1.0 million due to expenses
associated with the operation of additional projects and the development of
new projects. PDI is pursuing additional long-term out-take contracts at
ECO Coal Pelletization #12, LLC where $0.8 million in expenses were incurred.
SIX MONTHS 1999 COMPARED WITH SIX MONTHS 1998
WPS RESOURCES CORPORATION OVERVIEW
WPS Resources consolidated operating revenues were $551.4 million in the first
six months of 1999 compared with $523.3 million in the first six months of
1998, an increase of 5.4%. Net income was $32.8 million in the first six
months of 1999 and $28.4 million in the first six months of 1998, an increase
of 15.5%. Basic and diluted earnings per share were $1.23 in the first six
months of 1999 compared with $1.07 in the first six months of 1998, an
increase of 15.0%. The primary reasons for the increase in earnings, as
explained below, were increased electric utility, gas utility, and
nonregulated gas margins. Partially offsetting these factors were higher
other operating and maintenance expenses.
OVERVIEW OF UTILITY OPERATIONS (WISCONSIN PUBLIC SERVICE AND UPPER PENINSULA
POWER)
Revenues at Wisconsin Public Service were $355.0 million in the first six
months of 1999 compared with $327.7 million in the first six months of 1998,
an increase of 8.3%. Earnings were $34.0 million in the first six months of
1999 and $29.3 million in the first six months of 1998, an increase of 16.0%.
The primary reasons for the increase in earnings at Wisconsin Public Service
were increased electric and gas utility margins largely as a result of the
-21-
<PAGE>
implementation of a January 15, 1999, Public Service Commission of Wisconsin
rate order which authorized a 6.3% increase in Wisconsin retail electric rates
and a 5.1% increase in Wisconsin retail gas rates. Partially offsetting these
factors were increases in other operating expenses and maintenance expense.
Revenues at Upper Peninsula Power were $30.7 million in the first six months
of 1999 compared with $29.5 million in the first six months of 1998, an
increase of 4.1%. Earnings were $1.9 million in the first six months of 1999
and $1.9 million in the first six months of 1998.
ELECTRIC UTILITY OPERATIONS (WISCONSIN PUBLIC SERVICE AND UPPER PENINSULA
POWER)
WPS Resources consolidated electric utility margin increased $7.2 million, or
3.9%, primarily due to Wisconsin Public Service's implementation of a
January 15, 1999, Public Service Commission of Wisconsin rate order which
authorized a 6.3% increase in Wisconsin retail electric rates.
Six Months
WPS Resources Consolidated ------------------------------
Electric Utility Margins (Thousands) 1999 1998
- ------------------------------------ ---- ----
Revenues $279,318 $264,714
Fuel and purchased power 87,566 80,130
------- -------
Margin $191,752 $184,584
======= =======
Sales in kilowatt-hours (Thousands) 6,133,548 5,883,332
Our consolidated electric utility revenues increased $14.6 million, or 5.5%,
largely due to the electric rate increase at Wisconsin Public Service. Also
contributing to higher electric revenues was a 4.4% increase in overall
kilowatt-hour sales at Wisconsin Public Service and a 6.1% increase in
kilowatt-hour sales at Upper Peninsula Power Company. These sales were
largely the result of weather that was 8.5% colder in the first six months of
1999 than in the first six months of 1998. Weather was still 9.4% warmer than
normal.
Our consolidated electric production fuel expense increased $0.6 million, or
1.1%, primarily as a result of increased generation requirements at
Wisconsin Public Service's combustion turbine and nuclear generating plants in
the first six months of 1999. Partially offsetting this factor was a decrease
in production at Wisconsin Pubic Service's fossil-fueled generation plants as
a result of scheduled maintenance activities.
Our consolidated purchased power expense increased $6.9 million, or 24.9%,
primarily due to additional purchase requirements at both Wisconsin Public
Service and Upper Peninsula Power Company in the first six months of 1999.
Purchase requirements at Wisconsin Public Service in the first six months of
1999 were higher due to lack of production at its fossil-fueled generation
plants which were off-line for scheduled maintenance activities.
-22-
<PAGE>
The Public Service Commission of Wisconsin allows Wisconsin Public Service to
prospectively adjust the amount billed to Wisconsin retail customers for fuel
and purchased power if costs fall outside a specified range. Wisconsin Public
Service is required to file an application to adjust rates either higher or
lower when costs are plus or minus 2.0% from forecasted costs on an annualized
basis. Forecasted annual 1999 fuel costs at June 30, 1999 are expected to be
within this 2.0% window.
GAS UTILITY OPERATIONS (WISCONSIN PUBLIC SERVICE)
WPS Resources consolidated gas margin increased $8.0 million, or 23.7%, in the
first six months of 1999. This increase was primarily due to the
implementation of a Public Service Commission of Wisconsin rate order which
authorized a 5.1% increase in Wisconsin retail gas rates.
Six Months
WPS Resources Consolidated -----------------------------
Gas Utility Margins (Thousands) 1999 1998
- ------------------------------- ---- ----
Revenues $102,855 $89,872
Purchase costs 60,971 55,999
------- ------
Margin $ 41,884 $33,873
======= ======
Volume in therms (Thousands) 372,080 337,729
Our consolidated gas operating revenues increased $13.0 million, or 14.4%.
This increase was due to the implementation of new Wisconsin retail gas rates
and a 10.2% increase in overall therm sales as a result of colder weather in
the first six months of 1999. Although weather was 8.5% colder in the first
six months of 1999 than in the first six months of 1998, it was still 9.4%
warmer than normal. In addition, gas revenues at Wisconsin Public Service in
the first six months of 1998 were reduced by $7.5 million for refunds from ANR
Pipeline Company which were passed on to its customers.
Our consolidated gas purchase costs increased $5.0 million, or 8.9%. This
increase was due to the $7.5 million refund from ANR Pipeline Company which
was credited to gas expense in the second quarter of 1998. Under current
regulatory practice, the Public Service Commission of Wisconsin and the
Michigan Public Service Commission allow Wisconsin Public Service to pass
changes in the cost of gas on to customers through a purchased gas adjustment
clause.
OTHER UTILITY EXPENSES/INCOME (WISCONSIN PUBLIC SERVICE AND UPPER PENINSULA
POWER COMPANY)
Other operating expenses at Wisconsin Public Service increased $6.6 million,
or 9.9%, primarily due to higher miscellaneous electric distribution expense
of $1.7 million, higher customer service expense of $1.6 million, higher
pension costs of $1.2 million, higher administrative salary and office expense
-23-
<PAGE>
of $1.1 million, and higher contracted services expense of $0.3 million in the
first six months of 1999.
Maintenance expense at Wisconsin Public Service increased $3.9 million, or
15.3%, primarily due to additional costs for scheduled and unscheduled
maintenance activities at the fossil-fueled generation plants. Right-of-way
maintenance for overhead lines also increased.
OVERVIEW OF NONREGULATED OPERATIONS
Nonregulated operations experienced a loss of $3.1 million in the first six
months of 1999 compared with a loss of $2.8 million in the first six months of
1998. Although margins on nonregulated energy sales continue to grow, losses
are being experienced primarily due to operating expenses associated with
additional projects. In addition, nonregulated earnings decreased in the
first six months of 1999 compared with the first six months of 1998 due to a
one-time dividend of $2.0 million received by WPS Resources from a venture
capital investment in the first quarter of 1998.
OVERVIEW OF WPS ENERGY SERVICES
Revenues at WPS Energy Services were $162.3 million in the first six months of
1999 compared with $168.5 million in the first six months of 1998, a decrease
of 3.7%. WPS Energy Services experienced a loss of $0.8 million in the first
six months of 1999 compared with a loss of $2.5 million in the first six
months of 1998. The primary reasons for the decrease in losses at WPS Energy
Services were lower electric and gas trading losses primarily due to improved
trading activities in 1999 and an increase in the gas margin due to improved
gas procurement operations and processes including a reduced emphasis on lower
margin wholesale sales.
NONREGULATED MARGINS (WPS ENERGY SERVICES)
Gas margins at WPS Energy Services were $3.7 million in the first six months
of 1999 compared with $2.4 million in the first six months of 1998, an
increase of 54.2%. Electric margins remained fairly stable. Gas revenues at
WPS Energy Services were $160.1 million in the first six months of 1999
compared with $159.8 million in the first six months of 1998. Electric
revenues were $1.9 million in the first six months of 1999 and $8.4 million in
the first six months of 1998, a decrease of 77.4%. This decrease was the
result of WPS Energy Services' effort to reduce participation in the wholesale
electric markets.
WPS Energy Services' cost of sales were $158.2 million in the first six months
of 1999 and $165.7 million in the first six months of 1998, a decrease of
4.5%. This decrease was due to decreased gas purchases of $1.0 million due to
improvements in gas procurement and decreased electric purchases of
$6.6 million due to decreased sales.
OTHER NONREGULATED EXPENSES/INCOME (WPS ENERGY SERVICES)
Other operating expenses at WPS Energy Services increased $1.0 million, or
24.5%, due to costs of $0.6 million associated with entering into expanded
retail customer-choice programs and increased benefit and payroll expenses of
$0.4 million. Improved processes and strategies emphasizing reduced risk at
-24-
<PAGE>
WPS Energy Services resulted in minimal gas trading losses in the first six
months of 1999 compared with $2.3 million in the first six months of 1998.
PRICE RISK MANAGEMENT ACTIVITIES (WPS ENERGY SERVICES)
WPS Resources has minimal price risk management activities at its utility
operations. Much of the utility price risk exposure is recoverable through
customer rates. More price risk exposure is experienced at WPS Energy
Services, and WPS Energy Services actively engages in price risk management
activities. See the discussion at pages 20 and 21 for a discussion of
WPS Energy Services' price risk management activities.
OTHER NONREGULATED OPERATIONS
Losses at WPS Power Development were $1.7 million in the first six months of
1999 compared with $0.9 million in the first six months of 1998. The increase
in losses at WPS Power Development was primarily due to additional costs
incurred in the first six months of 1999 for the operation of additional
projects and the development of new projects. Other operating expenses
increased $2.1 million due to higher project expenses. Minimal revenues were
recorded at ECO Coal Pelletization #12, LLC although $1.4 million in related
expenses were incurred.
The first six months of 1998 included a one-time dividend of $2.0 million
received by WPS Resources from a venture capital investment. This dividend
represented a four cents per share increase to earnings for the first six
months of 1998.
FINANCIAL CONDITION - WPS RESOURCES
INVESTMENTS AND FINANCING
Special common stock dividends of $25.0 million were paid by Wisconsin Public
Service to WPS Resources in the first six months of 1999. Equity infusions of
$20.0 million were made by WPS Resources to Wisconsin Public Service
Corporation in the first six months of 1999. These special dividends and
equity infusions allowed Wisconsin Public Service's average equity
capitalization ratio for ratemaking to remain at its target level as
established by the Public Service Commission of Wisconsin in its most recent
rate order.
Cash requirements exceeded internally generated funds in the first six months
of 1999 and short-term borrowings increased $15.6 million as a result of
obtaining funds for the acquisition of generating units from Maine Public
Service Corporation. Our pretax interest coverage was 3.27 times for the
12 months ended June 30, 1999. See the table below for WPS Resources' credit
ratings.
-25-
<PAGE>
Credit Ratings Standard & Poor's Moody's
- -------------- ----------------- -------
Wisconsin Public Service Corporation
Bonds AA+ Aa2
Preferred stock AA aa3
Commercial paper A1+ P1
WPS Resources Corporation
Trust preferred securities A+ a1
Commercial paper A1+ P1
WPS Resources Capital Corporation
Unsecured debt* AA A1
* No securities currently outstanding.
We will use internally-generated funds and short-term borrowing to satisfy
most of our capital requirements. We may periodically issue additional
long-term debt and common stock to reduce short-term debt and to maintain
desired capitalization ratios.
The specific forms of financing, amounts, and timing will depend on the
availability of projects, market conditions, and other factors. We may issue
up to $50.0 million of medium-term notes in the next few months to reduce
short-term debt. We began issuing new shares of common stock for our Stock
Investment Plan in January 1999. We may also expand our leveraged employee
stock ownership plan during the next three-year period.
Wisconsin Public Service makes large investments in capital assets.
Construction expenditures for Wisconsin Public Service are expected to be
approximately $376.0 million in the aggregate for the 1999 through 2001
period. This includes expenditures for the replacement of the Kewaunee
Nuclear Power Plant steam generators and construction of a proposed
transmission line between Wausau, Wisconsin and Duluth, Minnesota.
In addition, other capital requirements for Wisconsin Public Service for the
three-year period will include contributions of approximately $20.7 million to
the Kewaunee Nuclear Power Plant decommissioning trust fund.
Wisconsin Public Service's agreement to purchase electricity from the
De Pere Energy Center, a gas-fired cogeneration facility, is accounted for as
a capital lease. The De Pere Energy Center lease was capitalized at
$74.1 million at the in-service date, June 14, 1999. While not a capital
expenditure, this accounting affects the capital structure.
Upper Peninsula Power Company will incur construction expenditures of about
$23.0 million in the aggregate for the period 1999 through 2001, primarily for
electric distribution improvements.
WPS Power Development entered into a firm commitment with PP&L Resources, Inc.
to purchase the Sunbury Station for $106.0 million. The coal-fired units have
a capacity of 389 megawatts. The purchase is contingent upon receipt of
regulatory approvals.
WPS Power Development's purchase of generation assets from Maine Public
Service Company for $37.5 million may be refinanced with nonrecourse debt.
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<PAGE>
Other investment expenditures for nonregulated projects are uncertain since
there are few firm commitments at this time. Financing for most nonregulated
projects is expected to be obtained through nonrecourse project financing
and/or through a new subsidiary, WPS Resources Capital Corporation, which was
formed in January 1999 to obtain funding for those projects.
REGULATORY
Wisconsin Public Service received a rate order in the Wisconsin jurisdiction
on January 15, 1999. The impact is a $26.9 million increase in electric
revenues and a $10.3 million increase in gas revenues on an annual basis. The
new rates will be effective for 1999 and 2000. The Public Service Commission
of Wisconsin authorized a 12.1% return on Wisconsin Public Service's equity
for 1999 and 2000. On July 1, 1999 Wisconsin Public Service filed to reopen
this rate order to consider issues related to the Kewaunee Nuclear Power
Plant, the recovery of deferred expenses related to the repowering of Pulliam
Unit 3, and the fuel forecast for 2000. Hearings on the rate reopener are
expected in the fall of 1999.
YEAR 2000 COMPLIANCE
The Year 2000 issue arises because software programs, computer hardware, and
equipment that have date sensitive software or embedded chips may recognize a
date using "00" as the year 1900 rather than the year 2000. This may result
in system failures or other disruptions of operations.
WPS Resources and its subsidiary companies are committed to eliminating or
minimizing adverse effects of the Year 2000 computer compliance issue on our
business operations, including the products and services provided to
customers, and to maintaining our reputation as an efficient and reliable
supplier of energy. We, however, are unable to guarantee that there will be
no adverse effects as a result of the Year 2000 computer compliance issue
because many aspects of compliance are beyond our direct control.
We have undertaken a program to assess Year 2000 compliance and to bring
computer systems into compliance by the year 2000. All systems, including
energy production and delivery systems, other embedded systems, and third
party systems of suppliers were evaluated and steps were taken to resolve
potential problems.
A Year 2000 project plan which includes awareness, inventory and assessment,
remediation, testing, and implementation was developed. The formal awareness
phase of the Year 2000 project which includes understanding and communication
of the issue to employees, customers, suppliers, and other affected parties is
complete. The Year 2000 issue was communicated to our employees and customers
via several media. All of our business unit leaders are aware of the
Year 2000 project plan and their roles in implementing the plan.
Communication and response to Year 2000 inquiries continue.
The inventory and assessment phase which includes identification of all
information and non-information technology systems and of non-compliant
systems, applications, and hardware, is complete.
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Our Information Technology Department has identified five major systems. All
of these systems (customer information, finance, human resources, materials
management, and facility management) are currently Year 2000 compliant.
In addition, all other systems including non-information technology systems
were identified and ranked as to the risk posed by non-compliance.
Non-information technology systems include computer and embedded systems
related to power plant, system operating, hydroelectric, transmission, and
other operating functions. All systems ranked as "critical," "severe," or
"high" are Year 2000 compliant.
We hired an external consulting group to monitor the progress of our Year 2000
compliance activities. The consulting group's responsibilities include
performing a status check on our ability to achieve Year 2000 compliance.
In addition, we are identifying, contacting, and assessing suppliers and other
business partners for Year 2000 readiness, as these external parties may have
the potential to impact our Year 2000 readiness. We are also working to
address Year 2000 issues related to all joint ownership facilities. At the
present time, we are not aware of problems that would materially impact our
operations. However, we have no means of ensuring that all third parties will
be Year 2000 compliant in a timely manner, and the inability of these parties
to resolve successfully their Year 2000 issues could have a material impact on
our operations.
Due to fewer expenditures for hardware and software than originally
anticipated, the estimate of total Year 2000 project costs has been reduced to
$6.0 million. This estimate is considered reasonable and the Wisconsin retail
portion of this cost has been approved for rate recovery by the Public Service
Commission of Wisconsin. This estimate includes internal labor costs of
$2.4 million, software replacement costs for non-compliant products of
$1.2 million, and contract labor costs of $2.4 million. Expenditures for the
Year 2000 project incurred through June 30, 1999, were $2.7 million.
The failure to correct a material Year 2000 problem could result in an
interruption in, or the failure of, certain normal business activities or
operations which could materially affect our results of operations. However,
due to the general uncertainty inherent in the Year 2000 issue, we are unable
to determine at this time whether the consequences of Year 2000 failures will
have a material impact on operations. A preliminary identification of
potential risks related to the failure to be in compliance by the Year 2000
was made. The most reasonably likely worst case Year 2000 scenario includes
loss or unavailability of some generation, partial loss of system monitoring
and control functions, partial loss of voice communications, loss of
transmission facilities, and loss of load or uncharacteristic loads. We
believe that the probable extent of any of these events is not significantly
in excess of similar events caused by normal risks and the handling of such
events is within the capabilities of the systems.
WPS Resources assessed the potential impact of failure to achieve Year 2000
compliance with respect to each of the following:
- - Generation availability
- - System monitoring and control functions
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- - Ability to restart generators that are out of service for planned or
unplanned outages
- - Company-owned voice/data communications
- - Transmission facilities
- - System protection
- - Critical operating data (i.e., generation plant data)
- - Electric and gas distribution systems
- - Pipelines' constraints to the supply or pressure of natural gas
- - Major support systems
Contingency plans for dealing with Year 2000 issues were developed for each
application identified as "critical" or "severe." In addition, a proposal for
a "quick response team" concept was drafted, and a process for handling
unexpected Year 2000 problems was formalized. A crisis management training
session utilizing a Year 2000 case study has been completed.
GENERATION ASSET ACQUISITION
On June 8, 1999, WPS Power Development purchased generation assets from
Maine Public Service Company for $37.5 million. The purchase included
hydroelectric, steam, and diesel units in the State of Maine and in the
Canadian Province of New Brunswick with a total capacity of 91.7 megawatts.
RENEWABLE ENERGY
The Wisconsin Electric Reliability Act requires state utilities to generate a
combined total of 50 megawatts of electricity through renewable energy by
December 31, 2000. Wisconsin Public Service placed 14 wind generators in
commercial operation on June 26, 1999. These windmills, which cost
approximately $10.3 million, will supply the nine megawatts of renewable
energy generation that Wisconsin Public Service is required to supply under
the Act.
ENVIRONMENTAL
In September 1998, the Environmental Protection Agency required certain
states, including Wisconsin, to develop plans to reduce the emission of
nitrogen oxides from sources within the state by May of 2003. In May 1999,
the U.S. Court of Appeals for the District of Columbia found the national air
quality standards for ozone and particulate matter flawed. The Court stayed
the requirement for states to file implementation plans by September of 1999.
The Public Service Commission of Wisconsin has since delayed hearings to
review the plans of Wisconsin utilities to meet the pollution reduction
standards.
Capital expenditures for complying with the original requirements in current
year dollars are projected to be between $58.0 million and $118.0 million.
The nature of any revised emission standard, the implementation period for
compliance, and the number of Wisconsin utilities required to implement the
new standard could impact future expenditure levels.
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<PAGE>
RESULTS OF OPERATIONS - WISCONSIN PUBLIC SERVICE CORPORATION
Wisconsin Public Service is a regulated electric and gas utility. Electric
operations accounted for 71% of revenues for the first six months of 1999,
while gas operations accounted for 29% of revenues for the first six months of
1999.
SECOND QUARTER 1999 COMPARED WITH SECOND QUARTER 1998
WISCONSIN PUBLIC SERVICE OVERVIEW
Revenues at Wisconsin Public Service were $159.2 million in the second quarter
of 1999 compared with $149.4 million in the second quarter of 1998, an
increase of 6.6%. Earnings were $10.6 million in the second quarter of 1999
and $11.4 million in the second quarter of 1998, a decrease of 7.0%. The
primary reasons for the decrease in earnings were higher other operating
expenses and a decrease in the electric utility margin. Partially offsetting
these factors were a higher gas utility margin and an increase in other
income.
ELECTRIC UTILITY OPERATIONS
Wisconsin Public Service's electric utility margin decreased $1.3 million, or
1.6%, primarily due to surcharge revenues collected in 1998 and increased
power purchases in 1999.
Second Quarter
Wisconsin Public Service ------------------------------
Electric Margins (Thousands) 1999 1998
- ---------------------------- ---- ----
Revenues $124,640 $125,058
Fuel and purchased power 39,689 38,762
------- -------
Margin $ 84,951 $ 86,296
======= =======
Sales in kilowatt-hours (Thousands) 2,842,621 2,796,853
Electric utility revenues remained fairly stable. Revenues in the second
quarter of 1998 included $3.8 million of surcharge revenues related to the
recovery of the deferred costs of the 1997 steam generator repairs at the
Kewaunee Nuclear Power Plant. Wisconsin Public Service is the operator and
41.2% owner of the Kewaunee Plant. Absent the 1998 surcharge revenue,
electric revenues increased $3.4 million, or 2.8%. Second quarter 1999
electric revenues included a 6.3% increase in Wisconsin retail electric rates;
however, kilowatt-hour sales to wholesale customers decreased 5.9%.
Purchased power expense increased $1.2 million, or 10.2%, primarily due to
additional purchase requirements. These purchases supplemented
Wisconsin Public Service's generation during scheduled maintenance outages at
its fossil-fueled generation plants.
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The Public Service Commission of Wisconsin allows Wisconsin Public Service to
prospectively adjust the amount billed to Wisconsin retail customers for fuel
and purchased power if costs fall outside a specified range. Wisconsin Public
Service is required to file an application to adjust rates either higher or
lower when costs are plus or minus 2.0% from forecasted costs on an annualized
basis. Forecasted annual 1999 fuel costs at June 30, 1999 are expected to be
within this 2.0% window.
GAS UTILITY OPERATIONS
Wisconsin Public Service's gas margin increased $2.2 million in the second
quarter of 1999, or 19.2%, primarily due to the implementation of a
Public Service Commission of Wisconsin rate order which authorized a 5.1%
increase in Wisconsin retail gas rates.
Second Quarter
Wisconsin Public Service -----------------------------
Gas Margins (Thousands) 1999 1998
- ------------------------ ---- ----
Revenues $34,556 $24,388
Purchase costs 20,906 12,940
------ ------
Margin $13,650 $11,448
====== ======
Volume in therms (Thousands) 121,195 113,925
Gas revenues increased $10.2 million, or 41.7%. This increase was due to the
implementation of new Wisconsin retail gas rates and a 6.4% increase in
overall therm sales as a result of colder weather in the second quarter of
1999. Although weather was 7.9% colder in the second quarter of 1999 than in
the second quarter of 1998, it was still 13.1% warmer than normal. In
addition, gas revenues at Wisconsin Public Service in the second quarter of
1998 were reduced by $7.5 million for refunds from ANR Pipeline Company which
were passed on to its customers.
Gas purchase costs increased $8.0 million, or 61.6%. This increase was
largely due to the $7.5 million refund from ANR Pipeline Company which was
credited to gas expense in the second quarter of 1998. Under current
regulatory practice, the Public Service Commission of Wisconsin and the
Michigan Public Service Commission allow Wisconsin Public Service to pass
changes in the cost of gas on to customers through a purchased gas adjustment
clause.
OTHER UTILITY EXPENSES/INCOME
Other operating expenses at Wisconsin Public Service increased $3.1 million,
or 8.9%, primarily due to higher miscellaneous electric distribution expense
of $0.9 million, higher customer service expense of $0.7 million, higher
pension costs of $0.6 million, and higher contracted services expense of
$0.4 million in the second quarter of 1999.
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Maintenance expense at Wisconsin Public Service's fossil-fueled generation
plants increased $2.0 million due to additional costs for scheduled and
unscheduled maintenance activities. Offsetting this increase was a decrease
in nuclear maintenance expense. This decrease was due to the second quarter
of 1998 recognition of the 1997 deferred expenses for the Kewaunee Nuclear
Power Plant's steam generator repairs. The Public Service Commission of
Wisconsin approved deferral of the costs associated with 1997 repairs. The
cost of the repairs was collected in the second quarter of 1998 through a
$3.8 million electric revenue surcharge.
SIX MONTHS 1999 COMPARED WITH SIX MONTHS 1998
WISCONSIN PUBLIC SERVICE CORPORATION
Revenues at Wisconsin Public Service were $355.0 million in the first six
months of 1999 compared with $327.7 million in the first six months of 1998,
an increase of 8.3%. Earnings were $34.0 million in the first six months of
1999 and $29.3 million in the first six months of 1998, an increase of 16.0%.
The primary reasons for the increase in earnings at Wisconsin Public Service
were increased electric and gas utility margins largely as a result of the
implementation of a January 15, 1999, Public Service Commission of Wisconsin
rate order which authorized a 6.3% increase in Wisconsin retail electric rates
and a 5.1% increase in Wisconsin retail gas rates. Partially offsetting these
factors were increases in other operating expenses and maintenance expense.
ELECTRIC UTILITY OPERATIONS
Wisconsin Public Service's electric utility margin increased $7.4 million, or
4.5%, primarily due to Wisconsin Public Service's implementation of a
January 15, 1999, Public Service Commission of Wisconsin rate order which
authorized a 6.3% increase in Wisconsin retail electric rates.
Six Months
Wisconsin Public Service ------------------------------
Electric Margins (Thousands) 1999 1998
- ---------------------------- ---- ----
Revenues $252,177 $237,864
Fuel and purchased power 79,463 72,545
------- -------
Margin $172,714 $165,319
======= =======
Sales in kilowatt-hours (Thousands) 5,817,305 5,570,604
Wisconsin Public Service's electric utility revenues increased $14.3 million,
or 6.0%, largely due to the electric rate increase. Also contributing to
higher electric revenues was a 4.4% increase in overall kilowatt-hour sales.
These sales were largely the result of weather that was 8.5% colder in the
first six months of 1999 than in the first six months of 1998. Weather was
still 9.4% warmer than normal.
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<PAGE>
Wisconsin Public Service's electric production fuel expense increased
$0.6 million, or 1.1%, primarily as a result of increased generation
requirements at Wisconsin Public Service's combustion turbine and nuclear
generating plants in the first six months of 1999. Partially offsetting this
factor was a decrease in production at Wisconsin Pubic Service's fossil-fueled
generation plants as a result of scheduled maintenance activities.
Wisconsin Public Service's purchased power expense increased $6.3 million, or
31.5%, primarily due to additional purchase requirements. Purchase
requirements at Wisconsin Public Service in the first six months of 1999 were
higher due to lack of production at its fossil-fueled generation plants which
were off-line for scheduled maintenance activities.
The Public Service Commission of Wisconsin allows Wisconsin Public Service to
prospectively adjust the amount billed to Wisconsin retail customers for fuel
and purchased power if costs fall outside a specified range. Wisconsin Public
Service is required to file an application to adjust rates either higher or
lower when costs are plus or minus 2.0% from forecasted costs on an annualized
basis. Forecasted annual 1999 fuel costs at June 30, 1999 were within this
2.0% window.
GAS UTILITY OPERATIONS
Wisconsin Public Service's gas margin increased $7.5 million, or 21.8%, in the
first six months of 1999. This increase was primarily due to the
implementation of a Public Service Commission of Wisconsin rate order which
authorized a 5.1% increase in Wisconsin retail gas rates.
Six Months
Wisconsin Public Service -----------------------------
Gas Margins (Thousands) 1999 1998
- ----------------------- ---- ----
Revenues $102,855 $89,872
Purchase costs 60,777 55,334
------- ------
Margin $ 42,078 $34,538
======= ======
Volume in therms (Thousands) 372,080 337,729
Wisconsin Public Service's gas operating revenues increased $13.0 million, or
14.4%. This increase was due to the implementation of new Wisconsin retail
gas rates and a 10.2% increase in overall therm sales as a result of colder
weather in the first six months of 1999. Although weather was 8.5% colder in
the first six months of 1999 than in the first six months of 1998, it was
still 9.4% warmer than normal. In addition, gas revenues at Wisconsin Public
Service in the first six months of 1998 were reduced by $7.5 million for
refunds from ANR Pipeline Company which were passed on to its customers.
Wisconsin Public Service's gas purchase costs increased $5.4 million, or 9.8%.
This increase was due to the $7.5 million refund from ANR Pipeline Company
which was credited to gas expense in the second quarter of 1998. Under
current regulatory practice, the Public Service Commission of Wisconsin and
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the Michigan Public Service Commission allow Wisconsin Public Service to pass
changes in the cost of gas on to customers through a purchased gas adjustment
clause.
OTHER UTILITY EXPENSES/INCOME
Other operating expenses at Wisconsin Public Service increased $6.6 million,
or 9.9%, primarily due to higher miscellaneous electric distribution expense
of $1.7 million, higher customer service expense of $1.6 million, higher
pension costs of $1.2 million, higher administrative salary and office expense
of $1.1 million, and higher contracted services expense of $0.3 million in the
first six months of 1999.
Maintenance expense at Wisconsin Public Service increased $3.9 million, or
15.3%, primarily due to additional costs for scheduled and unscheduled
maintenance activities at the fossil-fueled generation plants. Right-of-way
maintenance for overhead lines also increased.
FINANCIAL CONDITION - WISCONSIN PUBLIC SERVICE
INVESTMENTS AND FINANCING
Special common stock dividends of $25.0 million were paid by Wisconsin Public
Service to WPS Resources in the first six months of 1999. Equity infusions of
$20.0 million were made by WPS Resources to Wisconsin Public Service in the
first six months of 1999. These special dividends and equity infusions
allowed Wisconsin Public Service's average equity capitalization ratio for
ratemaking to remain at its target level established by the Public Service
Commission of Wisconsin in its most recent rate order.
Internally generated funds exceeded Wisconsin Public Service's cash
requirements in the first six months of 1999 resulting in a $4.0 million
reduction in short-term borrowings. Wisconsin Public Service's pretax
interest coverage was 4.69 times for the 12 months ended June 30, 1999. See
the table below for Wisconsin Public Service's credit ratings.
Credit Ratings Standard & Poor's Moody's
- -------------- ----------------- -------
Wisconsin Public Service Corporation
Bonds AA+ Aa2
Preferred stock AA aa3
Commercial paper A1+ P1
See WPS Resources' management discussion at page 25 for additional information
regarding Wisconsin Public Service's financial condition.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and Qualitative Disclosures About Market Risk are reported under
"Price Risk Management Activities (WPS Energy Services)" as part of Item 2,
Management's Discussion and Analysis of Financial Condition and Results of
Operations, on pages 20 and 21.
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<PAGE>
Part II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the 1999 WPS Resources Annual Meeting of Shareholders on May 6, 1999,
A. Dean Arganbright and James L. Kemerling were re-elected to three-year terms
on the Board of Directors. The vote was:
A. Dean Arganbright James L. Kemerling
------------------- ------------------
Votes For 22,781,691 22,811,811
Votes Withheld 554,197 524,077
Not Voted 3,186,223 3,186,223
---------- ----------
Total Shares Outstanding 26,522,111 26,522,111
Nominees for membership on the Board of Directors receiving the largest number
of votes cast are elected as directors up to the number of directors to be
elected at the meeting.
The continuing Board members are:
Michael S. Ariens
Richard A. Bemis
Daniel A. Bollom
Clarence R. Fisher
Robert C. Gallagher
Kathryn M. Hasselblad-Pascale
Larry L. Weyers
Shareholders approved the WPS Resources Corporation 1999 Stock Option Plan.
The vote was:
Shares
------
Votes For 15,851,952
Votes Against or Abstained 3,294,876
----------
Total Shares Voted 19,146,828
Not Voted - Brokers 6,138,800
Not Voted - Other 1,236,483
----------
Total Shares Outstanding 26,522,111
Approval required the affirmative vote of a majority of the shares voted at
the Annual Meeting of Shareholders. Shares abstaining were treated as votes
against the proposal.
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<PAGE>
ITEM 5. OTHER INFORMATION
PURCHASE OF ELECTRIC GENERATION UNITS
WPS Power Development, Inc. purchased generation assets from Maine Public
Service Company on June 8, 1999. The assets, located in the state of Maine
and the Canadian province of New Brunswick, have a total capacity of
91.7 megawatts. The assets include 35.8 megawatts of hydroelectric facilities
and 55.9 megawatts of fossil fuel facilities.
The $37.5 million purchase price includes a generator outlet line
interconnection with New Brunswick Power.
CLEAN AIR REGULATIONS
In September of 1998, the Environmental Protection Agency required 22 states,
including Wisconsin and the District of Columbia, to develop plans to reduce
emissions of nitrogen oxides by May 2003.
On May 14, 1999, the U.S. Court of Appeals for the District of Columbia found
the national air quality standards for ozone and particulate matter to be
flawed. The Court ordered the Environmental Protection Agency to justify the
levels at which the standards were set. This decision raises questions
regarding the appropriateness of requiring any implementation activities
pending resolution of the validity of these air quality standards.
On May 25, 1999, the Court stayed the requirement for each state to file a
State Implementation Plan by September of this year. The Public Service
Commission of Wisconsin has since delayed hearings to review the plans of
Wisconsin utilities to meet the pollution reduction standards. The Wisconsin
Department of Natural Resources is reviewing whether all Wisconsin utilities
will need to make reductions in emissions. If a decision is made to exempt
certain state utilities from compliance, the cost of compliance for the
remaining utilities could increase.
Wisconsin Public Service has projected that compliance with the original
regulations could result in expenditures of between $58 and $118 million. The
nature of the revised emission standard, the implementation period for
compliance, and the number of Wisconsin utilities that must implement the
regulations all could significantly increase or decrease future expenditures.
This issue was previously discussed in our Form 10-K Annual Report for the
Year Ended December 31, 1998, at page 28.
RENEWABLE ENERGY
The Wisconsin Electric Reliability Act requires state utilities to generate
50 megawatts of electricity through renewable energy by December 31, 2000.
Wisconsin Public Service placed 14 wind generators in commercial operation on
June 26, 1999. These windmills, which cost $10.3 million, will provide the
nine megawatts that Wisconsin Public Service is required to supply under the
Act.
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<PAGE>
GENERATING PLANT
The De Pere Energy Center, a 179-megawatt combustion turbine generation
facility, has been in full operation since June 14, 1999. The plant, which is
owned and operated by an independent power producer, will provide electric
capacity and energy to Wisconsin Public Service. This issue was previously
discussed in our Form 10-K Annual Report for the Year Ended December 31, 1998,
at page 5.
DEREGULATION
The Michigan Supreme Court has ruled that the Michigan Public Service
Commission lacks authority to mandate competition in the electric market.
The Court determined the Michigan Public Service Commission could not mandate
customer choice without authority from the Legislature. It is anticipated
that the Michigan Legislature will take up the issue in the near future.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
The following documents are filed herewith:
Exhibit 3B-1 By-laws of WPS Resources Corporation as
Amended May 6, 1999
Exhibit 3B-2 By-laws of Wisconsin Public Service
Corporation as Amended May 6, 1999
Exhibit 10-1 Asset Purchase Agreement by and among
PP&L, Inc., Lady Jane Collieries, Inc.
and Sunbury Holdings, LLC
Exhibit 10-2 WPS Resources 1999 Stock Option Plan
Exhibit 11 Statement Regarding Computation of Per
Share Earnings
WPS Resources Corporation
Exhibit 27 Financial Data Schedule
WPS Resources Corporation
Wisconsin Public Service Corporation
(b) REPORT ON FORM 8-K
A Current Report on Form 8-K, dated May 24, 1999, was filed
by WPS Resources Corporation on June 1, 1999. The report
included under Item 5 a WPS Power Development Press Release
announcing that it reached agreement with PP&L Resources,
Inc. to purchase the 389-megawatt Sunbury Station.
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant, WPS Resources Corporation, has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
WPS Resources Corporation
Date: August 11, 1999 /s/ Diane L. Ford
_________________________________
Diane L. Ford
Vice President - Controller
and Chief Accounting Officer
(Duly Authorized Officer and
Chief Accounting Officer)
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant, Wisconsin Public Service Corporation, has duly caused this report
to be signed on its behalf by the undersigned thereunto duly authorized.
Wisconsin Public Service Corporation
Date: August 11, 1999 /s/ Diane L. Ford
____________________________________
Diane L. Ford
Vice President - Controller
(Duly Authorized Officer and
Chief Accounting Officer)
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<PAGE>
<PAGE>
WPS RESOURCES CORPORATION AND
WISCONSIN PUBLIC SERVICE CORPORATION
EXHIBIT INDEX TO FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1999
Exhibit No. Description
___________ ___________
3B-1 By-laws of WPS Resources Corporation as Amended May 6,
1999
3B-2 By-laws of Wisconsin Public Service Corporation as Amended
May 6, 1999
10-1 Asset Purchase Agreement by and among PP&L, Inc.,
Lady Jane Collieries, Inc. and Sunbury Holdings, LLC
Dated as of May 1, 1999
10-2 WPS Resources 1999 Stock Option Plan
11 Statement Regarding Computation of Per Share Earnings
WPS Resources Corporation
27 Financial Data Schedule
WPS Resources Corporation
Wisconsin Public Service Corporation
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<PAGE>
EXHIBIT 3B-1
WPS RESOURCES CORPORATION
BY-LAWS
AS IN EFFECT MAY 6, 1999
ARTICLE I. OFFICES
1. PRINCIPAL OFFICE
The principal office of the Corporation in the State of Wisconsin shall
be in the City of Green Bay. The Corporation may also have offices at
such other places, within and outside of the State of Wisconsin, as the
Board of Directors may designate or as the business of the Corporation
may require.
2. REGISTERED OFFICE
The Board of Directors shall designate the registered office of the
Corporation and may change such registered office by resolution.
ARTICLE II. SHAREHOLDERS
1. ANNUAL MEETING
The annual meeting of the shareholders for the election of directors and
for the transaction of such other business as may properly be brought
before the meeting shall be held each year not later than the fourth
Tuesday in May, on the date designated by the Board of Directors and
specified in the notice of meeting. If the election of directors shall
not be held on the day designated for any annual meeting of the
shareholders, or at any adjournment thereof, the Board of Directors
shall cause the election to be held at a special meeting of the
shareholders as soon thereafter as convenient.
2. SPECIAL MEETINGS
Special meetings of the shareholders may be called by the Chairman of
the Board of Directors or the President or the Secretary, or by
resolution of the Board of Directors. The Corporation shall call a
special meeting of shareholders in the event that the holders of at
least 10% of all the votes entitled to be cast on any issue proposed to
be considered at the proposed special meeting sign, date, and deliver to
the Corporation one or more written demands for the meeting describing
one or more purposes for which it is to be held. The Corporation shall
<PAGE>
give notice of such a special meeting within 30 days after the date that
the demand is delivered to the Corporation.
3. PLACE OF MEETING
Each meeting of shareholders, annual or special, shall be held at the
principal office of the Corporation unless another place, either within
or without the State of Wisconsin, has been designated by the Board of
Directors and specified in the notice of such meeting, but any meeting
of shareholders may be adjourned to reconvene at any place designated by
a majority of the shares represented at such meeting.
4. NOTICE OF MEETINGS
Written notice stating the date, time, and place of the meeting and, in
case of a special meeting, the purpose or purposes for which the meeting
is called, shall be delivered not less than 10 nor more than 60 days
before the date of the meeting (unless a different time is provided by
the Wisconsin Business Corporation Law or the Articles of Incorporation)
to each shareholder of record entitled to vote at such meeting and to
such other persons as required by the Wisconsin Business Corporation
Law. Such notice shall be given by or at the direction of the officer
or persons calling the meeting and shall be deemed to be delivered when
deposited in the United States mail, postage prepaid, addressed to the
shareholder of record at his or her address as it appears in the records
of the Corporation. If any meeting of the shareholders is adjourned to
another time or place, no notice of such adjourned meeting need be given
other than by announcement thereof at the meeting at which such
adjournment is taken; provided, however, that if a new record date for
an adjourned meeting is or must be fixed, the Corporation shall give
notice of the adjourned meeting to persons who are shareholders as of
the new record date.
5. WAIVER OF NOTICE
A shareholder may waive any notice required by the Wisconsin Business
Corporation Law, the Articles of Incorporation or these By-laws before
or after the date and time stated in the notice. The waiver shall be in
writing and signed by the shareholder entitled to the notice, contain
the same information that would have been required in the notice under
applicable provisions of the Wisconsin Business Corporation Law (except
that the time and place of meeting need not
2
<PAGE>
be stated) and be delivered to the Corporation for inclusion in the
corporate records. A shareholder's attendance at a meeting, in person
or by proxy, waives objection to all of the following:
a. Lack of notice or defective notice of the meeting, unless the
shareholder at the beginning of the meeting or promptly upon
arrival objects to holding the meeting or transacting business at
the meeting; and
b. Consideration of a particular matter at the meeting that is not
within the purpose described in the meeting notice, unless the
shareholder objects to considering the matter when it is
presented.
6. FIXING OF RECORD DATE
The Board of Directors may fix in advance a date as the record date for
the purpose of determining shareholders entitled to notice of and to
vote at any meeting of shareholders, shareholders entitled to demand a
special meeting as contemplated by Section 2 of this Article II,
shareholders entitled to take any other action, or shareholders for any
other purpose. Such record date shall not be more than 70 days prior to
the date on which the particular action, requiring such determination of
shareholders, is to be taken. If no record date is fixed by the Board
of Directors or by the Wisconsin Business Corporation Law for the
determination of shareholders entitled to notice of and to vote at a
meeting of shareholders, the record date shall be the close of business
on the day before the first notice is given to shareholders. If no
record date is fixed by the Board of Directors or by the Wisconsin
Business Corporation Law for the determination of shareholders entitled
to demand a special meeting as contemplated in Section 2 of this
Article II, the record date shall be the date that the first shareholder
signs the demand. Except as provided by the Wisconsin Business
Corporation Law for a court-ordered adjournment, a determination of
shareholders entitled to notice of and to vote at a meeting of
shareholders is effective for any adjournment of such meeting unless the
Board of Directors fixes a new record date, which it shall do if the
meeting is adjourned to a date more than 120 days after the date fixed
for the original meeting. The record date for determining shareholders
entitled to a distribution (other than a distribution involving a
purchase, redemption, or other acquisition of the Corporation's shares)
or a share dividend is the date on which the Board of Directors
authorized the distribution or share dividend, as the case may be,
unless the Board of Directors fixes a different record date.
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7. SHAREHOLDERS' LIST FOR MEETINGS
After a record date for a special or annual meeting of shareholders has
been fixed, the Corporation shall prepare a list of the names of all of
the shareholders entitled to notice of the meeting. The list shall be
arranged by class or series of shares, if any, and show the address of
and number of shares held by each shareholder. Such list shall be
available for inspection by any shareholder, beginning two business days
after notice of the meeting is given for which the list was prepared and
continuing to the date of the meeting, at the Corporation's principal
office or at a place identified in the meeting notice in the city where
the meeting will be held. A shareholder or his or her agent may, on
written demand, inspect and, subject to the limitations imposed by the
Wisconsin Business Corporation Law, copy the list, during regular
business hours and at his or her expense, during the period that it is
available for inspection pursuant to this Section. The Corporation
shall make the shareholders' list available at the meeting and any
shareholder or his or her agent or attorney may inspect the list at any
time during the meeting or any adjournment thereof. Refusal or failure
to prepare or make available the shareholders' list shall not affect the
validity of any action taken at a meeting of shareholders.
8. QUORUM AND VOTING REQUIREMENTS
Shares entitled to vote as a separate voting group may take action on a
matter at a meeting only if a quorum of those shares exists with respect
to that matter. The holders of a majority of the shares entitled to
vote, represented in person or by proxy, shall constitute a quorum at a
meeting of shareholders. Once a share is represented for any purpose at
a meeting, other than for the purpose of objecting to holding the
meeting or transacting business at the meeting, it is considered present
for purposes of determining whether a quorum exists for the remainder of
the meeting and for any adjournment of that meeting unless a new record
date is or must be set for the adjourned meeting. If a quorum exists,
except in the case of the election of directors, action on a matter
shall be approved if the votes cast within the voting group favoring the
action exceed the votes cast opposing the action, unless the Articles of
Incorporation or the Wisconsin Business Corporation Law requires a
greater number of affirmative votes. Unless otherwise provided in the
Articles of Incorporation, each director shall be elected by a plurality
of the votes cast by the shares entitled to vote in the election of
directors at a meeting at which a quorum is present. Though less than a
quorum of the outstanding votes of a voting group are represented at a
meeting, a majority of the votes so represented may adjourn the meeting
from time to time without further notice. At such adjourned meeting at
which a
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quorum shall be present or represented, any business may be transacted
which might have been transacted at the meeting as originally notified.
9. PROXIES
At all meetings of shareholders, a shareholder may vote his or her
shares in person or by proxy. A shareholder may appoint a proxy to vote
or otherwise act for the shareholder by signing an appointment form,
either personally or by his or her attorney-in-fact. An appointment of
a proxy is effective when received by the Secretary or other officer or
agent of the Corporation authorized to tabulate votes. An appointment
is valid for 11 months from the date of its signing unless a different
period is expressly provided in the appointment form.
10. ACCEPTANCE OF INSTRUMENTS SHOWING SHAREHOLDER ACTION
If the name signed on a vote, consent, waiver, or proxy appointment
corresponds to the name of a shareholder, the Corporation, if acting in
good faith, may accept the vote, consent, waiver, or proxy appointment
and give it effect as the act of a shareholder. If the name signed on a
vote, consent, waiver, or proxy appointment does not correspond to the
name of a shareholder, the Corporation, if acting in good faith, may
accept the vote, consent, waiver, or proxy appointment and give it
effect as the act of the shareholder if any of the following apply:
a. The shareholder is an entity and the name signed purports to be
that of an officer or agent of the entity.
b. The name purports to be that of a personal representative,
administrator, executor, guardian, or conservator representing the
shareholder and, if the Corporation requests, evidence of
fiduciary status acceptable to the Corporation is presented with
respect to the vote, consent, waiver, or proxy appointment.
c. The name signed purports to be that of a receiver or trustee in
bankruptcy of the shareholder and, if the Corporation requests,
evidence of this status acceptable to the Corporation is presented
with respect to the vote, consent, waiver, or proxy appointment.
d. The name signed purports to be that of a pledgee, beneficial
owner, or attorney-in-fact of the shareholder and, if the
Corporation requests, evidence acceptable to the Corporation of
the signatory's authority to sign
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for the shareholder is presented with respect to the vote, consent,
waiver, or proxy appointment.
e. Two or more persons are the shareholders as co-tenants or
fiduciaries and the name signed purports to be the name of at
least one of the co-owners and the person signing appears to be
acting on behalf of all co-owners.
The Corporation may reject a vote, consent, waiver, or proxy appointment
if the Secretary or other officer or agent of the Corporation who is
authorized to tabulate votes, acting in good faith, has reasonable basis
for doubt about the validity of the signature on it or about the
signatory's authority to sign for the shareholder.
ARTICLE III. BOARD OF DIRECTORS
1. GENERAL POWERS
The business and affairs of the Corporation shall be managed by its
Board of Directors. The Board shall determine the nature and character
of the business to be conducted by the Corporation and the method of
doing so; what employees, agents, and officers shall be employed and
their compensation; and what purchases or contracts for purchase shall
be made. The Board may delegate any of its aforesaid powers to
committees or to officers, agents, or employees as it may from time to
time determine.
2. NUMBER OF DIRECTORS
The number of directors of the Corporation shall be nine, divided into
three classes: Class A - 4 members, Class B - 2 members, and Class C -
3 members. (Amended May 6, 1999)
3. TERM
At the 1994 annual meeting of shareholders, the directors of Class A
shall be elected for a term to expire at the first annual meeting of
shareholders after their election, and until their successors are
elected and qualify, the directors of Class B shall be elected for a
term to expire at the second annual meeting of shareholders after their
election, and until their successors are elected and qualify, and the
directors of Class C shall be elected for a term to expire at the third
annual meeting of shareholders after their election and until their
successors are elected and qualify. At each annual meeting of
shareholders
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after the 1994 annual meeting of shareholders, the successors to the
class of directors whose terms shall expire at the time of such annual
meeting shall be elected to hold office until the third succeeding
annual meeting of shareholders, and until their successors are elected
and qualify.
4. QUALIFICATIONS
No director shall be eligible for re-election after attaining the age of
70 years. Directors need not be shareholders of the Corporation or
residents of the State of Wisconsin.
5. MEETINGS
The Board of Directors shall hold its meetings at such place or places,
within or without the State of Wisconsin, as the Board may from time to
time determine.
a. A meeting of the Board of Directors, to be known as the annual
meeting, may be held, without notice, immediately after and at the
same place as the annual meeting of the shareholders at which such
Board is elected, for the purpose of electing the officers of the
Corporation and to transact such other business as may come before
the Board. Such annual meeting may be held at a different place
than the annual meeting of shareholders and/or on a date
subsequent to the annual meeting of shareholders, if notice of such
different place and/or date has been given to or waived by all the
directors.
b. Regular meetings of the Board of Directors may be held without
call and without notice, at such times and in such places as the
Board may by resolution from time to time determine.
c. Special meetings of the Board of Directors may be called at any
time by the Chairman of the Board or the Chief Executive Officer
and shall be called by the Secretary of the Corporation upon the
written request of three or more directors.
6. NOTICE; WAIVER
Notice of each special meeting of the Board of Directors shall be given
by written notice delivered or communicated in person, by telegraph,
teletype, facsimile or other form of wire or wireless communication, or
by mail or private carrier, to each director at his or her business
address or at such other address as such director shall have designated
in writing filed with the Secretary, in each case not
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less than 48 hours prior to the meeting. The notice need not prescribe
the purpose of the special meeting of the Board of Directors or the
business to be transacted at such meeting. If mailed, such notice shall
be deemed to be effective when deposited in the United States mail so
addressed, with postage thereon prepaid. If notice is given by telegram,
such notice shall be deemed to be effective when the telegram is
delivered to the telegraph company. If notice is given by private
carrier, such notice shall be deemed to be effective when delivered to
the private carrier. Whenever any notice whatever is required to be
given to any director of the Corporation under the Articles of
Incorporation or these By-laws or any provision of the Wisconsin
Business Corporation Law, a waiver thereof in writing, signed at any
time, whether before or after the date and time of meeting, by the
director entitled to such notice shall be deemed equivalent to the
giving of such notice. The Corporation shall retain any such waiver
as part of the permanent corporate records. A director's attendance
at or participation in a meeting waives any required notice to him or
her of the meeting unless the director at the beginning of the meeting
or promptly upon his or her arrival objects to holding the meeting or
transacting business at the meeting and does not thereafter vote for or
assent to action taken at the meeting.
7. QUORUM
Except as otherwise provided by the Wisconsin Business Corporation Law
or by the Articles of Incorporation or these By-laws, a majority of the
number of directors specified in Section 2 of Article III of these
By-laws shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors. Except as otherwise provided by the
Wisconsin Business Corporation Law, the Articles of Incorporation, or
these By-laws, a quorum of any committee of the Board of Directors
created pursuant to Section 13 hereof shall consist of a majority of the
number of directors appointed to serve on the committee. A majority of
the directors present (though less than such quorum) may adjourn any
meeting of the Board of Directors or any committee thereof, as the case
may be, from time to time without further notice.
8. MANNER OF ACTING
The affirmative vote of a majority of the directors present at a meeting
of the Board of Directors or a committee thereof at which a quorum is
present shall be the act of the Board of Directors or such committee, as
the case may be, unless the Wisconsin Business Corporation Law, the
Articles of Incorporation, or these By-laws require the vote of a
greater number of directors.
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9. MINUTES OF MEETINGS
Minutes of any regular or special meeting of the Board of Directors
shall be prepared and distributed to each director.
10. VACANCIES
Vacancies occurring in the Board of Directors shall be filled in the
manner provided in Article 5 of the Articles of Incorporation.
11. COMPENSATION
The Board of Directors, irrespective of any personal interest of any of
its members, may establish reasonable compensation of all directors for
services to the Corporation as directors, officers, or otherwise, or may
delegate such authority to an appropriate committee. The Board of
Directors also shall have authority to provide for or delegate authority
to an appropriate committee to provide for reasonable pensions,
disability or death benefits, and other benefits or payments, to
directors, officers, and employees and to their estates, families,
dependents, or beneficiaries on account of prior services rendered by
such directors, officers, and employees to the Corporation.
12. PRESUMPTION OF ASSENT
A director who is present and is announced as present at a meeting of
the Board of Directors or any committee thereof created in accordance
with Section 13 of this Article III, when corporate action is taken,
assents to the action taken unless any of the following occurs:
a. The director objects at the beginning of the meeting or promptly
upon his or her arrival to holding the meeting or transacting
business at the meeting;
b. The director's dissent or abstention from the action taken is
entered in the minutes of the meeting; or
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c. The director delivers written notice that complies with the
Wisconsin Business Corporation Law of his or her dissent or
abstention to the presiding officer of the meeting before its
adjournment or to the Corporation immediately after adjournment of
the meeting.
Such right of dissent or abstention shall not apply to a director who
votes in favor of the action taken.
13. COMMITTEES
The Board of Directors by resolution adopted by the affirmative vote of
a majority of all of the directors then in office may create one or more
committees, appoint members of the Board of Directors to serve on the
committees and designate other members of the Board of Directors to
serve as alternates. Each committee shall have two or more members who
shall, unless otherwise provided by the Board of Directors, serve at the
pleasure of the Board of Directors. A committee may be authorized to
exercise the authority of the Board of Directors, except that a
committee may not do any of the following:
a. Authorize distributions;
b. Approve or propose to shareholders action that the Wisconsin
Business Corporation Law requires to be approved by shareholders;
c. Fill vacancies on the Board of Directors or, unless the Board of
Directors provides by resolution that vacancies on a committee
shall be filled by the affirmative vote of the remaining committee
members, on any Board committee;
d. Amend the Corporation's Articles of Incorporation;
e. Adopt, amend, or repeal By-laws;
f. Approve a plan of merger not requiring shareholder approval;
g. Authorize or approve reacquisition of shares, except according to
a formula or method prescribed by the Board of Directors; and
h. Authorize or approve the issuance or sale or contract for sale of
shares, or determine the designation and relative rights,
preferences and limitations of a class or series of shares, except
that the Board of Directors may authorize a committee to do so
within limits prescribed by the Board of
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Directors. Unless otherwise provided by the Board of Directors in
creating the committee, a committee may employ counsel,
accountants, and other consultants to assist it in the exercise of
its authority.
14. TELEPHONIC MEETINGS
Except as herein provided and notwithstanding any place set forth in the
notice of the meeting or these By-laws, members of the Board of
Directors (and any committees thereof created pursuant to Section 13 of
this Article III) may participate in regular or special meetings by, or
through the use of, any means of communication by which all participants
may simultaneously hear each other, such as by conference telephone. If
a meeting is conducted by such means, then at the commencement of such
meeting the presiding officer shall inform the participating directors
that a meeting is taking place at which official business may be
transacted. Any participant in a meeting by such means shall be deemed
present in person at such meeting. Notwithstanding the foregoing, no
action may be taken at any meeting held by such means on any particular
matter which the presiding officer determines, in his or her sole
discretion, to be inappropriate under the circumstances for action at a
meeting held by such means. Such determination shall be made and
announced in advance of such meeting.
15. ACTION WITHOUT MEETING
Any action required or permitted by the Wisconsin Business Corporation
Law to be taken at a meeting of the Board of Directors or a committee
thereof created pursuant to Section 13 of this Article III may be taken
without a meeting if the action is taken by all members of the Board or
of the committee. The action shall be evidenced by one or more written
consents describing the action taken, signed by each director or
committee member, and retained by the Corporation. Such action shall be
effective when the last director or committee member signs the consent,
unless the consent specifies a different effective date.
ARTICLE IV. OFFICERS
1. PRINCIPAL OFFICERS
The principal officers of the Corporation required by statute shall be a
President, such number of Vice Presidents as may be elected by the Board
of Directors, a Secretary, and a Treasurer. The Board of Directors may
elect from among the directors a Chairman of the Board of Directors and
a Vice Chairman of the Board
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of Directors, may designate such Chairman, Vice Chairman, or any
principal officer as the Chief Executive Officer, may elect such
assistant secretaries and assistant treasurers and other officers as
it shall deem necessary, and may prescribe by resolution their
respective powers and duties.
2. PRESIDENT
The President shall be elected by the directors. Unless the Board of
Directors otherwise prescribes, he or she shall be the Chief Executive
Officer of the Corporation. In the event that the President is not the
Chief Executive Officer, he or she shall have such powers and duties as
the Board of Directors may prescribe.
3. CHAIRMAN OF THE BOARD OF DIRECTORS
If a Chairman of the Board of Directors shall be elected, he or she
shall preside as Chairman of all meetings of the shareholders and of the
Board of Directors. He or she shall have such other authority as the
Board may from time to time prescribe. If there is no Chairman of the
Board, or in the absence of the Chairman, the presiding officer at
meetings of the shareholders, and of the Board of Directors shall be
another officer in the following order of priority: Vice Chairman of
the Board of Directors, President and Vice Presidents (subject, however,
to Section 5 of this Article).
4. CHIEF EXECUTIVE OFFICER
The Chief Executive Officer shall exercise active supervision over the
business, property, and affairs of the Corporation.
a. The Chief Executive Officer shall have authority, subject to such
rules as may be prescribed from time to time by the Board or its
committees, to appoint agents or employees other than those
elected by the Board, to prescribe their powers and duties, and to
delegate such authority as he or she may see fit. Any agent or
employee not elected by the Board shall hold office at the
discretion of the Chief Executive Officer or other officer
employing him.
b. The Chief Executive Officer is authorized to sign, execute, and
acknowledge, on behalf of the Corporation, all deeds, mortgages,
bonds, notes, debentures, contracts, leases, reports and other
documents and instruments, except where the signing and execution
thereof by some other officer or agent shall be expressly
authorized and directed by law or
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by the Board or by these By-laws. Unless otherwise provided by
law or by the Board, the Chief Executive Officer may authorize
any officer, employee, or agent to sign, execute, and acknowledge,
on behalf of the Corporation, and in his or her place and stead,
all such documents and instruments.
c. Unless otherwise ordered by the Board of Directors, the Chief
Executive Officer, or a proxy appointed by him, shall have full
power and authority, in the name of and on behalf of the
Corporation, to attend, act, and vote at any meeting of the
shareholders of any other corporation in which the Corporation may
hold shares of stock. At any such meeting, he or she shall
possess and may exercise any and all rights and powers incident to
the ownership of shares of stock.
d. The Chief Executive Officer shall have such other powers and
perform such other duties as are incident to the office of Chief
Executive Officer and as may be prescribed by the Board.
5. VICE PRESIDENTS
In the absence of the President or during his or her inability or
refusal to act, his or her powers and duties shall temporarily devolve
upon such Vice Presidents or other officers as shall be designated by
the Board of Directors or, if not designated by the Board, by the Chief
Executive Officer or other officer to whom such power may be delegated
by the Board; provided, that no Vice President or other officer shall
--------
act as a member or chairman of any committee of the Board of Directors
of which the President is a member or chairman, except at the direction
of the Board.
a. Each Vice President shall have such powers and perform such other
duties as may be assigned to him by the Board or by the President,
including the power to sign, execute, and acknowledge all
documents and instruments referred to in Section 4 of this
Article.
b. The Board may assign to any Vice President, general supervision
and charge over any branch of the business and affairs of the
Corporation, subject to such limitations as it may elect to
impose.
c. The Board of Directors may, if it chooses, designate one or more
of the Vice Presidents "Executive Vice President" with such powers
and duties as the Board shall prescribe.
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6. SECRETARY
The Secretary shall attend, and keep the minutes of meetings of the
shareholders, of the Board of Directors and, unless otherwise directed
by any such committee, of all committees, in books provided for that
purpose; shall have custody of the corporate records and seal; shall see
that notices are given and records and reports properly kept and filed
as required by law or by these By-laws; and, in general, shall have such
other powers and perform such other duties as are incident to the office
of Secretary and as may be assigned to him or her by the Board of
Directors or the Chief Executive Officer.
7. ASSISTANT SECRETARIES
In the absence of the Secretary, or during his or her inability or
refusal to act, his or her powers and duties shall temporarily devolve
upon such one of the Assistant Secretaries as the President or the Board
of Directors may direct. The Assistant Secretaries shall have such
other powers and perform such other duties as may be assigned to them by
the Board, the Chief Executive Officer, or the Secretary.
8. TREASURER
The Treasurer shall have charge and custody of the funds, securities,
and other evidences of value of the Corporation, and shall keep and
deposit them as required by the Board of Directors. He or she shall
keep proper accounts of all receipts and disbursements and of the
financial transactions of the Corporation. He or she shall render
statements of such accounts and of money received and disbursed by him
or her and of property and money belonging to the Corporation as
required by the Board. The Treasurer shall have such other powers and
perform such other duties as are incident to the office of Treasurer and
as from time to time may be prescribed by the Board or the Chief
Executive Officer.
9. ASSISTANT TREASURERS
In the absence of the Treasurer, or during his or her inability or
refusal to act, his or her powers and duties shall temporarily devolve
upon such one of the Assistant Treasurers as the President or the Board
of Directors may direct. The Assistant Treasurers shall have such other
powers and perform such other duties as from time to time may be
assigned to them, respectively, by the Board, the Chief Executive
Officer, or the Treasurer.
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10. OTHER ASSISTANTS AND ACTING OFFICERS
The Board of Directors shall have the power to appoint any person to act
as assistant to any officer, or as agent for the Corporation in his or
her stead, or to perform the duties of such officer whenever for any
reason it is impracticable for such officer to act personally, and such
assistant or acting officer or other agent so appointed by the Board of
Directors or an authorized officer shall have the power to perform all
the duties of the office to which he or she is so appointed to be an
assistant, or as to which he or she is so appointed to act, except as
such power may be otherwise defined or restricted by the Board of
Directors.
11. COMPENSATION
The salaries or other compensation of all officers elected as provided
under Section 1 of this Article (other than assistant officers) shall be
fixed from time to time by the Board of Directors. The salaries or
other compensation of all other agents and employees of the Corporation
shall be fixed from time to time by the Chief Executive Officer, but
only within such limits as to amount, and in accordance with such other
conditions as may be prescribed by or under the authority of the Board
of Directors.
12. TENURE
Each officer shall hold office until his or her successor shall have
been duly elected and qualified, or until his or her death, resignation,
disqualification, or removal. Any officer, agent, or employee may be
removed, with or without cause, at any time by the Board of Directors
notwithstanding the contract rights, if any, of the officer removed.
The appointment of an officer does not of itself create contract rights.
13. RESIGNATION
An officer may resign at any time by delivering notice to the
Corporation that complies with the Wisconsin Business Corporation Law.
The resignation shall be effective when the notice is delivered, unless
the notice specifies a later effective date and the Corporation accepts
the later effective date.
14. VACANCIES
Any vacancy in any office may be filled by the Board of Directors for
the unexpired portion of the term. If a resignation of an officer is
effective at a later date as contemplated by Section 13 of this
Article IV, the Board of Directors may
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fill the pending vacancy before the effective date if the Board provides
that the successor may not take office until the effective date.
15. REASSIGNMENT OF DUTIES
In case of the absence or disability of any officer of the Corporation,
or for any other reason deemed sufficient by the Board of Directors, the
Board may reassign or delegate the powers and duties, or any of them, to
any other officer, director, or person it may select.
ARTICLE V. CERTIFICATES FOR AND TRANSFER OF SHARES
1. FORM
Certificates representing shares of the Corporation shall be in such
form as shall be determined by the Board of Directors. All certificates
for shares shall be consecutively numbered or otherwise identified. The
name and address of the person to whom the shares represented thereby
are issued, with the number of shares and date of issue, shall be
entered on the stock transfer books of the Corporation. All
certificates surrendered for the transfer shall be cancelled and no new
certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and cancelled, except in
case of a lost or destroyed certificate provided for in Section 4 of
this Article V or a certificate for shares transferred in compliance
with the escheat laws of any state.
2. SIGNATURES
Certificates representing shares of the Corporation shall be signed by
the President or a Vice President and by the Secretary or an Assistant
Secretary; and may be sealed with the seal of the Corporation (which may
be a facsimile) and countersigned and registered in such manner, if any,
as the Board of Directors may prescribe. Whenever any certificate is
manually signed on behalf of a transfer agent, or a registrar, other
than the Corporation itself or an employee of the Corporation, the
signatures of the President, Vice President, Secretary, or Assistant
Secretary, upon such certificate may be facsimiles. In case any officer
who has signed, or whose facsimile signature has been placed upon such
certificate, ceases to be such officer before such certificate is
issued, it may be issued with the same effect as if he or she were such
officer at the date of its issue.
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3. RESTRICTIONS ON TRANSFER
The face or reverse side of each certificate representing shares shall
bear a conspicuous notation of any restriction imposed by the
Corporation upon the transfer of such shares.
4. LOST, DESTROYED, OR STOLEN CERTIFICATES
Where the owner claims that his or her certificate for shares has been
lost, destroyed, or wrongfully taken, a new certificate shall be issued
in place thereof if the owner:
a. So requests before the Corporation has notice that such shares
have been acquired by a bona fide purchaser;
b. Files with the Corporation a sufficient indemnity bond; and
c. Satisfies such other reasonable requirements as may be prescribed
by or under the authority of the Board of Directors.
5. TRANSFER OF SHARES
Prior to due presentment of a certificate for shares for registration of
transfer the Corporation may treat the registered owner of such shares
as the person exclusively entitled to vote, to receive notifications,
and otherwise to have and exercise all the rights and powers of an
owner. Where a certificate for shares is presented to the Corporation
with a request to register for transfer, the Corporation shall not be
liable to the owner or any other person suffering loss as a result of
such registration of transfer if:
a. There were on or with the certificate the necessary endorsements;
and
b. The Corporation had no duty to inquire into adverse claims or has
discharged any such duty.
The Corporation may require reasonable assurance that said endorsements
are genuine and effective and compliance with such other regulations as
may be prescribed by or under the authority of the Board of Directors.
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6. CONSIDERATION FOR SHARES
The Board of Directors may authorize shares to be issued for
consideration consisting of any tangible or intangible property or
benefit to the Corporation, including cash, promissory notes, services
performed, contracts for services to be performed or other securities of
the Corporation. Before the Corporation issues shares, the Board of
Directors shall determine that the consideration received or to be
received for the shares to be issued is adequate. The determination of
the Board of Directors is conclusive insofar as the adequacy of
consideration for the issuance of shares relates to whether the shares
are validly issued, fully paid, and nonassessable. The Corporation may
place in escrow shares issued in whole or in part for a contract for
future services or benefits, a promissory note, or otherwise for
property to be issued in the future, or make other arrangements to
restrict the transfer of the shares, and may credit distributions in
respect of the shares against their purchase price, until the services
are performed, the benefits or property are received, or the promissory
note is paid. If the services are not performed, the benefits or
property are not received, or the promissory note is not paid, the
Corporation may cancel, in whole or in part, the shares escrowed or
restricted and the distributions credited.
7. OTHER RULES
The Board of Directors shall have the power and authority to make all
such further rules and regulations not inconsistent with the statutes of
the State of Wisconsin as it may deem expedient concerning the issue,
transfer, and registration of certificates representing shares of the
Corporation, including the appointment and designation of Transfer
Agents and Registrars.
ARTICLE VI. INDEMNIFICATION OF OFFICERS AND DIRECTORS
1. MANDATORY INDEMNIFICATION
a. In all cases other than those set forth in Section 1b hereof,
subject to the conditions and limitations set forth hereinafter in
this Article VI, the Corporation shall indemnify and hold harmless
any person who is or was a party, or is threatened to be made a
party, to any Action (see Section 16 of this Article VI for
definitions of capitalized terms used herein) by reason of his or
her status as an Executive, and/or as to acts performed in the
course of such Executive's duties to the Corporation and/or an
Affiliate, against Liabilities and reasonable Expenses incurred by
or on behalf of an Executive in connection with any Action,
including, without limitation, in
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connection with the investigation, defense, settlement or appeal
of any Action; provided, pursuant to Section 3 of this Article VI,
that it is not determined by the Authority, or by a court, that
the Executive engaged in misconduct which constitutes a Breach of
Duty.
b. To the extent an Executive has been successful on the merits or
otherwise in connection with any Action, including, without
limitation, the settlement, dismissal, abandonment, or withdrawal
of any such Action where the Executive does not pay, incur, or
assume any material Liabilities, or in connection with any claim,
issue, or matter therein, he or she shall be indemnified by the
Corporation against reasonable Expenses incurred by or on behalf
of him or her in connection therewith. The Corporation shall pay
such Expenses to the Executive (net of all Expenses, if any,
previously advanced to the Executive pursuant to Section 2 of this
Article VI), or to such other person or entity as the Executive
may designate in writing to the Corporation, within ten days after
the receipt of the Executive's written request therefor, without
regard to the provisions of Section 3 of this Article VI. In the
event the Corporation refuses to pay such requested Expenses, the
Executive may petition a court to order the Corporation to make
such payment pursuant to Section 4 of this Article VI.
c. Notwithstanding any other provision contained in this Article VI
to the contrary, the Corporation shall not:
(1) Indemnify, contribute, or advance Expenses to an Executive
with respect to any Action initiated or brought voluntarily
by the Executive and not by way of defense, except with
respect to Actions:
(a) brought to establish or enforce a right to
indemnification, contribution, and/or an advance of
Expenses under Section 4 of this Article VI, under the
Statute as it may then be in effect or under any other
statute or law or otherwise as required;
(b) initiated or brought voluntarily by an Executive to
the extent such Executive is successful on the merits
or otherwise in connection with such an Action in
accordance with and pursuant to Section 1b of this
Article VI; or
(c) as to which the Board determines it to be appropriate.
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(2) indemnify the Executive under this Article VI for any
amounts paid in settlement of any Action effected without
the Corporation's written consent.
The Corporation shall not settle in any manner which would impose
any Liabilities or other type of limitation on the Executive
without the Executive's written consent. Neither the Corporation
nor the Executive shall unreasonably withhold their consent to any
proposed settlement.
d. An Executive's conduct with respect to an employee benefit plan
sponsored by or otherwise associated with the Corporation and/or
an Affiliate for a purpose he or she reasonably believes to be in
the interests of the participants in and beneficiaries of such
plan is conduct that does not constitute a breach or failure to
perform his or her duties to the Corporation or an Affiliate, as
the case may be.
2. ADVANCE FOR EXPENSES
a. The Corporation shall pay to an Executive, or to such other person
or entity as the Executive may designate in writing to the
Corporation, his or her reasonable Expenses incurred by or on
behalf of such Executive in connection with any Action, or claim,
issue, or matter associated with any such Action, in advance of
the final disposition or conclusion of any such Action (or claim,
issue, or matter associated with any such Action), within ten days
after the receipt of the Executive's written request therefor;
provided, the following conditions are satisfied:
(1) The Executive has first requested an advance of such
Expenses in writing (and delivered a copy of such request to
the Corporation) from the insurance carrier(s), if any, to
whom a claim has been reported under an applicable insurance
policy purchased by the Corporation and each such insurance
carrier, if any, has declined to make such an advance;
(2) The Executive furnishes to the Corporation an executed
written certificate affirming his or her good faith belief
that he or she has not engaged in misconduct which
constitutes a Breach of Duty; and
(3) The Executive furnishes to the Corporation an executed
written agreement to repay any advances made under this
Section 2 if it is ultimately determined that he or she is
not entitled to be
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indemnified by the Corporation for such Expenses pursuant to
this Article VI.
b. If the Corporation makes an advance of Expenses to an Executive
pursuant to this Section 2, the Corporation shall be subrogated to
every right of recovery the Executive may have against any
insurance carrier from whom the Corporation has purchased
insurance for such purpose.
3. DETERMINATION OF RIGHT TO INDEMNIFICATION
a. Except as otherwise set forth in this Section 3 or in Section 1c
of this Article VI, any indemnification to be provided to an
Executive by the Corporation under Section 1a of this Article VI
upon the final disposition or conclusion of any Action, or any
claim, issue, or matter associated with any such Action, unless
otherwise ordered by a court, shall be paid by the Corporation to
the Executive (net of all Expenses, if any, previously advanced to
the Executive pursuant to Section 2 of this Article VI), or to
such other person or entity as the Executive may designate in
writing to the Corporation, within 60 days after the receipt of
the Executive's written request therefor. Such request shall
include an accounting of all amounts for which indemnification is
being sought. No further corporate authorization for such payment
shall be required other than this Section 3.
b. Notwithstanding the foregoing, the payment of such requested
indemnifiable amounts pursuant to Section 1a of this Article VI
may be denied by the Corporation if:
(1) the Board by a majority vote thereof determines that the
Executive has engaged in misconduct which constitutes a
Breach of Duty; or
(2) a majority of the directors of the Corporation are a party
in interest to such Action.
c. In either event of nonpayment pursuant to Section 3b of this
Article VI, the Board shall immediately authorize and direct, by
resolution, that an independent determination be made as to
whether the Executive has engaged in misconduct which constitutes
a Breach of Duty and, therefore, whether indemnification of the
Executive is proper pursuant to this Article VI.
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d. Such independent determination shall be made, at the option of the
Executive(s) seeking indemnification, by:
(1) A panel of three arbitrators (selected as set forth below in
Section 3f from the panels of arbitrators of the American
Arbitration Association) in Milwaukee, Wisconsin, in
accordance with the Commercial Arbitration Rules then
prevailing of the American Arbitration Association;
(2) An independent legal counsel mutually selected by the
Executive(s) seeking indemnification and the Board by a
majority vote of a quorum thereof consisting of directors
who were not parties in interest to such Action (or, if such
quorum is not obtainable, by the majority vote of the entire
Board); or
(3) A court in accordance with Section 4 of this Article VI.
e. In any such determination there shall exist a rebuttable
presumption that the Executive has not engaged in misconduct which
constitutes a Breach of Duty and is, therefore, entitled to
indemnification hereunder. The burden of rebutting such
presumption by clear and convincing evidence shall be on the
Corporation.
f. If a panel of arbitrators is to be employed hereunder, one of such
arbitrators shall be selected by the Board by a majority vote of a
quorum thereof consisting of directors who were not parties in
interest to such Action or, if such quorum is not obtainable, by
an independent legal counsel chosen by the majority vote of the
entire Board, the second by the Executive(s) seeking
indemnification, and the third by the previous two arbitrators.
g. The Authority shall make its independent determination hereunder
within 60 days of being selected and shall simultaneously submit a
written opinion of its conclusions to both the Corporation and the
Executive.
h. If the Authority determines that an Executive is entitled to be
indemnified for any amounts pursuant to this Article VI, the
Corporation shall pay such amounts to the Executive (net of all
Expenses, if any, previously advanced to the Executive pursuant to
Section 2 of this Article VI), including interest thereon as
provided in Section 6c of this Article VI, or such other person or
entity as the Executive may designate in writing to the
Corporation, within ten days of receipt of such opinion.
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i. Except with respect to any judicial determination pursuant to
Section 4 of this Article VI, the Expenses associated with the
indemnification process set forth in this Section 3 of this
Article VI, including, without limitation, the Expenses of the
Authority selected hereunder, shall be paid by the Corporation.
4. COURT-ORDERED INDEMNIFICATION AND ADVANCE FOR EXPENSES
a. An Executive may, either before or within two years after a
determination, if any, has been made by the Authority, petition
the court before which such Action was brought or any other court
of competent jurisdiction to independently determine whether or
not he or she has engaged in misconduct which constitutes a Breach
of Duty and is, therefore, entitled to indemnification under the
provisions of this Article VI. Such court shall thereupon have
the exclusive authority to make such determination unless and
until such court dismisses or otherwise terminates such proceeding
without having made such determination. An Executive may petition
a court under this Section 4 either to seek an initial
determination by the court as authorized by Section 3d of this
Article VI or to seek review by the court of a previous adverse
determination by the Authority.
b. The court shall make its independent determination irrespective of
any prior determination made by the Authority; provided, however,
that there shall exist a rebuttable presumption that the Executive
has not engaged in misconduct which constitutes a Breach of Duty
and is, therefore, entitled to indemnification hereunder. The
burden of rebutting such presumption by clear and convincing
evidence shall be on the Corporation.
c. In the event the court determines that an Executive has engaged in
misconduct which constitutes a Breach of Duty, it may nonetheless
order indemnification to be paid by the Corporation if it
determines that the Executive is fairly and reasonably entitled to
indemnification in view of all of the circumstances of such
Action.
d. In the event the Corporation does not:
(1) Advance Expenses to the Executive within ten days of such
Executive's compliance with Section 2 of this Article VI; or
(2) Indemnify an Executive with respect to requested Expenses
under Section 1b of this Article VI within ten days of such
Executive's written request therefor, the Executive may
petition the court before
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which such Action was brought, if any, or any other court of
competent jurisdiction to order the Corporation to pay such
reasonable Expenses immediately. Such court, after giving any
notice it considers necessary, shall order the Corporation to
pay such Expenses if it determines that the Executive has
complied with the applicable provisions of Section 2 of this
Article VI or 1b of this Article VI, as the case may be.
e. If the court determines pursuant to this Section 4 that the
Executive is entitled to be indemnified for any Liabilities and/or
Expenses, or to the advance of Expenses, unless otherwise ordered
by such court, the Corporation shall pay such Liabilities and/or
Expenses to the Executive (net of all Expenses, if any, previously
advanced to the Executive pursuant to Section 2 of this
Article VI), including interest thereon as provided in Section 6c
of this Article VI, or to such other person or entity as the
Executive may designate in writing to the Corporation, within
ten days of the rendering of such determination.
f. An Executive shall pay all Expenses incurred by such Executive in
connection with the judicial determination provided in this
Section 4, unless it shall ultimately be determined by the court
that he or she is entitled, in whole or in part, to be indemnified
by, or to receive an advance from, the Corporation as authorized
by this Article VI. All Expenses incurred by an Executive in
connection with any subsequent appeal of the judicial
determination provided for in this Section 4 shall be paid by the
Executive regardless of the disposition of such appeal.
5. TERMINATION OF AN ACTION IS NONCONCLUSIVE
The adverse termination of any Action against an Executive by judgment,
order settlement, conviction, or upon a plea of no contest or its
equivalent, shall not, of itself, create a presumption that the
Executive has engaged in misconduct which constitutes a Breach of Duty.
6. PARTIAL INDEMNIFICATION; REASONABLENESS; INTEREST
a. If it is determined by the Authority, or by a court, that an
Executive is entitled to indemnification as to some claims,
issues, or matters, but not as to other claims, issues, or
matters, involved in any Action, the Authority, or the court,
shall authorize the proration and payment by the Corporation of
such Liabilities and/or reasonable Expenses with respect to which
indemnification is sought by the Executive, among such claims,
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issues, or matters as the Authority, or the court, shall deem
appropriate in light of all of the circumstances of such Action.
b. If it is determined by the Authority, or by a court, that certain
Expenses incurred by or on behalf of an Executive are for whatever
reason unreasonable in amount, the Authority, or the court, shall
nonetheless authorize indemnification to be paid by the
Corporation to the Executive for such Expenses as the Authority,
or the court, shall deem reasonable in light of all of the
circumstances of such Action.
c. Interest shall be paid by the Corporation to an Executive, to the
extent deemed appropriate by the Authority, or by a court, at a
reasonable interest rate, for amounts for which the Corporation
indemnifies or advances to the Executive.
7. INSURANCE; SUBROGATION
a. The Corporation may purchase and maintain insurance on behalf of
any person who is or was an Executive of the Corporation, and/or
is or was serving as an Executive of an Affiliate, against
Liabilities and/or Expenses asserted against him or her and/or
incurred by or on behalf of him or her in any such capacity, or
arising out of his or her status as such an Executive, whether or
not the Corporation would have the power to indemnify him or her
against such Liabilities and/or Expenses under this Article VI or
under the Statute as it may then be in effect. Except as
expressly provided herein, the purchase and maintenance of such
insurance shall not in any way limit or affect the rights and
obligations of the Corporation and/or any Executive under this
Article VI. Such insurance may, but need not, be for the benefit
of all Executives of the Corporation and those serving as an
Executive of an Affiliate.
b. If an Executive shall receive payment from any insurance carrier
or from the plaintiff in any Action against such Executive in
respect of indemnified amounts after payments on account of all or
part of such indemnified amounts have been made by the Corporation
pursuant to this Article VI, such Executive shall promptly
reimburse the Corporation for the amount, if any, by which the sum
of such payment by such insurance carrier or such plaintiff and
payments by the Corporation to such Executive exceeds such
indemnified amounts; provided, however, that such portions, if
any, of such insurance proceeds that are required to be reimbursed
to the insurance carrier under the terms of its insurance policy,
such as
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deductible, retention, or co-insurance amounts, shall not be
deemed to be payments to such Executive hereunder.
c. Upon payment of indemnified amounts under this Article VI, the
Corporation shall be subrogated to such Executive's rights against
any insurance carrier in respect of such indemnified amounts and
the Executive shall execute and deliver any and all instruments
and/or documents and perform any and all other acts or deeds which
the Corporation shall deem necessary or advisable to secure such
rights. The Executive shall do nothing to prejudice such rights
of recovery or subrogation.
8. WITNESS EXPENSES
The Corporation shall advance or reimburse any and all reasonable
Expenses incurred by or on behalf of an Executive in connection with his
or her appearance as a witness in any Action at a time when he or she
has not been formally named a defendant or respondent to such an Action,
within ten days after the receipt of an Executive's written request
therefor.
9. CONTRIBUTION
a. Subject to the limitations of this Section 9, if the indemnity
provided for in Section 1 of this Article VI is unavailable to an
Executive for any reason whatsoever, the Corporation, in lieu of
indemnifying the Executive, shall contribute to the amount
incurred by or on behalf of the Executive, whether for Liabilities
and/or for reasonable Expenses in connection with any Action in
such proportion as deemed fair and reasonable by the Authority, or
by a court, in light of all of the circumstances of any such
Action, in order to reflect:
(1) The relative benefits received by the Corporation and the
Executive as a result of the event(s) and/or transaction(s)
giving cause to such Action; and/or
(2) The relative fault of the Corporation (and its other
Executives, employees, and/or agents) and the Executive in
connection with such event(s) and/or transaction(s).
b. The relative fault of the Corporation (and its other Executives,
employees, and/or agents), on the one hand, and of the Executive,
on the other hand, shall be determined by reference to, among
other things, the parties'
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relative intent, knowledge, access to information, and opportunity
to correct or prevent the circumstances resulting in such
Liabilities and/or Expenses. The Corporation agrees that it
would not be just and equitable if contribution pursuant to this
Section 9 were determined by pro rata allocation or any other
method of allocation which does not take account of the foregoing
equitable considerations.
c. An Executive shall not be entitled to contribution from the
Corporation under this Section 9 in the event it is determined by
the Authority, or by a court, that the Executive has engaged in
misconduct which constitutes a Breach of Duty.
d. The Corporation's payment of, and an Executive's right to,
contribution under this Section 9 shall be made and determined in
accordance with and pursuant to the provisions in Sections 3
and/or 4 of this Article VI relating to the Corporation's payment
of, and the Executive's right to, indemnification under this
Article VI.
10. INDEMNIFICATION OF EMPLOYEES
Unless otherwise specifically set forth in this Article VI, the
Corporation shall indemnify and hold harmless any person who is or was a
party, or is threatened to be made a party to any Action by reason of
his or her status as, or the fact that he or she is or was an employee
or authorized agent or representative of the Corporation and/or an
Affiliate as to acts performed in the course and within the scope of
such employee's, agent's, or representative's duties to the Corporation
and/or an Affiliate, in accordance with and to the fullest extent
permitted by the Statute as it may then be in effect.
11. SEVERABILITY
If any provision of this Article VI shall be deemed invalid or
inoperative, or if a court of competent jurisdiction determines that any
of the provisions of this Article VI contravene public policy, this
Article VI shall be construed so that the remaining provisions shall not
be affected, but shall remain in full force and effect, and any such
provisions which are invalid or inoperative or which contravene public
policy shall be deemed, without further Action or deed by or on behalf
of the Corporation, to be modified, amended, and/or limited, but only to
the extent necessary to render the same valid and enforceable, and the
Corporation shall indemnify an Executive as to Liabilities and
reasonable Expenses with respect to any Action to the full extent
permitted by any
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applicable provision of this Article VI that shall not have been
invalidated and to the full extent otherwise permitted by the
Statute as it may then be in effect.
12. NONEXCLUSIVITY OF ARTICLE VI
The right to indemnification, contribution, and advancement of Expenses
provided to an Executive by this Article VI shall not be deemed
exclusive of any other rights to indemnification, contribution, and/or
advancement of Expenses which any Executive or other employee or agent
of the Corporation and/or of an Affiliate may be entitled under any
charter provision, written agreement, resolution, vote of shareholders
or disinterested directors of the Corporation or otherwise, including,
without limitation, under the Statute as it may then be in effect, both
as to acts in his or her official capacity as such Executive or other
employee or agent of the Corporation and/or of an Affiliate or as to
acts in any other capacity while holding such office or position,
whether or not the Corporation would have the power to indemnify,
contribute, and/or advance Expenses to the Executive under this
Article VI or under the Statute; provided that it is not determined that
the Executive or other employee or agent has engaged in misconduct which
constitutes a Breach of Duty.
13. NOTICE TO THE CORPORATION; DEFENSE OF ACTIONS
a. An Executive shall promptly notify the Corporation in writing upon
being served with or having actual knowledge of any citation,
summons, complaint, indictment, or any other similar document
relating to any Action which may result in a claim of
indemnification, contribution, or advancement of Expenses
hereunder, but the omission so to notify the Corporation will not
relieve the Corporation from any liability which it may have to
the Executive otherwise than under this Article VI unless the
Corporation shall have been irreparably prejudiced by such
omission.
b. With respect to any such Action as to which an Executive notifies
the Corporation of the commencement thereof:
(1) The Corporation shall be entitled to participate therein at
its own expense; and
(2) Except as otherwise provided below, to the extent that it
may wish, the Corporation (or any other indemnifying party,
including any insurance carrier, similarly notified by the
Corporation or the Executive) shall be entitled to assume
the defense thereof, with
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counsel selected by the Corporation (or such other
indemnifying party) and reasonably satisfactory to the
Executive.
c. After notice from the Corporation (or such other indemnifying
party) to the Executive of its election to assume the defense of
an Action, the Corporation shall not be liable to the Executive
under this Article VI for any Expenses subsequently incurred by
the Executive in connection with the defense thereof other than
reasonable costs of investigation or as otherwise provided below.
The Executive shall have the right to employ his or her own
counsel in such Action but the Expenses of such counsel incurred
after notice from the Corporation (or such other indemnifying
party) of its assumption of the defense thereof shall be at the
expense of the Executive unless:
(1) The employment of counsel by the Executive has been
authorized by the Corporation;
(2) The Executive shall have reasonably concluded that there may
be a conflict of interest between the Corporation (or such
other indemnifying party) and the Executive in the conduct
of the defense of such Action; or
(3) The Corporation (or such other indemnifying party) shall not
in fact have employed counsel to assume the defense of such
Action, in each of which cases the Expenses of counsel shall
be at the expense of the Corporation. The Corporation shall
not be entitled to assume the defense of any Derivative
Action or any Action as to which the Executive shall have
made the conclusion provided for in clause (2) above.
14. CONTINUITY OF RIGHTS AND OBLIGATIONS
The terms and provisions of this Article VI shall continue as to an
Executive subsequent to the Termination Date and such terms and
provisions shall inure to the benefit of the heirs, estate, executors,
and administrators of such Executive and the successors and assigns of
the Corporation, including, without limitation, any successor to the
Corporation by way of merger, consolidation, and/or sale or disposition
of all or substantially all of the assets or capital stock of the
Corporation. Except as provided herein, all rights and obligations of
the Corporation and the Executive hereunder shall continue in full force
and effect despite the subsequent amendment or modification of the
Corporation's Articles of Incorporation, as such are in effect on the
date hereof, and such rights and
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obligations shall not be affected by any such amendment or modification,
any resolution of directors or shareholders of the Corporation, or by
any other corporate action which conflicts with or purports to amend,
modify, limit, or eliminate any of the rights or obligations of the
Corporation and/or of the Executive hereunder.
15. AMENDMENT
This Article VI may only be altered, amended, or repealed by the
affirmative vote of a majority of the shareholders of the Corporation so
entitled to vote; provided, however, that the Board may alter or amend
this Article VI without such shareholder approval if any such alteration
or amendment:
a. Is made in order to conform to any amendment or revision of the
Wisconsin Business Corporation Law, including, without limitation,
the Statute, which
(1) Expands or permits the expansion of an Executive's right to
indemnification thereunder;
(2) Limits or eliminates, or permits the limitation or
elimination, of liability of the Executives; or
(3) Is otherwise beneficial to the Executives; or
b. In the sole judgment and discretion of the Board, does not
materially adversely affect the rights and protections of the
shareholders of the Corporation.
Any repeal, modification, or amendment of this Article VI shall not
adversely affect any rights or protections of an Executive existing
under this Article VI immediately prior to the time of such repeal,
modification, or amendment and any such repeal, modification, or
amendment shall have a prospective effect only.
16. CERTAIN DEFINITIONS
The following terms as used in this Article VI shall be defined as
follows:
a. "Action(s)" shall include, without limitation, any threatened,
pending, or completed action, claim, litigation, suit, or
proceeding, whether civil, criminal, administrative, arbitrative,
or investigative, whether predicated on foreign, Federal, state,
or local law, whether brought under and/or
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predicated upon the Securities Act of 1933, as amended, and/or the
Securities Exchange Act of 1934, as amended, and/or their
respective state counterparts and/or any rule or regulation
promulgated thereunder, whether a Derivative Action and whether
formal or informal.
b. "Affiliate" shall include, without limitation, any corporation,
partnership, joint venture, employee benefit plan, trust, or other
similar enterprise that directly or indirectly through one or more
intermediaries, controls or is controlled by, or is under common
control with, the Corporation.
c. "Authority" shall mean the panel of arbitrators or independent
legal counsel selected under Section 3 of this Article VI.
d. "Board" shall mean the Board of Directors of the Corporation.
e. "Breach of Duty" shall mean the Executive breached or failed to
perform his or her duties to the Corporation or an Affiliate, as
the case may be, and the Executive's breach of or failure to
perform those duties constituted:
(1) A willful failure to deal fairly with the Corporation (or an
Affiliate) or its shareholders in connection with a matter
in which the Executive has a material conflict of interest;
(2) A violation of the criminal law, unless the Executive:
(a) Had reasonable cause to believe his or her conduct was
lawful; or
(b) Had no reasonable cause to believe his or her conduct
was unlawful;
(3) A transaction from which the Executive derived an improper
personal profit (unless such profit is determined to be
immaterial in light of all the circumstances of the Action);
or
(4) Willful misconduct.
f. "Derivative Action" shall mean any Action brought by or in the
right of the Corporation and/or an Affiliate.
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g. "Executive(s)" shall mean any individual who is, was, or has
agreed to become a director and/or officer of the Corporation
and/or an Affiliate.
h. "Expenses" shall include, without limitation, all expenses, fees,
costs, charges, attorneys' fees and disbursements, other
out-of-pocket costs, reasonable compensation for time spent by the
Executive in connection with the Action for which he or she is not
otherwise compensated by the Corporation, any Affiliate, any third
party or other entity, and any and all other direct and indirect
costs of any type or nature whatsoever.
i. "Liabilities" shall include, without limitation, judgments,
amounts incurred in settlement, fines, penalties and, with respect
to any employee benefit plan, any excise tax or penalty incurred
in connection therewith, and any and all other liabilities of
every type or nature whatsoever.
j. "Statute" shall mean Wisconsin Business Corporation Law
Sections 180.0850-180.0859 (or any successor provisions).
k. "Termination Date" shall mean the date an Executive ceases, for
whatever reason, to serve in an employment relationship with the
Company and/or any Affiliate.
ARTICLE VII. SEAL
BOARD OF DIRECTORS
The Board of Directors shall provide a corporate seal which shall be circular
in form and shall have inscribed thereon the words "WPS RESOURCES CORPORATION,
CORPORATE SEAL." The continued use for any purpose of any former corporate
seal or facsimile thereof shall have the same effect as the use of the
corporate seal or facsimile thereof in the form provided by the preceding
sentence.
ARTICLE VIII. AMENDMENTS
1. The Board of Directors shall have authority to adopt, amend, or repeal
the By-laws of this Corporation upon affirmative vote of a majority of
the total number of directors at a meeting of the Board, the notice of
which shall have included notice of the proposed amendment; but the
Board of Directors shall have no power to amend any By-law or to
reinstate any By-law repealed by the
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shareholders unless the shareholders shall hereafter confer such
authority upon the Board of Directors.
2. The shareholders shall have power to adopt, amend, or repeal any of the
By-laws of the Corporation, at any regular or special meeting of the
shareholders, in accordance with the provisions of Article II of these
By-laws. There shall be included in the notice of such regular or
special meeting a statement of the nature of any amendment that is
proposed for the consideration of the shareholders by the holders of at
least 5% of the voting stock of the Corporation in a writing delivered
to the Secretary of the Corporation not less than 90 days prior to the
date of such meeting or by the Board of Directors.
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EXHIBIT 3B-2
WISCONSIN PUBLIC SERVICE CORPORATION
BY-LAWS
AS IN EFFECT MAY 6, 1999
ARTICLE I. OFFICES
1. PRINCIPAL OFFICE
The principal office of the Corporation in the State of Wisconsin shall
be in the City of Green Bay. The Corporation may also have offices at
such other places, within and outside of the State of Wisconsin, as the
Board of Directors may designate or as the business of the Corporation
may require.
2. REGISTERED OFFICE
The Board of Directors shall designate the registered office of the
Corporation and may change such registered office by resolution.
ARTICLE II. SHAREHOLDERS
1. ANNUAL MEETING
The annual meeting of the shareholders for the election of directors and
for the transaction of such other business as may properly be brought
before the meeting shall be held each year not later than the fourth
Tuesday in May, on the date designated by the Board of Directors and
specified in the notice of meeting. If the election of directors shall
not be held on the day designated for any annual meeting of the
shareholders, or at any adjournment thereof, the Board of Directors shall
cause the election to be held at a special meeting of the shareholders as
soon thereafter as convenient.
2. SPECIAL MEETINGS
Special meetings of the shareholders may be called by the Chairman of the
Board of Directors, the President, the Secretary, or by resolution of the
Board of Directors. The Corporation shall call a special meeting of
shareholders in the event that the holders of at least 10% of all the
votes entitled to be cast on any issue proposed to be considered at the
proposed special meeting sign, date, and deliver to the Corporation one
or more written demands for the meeting describing one or more purposes
for which it is to be held. The Corporation shall give notice of such a
special meeting within 30 days after the date that the demand is
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delivered to the Corporation. If the holders of the Preferred Stock
shall become entitled, as provided by Article II of the Articles of
Incorporation, to elect members of the Board of Directors, special
meetings of the shareholders shall be held upon call as provided in said
Article III.
3. PLACE OF MEETING
Each meeting of shareholders, annual or special, shall be held at the
principal office of the Corporation unless another place, either within
or without the State of Wisconsin, has been designated by the Board of
Directors and specified in the notice of such meeting, but any meeting of
shareholders may be adjourned to reconvene at any place designated by a
majority of the shares represented at such meeting.
4. NOTICE OF MEETINGS
Written notice stating the date, time, and place of the meeting and, in
case of a special meeting, the purpose or purposes for which the meeting
is called, shall be delivered not less than 10 nor more than 60 days
before the date of the meeting (unless a different time is provided by
the Wisconsin Business Corporation Law or the Articles of Incorporation)
to each shareholder of record entitled to vote at such meeting and to
such other persons as required by the Wisconsin Business Corporation Law.
Such notice shall be given by or at the direction of the officer or
persons calling the meeting and shall be deemed to be delivered when
deposited in the United States mail, postage prepaid, addressed to the
shareholder of record at his address as it appears in the records of the
Corporation.
a. If any meeting of the shareholders is adjourned to another time or
place, no notice of such adjourned meeting need be given other than
by announcement thereof at the meeting at which such adjournment is
taken; provided, however, that if a new record date for an adjourned
meeting is or must be fixed, the Corporation shall give notice of
the adjourned meeting to persons who are shareholders as of the new
record date.
b. In connection with the election of members of the Board of Directors
by the holders of the Preferred Stock pursuant to Article III of the
Articles of Incorporation, the Corporation shall prepare and mail to
the holders of record of Preferred Stock such proxy forms,
communications, and documents as may be deemed appropriate and as
may be required by any governmental authority having jurisdiction
thereof.
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5. WAIVER OF NOTICE
A shareholder may waive any notice required by the Wisconsin Business
Corporation Law, the Articles of Incorporation, or these By-laws before
or after the date and time stated in the notice. The waiver shall be in
writing and signed by the shareholder entitled to the notice, contain the
same information that would have been required in the notice under
applicable provisions of the Wisconsin Business Corporation Law (except
that the time and place of meeting need not be stated), and be delivered
to the Corporation for inclusion in the corporate records. A
shareholder's attendance at a meeting, in person or by proxy, waives
objection to all of the following:
a. Lack of notice or defective notice of the meeting, unless the
shareholder at the beginning of the meeting or promptly upon arrival
objects to holding the meeting or transacting business at the
meeting.
b. Consideration of a particular matter at the meeting that is not
within the purpose described in the meeting notice, unless the
shareholder objects to considering the matter when it is presented.
6. FIXING OF RECORD DATE
The Board of Directors may fix in advance a date as the record date for
the purpose of determining shareholders entitled to notice of and to vote
at any meeting of shareholders, shareholders entitled to demand a special
meeting as contemplated by Section 2 of this Article II, shareholders
entitled to take any other action, or shareholders for any other purpose.
Such record date shall not be more than 70 days prior to the date on
which the particular action, requiring such determination of
shareholders, is to be taken. If no record date is fixed by the Board of
Directors or by the Wisconsin Business Corporation Law for the
determination of shareholders entitled to notice of and to vote at a
meeting of shareholders, the record date shall be the close of business
on the day before the first notice is given to shareholders. If no
record date is fixed by the Board of Directors or by the Wisconsin
Business Corporation Law for the determination of shareholders entitled
to demand a special meeting as contemplated in Section 2 of this Article
II, the record date shall be the date that the first shareholder signs
the demand. Except as provided by the Wisconsin Business Corporation Law
for a court-ordered adjournment, a determination of shareholders entitled
to notice of and to vote at a meeting of shareholders is effective for
any adjournment of such meeting unless the Board of Directors fixes a new
record date, which it shall do if the meeting is adjourned to a date more
than 120 days after the date fixed for the original meeting. The record
date for determining shareholders entitled to a distribution (other than
a distribution involving a purchase, redemption, or other acquisition of
the Corporation's shares) or a share dividend is the date on which
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the Board of Directors authorized the distribution or share dividend,
as the case may be, unless the Board of Directors fixes a different
record date.
7. SHAREHOLDERS' LIST FOR MEETINGS
After a record date for a special or annual meeting of shareholders has
been fixed, the Corporation shall prepare a list of the names of all of
the shareholders entitled to notice of the meeting. The list shall be
arranged by class or series of shares, if any, and show the address of
and number of shares held by each shareholder. Such list shall be
available for inspection by any shareholder, beginning two business days
after notice of the meeting is given for which the list was prepared and
continuing to the date of the meeting, at the Corporation's principal
office or at a place identified in the meeting notice in the city where
the meeting will be held. A shareholder or his or her agent may, on
written demand, inspect, and, subject to the limitations imposed by the
Wisconsin Business Corporation Law, copy the list, during regular
business hours and at his or her expense, during the period that it is
available for inspection pursuant to this Section. The Corporation shall
make the shareholders' list available at the meeting and any shareholder
or his or her agent or attorney may inspect the list at any time during
the meeting or any adjournment thereof. Refusal or failure to prepare or
make available the shareholders' list shall not affect the validity of
any action taken at a meeting of shareholders.
8. QUORUM AND VOTING REQUIREMENTS
Shares entitled to vote as a separate voting group may take action on a
matter at a meeting only if a quorum of those shares exists with respect
to that matter. The holders of a majority of the shares entitled to
vote, represented in person or by proxy, shall constitute a quorum at a
meeting of shareholders. Once a share is represented for any purpose at
a meeting, other than for the purpose of objecting to holding the meeting
or transacting business at the meeting, it is considered present for
purposes of determining whether a quorum exists for the remainder of the
meeting and for any adjournment of that meeting unless a new record date
is or must be set for the adjourned meeting. If a quorum exists, except
in the case of the election of directors, action on a matter shall be
approved if the votes cast within the voting group favoring the action
exceed the votes cast opposing the action, unless the Articles of
Incorporation or the Wisconsin Business Corporation Law requires a
greater number of affirmative votes. Unless otherwise provided in the
Articles of Incorporation, each director shall be elected by a plurality
of the votes cast by the shares entitled to vote in the election of
directors at a meeting at which a quorum is present. Though less than a
quorum of the outstanding votes of a voting group are represented at a
meeting, a majority of the votes so represented may adjourn the meeting
from time to time without further notice. At such adjourned meeting at
which a quorum shall be present or represented, any
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business may be transacted which might have been transacted at the
meeting as originally notified.
9. PROXIES
At all meetings of shareholders, a shareholder may vote his or her shares
in person or by proxy. A shareholder may appoint a proxy to vote or
otherwise act for the shareholder by signing an appointment form, either
personally or by his or her attorney-in-fact. An appointment of a proxy
is effective when received by the Secretary, other officer, or agent of
the Corporation authorized to tabulate votes. An appointment is valid
for 11 months from the date of its signing unless a different period is
expressly provided in the appointment form.
10. ACCEPTANCE OF INSTRUMENTS SHOWING SHAREHOLDER ACTION
If the name signed on a vote, consent, waiver, or proxy appointment
corresponds to the name of a shareholder, the Corporation, if acting in
good faith, may accept the vote, consent, waiver, or proxy appointment
and give it effect as the act of a shareholder. If the name signed on a
vote, consent, waiver, or proxy appointment does not correspond to the
name of a shareholder, the Corporation, if acting in good faith, may
accept the vote, consent, waiver, or proxy appointment and give it effect
as the act of the shareholder if any of the following apply:
a. The shareholder is an entity and the name signed purports to be that
of an officer or agent of the entity.
b. The name purports to be that of a personal representative,
administrator, executor, guardian, or conservator representing the
shareholder and, if the Corporation requests, evidence of fiduciary
status acceptable to the Corporation is presented with respect to
the vote, consent, waiver, or proxy appointment.
c. The name signed purports to be that of a receiver or trustee in
bankruptcy of the shareholder and, if the Corporation requests,
evidence of this status acceptable to the Corporation is presented
with respect to the vote, consent, waiver, or proxy appointment.
d. The name signed purports to be that of a pledgee, beneficial owner,
or attorney-in-fact of the shareholder and, if the Corporation
requests, evidence acceptable to the Corporation of the signatory's
authority to sign for the shareholder is presented with respect to
the vote, consent, waiver, or proxy appointment.
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e. Two or more persons are the shareholders as co-tenants or
fiduciaries and the name signed purports to be the name of at least
one of the co-owners and the person signing appears to be acting on
behalf of all co-owners.
The Corporation may reject a vote, consent, waiver, or proxy appointment
if the Secretary, other officer, or agent of the Corporation who is
authorized to tabulate votes, acting in good faith, has reasonable basis
for doubt about the validity of the signature on it or about the
signatory's authority to sign for the shareholder.
ARTICLE III. BOARD OF DIRECTORS
1. GENERAL POWERS
The business and affairs of the Corporation shall be managed by its Board
of Directors. The Board shall determine the nature and character of the
business to be conducted by the Corporation and the method of doing so;
what employees, agents, and officers shall be employed and their
compensation; and what purchases or contracts for purchase shall be made.
The Board may delegate any of its aforesaid powers to committees or to
officers, agents, or employees as it may from time to time determine.
2. NUMBER OF DIRECTORS
The number of directors of the Corporation shall be nine, divided into
three classes: Class A - 4 members, Class B - 2 members, and
Class C - 3 members. (Amended May 6, 1999)
3. TERM
At the 1988 annual meeting of shareholders, the directors of Class A
shall be elected for a term to expire at the first annual meeting of
shareholders after their election, and until their successors are elected
and qualify, the directors of Class B shall be elected for a term to
expire at the second annual meeting of shareholders after their election,
and until their successors are elected and qualify, and the directors of
Class C shall be elected for a term to expire at the third annual meeting
of shareholders after their election and until their successors are
elected and qualify. At each annual meeting of shareholders after the
1988 annual meeting of shareholders, the successors to the class of
directors whose terms shall expire at the time of such annual meeting
shall be elected to hold office until the third succeeding annual meeting
of shareholders, and until their successors are elected and qualify.
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4. QUALIFICATIONS
No director elected to such office for the first time after January 1,
1972 shall be eligible for re-election after attaining the age of 70
years. Directors need not be shareholders of the Corporation or
residents of the State of Wisconsin.
5. MEETINGS
The Board of Directors shall hold its meetings at such place or places,
within or without the State of Wisconsin, as the Board may from time to
time determine.
a. A meeting of the Board of Directors, to be known as the annual
meeting, may be held, without notice, immediately after and at the
same place as the annual meeting of the shareholders at which such
Board is elected, for the purpose of electing the officers of the
Corporation and to transact such other business as may come before
the Board. Such annual meeting may be held at a different place
than the annual meeting of shareholders and/or on a date subsequent
to the annual meeting of shareholders, if notice of such different
place and/or date has been given to or waived by all the directors.
b. Regular meetings of the Board of Directors may be held without call
and without notice, at such times and in such places as the Board
may by resolution from time to time determine.
c. Special meetings of the Board of Directors may be called at any time
by the Chairman of the Board or the Chief Executive Officer and
shall be called by the Secretary of the Corporation upon the written
request of three or more directors.
6. NOTICE; WAIVER
Notice of each special meeting of the Board of Directors shall be given
by written notice delivered or communicated in person, by telegraph,
teletype, facsimile, or other form of wire or wireless communication, or
by mail or private carrier, to each director at his business address or
at such other address as such director shall have designated in writing
filed with the Secretary, in each case not less than 48 hours prior to
the meeting. The notice need not prescribe the purpose of the special
meeting of the Board of Directors or the business to be transacted at
such meeting. If mailed, such notice shall be deemed to be effective
when deposited in the United States mail so addressed, with postage
thereon prepaid. If notice is given by telegram, such notice shall be
deemed to be effective when the telegram is delivered to the telegraph
company. If notice is given by private carrier, such notice shall be
deemed to be effective when delivered to the private carrier. Whenever
any notice whatever is required to be given to any director of the
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Corporation under the Articles of Incorporation, these By-laws, or any
provision of the Wisconsin Business Corporation Law, a waiver thereof in
writing, signed at any time, whether before or after the date and time of
meeting, by the director entitled to such notice shall be deemed
equivalent to the giving of such notice. The Corporation shall retain
any such waiver as part of the permanent corporate records. A director's
attendance at or participation in a meeting waives any required notice to
him or her of the meeting unless the director at the beginning of the
meeting or promptly upon his or her arrival objects to holding the
meeting or transacting business at the meeting and does not thereafter
vote for or assent to action taken at the meeting.
7. QUORUM
Except as otherwise provided by the Wisconsin Business Corporation Law,
by the Articles of Incorporation, or these By-laws, a majority of the
number of directors specified in Section 2 of Article III of these
By-laws shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors. Except as otherwise provided by the
Wisconsin Business Corporation Law, by the Articles of Incorporation, or
by these By-laws, a quorum of any committee of the Board of Directors
created pursuant to Section 13 hereof shall consist of a majority of the
number of directors appointed to serve on the committee. A majority of
the directors present (though less than such quorum) may adjourn any
meeting of the Board of Directors or any committee thereof, as the case
may be, from time to time without further notice.
8. MANNER OF ACTING
The affirmative vote of a majority of the directors present at a meeting
of the Board of Directors or a committee thereof at which a quorum is
present shall be the act of the Board of Directors or such committee, as
the case may be, unless the Wisconsin Business Corporation Law, the
Articles of Incorporation, or these By-laws require the vote of a greater
number of directors.
9. MINUTES OF MEETINGS
Minutes of any regular or special meeting of the Board of Directors shall
be prepared and distributed to each director.
10. VACANCIES
Vacancies occurring in the Board of Directors shall be filled in the
manner provided in Article V of the Articles of Incorporation.
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11. COMPENSATION
The Board of Directors, irrespective of any personal interest of any of
its members, may establish reasonable compensation of all directors for
services to the Corporation as directors, officers, or otherwise, or may
delegate such authority to an appropriate committee. The Board of
Directors also shall have authority to provide for or delegate authority
to an appropriate committee to provide for reasonable pensions,
disability, or death benefits, and other benefits or payments, to
directors, officers, and employees, and to their estates, families,
dependents, or beneficiaries on account of prior services rendered by
such directors, officers, and employees to the Corporation.
12. PRESUMPTION OF ASSENT
A director who is present and is announced as present at a meeting of the
Board of Directors or any committee thereof created in accordance with
Section 13 of this Article III, when corporate action is taken, assents
to the action taken unless any of the following occurs:
a. The director objects at the beginning of the meeting or promptly
upon his or her arrival to holding the meeting or transacting
business at the meeting.
b. The director's dissent or abstention from the action taken is
entered in the minutes of the meeting.
c. The director delivers written notice that complies with the
Wisconsin Business Corporation Law of his or her dissent or
abstention to the presiding officer of the meeting before its
adjournment or to the Corporation immediately after adjournment of
the meeting.
Such right of dissent or abstention shall not apply to a director who
votes in favor of the action taken.
13. COMMITTEES
The Board of Directors by resolution adopted by the affirmative vote of a
majority of all of the directors then in office may create one or more
committees, appoint members of the Board of Directors to serve on the
committees, and designate other members of the Board of Directors to
serve as alternates. Each committee shall have two or more members who
shall, unless otherwise provided by the Board of Directors, serve at the
pleasure of the Board of Directors. A committee
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may be authorized to exercise the authority of the Board of Directors,
except that a committee may not do any of the following:
a. Authorize distributions.
b. Approve or propose to shareholders action that the Wisconsin
Business Corporation Law requires to be approved by shareholders.
c. Fill vacancies on the Board of Directors or, unless the Board of
Directors provides by resolution that vacancies on a committee shall
be filled by the affirmative vote of the remaining committee
members, on any Board committee.
d. Amend the Corporation's Articles of Incorporation.
e. Adopt, amend, or repeal By-laws.
f. Approve a plan of merger not requiring shareholder approval.
g. Authorize or approve reacquisition of shares, except according to a
formula or method prescribed by the Board of Directors.
h. Authorize or approve the issuance or sale or contract for sale of
shares, or determine the designation and relative rights,
preferences and limitations of a class or series of shares, except
that the Board of Directors may authorize a committee to do so
within limits prescribed by the Board of Directors. Unless
otherwise provided by the Board of Directors in creating the
committee, a committee may employ counsel, accountants, and other
consultants to assist it in the exercise of its authority.
14. TELEPHONIC MEETINGS
Except as herein provided and notwithstanding any place set forth in the
notice of the meeting or these By-laws, members of the Board of Directors
(and any committees thereof created pursuant to Section 13 of this
Article III) may participate in regular or special meetings by, or
through the use of, any means of communication by which all participants
may simultaneously hear each other, such as by conference telephone. If
a meeting is conducted by such means, then at the commencement of such
meeting the presiding officer shall inform the participating directors
that a meeting is taking place at which official business may be
transacted. Any participant in a meeting by such means shall be deemed
present in person at such meeting. Notwithstanding the foregoing, no
action may be taken at any meeting held by such means on any particular
matter which the presiding officer determines, in his or her sole
discretion, to be inappropriate
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under the circumstances for action at a meeting held by such means. Such
determination shall be made and announced in advance of such meeting.
15. ACTION WITHOUT MEETING
Any action required or permitted by the Wisconsin Business Corporation
Law to be taken at a meeting of the Board of Directors or a committee
thereof created pursuant to Section 13 of this Article III may be taken
without a meeting if the action is taken by all members of the Board or
of the committee. The action shall be evidenced by one or more written
consents describing the action taken, signed by each director or
committee member and retained by the Corporation. Such action shall be
effective when the last director or committee member signs the consent,
unless the consent specifies a different effective date.
ARTICLE IV. OFFICERS
1. PRINCIPAL OFFICERS
The principal officers of the Corporation required by statute shall be a
President, such number of Vice Presidents as may be elected by the Board
of Directors, a Secretary, and a Treasurer. The Board of Directors may
elect from among the directors a Chairman of the Board of Directors and a
Vice Chairman of the Board of Directors, may designate such Chairman,
Vice Chairman, or any principal officer as the Chief Executive Officer,
may elect such Assistant Secretaries and Assistant Treasurers and other
officers as it shall deem necessary, and may prescribe by resolution
their respective powers and duties.
2. PRESIDENT
The President shall be elected by the directors. Unless the Board of
Directors otherwise prescribes, he or she shall be the Chief Executive
Officer of the Corporation. In the event that the President is not the
Chief Executive Officer, he or she shall have such powers and duties as
the Board of Directors may prescribe.
3. CHAIRMAN OF THE BOARD OF DIRECTORS
If a Chairman of the Board of Directors shall be elected, he or she shall
preside as Chairman of all meetings of the shareholders and of the Board
of Directors. He or she shall have such other authority as the Board may
from time to time prescribe. If there is no Chairman of the Board, or in
the absence of the Chairman, the presiding officer at meetings of the
shareholders, and of the Board of Directors shall be another officer in
the following order of priority: Vice Chairman of the
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Board of Directors, President, and Vice Presidents (subject, however, to
Section 5 of this Article).
4. CHIEF EXECUTIVE OFFICER
The Chief Executive Officer shall exercise active supervision over the
business, property, and affairs of the Corporation.
a. The Chief Executive Officer shall have authority, subject to such
rules as may be prescribed from time to time by the Board or its
committees, to appoint agents or employees other than those elected
by the Board, to prescribe their powers and duties, and to delegate
such authority as he or she may see fit. Any agent or employee not
elected by the Board shall hold office at the discretion of the
Chief Executive Officer or other officer employing him.
b. The Chief Executive Officer is authorized to sign, execute, and
acknowledge, on behalf of the Corporation, all deeds, mortgages,
bonds, notes, debentures, contracts, leases, reports, and other
documents and instruments, except where the signing and execution
thereof by some other officer or agent shall be expressly authorized
and directed by law or by the Board or by these By-laws. Unless
otherwise provided by law or by the Board, the Chief Executive
Officer may authorize any officer, employee, or agent to sign,
execute, and acknowledge, on behalf of the Corporation, and in his
place and stead, all such documents and instruments.
c. Unless otherwise ordered by the Board of Directors, the Chief
Executive Officer, or a proxy appointed by him, shall have full
power and authority, in the name of and on behalf of the
Corporation, to attend, act, and vote at any meeting of the
shareholders of any other corporation in which the Corporation may
hold shares of stock. At any such meeting, he or she shall possess
and may exercise any and all rights and powers incident to the
ownership of shares of stock.
d. The Chief Executive Officer shall have such other powers and perform
such other duties as are incident to the office of Chief Executive
Officer and as may be prescribed by the Board.
5. VICE PRESIDENTS
In the absence of the President or during his inability or refusal to
act, his powers and duties shall temporarily devolve upon such Vice
Presidents or other officers as shall be designated by the Board of
Directors or, if not designated by the Board, by the Chief Executive
Officer or other officer to whom such power may be
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delegated by the Board; provided, that no Vice President or other officer
--------
shall act as a member or chairman of any committee of the Board of
Directors of which the President is a member or chairman, except at the
direction of the Board.
a. Each Vice President shall have such powers and perform such other
duties as may be assigned to him or her by the Board or by the
President, including the power to sign, execute, and acknowledge all
documents and instruments referred to in Section 4 of this Article.
b. The Board may assign to any Vice President, general supervision and
charge over any branch of the business and affairs of the
Corporation, subject to such limitations as it may elect to impose.
c. The Board of Directors may, if it chooses, designate one or more of
the Vice Presidents "Executive Vice President" with such powers and
duties as the Board shall prescribe.
6. SECRETARY
The Secretary shall attend, and keep the minutes of, meetings of the
shareholders, the Board of Directors and, unless otherwise directed by
any such committee, all committees, in books provided for that purpose;
shall have custody of the corporate records and seal; shall see that
notices are given and records and reports properly kept and filed as
required by law or by these By-laws; and, in general, shall have such
other powers and perform such other duties as are incident to the office
of Secretary and as may be assigned to him or her by the Board of
Directors or the Chief Executive Officer.
7. ASSISTANT SECRETARIES
In the absence of the Secretary, or during his or her inability or
refusal to act, his powers and duties shall temporarily devolve upon such
one of the Assistant Secretaries as the President or the Board of
Directors may direct. The Assistant Secretaries shall have such other
powers and perform such other duties as may be assigned to them by the
Board, the Chief Executive Officer, or the Secretary.
8. TREASURER
The Treasurer shall have charge and custody of the funds, securities, and
other evidences of value of the Corporation, and shall keep and deposit
them as required by the Board of Directors. He or she shall keep proper
accounts of all receipts and disbursements and of the financial
transactions of the Corporation. He or she shall render statements of
such accounts and of money received and disbursed by him or her and of
property and money belonging to the Corporation
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as required by the Board. The Treasurer shall have such other powers and
perform such other duties as are incident to the office of Treasurer and
as from time to time may be prescribed by the Board or the Chief
Executive Officer.
9. ASSISTANT TREASURERS
In the absence of the Treasurer, or during his or her inability or
refusal to act, his or her powers and duties shall temporarily devolve
upon such one of the Assistant Treasurers as the President or the Board
of Directors may direct. The Assistant Treasurers shall have such other
powers and perform such other duties as from time to time may be assigned
to them, respectively, by the Board, the Chief Executive Officer, or the
Treasurer.
10. OTHER ASSISTANTS AND ACTING OFFICERS
The Board of Directors shall have the power to appoint any person to act
as assistant to any officer, or as agent for the Corporation in his or
her stead, or to perform the duties of such officer whenever for any
reason it is impracticable for such officer to act personally, and such
assistant or acting officer or other agent so appointed by the Board of
Directors or an authorized officer shall have the power to perform all
the duties of the office to which he or she is so appointed to be an
assistant, or as to which he or she is so appointed to act, except as
such power may be otherwise defined or restricted by the Board of
Directors.
11. COMPENSATION
The salaries or other compensation of all officers elected as provided
under Section 1 of this Article (other than assistant officers) shall be
fixed from time to time by the Board of Directors. The salaries or other
compensation of all other agents and employees of the Corporation shall
be fixed from time to time by the Chief Executive Officer, but only
within such limits as to amount, and in accordance with such other
conditions as may be prescribed by or under the authority of the Board of
Directors.
12. TENURE
Each officer shall hold office until his successor shall have been duly
elected and qualified, or until his death, resignation, disqualification,
or removal. Any officer, agent, or employee may be removed, with or
without cause, at any time by the Board of Directors notwithstanding the
contract rights, if any, of the officer removed. The appointment of an
officer does not of itself create contract rights.
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13. RESIGNATION
An officer may resign at any time by delivering notice to the Corporation
that complies with the Wisconsin Business Corporation Law. The
resignation shall be effective when the notice is delivered, unless the
notice specifies a later effective date, and the Corporation accepts the
later effective date.
14. VACANCIES
Any vacancy in any office may be filled by the Board of Directors for the
unexpired portion of the term. If a resignation of an officer is
effective at a later date as contemplated by Section 13 of this Article
IV, the Board of Directors may fill the pending vacancy before the
effective date if the Board provides that the successor may not take
office until the effective date.
15. REASSIGNMENT OF DUTIES
In case of the absence or disability of any officer of the Corporation,
or for any other reason deemed sufficient by the Board of Directors, the
Board may reassign or delegate the powers and duties, or any of them, to
any other officer, director, or person it may select.
ARTICLE V. CERTIFICATES FOR AND TRANSFER OF SHARES
1. FORM
Certificates representing shares of the Corporation shall be in such form
as shall be determined by the Board of Directors. All certificates for
shares shall be consecutively numbered or otherwise identified. The name
and address of the person to whom the shares represented thereby are
issued, with the number of shares and date of issue, shall be entered on
the stock transfer books of the Corporation. All certificates
surrendered for the transfer shall be cancelled, and no new certificate
shall be issued until the former certificate for a like number of shares
shall have been surrendered and cancelled, except in case of a lost or
destroyed certificate provided for in Section 4 of this Article V or a
certificate for shares transferred in compliance with the escheat laws of
any state.
2. SIGNATURES
Certificates representing shares of the Corporation shall be signed by
the President or a Vice President and by the Secretary or an Assistant
Secretary; and may be sealed with the seal of the Corporation (which may
be a facsimile) and countersigned and registered in such manner, if any,
as the Board of Directors
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may prescribe. Whenever any certificate is manually signed on behalf of
a transfer agent or a registrar, other than the Corporation itself or an
employee of the Corporation, the signatures of the President, Vice
President, Secretary, or Assistant Secretary, upon such certificate may
be facsimiles. In case any officer who has signed, or whose facsimile
signature has been placed upon such certificate, ceases to be such
officer before such certificate is issued, it may be issued with the
same effect as if he or she were such officer at the date of its issue.
3. RESTRICTIONS ON TRANSFER
The face or reverse side of each certificate representing shares shall
bear a conspicuous notation of any restriction imposed by the Corporation
upon the transfer of such shares.
4. LOST, DESTROYED, OR STOLEN CERTIFICATES
Where the owner claims that his certificate for shares has been lost,
destroyed, or wrongfully taken, a new certificate shall be issued in
place thereof if the owner:
a. So requests before the Corporation has notice that such shares have
been acquired by a bona fide purchaser.
b. Files with the Corporation a sufficient indemnity bond.
c. Satisfies such other reasonable requirements as may be prescribed by
or under the authority of the Board of Directors.
5. TRANSFER OF SHARES
Prior to due presentment of a certificate for shares for registration of
transfer, the Corporation may treat the registered owner of such shares
as the person exclusively entitled to vote, to receive notifications, and
otherwise to have and exercise all the rights and powers of an owner.
Where a certificate for shares is presented to the Corporation with a
request to register for transfer, the Corporation shall not be liable to
the owner or any other person suffering loss as a result of such
registration of transfer if:
a. There were on or with the certificate the necessary endorsements
b. The Corporation had no duty to inquire into adverse claims or has
discharged any such duty.
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The Corporation may require reasonable assurance that said endorsements
are genuine and effective and compliance with such other regulations as
may be prescribed by or under the authority of the Board of Directors.
6. CONSIDERATION FOR SHARES
The Board of Directors may authorize shares to be issued for
consideration consisting of any tangible or intangible property or
benefit to the Corporation, including cash, promissory notes, services
performed, contracts for services to be performed, or other securities of
the Corporation. Before the Corporation issues shares, the Board of
Directors shall determine that the consideration received or to be
received for the shares to be issued is adequate. The determination of
the Board of Directors is conclusive insofar as the adequacy of
consideration for the issuance of shares relates to whether the shares
are validly issued, fully paid, and nonassessable. The Corporation may
place in escrow shares issued in whole or in part for a contract for
future services or benefits, a promissory note, or otherwise for property
to be issued in the future, or make other arrangements to restrict the
transfer of the shares, and may credit distributions in respect of the
shares against their purchase price, until the services are performed,
the benefits or property are received, or the promissory note is paid.
If the services are not performed, the benefits or property are not
received or the promissory note is not paid, the Corporation may cancel,
in whole or in part, the shares escrowed or restricted and the
distributions credited.
7. OTHER RULES
The Board of Directors shall have the power and authority to make all
such further rules and regulations not inconsistent with the statutes of
the State of Wisconsin as it may deem expedient concerning the issue,
transfer, and registration of certificates representing shares of the
Corporation, including the appointment and designation of Transfer Agents
and Registrars.
ARTICLE VI. INDEMNIFICATION OF OFFICERS AND DIRECTORS
1. MANDATORY INDEMNIFICATION
a. In all cases other than those set forth in Section 1b hereof,
subject to the conditions and limitations set forth hereinafter in
this Article VI, the Corporation shall indemnify and hold harmless
any person who is or was a party, or is threatened to be made a
party, to any Action (see Section 16 of this Article VI for
definitions of capitalized terms used herein) by reason of his or
her status as an Executive, and/or as to acts performed in the
course of such Executive's duties to the Corporation and/or an
Affiliate, against
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Liabilities and reasonable Expenses incurred by or on behalf of an
Executive in connection with any Action, including, without
limitation, in connection with the investigation, defense,
settlement, or appeal of any Action; provided, pursuant to
Section 3 of this Article VI, that it is not determined by the
Authority or by a court, that the Executive engaged in misconduct
which constitutes a Breach of Duty.
b. To the extent an Executive has been successful on the merits or
otherwise in connection with any Action, including, without
limitation, the settlement, dismissal, abandonment, or withdrawal of
any such Action where the Executive does not pay, incur, or assume
any material Liabilities, or in connection with any claim, issue or
matter therein, he or she shall be indemnified by the Corporation
against reasonable Expenses incurred by or on behalf of him or her
in connection therewith. The Corporation shall pay such Expenses to
the Executive (net of all Expenses, if any, previously advanced to
the Executive pursuant to Section 2 of this Article VI), or to such
other person or entity as the Executive may designate in writing to
the Corporation, within ten days after the receipt of the
Executive's written request therefor, without regard to the
provisions of Section 3 of this Article VI. In the event the
Corporation refuses to pay such requested Expenses, the Executive
may petition a court to order the Corporation to make such payment
pursuant to Section 4 of this Article VI.
c. Notwithstanding any other provision contained in this Article VI to
the contrary, the Corporation shall not:
(1) Indemnify, contribute or advance Expenses to an Executive with
respect to any Action initiated or brought voluntarily by the
Executive and not by way of defense, except with respect to
Actions:
(a) Brought to establish or enforce a right to indemnification,
contribution and/or an advance of Expenses under Section 4
of this Article VI, under the Statute as it may then be in
effect or under any other statute or law or otherwise as
required;
(b) Initiated or brought voluntarily by an Executive to the
extent such Executive is successful on the merits or
otherwise in connection with such an Action in accordance
with and pursuant to Section 1b of this Article VI; or
(c) As to which the Board determines it to be appropriate.
(2) Indemnify the Executive under this Article VI for any amounts
paid in settlement of any Action effected without the
Corporation's written consent.
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The Corporation shall not settle in any manner which would impose
any Liabilities or other type of limitation on the Executive without
the Executive's written consent. Neither the Corporation nor the
Executive shall unreasonably withhold their consent to any proposed
settlement.
d. An Executive's conduct with respect to an employee benefit plan
sponsored by or otherwise associated with the Corporation and/or an
Affiliate for a purpose he or she reasonably believes to be in the
interests of the participants in and beneficiaries of such plan is
conduct that does not constitute a breach or failure to perform his
or her duties to the Corporation or an Affiliate, as the case may
be.
2. ADVANCE FOR EXPENSES
a. The Corporation shall pay to an Executive, or to such other person
or entity as the Executive may designate in writing to the
Corporation, his or her reasonable Expenses incurred by or on behalf
of such Executive in connection with any Action, claim, issue, or
matter associated with any such Action, in advance of the final
disposition or conclusion of any such Action (or claim, issue, or
matter associated with any such Action), within ten days after the
receipt of the Executive's written request therefor; provided, the
following conditions are satisfied:
(1) The Executive has first requested an advance of such Expenses
in writing (and delivered a copy of such request to the
Corporation) from the insurance carrier(s), if any, to whom a
claim has been reported under an applicable insurance policy
purchased by the Corporation and each such insurance carrier,
if any, has declined to make such an advance;
(2) The Executive furnishes to the Corporation an executed written
certificate affirming his or her good faith belief that he or
she has not engaged in misconduct which constitutes a Breach of
Duty; and
(3) The Executive furnishes to the Corporation an executed written
agreement to repay any advances made under this Section 2 if it
is ultimately determined that he or she is not entitled to be
indemnified by the Corporation for such Expenses pursuant to
this Article VI.
b. If the Corporation makes an advance of Expenses to an Executive
pursuant to this Section 2, the Corporation shall be subrogated to
every right of recovery the Executive may have against any insurance
carrier from whom the Corporation has purchased insurance for such
purpose.
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3. DETERMINATION OF RIGHT TO INDEMNIFICATION
a. Except as otherwise set forth in this Section 3 or in Section 1c of
this Article VI, any indemnification to be provided to an Executive
by the Corporation under Section 1a of this Article VI upon the
final disposition or conclusion of any Action, claim, issue, or
matter associated with any such Action, unless otherwise ordered by
a court, shall be paid by the Corporation to the Executive (net of
all Expenses, if any, previously advanced to the Executive pursuant
to Section 2 of this Article VI), or to such other person or entity
as the Executive may designate in writing to the Corporation, within
60 days after the receipt of the Executive's written request
therefor. Such request shall include an accounting of all amounts
for which indemnification is being sought. No further corporate
authorization for such payment shall be required other than this
Section 3.
b. Notwithstanding the foregoing, the payment of such requested
indemnifiable amounts pursuant to Section 1a of this Article VI may
be denied by the Corporation if:
(1) The Board by a majority vote thereof determines that the
Executive has engaged in misconduct which constitutes a Breach
of Duty; or
(2) A majority of the directors of the Corporation are a party in
interest to such Action.
c. In either event of nonpayment pursuant to Section 3b of this
Article VI, the Board shall immediately authorize and direct, by
resolution, that an independent determination be made as to whether
the Executive has engaged in misconduct which constitutes a Breach
of Duty and, therefore, whether indemnification of the Executive is
proper pursuant to this Article VI.
d. Such independent determination shall be made, at the option of the
Executive(s) seeking indemnification, by:
(1) A panel of three arbitrators (selected as set forth below in
Section 3f of this Article VI from the panels of arbitrators of
the American Arbitration Association) in Milwaukee, Wisconsin,
in accordance with the Commercial Arbitration Rules then
prevailing of the American Arbitration Association;
(2) An independent legal counsel mutually selected by the
Executive(s) seeking indemnification and the Board by a
majority vote of a quorum thereof consisting of directors who
were not parties in interest to such Action (or, if such
quorum is not obtainable, by the majority vote of the entire
Board); or
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(3) A court in accordance with Section 4 of this Article VI.
e. In any such determination there shall exist a rebuttable presumption
that the Executive has not engaged in misconduct which constitutes a
Breach of Duty and is, therefore, entitled to indemnification
hereunder. The burden of rebutting such presumption by clear and
convincing evidence shall be on the Corporation.
f. If a panel of arbitrators is to be employed hereunder, one of such
arbitrators shall be selected by the Board by a majority vote of a
quorum thereof consisting of directors who were not parties in
interest to such Action or, if such quorum is not obtainable, by an
independent legal counsel chosen by the majority vote of the entire
Board, the second by the Executive(s) seeking indemnification, and
the third by the previous two arbitrators.
g. The Authority shall make its independent determination hereunder
within 60 days of being selected and shall simultaneously submit a
written opinion of its conclusions to both the Corporation and the
Executive.
h. If the Authority determines that an Executive is entitled to be
indemnified for any amounts pursuant to this Article VI, the
Corporation shall pay such amounts to the Executive (net of all
Expenses, if any, previously advanced to the Executive pursuant to
Section 2 of this Article VI), including interest thereon as
provided in Section 6c of this Article VI, or such other person or
entity as the Executive may designate in writing to the Corporation,
within ten days of receipt of such opinion.
i. Except with respect to any judicial determination pursuant to
Section 4 of this Article VI, the Expenses associated with the
indemnification process set forth in this Section 3 of this Article
VI, including, without limitation, the Expenses of the Authority
selected hereunder, shall be paid by the Corporation.
4. COURT-ORDERED INDEMNIFICATION AND ADVANCE FOR EXPENSES
a. An Executive may, either before or within two years after a
determination, if any, has been made by the Authority, petition the
court before which such Action was brought or any other court of
competent jurisdiction to independently determine whether or not he
or she has engaged in misconduct which constitutes a Breach of Duty
and is, therefore, entitled to indemnification under the provisions
of this Article VI. Such court shall thereupon have the exclusive
authority to make such determination unless and until such court
dismisses or otherwise terminates such proceeding without having
made such determination. An Executive may petition a court under
this Section 4 either to seek an initial determination by the court
as
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authorized by Section 3d of this Article VI or to seek review by
the court of a previous adverse determination by the Authority.
b. The court shall make its independent determination irrespective of
any prior determination made by the Authority; provided, however,
that there shall exist a rebuttable presumption that the Executive
has not engaged in misconduct which constitutes a Breach of Duty and
is, therefore, entitled to indemnification hereunder. The burden of
rebutting such presumption by clear and convincing evidence shall be
on the Corporation.
c. In the event the court determines that an Executive has engaged in
misconduct which constitutes a Breach of Duty, it may nonetheless
order indemnification to be paid by the Corporation if it determines
that the Executive is fairly and reasonably entitled to
indemnification in view of all of the circumstances of such Action.
d. In the event the Corporation does not:
(1) Advance Expenses to the Executive within ten days of such
Executive's compliance with Section 2 of this Article VI; or
(2) Indemnify an Executive with respect to requested Expenses under
Section 1b of this Article VI within ten days of such
Executive's written request therefore, the Executive may
petition the court before which such Action was brought, if
any, or any other court of competent jurisdiction to order the
Corporation to pay such reasonable Expenses immediately.
Such court, after giving any notice it considers necessary, shall
order the Corporation to pay such Expenses if it determines that the
Executive has complied with the applicable provisions of Section 2
of this Article VI or Section 1b of this Article VI, as the case may
be.
e. If the court determines pursuant to this Section 4 of this Article
VI that the Executive is entitled to be indemnified for any
Liabilities and/or Expenses, or to the advance of Expenses, unless
otherwise ordered by such court, the Corporation shall pay such
Liabilities and/or Expenses to the Executive (net of all Expenses,
if any, previously advanced to the Executive pursuant to Section 2
of this Article VI), including interest thereon as provided in
Section 6c of this Article VI, or to such other person or entity as
the Executive may designate in writing to the Corporation, within
ten days of the rendering of such determination.
f. An Executive shall pay all Expenses incurred by such Executive in
connection with the judicial determination provided in this
Section 4 of this
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Article VI, unless it shall ultimately be determined by the court
that he or she is entitled, in whole or in part, to be indemnified
by, or to receive an advance from, the Corporation as authorized by
this Article VI. All Expenses incurred by an Executive in connection
with any subsequent appeal of the judicial determination provided for
in this Section 4 of this Article VI shall be paid by the Executive
regardless of the disposition of such appeal.
5. TERMINATION OF AN ACTION IS NONCONCLUSIVE
The adverse termination of any Action against an Executive by judgment,
order settlement, conviction, or upon a plea of no contest or its
equivalent, shall not, of itself, create a presumption that the Executive
has engaged in misconduct which constitutes a Breach of Duty.
6. PARTIAL INDEMNIFICATION; REASONABLENESS; INTEREST
a. If it is determined by the Authority, or by a court, that an
Executive is entitled to indemnification as to some claims, issues,
or matters, but not as to other claims, issues, or matters, involved
in any Action, the Authority, or the court, shall authorize the
proration and payment by the Corporation of such Liabilities and/or
reasonable Expenses with respect to which indemnification is sought
by the Executive, among such claims, issues, or matters as the
Authority, or the court, shall deem appropriate in light of all of
the circumstances of such Action.
b. If it is determined by the Authority, or by a court, that certain
Expenses incurred by or on behalf of an Executive are for whatever
reason unreasonable in amount, the Authority, or the court, shall
nonetheless authorize indemnification to be paid by the Corporation
to the Executive for such Expenses as the Authority, or the court,
shall deem reasonable in light of all of the circumstances of such
Action.
c. Interest shall be paid by the Corporation to an Executive, to the
extent deemed appropriate by the Authority, or by a court, at a
reasonable interest rate, for amounts for which the Corporation
indemnifies or advances to the Executive.
7. INSURANCE; SUBROGATION
a. The Corporation may purchase and maintain insurance on behalf of any
person who is or was an Executive of the Corporation, and/or is or
was serving as an Executive of an Affiliate, against Liabilities
and/or Expenses asserted against him or her and/or incurred by or on
behalf of him or her in any such capacity, or arising out of his or
her status as such an Executive,
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whether or not the Corporation would have the power to indemnify him
or her against such Liabilities and/or Expenses under this Article VI
or under the Statute as it may then be in effect. Except as
expressly provided herein, the purchase and maintenance of such
insurance shall not in any way limit or affect the rights and
obligations of the Corporation and/or any Executive under this
Article VI. Such insurance may, but need not, be for the benefit of
all Executives of the Corporation and those serving as an Executive
of an Affiliate.
b. If an Executive shall receive payment from any insurance carrier or
from the plaintiff in any Action against such Executive in respect
of indemnified amounts after payments on account of all or part of
such indemnified amounts have been made by the Corporation pursuant
to this Article VI, such Executive shall promptly reimburse the
Corporation for the amount, if any, by which the sum of such payment
by such insurance carrier or such plaintiff and payments by the
Corporation to such Executive exceeds such indemnified amounts;
provided, however, that such portions, if any, of such insurance
proceeds that are required to be reimbursed to the insurance carrier
under the terms of its insurance policy, such as deductible,
retention, or co-insurance amounts, shall not be deemed to be
payments to such Executive hereunder.
c. Upon payment of indemnified amounts under this Article VI, the
Corporation shall be subrogated to such Executive's rights against
any insurance carrier in respect of such indemnified amounts; and
the Executive shall execute and deliver any and all instruments
and/or documents and perform any and all other acts or deeds which
the Corporation shall deem necessary or advisable to secure such
rights. The Executive shall do nothing to prejudice such rights of
recovery or subrogation.
8. WITNESS EXPENSES
The Corporation shall advance or reimburse any and all reasonable
Expenses incurred by or on behalf of an Executive in connection with his
or her appearance as a witness in any Action at a time when he or she has
not been formally named a defendant or respondent to such an Action,
within ten days after the receipt of an Executive's written request
therefore.
9. CONTRIBUTION
a. Subject to the limitations of this Section 9, if the indemnity
provided for in Section 1 of this Article VI is unavailable to an
Executive for any reason whatsoever, the Corporation, in lieu of
indemnifying the Executive, shall contribute to the amount incurred
by or on behalf of the Executive, whether
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for Liabilities and/or for reasonable Expenses in connection with
any Action in such proportion as deemed fair and reasonable by the
Authority, or by a court, in light of all of the circumstances of
any such Action, in order to reflect:
(1) The relative benefits received by the Corporation and the
Executive as a result of the event(s) and/or transaction(s)
giving cause to such Action; and/or
(2) The relative fault of the Corporation (and its other
Executives, employees, and/or agents) and the Executive
in connection with such event(s) and/or transaction(s).
b. The relative fault of the Corporation (and its other Executives,
employees, and/or agents), on the one hand, and of the Executive, on
the other hand, shall be determined by reference to, among other
things, the parties' relative intent, knowledge, access to
information, and opportunity to correct or prevent the circumstances
resulting in such Liabilities and/or Expenses. The Corporation
agrees that it would not be just and equitable if contribution
pursuant to this Section 9 were determined by pro rata allocation or
any other method of allocation which does not take account of the
foregoing equitable considerations.
c. An Executive shall not be entitled to contribution from the
Corporation under this Section 9 in the event it is determined by
the Authority, or by a court, that the Executive has engaged in
misconduct which constitutes a Breach of Duty.
d. The Corporation's payment of, and an Executive's right to,
contribution under this Section 9 shall be made and determined in
accordance with and pursuant to the provisions in Sections 3 and/or
4 of this Article VI relating to the Corporation's payment of, and
the Executive's right to, indemnification under this Article VI.
10. INDEMNIFICATION OF EMPLOYEES
Unless otherwise specifically set forth in this Article VI, the
Corporation shall indemnify and hold harmless any person who is or was a
party, or is threatened to be made a party to any Action by reason of his
or her status as, or the fact that he or she is or was an employee or
authorized agent or representative of the Corporation and/or an Affiliate
as to acts performed in the course and within the scope of such
employee's, agent's, or representative's duties to the Corporation and/or
an Affiliate, in accordance with and to the fullest extent permitted by
the Statute as it may then be in effect.
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11. SEVERABILITY
If any provision of this Article VI shall be deemed invalid or
inoperative, or if a court of competent jurisdiction determines that any
of the provisions of this Article VI contravene public policy, this
Article VI shall be construed so that the remaining provisions shall not
be affected, but shall remain in full force and effect, and any such
provisions which are invalid or inoperative or which contravene public
policy shall be deemed, without further Action or deed by or on behalf of
the Corporation, to be modified, amended, and/or limited, but only to the
extent necessary to render the same valid and enforceable, and the
Corporation shall indemnify an Executive as to Liabilities and reasonable
Expenses with respect to any Action to the full extent permitted by any
applicable provision of this Article VI that shall not have been
invalidated and to the full extent otherwise permitted by the Statute as
it may then be in effect.
12. NONEXCLUSIVITY OF ARTICLE VI
The right to indemnification, contribution, and advancement of Expenses
provided to an Executive by this Article VI shall not be deemed exclusive
of any other rights to indemnification, contribution, and/or advancement
of Expenses which any Executive or other employee or agent of the
Corporation and/or of an Affiliate may be entitled under any charter
provision, written agreement, resolution, vote of shareholders, or
disinterested directors of the Corporation or otherwise, including,
without limitation, under the Statute as it may then be in effect, both
as to acts in his or her official capacity as such Executive or other
employee or agent of the Corporation and/or of an Affiliate or as to acts
in any other capacity while holding such office or position, whether or
not the Corporation would have the power to indemnify, contribute, and/or
advance Expenses to the Executive under this Article VI or under the
Statute; provided that it is not determined that the Executive or other
employee or agent has engaged in misconduct which constitutes a Breach of
Duty.
13. NOTICE TO THE CORPORATION; DEFENSE OF ACTIONS
a. An Executive shall promptly notify the Corporation in writing upon
being served with or having actual knowledge of any citation,
summons, complaint, indictment, or any other similar document
relating to any Action which may result in a claim of
indemnification, contribution, or advancement of Expenses hereunder,
but the omission so to notify the Corporation will not relieve the
Corporation from any liability which it may have to the Executive
otherwise than under this Article VI unless the Corporation shall
have been irreparably prejudiced by such omission.
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b. With respect to any such Action as to which an Executive notifies
the Corporation of the commencement thereof:
(1) The Corporation shall be entitled to participate therein at its
own expense; and
(2) Except as otherwise provided below, to the extent that it may
wish, the Corporation (or any other indemnifying party,
including any insurance carrier, similarly notified by the
Corporation or the Executive) shall be entitled to assume the
defense thereof, with counsel selected by the Corporation (or
such other indemnifying party) and reasonably satisfactory to
the Executive.
c. After notice from the Corporation (or such other indemnifying party)
to the Executive of its election to assume the defense of an Action,
the Corporation shall not be liable to the Executive under this
Article VI for any Expenses subsequently incurred by the Executive
in connection with the defense thereof other than reasonable costs
of investigation or as otherwise provided below. The Executive
shall have the right to employ his or her own counsel in such Action
but the Expenses of such counsel incurred after notice from the
Corporation (or such other indemnifying party) of its assumption of
the defense thereof shall be at the expense of the Executive unless:
(1) The employment of counsel by the Executive has been authorized
by the Corporation;
(2) The Executive shall have reasonably concluded that there may be
a conflict of interest between the Corporation (or such other
indemnifying party) and the Executive in the conduct of the
defense of such Action; or
(3) The Corporation (or such other indemnifying party) shall not
in fact have employed counsel to assume the defense of such
Action, in each of which cases the Expenses of counsel shall
be at the expense of the Corporation.
The Corporation shall not be entitled to assume the defense of any
Derivative Action or any Action as to which the Executive shall have
made the conclusion provided for in clause (2) above.
14. CONTINUITY OF RIGHTS AND OBLIGATIONS
The terms and provisions of this Article VI shall continue as to an
Executive subsequent to the Termination Date and such terms and
provisions shall inure to
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the benefit of the heirs, estate, executors, and administrators of such
Executive and the successors and assigns of the Corporation, including,
without limitation, any successor to the Corporation by way of merger,
consolidation, and/or sale or disposition of all or substantially all of
the assets or capital stock of the Corporation. Except as provided
herein, all rights and obligations of the Corporation and the Executive
hereunder shall continue in full force and effect despite the subsequent
amendment or modification of the Corporation's Articles of Incorporation,
as such are in effect on the date hereof, and such rights and obligations
shall not be affected by any such amendment or modification, any
resolution of directors or shareholders of the Corporation, or by any
other corporate action which conflicts with or purports to amend, modify,
limit, or eliminate any of the rights or obligations of the Corporation
and/or of the Executive hereunder.
15. AMENDMENT
This Article VI may only be altered, amended, or repealed by the
affirmative vote of a majority of the shareholders of the Corporation so
entitled to vote; provided, however, that the Board may alter or amend
this Article VI without such shareholder approval if any such alteration
or amendment:
a. Is made in order to conform to any amendment or revision of the
Wisconsin Business Corporation Law, including, without limitation,
the Statute, which:
(1) Expands or permits the expansion of an Executive's right to
indemnification thereunder;
(2) Limits or eliminates, or permits the limitation or elimination,
of liability of the Executives; or
(3) Is otherwise beneficial to the Executives; or
b. in the sole judgment and discretion of the Board, does not
materially adversely affect the rights and protections of the
shareholders of the Corporation.
Any repeal, modification, or amendment of this Article VI shall not
adversely affect any rights or protections of an Executive existing under
this Article VI immediately prior to the time of such repeal,
modification, or amendment and any such repeal, modification, or
amendment shall have a prospective effect only.
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16. CERTAIN DEFINITIONS
The following terms as used in this Article VI shall be defined as
follows:
a. "Action(s)" shall include, without limitation, any threatened,
pending, or completed action, claim, litigation, suit, or
proceeding, whether civil, criminal, administrative, arbitrative, or
investigative, whether predicated on foreign, federal, state, or
local law, whether brought under and/or predicated upon the
Securities Act of 1933, as amended, and/or the Securities Exchange
Act of 1934, as amended, and/or their respective state counterparts,
and/or any rule or regulation promulgated thereunder, whether a
Derivative Action, and whether formal or informal.
b. "Affiliate" shall include, without limitation, any corporation,
partnership, joint venture, employee benefit plan, trust, or other
similar enterprise that directly or indirectly through one or more
intermediaries, controls or is controlled by, or is under common
control with, the Corporation.
c. "Authority" shall mean the panel of arbitrators or independent legal
counsel selected under Section 3 of this Article VI.
d. "Board" shall mean the Board of Directors of the Corporation.
e. "Breach of Duty" shall mean the Executive breached or failed to
perform his or her duties to the Corporation or an Affiliate, as the
case may be, and the Executive's breach of or failure to perform
those duties constituted:
(1) A willful failure to deal fairly with the Corporation (or an
Affiliate) or its shareholders in connection with a matter in
which the Executive has a material conflict of interest;
(2) A violation of the criminal law, unless the Executive:
(a) Had reasonable cause to believe his or her conduct was
lawful; or
(b) Had no reasonable cause to believe his or her conduct was
unlawful;
(3) A transaction from which the Executive derived an improper
personal profit (unless such profit is determined to be
immaterial in light of all the circumstances of the Action); or
(4) Willful misconduct.
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f. "Derivative Action" shall mean any Action brought by or in the right
of the Corporation and/or an Affiliate.
g. "Executive(s)" shall mean any individual who is, was, or has agreed
to become a director and/or officer of the Corporation and/or an
Affiliate.
h. "Expenses" shall include, without limitation, all expenses, fees,
costs, charges, attorneys' fees and disbursements, other
out-of-pocket costs, reasonable compensation for time spent by the
Executive in connection with the Action for which he or she is not
otherwise compensated by the Corporation, any Affiliate, any third
party or other entity, and any and all other direct and indirect
costs of any type or nature whatsoever.
I. "Liabilities" shall include, without limitation, judgments, amounts
incurred in settlement, fines, penalties, and, with respect to any
employee benefit plan, any excise tax or penalty incurred in
connection therewith, and any and all other liabilities of every
type or nature whatsoever.
j. "Statute" shall mean Wisconsin Business Corporation Law Sections
180.0850-180.0859 (or any successor provisions).
k. "Termination Date" shall mean the date an Executive ceases, for
whatever reason, to serve in an employment relationship with the
Company and/or any Affiliate.
ARTICLE VII. SEAL
BOARD OF DIRECTORS
The Board of Directors shall provide a corporate seal which shall be circular
in form and shall have inscribed thereon the words "WISCONSIN PUBLIC SERVICE
CORPORATION, GREEN BAY, WIS., CORPORATE SEAL." The continued use for any
purpose of any former corporate seal or facsimile thereof shall have the same
effect as the use of the corporate seal or facsimile thereof in the form
provided by the preceding sentence.
ARTICLE VIII. AMENDMENTS
1. The Board of Directors shall have authority to adopt, amend, or repeal
the By-laws of this Corporation upon affirmative vote of a majority of
the total number of directors at a meeting of the Board, the notice of
which shall have included notice of the proposed amendment; but the Board
of Directors shall have no
30
<PAGE>
power to amend any By-law adopted or amended by the shareholders after
May 23, 1972, or to reinstate any By-law repealed by the shareholders
after May 23, 1972, unless the shareholders shall hereafter confer such
authority upon the Board of Directors.
2. The shareholders shall have power to adopt, amend, or repeal any of the
By-laws of the Corporation, at any regular or special meeting of the
shareholders, in accordance with the provisions of Article II of these
By-laws. There shall be included in the notice of such regular or
special meeting a statement of the nature of any amendment that is
proposed for the consideration of the shareholders by the holders of at
least 5% of the voting stock of the Corporation in a writing delivered to
the Secretary of the Corporation not less than 90 days prior to the date
of such meeting or by the Board of Directors.
31
<PAGE>
EXHIBIT 10-1
ASSET PURCHASE AGREEMENT
BY AND AMONG
PP&L, INC.,
PP&L RESOURCES, INC.,
LADY JANE COLLIERIES, INC.
and
SUNBURY HOLDINGS, LLC
Dated as of May 1, 1999
<PAGE>
LIST OF SCHEDULES AND DISCLOSURE SCHEDULES
------------------------------------------
SCHEDULES
Schedule I Form of Assignment and Assumption Agreement
Schedule II Form of Bill of Sale
Schedule III Form of Control House Lease
Schedule IV Form of Easement Agreement
Schedule V Form of FIRPTA Affidavit
Schedule VI Form of Interchange Scheduling Agreement
Schedule VII Form of Interconnection Agreement
Schedule VIII Form of Special Warranty Deeds
Schedule IX Form of Transition Power Purchase Agreement
DISCLOSURE SCHEDULES
1.1(80) Permitted Encumbrances
1.1(118) Transferable Permits
2.1(b) Real Property at Buck Run and Forrestville
2.1(d) Tangible Personal Property
2.1(e) Sellers' Agreements
2.1(g) Emission Allowances
2.1(i) Location of Rail Spur
2.1(o) Intellectual Property
2.2(a) Description of Transmission Assets not included in Conveyance
4.3(a) Conflicts; Violations
4.3(b) Sellers' Required Regulatory Approvals
4.4 Insurance
4.5 Exceptions to Title
4.6 Environmental Matters
4.7 Labor Matters
4.8 Benefit Plans
4.9 Real Property
4.l0 Notices of Condemnation
4.11(a) Other Material Contracts
4.11(b) Non-Binding and Non-Assignable Contracts
4.11(c) Defaults under the Contracts
4.12 Legal Proceedings
4.13(a) Violations
4.13(b) Material Permits (other than Transferable Permits)
4.14 Taxes
4.16 Intellectual Property Exceptions
i
<PAGE>
4.17 Compliance with Laws
4.18 Sufficiency of Purchased Assets
4.24 Information
5.3(a) Consents and Approvals; No Violation
5.3(b) Buyer's Required Regulatory Approvals
6.1 Permitted Activities Prior to Closing
6.10(d) IBEW Collective Bargaining Agreement
6.10(e) Non-Union Employees
6.13 Post-Closing Services
7.1(n) Buyer's Closing Condition: Transfer of (or Buyer's Acquisition of
Satisfactory Substitutes for) the Following Transferable Permits
7.1(o) Buyer's Closing Condition: Assignment of the Following Sellers'
Agreements and Intellectual Property
7.1(p) Buyer's Closing Condition: Consents and Approvals
7.2(d) Sellers' Closing Condition: Consents and Approvals
ii
<PAGE>
TABLE OF CONTENTS
-----------------
ARTICLE I
DEFINITIONS
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Certain Interpretive Matters. . . . . . . . . . . . . . . . . 14
ARTICLE II
PURCHASE AND SALE
2.1 Transfer of Assets. . . . . . . . . . . . . . . . . . . . . . 15
2.2 Excluded Assets . . . . . . . . . . . . . . . . . . . . . . . 17
2.3 Assumed Liabilities . . . . . . . . . . . . . . . . . . . . . 19
2.4 Excluded Liabilities. . . . . . . . . . . . . . . . . . . . . 20
2.5 Control of Litigation . . . . . . . . . . . . . . . . . . . . 23
ARTICLE III
THE CLOSING
3.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.2 Payment of Purchase Price . . . . . . . . . . . . . . . . . . 23
3.3 Adjustment to Purchase Price. . . . . . . . . . . . . . . . . 23
3.4 Allocation of Purchase Price. . . . . . . . . . . . . . . . . 25
3.5 Prorations. . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.6 Deliveries by Sellers . . . . . . . . . . . . . . . . . . . . 26
3.7 Deliveries by Buyer . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLERS
4.1 Incorporation; Qualification. . . . . . . . . . . . . . . . . 28
4.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.3 Consents and Approvals; No Violation. . . . . . . . . . . . . 29
4.4 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.5 Title and Related Matters . . . . . . . . . . . . . . . . . . 30
4.6 Environmental Matters . . . . . . . . . . . . . . . . . . . . 30
4.7 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . 31
4.8 Benefit Plans; ERISA . . . . . . . . . . . . . . . . . . . . 31
4.9 Real Property . . . . . . . . . . . . . . . . . . . . . . . . 31
4.10 Condemnation. . . . . . . . . . . . . . . . . . . . . . . . . 31
4.11 Contracts and Leases. . . . . . . . . . . . . . . . . . . . . 32
iii
<PAGE>
4.12 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 32
4.13 Permits . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
4.14 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.15 Year 2000 . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.16 Intellectual Property . . . . . . . . . . . . . . . . . . . . 33
4.17 Compliance with Laws. . . . . . . . . . . . . . . . . . . . . 34
4.18 Sufficiency of Purchased Assets . . . . . . . . . . . . . . . 34
4.19 Conveyance of Real Property . . . . . . . . . . . . . . . . . 34
4.20 Emission Allowances . . . . . . . . . . . . . . . . . . . . . 34
4.21 CTGs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.22 Copies. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.23 Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.24 Information . . . . . . . . . . . . . . . . . . . . . . . . . 35
4.25 Disclaimers Regarding Purchased Assets. . . . . . . . . . . . 35
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
5.1 Organization. . . . . . . . . . . . . . . . . . . . . . . . . 36
5.2 Authority . . . . . . . . . . . . . . . . . . . . . . . . . . 36
5.3 Consents and Approvals; No Violation. . . . . . . . . . . . . 37
5.4 Availability of Funds . . . . . . . . . . . . . . . . . . . . 37
5.5 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 38
5.6 Qualified Buyer . . . . . . . . . . . . . . . . . . . . . . . 38
5.7 WARN Act. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
5.8 Equity Contribution Agreement . . . . . . . . . . . . . . . . 38
ARTICLE VI
COVENANTS OF THE PARTIES
6.1 Conduct of Business Relating to the Purchased Assets. . . . . 38
6.2 Access to Information . . . . . . . . . . . . . . . . . . . . 40
6.3 Public Statements . . . . . . . . . . . . . . . . . . . . . . 43
6.4 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . 43
6.5 Further Assurances. . . . . . . . . . . . . . . . . . . . . . 43
6.6 Consents and Approvals. . . . . . . . . . . . . . . . . . . . 44
6.7 Fees and Commissions. . . . . . . . . . . . . . . . . . . . . 45
6.8 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . 46
6.9 Advice of Changes . . . . . . . . . . . . . . . . . . . . . . 47
6.10 Employees . . . . . . . . . . . . . . . . . . . . . . . . . . 47
6.11 Risk of Loss. . . . . . . . . . . . . . . . . . . . . . . . . 51
6.12 Real Property Title; Title Insurance; Surveys . . . . . . . . 51
6.13 Post-Closing Services.. . . . . . . . . . . . . . . . . . . . 52
6.14 Easement Agreement. . . . . . . . . . . . . . . . . . . . . . 52
6.15 Other Covenants of Buyer. . . . . . . . . . . . . . . . . . . 52
iv
<PAGE>
ARTICLE VII
CONDITIONS
7.1 Conditions to Obligations of Buyer. . . . . . . . . . . . . . 53
7.2 Conditions to Obligations of Sellers. . . . . . . . . . . . . 56
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification . . . . . . . . . . . . . . . . . . . . . . . 58
8.2 Defense of Claims . . . . . . . . . . . . . . . . . . . . . . 60
ARTICLE IX
TERMINATION
9.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . 61
9.2 Procedure and Effect of No-Default Termination. . . . . . . . 63
ARTICLE X
MISCELLANEOUS PROVISIONS
10.1 Amendment and Modification. . . . . . . . . . . . . . . . . . 63
10.2 Waiver of Compliance; Consents. . . . . . . . . . . . . . . . 63
10.3 No Survival . . . . . . . . . . . . . . . . . . . . . . . . . 63
10.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
10.5 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . 65
10.6 Transfer of Certain Purchased Assets to Affiliates of PP&L. . 65
10.7 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 65
10.8 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 66
10.9 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . 66
10.10 Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . 66
10.11 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 66
10.12 Bulk Sales Laws . . . . . . . . . . . . . . . . . . . . . . . 66
10.13 U.S. Dollars. . . . . . . . . . . . . . . . . . . . . . . . . 67
v
<PAGE>
ASSET PURCHASE AGREEMENT
------------------------
ASSET PURCHASE AGREEMENT, dated as of May 1, 1999, by and among PP&L,
Inc., a Pennsylvania corporation ("PP&L"), PP&L Resources, Inc., a
----
Pennsylvania corporation ("Resources"), Lady Jane Collieries, Inc., a
---------
Pennsylvania corporation ("LJC" and together with PP&L and Resources,
---
"Sellers"), and Sunbury Holdings, LLC, a Delaware limited liability company
-------
("Buyer"). PP&L, Resources, LJC and Buyer may be referred to individually as
a "Party," and collectively as the "Parties."
W I T N E S S E T H
- - - - - - - - - -
WHEREAS, PP&L, a wholly-owned subsidiary of Resources, owns the Sunbury
Steam Electric Station ("Sunbury SES"), a four-unit coal-fired generating
-----------
station, including two black start diesel generating sets, and two oil-fired
combustion turbine generators ("CTGs," and together with Sunbury SES, "Sunbury
----- -------
Station"), located in Shamokin Dam, Pennsylvania, and certain facilities and
- -------
other assets associated therewith and ancillary thereto; and
WHEREAS, LJC, an indirectly wholly-owned subsidiary of Resources, owns a
fuel processing facility ("Lady Jane") located near Penfield, Pennsylvania;
---------
and
WHEREAS, Buyer, WPS Resources Capital Corporation, a Wisconsin
corporation ("WPSR Capital"), WPS Power Development, Inc., a Wisconsin
------------
corporation ("PDI") and a wholly-owned subsidiary of WPSR Capital, and Sellers
---
have entered into that certain Equity Contribution Agreement, dated as of the
date hereof (the "Equity Contribution Agreement"), pursuant to which PDI has
-----------------------------
agreed to make certain capital contributions into Buyer on or prior to the
Closing Date (as defined in Section 3.1 below) and WPSR Capital has agreed to
unconditionally guarantee the performance by Buyer of all of Buyer's
obligations under this Agreement due to be performed by Buyer at or prior to
the Closing and any Post-Closing Adjustments (as defined in Section 3.3(c)
below) thereafter; and
WHEREAS, Buyer desires to purchase and assume, or cause to be purchased
and assumed, and Sellers desire to sell and assign, or cause to be sold and
assigned, the Purchased Assets (as defined in Section 2.1 below) and certain
associated liabilities, upon the terms and conditions hereinafter set forth in
this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements hereinafter set forth, and
intending to be legally bound hereby, the Parties agree as follows:
1
<PAGE>
ARTICLE I
DEFINITIONS
-----------
1.1 Definitions. As used in this Agreement, the following terms
-----------
have the meanings specified in this Section 1.1.
(1) "Affiliate" has the meaning set forth in Rule 12b-2 of
---------
the General Rules and Regulations under the Exchange Act.
(2) "Additional Agreements" means the Interconnection
---------------------
Agreement, the Easement Agreement, the Equity Contribution Agreement,
the Transition Power Purchase Agreement, the Securities Account
Control Agreement, the Generation Support Services Agreement, the
Control House Lease, the Transition Services Agreement, the
Interchange Scheduling Agreement, the Assignment and Assumption
Agreement, the Bill of Sale and the Special Warranty Deeds.
(3) "Agreement" means this Asset Purchase Agreement, as
---------
amended or supplemented, together with the Schedules hereto.
(4) "Assignment and Assumption Agreement" means the
-----------------------------------
Assignment and Assumption Agreement between Sellers and Buyer,
substantially in the form of Schedule I hereto, pursuant to which
Sellers shall assign the Sellers' Agreements, certain intangible
assets and other Purchased Assets to Buyer as required in this
Agreement and whereby Buyer shall assume the Assumed Liabilities.
(5) "Assumed Liabilities" has the meaning set forth in
-------------------
Section 2.3.
(6) "Benefit Plans" has the meaning set forth in Section
-------------
4.8.
(7) "Bill of Sale" means the Bill of Sale, substantially in
------------
the form of Schedule II hereto, to be delivered at the Closing, with
respect to the Tangible Personal Property included in the Purchased
Assets to be transferred to Buyer at the Closing.
(8) "Buck Run" means the 67-acre site located near the
--------
village of Buck Run, Schuylkill County, Pennsylvania described in
Schedule 2.1(b).
(9) "Business Day" shall mean any day other than Saturday,
------------
Sunday and any day which is a day on which banking institutions in
the Commonwealth of Pennsylvania are authorized or required by law or
other governmental action to close.
(10) "Buyer Material Adverse Effect" has the meaning set
-----------------------------
forth in Section 5.3(a).
2
<PAGE>
(11) "Buyer's Benefit Plans" has the meaning set forth in
---------------------
Section 6.10(e)(iii).
(12) "Buyer's Indemnitee" has the meaning set forth in
------------------
Section 8.1(b).
(13) "Buyer's Pension Plan" has the meaning set forth in
--------------------
Section 6.10(g).
(14) "Buyer's Required Regulatory Approvals" has the meaning
-------------------------------------
set forth in Section 5.3(b).
(15) "Capital Expenditures" has the meaning set forth in
--------------------
Section 3.3(a)(iii).
(16) "CERCLA" means the Federal Comprehensive Environmental
------
Response, Compensation, and Liability Act of 1980, as amended.
(17) "Chester Engineers Letter" means the letter, dated May
------------------------
1, 1999, from Chester Engineers to Buyer regarding the Project Half
Moon Phase II Report referred to in Section 1.1(36) hereof.
(18) "Closing" has the meaning set forth in Section 3.1.
-------
(19) "Closing Adjustment" has the meaning set forth in
------------------
Section 3.3(b).
(20) "Closing Date" has the meaning set forth in Section
------------
3.1.
(21) "COBRA" means the Consolidated Omnibus Budget
-----
Reconciliation Act of 1985, as amended.
(22) "Code" means the Internal Revenue Code of 1986, as
----
amended.
(23) "Commercially Reasonable Efforts" means efforts which
-------------------------------
are reasonably within the contemplation of the Parties at the time of
executing this Agreement and which do not require the performing
Party to expend any funds other than expenditures which are customary
and reasonable in transactions of the kind and nature contemplated by
this Agreement in order for the performing Party to satisfy its
obligations hereunder.
(24) "Computer Systems" has the meaning set forth in Section
----------------
4.15.
(25) "Confidentiality Agreement" means the Confidentiality
-------------------------
Agreement, dated November 13, 1998, by and between PP&L and PDI.
(26) "Control House Lease" means the Lease between Buyer and
-------------------
PP&L in the form of Schedule III hereto whereby PP&L, or an Affiliate
of PP&L, will lease from Buyer certain portions of the Switchyard
Control House (as defined therein).
3
<PAGE>
(27) "Direct Claim" has the meaning set forth in Section
------------
8.2(c).
(28) "Easements" means, with respect to the Purchased
---------
Assets, the easements and access rights to be granted by Buyer to LJC
and PP&L, or an Affiliate of PP&L, pursuant to the Easement
Agreement, and the easements and access rights reserved by LJC, PP&L,
or an Affiliate of PP&L, in a Special Warranty Deed, including,
without limitation, easements authorizing access, use, maintenance,
construction, repair, replacement and other activities by LJC and
PP&L, or an Affiliate of PP&L, as further described in the Easement
Agreement and/or a Special Warranty Deed.
(29) "Easement Agreement" means the Easement Agreement
------------------
between Buyer, LJC and PP&L, or an Affiliate of PP&L, in the form of
Schedule IV hereto, whereby Buyer will provide LJC, PP&L, or an
Affiliate of PP&L, with Easements with respect to certain of the
Purchased Assets transferred to Buyer and whereby LJC and PP&L, or an
Affiliate of PP&L, will provide Buyer with certain easements and
access rights with respect to certain assets owned by LJC and PP&L,
or an Affiliate of PP&L.
(30) "Emission Allowance" means authorization by any
------------------
Governmental Authority with jurisdiction over Sunbury Station to emit
a specified amount of nitrogen oxide ("NOx") and sulfur dioxide
---
("SO2"), from a specified source during or after a specified time
---
frame. Emission Allowances for purposes of this Agreement shall
include all allowances allocated to any Sunbury Station assets by any
Governmental Authority whether allocated before, on or after the
Closing Date and which are vintage 1999 or later.
(31) "Emission Reduction Credit" means a permanent,
-------------------------
enforceable, quantifiable and surplus emissions reduction which can
be considered as a reduction for the purpose of offsetting emission
increases, pursuant to Pa. Code Ch. 127, including, without
limitation, NOx and volatile organic compound Emission Reduction
Credits.
(32) "Encumbrances" means any mortgages, pledges, liens,
------------
claims, security interests, agreements, easements, restrictions,
defects of title or encumbrances of any kind.
(33) "Environmental Condition" means the presence or Release
-----------------------
to the environment, whether at the Sites or at an off-Sites location,
of Hazardous Substances, including any migration of those Hazardous
Substances through air, soil or groundwater to or from the Sites or
any off-Sites location regardless of when such presence or Release
occurred or is discovered.
(34) "Environmental Laws" means all federal, state, local
------------------
and foreign laws, regulations, rules, ordinances, codes, decrees,
judgments, directives, or judicial or administrative orders relating
to pollution or protection of the environment, natural resources or
human health and safety, including, without limitation, laws relating
to Releases or threatened Releases of Hazardous Substances
(including, without limitation, Releases to ambient air, surface
water, groundwater, land, surface and subsurface strata)
4
<PAGE>
or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, Release, transport or handling of Hazardous
Substances. "Environmental Laws" include, without limitation, CERCLA
(42 U.S.C. Subsection 9601 et seq.), the Hazardous Materials
Transportation Act (49 U.S.C. Subsection 1801 et seq.), the Resource
Conservation and Recovery Act (42 U.S.C. Subsection 6901 et seq.), the
Federal Water Pollution Control Act (33 U.S.C. Subsection 1251 et
seq.), the Clean Air Act (42 U.S.C. Subsection 7401 et seq.), the
Toxic Substances Control Act (15 U.S.C. Subsection 2601 et seq.), the
Oil Pollution Act (33 U.S.C. Subsection 2701 et seq.), the Emergency
Planning and Community Right-to-Know Act (42 U.S.C. Subsection
11001 et seq.), the Occupational Safety and Health Act (29 U.S.C.
Subsection 651 et seq.), the Pennsylvania Air Pollution Control Act
(35 P.S. Subsection 4001 et seq.), the Pennsylvania Storage Tank and
Spill Prevention Act (35 P.S. Subsection 6021.01 et seq.), the
Pennsylvania Hazardous Sites Cleanup Act (35 P.S. Subsection 6020.101
et seq.), the Pennsylvania Solid Waste Management Act (35 P.S.
Subsection 6018.101 et seq.), the Pennsylvania Clean Stream Law
(35 P.S. Subsection 691.1 et seq.) and all other federal,
state, local or foreign laws analogous to any of the above.
(35) "Environmental Permits" has the meaning set forth in
---------------------
Section 4.6(a).
(36) "Environmental Report" means, collectively, the Project
--------------------
Half Moon Phase II Report, dated December 1998, prepared by Chester
Engineers with respect to the Sites and the Chester Engineers Letter.
(37) "Equity Contribution Agreement" has the meaning set
-----------------------------
forth in the Recitals.
(38) "ERISA" means the Employee Retirement Income Security
-----
Act of 1974, as amended.
(39) "ERISA Affiliate" has the meaning set forth in Section
---------------
2.4(k).
(40) "ERISA Affiliate Plans" has the meaning set forth in
---------------------
Section 2.4(k).
(41) "Estimated Adjustment" has the meaning set forth in
--------------------
Section 3.3(b).
(42) "Estimated Closing Statement" has the meaning set forth
---------------------------
in Section 3.3(b).
(43) "Exchange Act" means the Securities Exchange Act of
------------
1934, as amended.
(44) "Excluded Assets" has the meaning set forth in Section
---------------
2.2.
(45) "Excluded Liabilities" has the meaning set forth in
--------------------
Section 2.4.
5
<PAGE>
(46) "FERC" means the Federal Energy Regulatory Commission,
----
or any successor agency thereto.
(47) "FIRPTA Affidavit" means the Foreign Investment in Real
----------------
Property Tax Act Certification and Affidavit, substantially in the
form of Schedule V hereto.
(48) "Forrestville" means the approximately 16-acre site
------------
located near the village of Forrestville, Schuylkill County,
Pennsylvania described in Schedule 2.1(b).
(49) "Fuel Inventories" means coal, anthracite silt,
----------------
petroleum coke, fuel oil and alternative fuel inventories which are
located at, or are in transit to, Sunbury Station or Lady Jane on the
Closing Date. The term "Fuel Inventories" shall not include the
anthracite silt reserves located at Buck Run and Forrestville.
(50) "GAAP" means United States generally accepted
----
accounting principles as in effect from time to time, applied on a
consistent basis.
(51) "Generation Support Services Agreement" means the
-------------------------------------
Generation Support Services Agreement between PP&L, or an Affiliate
of PP&L, and Buyer, the terms and conditions of which shall be
negotiated prior to Closing in accordance with Section 6.13 hereof,
pursuant to which PP&L, or an Affiliate of PP&L, will provide certain
services to Buyer after the Closing Date.
(52) "Good Utility Practices" mean any of the practices,
----------------------
methods and acts engaged in or approved by a significant portion of
the electric utility industry during the relevant time period, or any
of the practices, methods or acts which, in the exercise of
reasonable judgment in light of the facts known at the time the
decision was made, could have been expected to accomplish the desired
result at a reasonable cost consistent with good business practices,
reliability, safety and expedition. Good Utility Practices are not
intended to be limited to the optimum practices, methods or acts to
the exclusion of all others, but rather to be practices, methods or
acts generally accepted in the PJM region.
(53) "Governmental Authority" means any federal, state,
----------------------
local or other governmental, regulatory or administrative agency,
commission, department, board, or other governmental subdivision,
court, tribunal, arbitrating body or other governmental authority.
(54) "Hazardous Substances" means (a) any petrochemical or
--------------------
petroleum products, oil or coal ash, radioactive materials, radon
gas, asbestos in any form that is or could become friable, urea
formaldehyde foam insulation and transformers or other equipment that
contain dielectric fluid which may contain levels of polychlorinated
biphenyls; (b) any chemicals, materials or substances defined as or
included in the definition of "hazardous substances," "hazardous
wastes," "hazardous materials," "hazardous constituents," "restricted
hazardous materials," "extremely hazardous
6
<PAGE>
substances," "toxic substances," "contaminants," "pollutants," "toxic
pollutants" or words of similar meaning and regulatory effect under
any applicable Environmental Law; and (c) any other chemical, material
or substance, exposure to which is prohibited, limited or regulated by
any applicable Environmental Law.
(55) "HSR Act" means the Hart-Scott-Rodino Antitrust
-------
Improvements Act of 1976, as amended.
(56) "IBEW" means Local 1600 of the International
----
Brotherhood of Electrical Workers.
(57) "IBEW Collective Bargaining Agreement" has the meaning
------------------------------------
set forth in Section 6.10(d).
(58) "IBEW Grievance" means, with respect to the business or
--------------
operations of the Purchased Assets, any grievance arising out of or
under the IBEW Collective Bargaining Agreement, or other applicable
collective bargaining agreement, prior to the Closing Date, including
without limitation the grievances identified in Schedule 4.7.
(59) "IBEW Memorandum of Understanding" has the meaning set
--------------------------------
forth in Section 7.1(q).
(60) "Improvements" means all buildings, structures
------------
(including all fuel handling and storage facilities), railyard,
machinery and equipment, fixtures, construction in progress, and
other improvements, including all piping, cables and similar
equipment forming part of the mechanical, electrical, plumbing or
HVAC infrastructure of any building, structure or equipment, located
on and affixed to the Sites.
(61) "Income Tax" means any federal, state, local or foreign
----------
Tax (a) based upon, measured by or calculated with respect to net
income, profits or receipts (including, without limitation, gross
receipts Taxes, capital gains Taxes and minimum Taxes) or (b) based
upon, measured by or calculated with respect to multiple bases
(including, without limitation, corporate franchise taxes) if one or
more of the bases on which such Tax may be based, measured by or
calculated with respect to, is described in clause (a), in each case
together with any interest, penalties, or additions to such Tax.
(62) "Indemnifiable Loss" has the meaning set forth in
------------------
Section 8.1(a).
(63) "Indemnifying Party" has the meaning set forth in
------------------
Section 8.1(e).
(64) "Indemnitee" has the meaning set forth in Section
----------
8.1(d).
7
<PAGE>
(65) "Independent Accounting Firm" means such independent
---------------------------
accounting firm within the "Big Five" as is mutually appointed by
PP&L and Buyer.
(66) "Inspection" means all tests, reviews, examinations,
----------
inspections, investigations, verifications, samplings and similar
activities conducted by Buyer or its Representatives with respect to
the Purchased Assets prior to the Closing.
(67) "Interchange Scheduling Agreement" means the
--------------------------------
Interchange Scheduling Agreement, between PP&L, or an Affiliate of
PP&L, and Buyer, in the form of Schedule VI hereto.
(68) "Intellectual Property" means patents and patent
---------------------
rights, trademarks and trademark rights, trade names and trade name
rights, service marks and service mark rights, service names and
service name rights, brand names, inventions, copyrights and
copyright rights, computer programs and pending applications for and
registrations of patents, trademarks, service marks and copyrights.
(69) "Interconnection Agreement" means the Interconnection
-------------------------
Agreement, between PP&L, or an Affiliate of PP&L, and Buyer, in the
form of Schedule VII hereto, pursuant to which PP&L, or an Affiliate
of PP&L, will provide Buyer with interconnection service to certain
of its transmission facilities and whereby Buyer will provide PP&L,
or an Affiliate of PP&L, with continuing access to certain of the
Purchased Assets after the Closing Date.
(70) "Knowledge" means the actual knowledge of the corporate
---------
officers of the specified Person charged with responsibility for the
particular function as of the date of this Agreement, or, with
respect to any certificate delivered pursuant to this Agreement, the
date of delivery of the certificate, after reasonable inquiry by them
of selected employees of the specified Person whom they believe, in
good faith, to be the persons generally responsible for the subject
matters to which the knowledge is pertinent.
(71) "Laws" means all laws, statutes, rules, regulations,
----
ordinances and other pronouncements having the effect of law of the
United States, any foreign country and any domestic or foreign state,
county, city or other political subdivision or of any Governmental
Authority.
(72) "Liability" or "Liabilities" means any liability or
--------- -----------
obligation (whether known or unknown, whether asserted or unasserted,
whether absolute or contingent, whether accrued or unaccrued, whether
liquidated or unliquidated, whether incurred or consequential, and
whether due or to become due).
(73) "Local Laws" means all laws, statutes, rules,
----------
regulations, ordinances and other pronouncements having the effect of
law of any county, city, township or other political subdivision of
the Commonwealth of Pennsylvania within which any of the Sites is
located.
8
<PAGE>
(74) "Material Adverse Effect" means any change in or effect
-----------------------
on the Purchased Assets, the operation of the Purchased Assets or the
Assumed Liabilities after the date hereof that is materially adverse to
(a) the ownership, business, assets, operations or condition (financial
or otherwise) of the Purchased Assets, individually or taken as a
whole, or (b) the magnitude, duration, timing or scope of the Assumed
Liabilities, other than (i) any change resulting from changes in the
international, national, regional or local wholesale or retail markets
for electricity, including any change in the structure, operating
agreements, operations or procedures of PJM or its control area,
(ii) any change resulting from changes in the international, national,
regional or local markets for any fuel used at Sunbury Station,
(iii) any change resulting from changes in the North American,
national, regional or local electricity transmission systems,
(iv) changes in Law that apply generally to similarly situated Persons
and (v) any materially adverse change in the Purchased Assets which is
cured (including by payment of money) to the reasonable satisfaction of
Buyer before the earlier of the Closing Date and the Termination Date.
Notwithstanding the foregoing, the term "Material Adverse Effect" shall
include any change in Local Law after the date hereof which, in its
application, operates in a way that, because of the nature of the
business conducted at Sunbury Station or Lady Jane, uniquely results in
a change or effect described in clauses (a) or (b) above (except that
any change in Local Law that arises from or in connection with the
proposed thruway construction disclosed on Schedule 4.10 shall not
constitute a Material Adverse Effect).
(75) "Non-Fuel Inventories" means limestone, materials,
--------------------
spare parts, consumable supplies and chemical and gas supply
inventories relating to the operation of Sunbury Station or Lady Jane
which are located at, or are in transit to, Sunbury Station or Lady
Jane on the Closing Date.
(76) "Non-Union Employees" has the meaning as set forth in
-------------------
Section 6.10(e).
(77) "PaPUC" means the Pennsylvania Public Utility
-----
Commission, and any successor agency thereto.
(78) "PaDEP" means the Pennsylvania Department of
-----
Environmental Protection, and any successor agency thereto.
(79) "Permits" has the meaning set forth in Section 4.13.
-------
(80) "Permitted Encumbrances" means: (i) the Easements; (ii)
----------------------
those exceptions to title to the Purchased Assets listed in Schedule
4.5 and those Encumbrances set forth in Schedule 1.1(80); (iii)
statutory liens for Taxes or other governmental charges or
assessments not yet due or delinquent or the validity of which is
being contested in good faith in appropriate proceedings, provided,
--------
that at or prior to the Closing, Sellers shall either (x) satisfy
such liens, (y) cause such liens to be omitted from the exceptions to
the title insurance policy being obtained by the Buyer by bonding,
escrow or otherwise or (z) cause the issuer of such title insurance
policy to insure the Buyer that such liens will
9
<PAGE>
not be collected out of or enforced against the Real Property; (iv)
mechanics', carriers', workers', repairers' and other similar liens
arising or incurred in the ordinary course of business securing
obligations that (A) are not overdue for a period of more than thirty
(30) days or (B) are being contested in good faith in appropriate
proceedings, provided, that at or prior to the Closing,
--------
Sellers shall either (x) satisfy such liens, (y) cause such liens to be
omitted from the exceptions to the title insurance policy being
obtained by the Buyer by bonding, escrow or otherwise or (z) cause the
issuer of such title insurance policy to insure the Buyer that such
liens will not be collected out of or enforced against the Real
Property; (v) zoning, entitlement, conservation restriction and other
land use and environmental regulations by Governmental Authorities; and
(vi) such other liens, imperfections in or failure of title, charges,
easements, restrictions and Encumbrances which do not materially
detract from the value of the Purchased Assets as currently used or
materially interfere with the present use of the Purchased Assets or do
not, individually or in the aggregate, create a Material Adverse
Effect.
(81) "Person" means any individual, partnership, limited
------
liability company, joint venture, corporation, trust, unincorporated
organization or any other business entity or governmental entity or
any department or agency thereof.
(82) "PJM" means PJM Interconnection, L.L.C., and any
---
successor thereto.
(83) "Post-Closing Adjustment" has the meaning set forth in
-----------------------
Section 3.3(c).
(84) "Post-Closing Statement" has the meaning set forth in
----------------------
Section 3.3(c).
(85) "Prior Welfare Plans" has the meaning set forth in
-------------------
Section 6.10(e)(iv).
(86) "Proposed Post-Closing Adjustment" has the meaning set
--------------------------------
forth in Section 3.3(c).
(87) "Proprietary Information" of a Party means all
-----------------------
information about the Party or its properties or operations furnished
to the other Party or its Representatives by the Party or its
Representatives, after the date hereof, regardless of the manner or
medium in which it is furnished. Proprietary Information does not
include information that: (a) is or becomes generally available to
the public, other than as a result of a disclosure by the other Party
or its Representatives; (b) was available to the other Party on a
nonconfidential basis prior to its disclosure by the Party or its
Representatives; (c) becomes available to the other Party on a
nonconfidential basis from a Person, other than the Party or its
Representatives, who, to the other Party's Knowledge, is not
otherwise bound by a confidentiality agreement with the Party or its
Representatives, or is not otherwise under any obligation to the
Party or any of its Representatives not to transmit the information
to the other Party or its Representatives; (d) is independently
developed
10
<PAGE>
by the other Party; or (e) was disclosed pursuant to the
Confidentiality Agreement and remains subject to the terms and
conditions of the Confidentiality Agreement.
(88) "Purchased Assets" has the meaning set forth in Section
----------------
2.1.
(89) "Purchase Price" has the meaning set forth in Section
--------------
3.2.
(90) "Rail Spur" means the rails, ties, ballasts and all
---------
related apparatus or appurtenances attached thereto which are
necessary for the operation of a railroad, beginning at the southern
property line of the Real Property at Sunbury Station and continuing
across those certain parcels of real property owned by PP&L, or an
Affiliate of PP&L, which are adjacent to such Real Property (the
"Retained Real Property") in a southerly direction to the
----------------------
southernmost property line of the Retained Real Property, as more
particularly described on Schedule 2.1(i), but specifically excluding
the underlying property interest in the Retained Real Property.
(91) "Real Property" has the meaning set forth in Section
-------------
2.1(a).
(92) "Release" means any release, spill, leak, discharge,
-------
disposal of, pumping, pouring, emitting, emptying, injecting,
leaching, dumping or allowing to escape into or through the
environment.
(93) "Remediation" means action of any kind to address a
-----------
Release or the presence of Hazardous Substances at the Sites or an
off-Sites location including, without limitation, any or all of the
following activities to the extent they relate to or arise from the
presence of a Hazardous Substance at the Sites or an off-Sites
location: (a) monitoring, investigation, assessment, treatment,
cleanup, containment, removal, mitigation, response or restoration
work; (b) obtaining any permits, consents, approvals or
authorizations of any Governmental Authority necessary to conduct any
such activity; (c) preparing and implementing any plans or studies
for any such activity; (d) obtaining a written notice from a
Governmental Authority with jurisdiction over the Sites or an off-Sites
location under Environmental Laws that no material additional
work is required by such Governmental Authority; (e) the use,
implementation, application, installation, operation or maintenance
of removal actions on the Sites or an off-Sites location, remedial
technologies applied to the surface or subsurface soils, excavation
and off-Sites treatment or disposal of soils, systems for long-term
treatment of surface water or ground water, engineering controls or
institutional controls; and (f) any other activities reasonably
determined by a Party to be necessary or appropriate or required
under Environmental Laws to address the presence or Release of
Hazardous Substances at the Sites or an off-Sites location.
(94) "Replacement Welfare Plans" has the meaning set forth
-------------------------
in Section 6.10(e)(iv).
11
<PAGE>
(95) "Representatives" of a Party means the Party and its
---------------
Affiliates and their respective directors, officers, employees,
agents, partners, advisors (including, without limitation,
accountants, legal counsel, environmental consultants, engineering
consultants, financial advisors and other authorized representatives)
and parents and other controlling Persons.
(96) "SEC" means the Securities and Exchange Commission, and
---
any successor agency thereto.
(97) "Securities Account Control Agreement" means the
------------------------------------
Securities Account Control Agreement, to be dated as of the Closing
Date, by and among Buyer, PP&L and the Securities Intermediary, in
substantially the form attached as Exhibit 3 to the Transition Power
Purchase Agreement.
(98) "Securities Act" means the Securities Act of 1933, as
--------------
amended.
(99) "Securities Intermediary" shall have the meaning set
-----------------------
forth in the Transition Power Purchase Agreement.
(100) "Sellers' Actuary" has the meaning set forth in Section
----------------
6.10(g).
(101) "Sellers' Agreements" means those contracts,
-------------------
agreements, licenses (other than Permits or Intellectual Property),
leases and deeds relating to the ownership, operation and maintenance
of Sunbury Station, Lady Jane, Buck Run or Forrestville and being
assigned to Buyer as part of the Purchased Assets, including the IBEW
Collective Bargaining Agreement.
(102) "Sellers' Indemnitee" has the meaning set forth in
-------------------
Section 8.1(a).
(103) "Sellers' Pension Plan" has the meaning set forth in
---------------------
Section 6.10(g).
(104) "Sellers' Required Regulatory Approvals" has the
--------------------------------------
meaning set forth in Section 4.3(b).
(105) "Silt Reserves Real Property" has the meaning set
---------------------------
forth in Section 2.1(b).
(106) "Sites" means the real property (including Improvements)
-----
forming a part of, or used or usable in connection with the operation
of, Sunbury Station, Lady Jane, Buck Run or Forrestville, including any
disposal sites included in such real property. Any reference to the
Sites shall include, by definition, the surface and subsurface
elements, to the extent owned by a Seller, including the soil and
groundwater present at the Sites and excluding the Excluded Assets,
and any reference to items "at the Sites" shall include all items "at,
on, in, upon, over, across, under and within" the Sites.
12
<PAGE>
(107) "Special Warranty Deeds" means the Special Warranty
----------------------
Deeds, in the form of Schedule VIII hereto, pursuant to which Sellers
will convey the Real Property and the Silt Reserves Real Property to
Buyer.
(108) "Subsidiary" when used in reference to any Person means
----------
any entity of which outstanding securities having ordinary voting
power to elect a majority of the Board of Directors or other Persons
performing similar functions of such entity are owned directly or
indirectly by such Person.
(109) "Stott Mine #1" means that certain deep coal mine
-------------
underlying Lady Jane.
(110) "Sunbury Station Compliance Accounts" means those
-----------------------------------
accounts established by the USEPA for Sunbury Station for purposes of
allocating, holding, transferring or using NOx or SO2 Emission
Allowances.
(111) "Surveys" has the meaning set forth in Section 6.12(a).
-------
(112) "Tangible Personal Property" has the meaning set forth
--------------------------
in Section 2.1(d).
(113) "Taxes" means all taxes, charges, fees, levies,
-----
penalties or other assessments imposed by any federal, state, local
or foreign taxing authority, including, but not limited to, income,
gross receipts, excise, property, sales, transfer, use, franchise,
payroll, withholding, social security, taxes payable under the
Pennsylvania Public Utility Realty Tax Act ("PURTA") or other taxes,
-----
including any interest, penalties or additions attributable thereto.
(114) "Tax Return" means any return, report, information
----------
return or other document (including any related or supporting
information) required to be supplied to any taxing authority with
respect to Taxes.
(115) "Termination Date" has the meaning set forth in Section
----------------
9.1(b).
(116) "Third Party Claim" has the meaning set forth in
-----------------
Section 8.2(a).
(117) "Title Commitments" has the meaning set forth in
-----------------
Section 6.12(a).
(118) "Transferable Permits" means those Permits and
--------------------
Environmental Permits (and any applications pertaining thereto) which
are lawfully transferable by Sellers to Buyer (with or without a
filing with, notice to, consent or approval of any Governmental
Authority) and are set forth in Schedule 1.1(118).
(119) "Transferred Non-Union Employee" has the meaning set
------------------------------
forth in Section 6.10(e).
13
<PAGE>
(120) "Transferred Pension Employees" has the meaning set
-----------------------------
forth in Section 6.10(g).
(121) "Transferred Union Employee" has the meaning set forth
--------------------------
in Section 6.10(a).
(122) "Transferring Employee Records" means records related
-----------------------------
to Sellers' personnel who will become employees of Buyer only to the
extent such files pertain to: (i) skill and development training,
(ii) seniority histories, (iii) salary and benefit information, (iv)
Occupational, Safety and Health Administration reports, (v) active
medical restriction forms, and (vi) disciplinary and attendance
histories.
(123) "Transition Power Purchase Agreement" means the
-----------------------------------
Transition Power Purchase Agreement between PP&L, or an Affiliate of
PP&L, and Buyer, in the form of Schedule IX hereto, relating to the
sale of designated quantities of capacity and/or energy to PP&L, or
an Affiliate of PP&L, following the Closing Date.
(124) "Transition Services Agreement" means the Transition
-----------------------------
Services Agreement between PP&L, or an Affiliate of PP&L, and Buyer,
the terms and conditions of which shall be negotiated prior to
Closing in accordance with Section 6.13 hereof, pursuant to which
PP&L, or an Affiliate of PP&L, will provide certain information
technology and other services to Buyer after the Closing Date.
(125) "Transmission Assets" has the meaning set forth in
-------------------
Section 2.2(a).
(126) "Union Employees" has the meaning set forth in Section
---------------
6.10(a).
(127) "USEPA" means the United States Environmental
-----
Protection Agency, and any successor agency thereto.
(128) "Year 2000 Compliant" has the meaning set forth in
-------------------
Section 4.15.
(129) "Year 2000 Ready" has the meaning set forth in Section
---------------
4.15.
(130) "WARN Act" means the Federal Worker Adjustment
--------
Retraining and Notification Act of 1988, as amended.
1.2 Certain Interpretive Matters. In this Agreement, unless the
----------------------------
context otherwise requires, the singular shall include the plural, the
masculine shall include the feminine and neuter, and vice versa. The term
"includes" or "including" shall mean "including without limitation."
References to a Section, Article or Schedule shall mean a Section, Article or
Schedule of this Agreement, and reference to a given agreement or instrument
shall be a reference to that agreement or instrument as modified, amended,
supplemented and restated through the date as of which such reference is made.
14
<PAGE>
ARTICLE II
PURCHASE AND SALE
-----------------
2.1 Transfer of Assets. Upon the terms and subject to the
------------------
satisfaction of the conditions set forth in this Agreement, at the Closing,
Sellers will sell, assign, convey, transfer and deliver to Buyer, and Buyer
will purchase, assume and acquire from Sellers, free and clear of all
Encumbrances (except for Permitted Encumbrances), all of Sellers' respective
right, title and interest in, to and under the following assets constituting,
or used in connection with the operation of, Sunbury Station or Lady Jane,
except as otherwise provided in Section 2.2, each as in existence on the
Closing Date (collectively, the "Purchased Assets"):
----------------
(a) Those certain parcels of real property (including all
buildings, railyard and other facilities and other Improvements thereon and
all appurtenances thereto) described in Schedule 4.9 (the "Real Property"),
-------------
but subject to those exceptions listed in Schedule 4.5 and except as otherwise
constituting part of the Excluded Assets;
(b) Sellers' ownership interests in the real property described
in Schedule 2.1(b) (the "Silt Reserves Real Property") underlying Sellers'
---------------------------
anthracite silt reserves at Buck Run and Forrestville and the anthracite silt
reserves located thereon as of the Closing Date;
(c) The Fuel Inventories and the Non-Fuel Inventories in
existence on the Closing Date;
(d) The machinery, equipment (including communications
equipment), vehicles, locomotives, furniture and other personal property
located on the Real Property and the Silt Reserves Real Property on the
Closing Date, including, without limitation, the items of personal property
included in Schedule 2.1(d), together with all the personal property of
Sellers used principally in the operation of the Purchased Assets and
expressly listed in Schedule 2.1(d), other than property used or primarily
usable as part of the Transmission Assets or otherwise constituting part of
the Excluded Assets (collectively, "Tangible Personal Property"); provided,
-------------------------- --------
however, that the nuclear fly ash level detection system (including all
- -------
sources and detectors and related equipment) shall not be transferred to Buyer
unless Buyer has obtained, at least thirty (30) days prior to Closing, an
appropriate license for such equipment from the Nuclear Regulatory Commission;
and provided further, that if Buyer has not obtained an appropriate license
-------- -------
for the nuclear fly ash level detection system at least thirty (30) days prior
to Closing, Sellers may, at their sole discretion, transfer a non-nuclear fly
ash level detection system (comparable in accuracy, reliability and
maintainability) to Buyer in substitution for the nuclear fly ash level
detection system;
(e) Subject to the receipt of necessary consents and approvals,
the Sellers' Agreements included in Schedule 2.1(e);
15
<PAGE>
(f) Subject to the receipt of necessary consents and approvals,
the Transferable Permits;
(g) The Emission Allowances as stated in Schedule 2.1(g), and
those Emission Allowances held by the USEPA in its Special Allowance Reserve
for SO2 emissions for the year 2000 and beyond and not sold prior to the
Closing Date by the USEPA for the benefit of Sunbury Station pursuant to the
Clean Air Act; provided that if the Closing occurs during 1999, Buyer shall be
required to authorize the USEPA to deduct vintage 1999 Emission Allowances for
Sellers' use and operation of Sunbury Station as permitted pursuant to Section
6.1 hereof as follows: (1) 53.92 SO2 Emission Allowances per day for each day
from January 1, 1999 through but not including the Closing Date; and (2) 17.59
NOx Emission Allowances per day for each day from May 1, 1999 through but not
including the Closing Date or September 30, 1999, whichever occurs first.
Notwithstanding Schedule 2.1(g), if the Closing occurs during the period
October 1, 1999 through and including October 31, 1999, Sellers shall transfer
to Buyer the amount of vintage 1999 NOx Emission Allowances for Sellers' use
and operation of Sunbury Station as permitted pursuant to Section 6.1 hereof
and Buyer shall authorize the USEPA to deduct them. If the Closing occurs
during the period November 1, 1999 through and including December 31, 1999,
Buyer shall authorize the USEPA to deduct only the vintage 1999 SO2 Emission
Allowances at 53.92 Emission Allowances per day as stated above. If the
Closing occurs during 2000, Buyer shall be required to authorize the USEPA to
deduct vintage 2000 Emission Allowances for Sellers' use and operation of
Sunbury Station as permitted pursuant to Section 6.1 hereof as follows: (1)
45.21 SO2 Emission Allowances per day for each day from January 1, 2000
through but not including the Closing Date and (2) 17.59 NOx Emission
Allowances per day for each day from May 1, 2000 through but not including the
Closing Date or September 30, 2000, whichever occurs first. Notwithstanding
Schedule 2.1(g), if the Closing occurs during the period October 1, 2000
through and including October 31, 2000, Sellers shall transfer to Buyer the
amount of the vintage 2000 NOx Emission Allowances for Sellers' use and
operation of Sunbury Station as permitted pursuant to Section 6.1 hereof and
Buyer shall authorize the USEPA to deduct them. If the Closing occurs during
the period November 1, 2000 through and including December 31, 2000, Buyer
shall authorize the USEPA to deduct only the vintage 2000 SO2 Emission
Allowances at 45.21 Emission Allowances per day as stated above. In the event
Sellers' use and operation of Sunbury Station result in actual emissions
requiring surrender of a larger number of SO2 or NOx Emission Allowances than
stated above, Buyer shall be required to authorize the USEPA to deduct NOx or
SO2 Emission Allowances, as applicable, to cover such excess and Sellers shall
transfer to Buyer at Closing additional Emission Allowances equal to such
excess and having a vintage of the year of Closing or earlier;
(h) All rights of Sellers with respect to the low flow dam
adjacent to Sunbury Station pursuant to Public Law 285, 80th Congress, 1st
Session, Chapter 395 (approved July 30, 1947);
(i) The Rail Spur located on the right-of-way described on
Schedule 2.1(i);
(j) All unexpired, transferable warranties and guarantees from
third parties with respect to any item of Real Property or Tangible Personal
Property constituting part of the Purchased Assets, as of the Closing Date;
16
<PAGE>
(k) The interests of Sellers in and to the names "Sunbury
Station" and "Lady Jane" whatever they may be; provided, however, that LJC may
-------- -------
continue its use of "Lady Jane Collieries, Inc." as its corporate and trade
name. Buyer expressly understands that Sellers are not assigning or
transferring to Buyer any right, title or interest in or to the names
"Pennsylvania Power & Light Company", "PP&L" , "PPL", or any derivation
thereof, as well as any related or similar name, or any other trade names,
trademarks, service marks, corporate names and logos or any part, derivation,
colorable imitation or combination thereof, including, without limitation, the
trademark or other rights with respect to the name "Stabil-Fill";
(l) The Transferring Employee Records;
(m) All books, expired purchase orders, operating records,
operating, safety and maintenance manuals, engineering design plans,
blueprints and as built plans, specifications, procedures, studies, reports
(including the Environmental Report), equipment repair, safety, maintenance or
service records, and similar items, to the extent maintained by Sellers and
related specifically to the Purchased Assets (subject to the right of Sellers
to retain copies of same for its use) other than such items which are
proprietary to third parties and accounting records (to the extent that any of
the foregoing, including without limitation the Transferring Employee Records,
is contained in an electronic format, Sellers shall cooperate with Buyer to
transfer such items to Buyer in a format that is reasonably acceptable to
Buyer);
(n) Benefit Plan assets to the extent described in Section
6.10(g) hereof; and
(o) Subject to the receipt of necessary consents and approvals,
the Intellectual Property listed in Schedule 2.1(o).
2.2 Excluded Assets. Notwithstanding anything to the contrary in this
---------------
Agreement, nothing in this Agreement will constitute or be construed as
conferring on Buyer, and Buyer is not acquiring, any right, title or interest
in or to (a) any properties, assets, business, operation, or division of
Sellers or their Affiliates not expressly set forth in Section 2.1, or (b) the
following specific assets which are associated with the Purchased Assets, but
which are hereby specifically excluded from the sale and the definition of
Purchased Assets herein (the "Excluded Assets"):
---------------
(a) The electrical transmission or distribution facilities (as
opposed to generation facilities) of Sellers or any of their Affiliates
located at Sunbury Station or forming part of Sunbury Station (whether or not
regarded as a "transmission" or "generation" asset for regulatory or
accounting purposes), including all switchyard facilities, substation
facilities and support equipment, as well as all permits, contracts and
warranties, to the extent they relate to such transmission and distribution
assets (other than any transmission or distribution assets expressly
identified in Schedule 2.1(d), any assets within the switchyard which are
directly associated with or necessary for the operation of any of the
Purchased Assets and which are expressly identified in Schedule 2.1(d) and any
Real Property underlying the electrical transmission or distribution
facilities expressly identified in Schedule 4.9, all of which is included as
Purchased Assets) (collectively, the "Transmission Assets"), and those certain
-------------------
assets, facilities and agreements all as identified in Schedule 2.2(a);
17
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(b) Certain switches and meters at Sunbury Station, gas
facilities, revenue meters and remote testing units, drainage pipes and
systems, as identified as "Excluded Property" in the Easement Agreement;
(c) The real property underlying the Rail Spur;
(d) Certificates of deposit, shares of stock, securities, bonds,
debentures, evidences of indebtedness, and interests in joint ventures,
partnerships, limited liability companies and other entities;
(e) All cash, cash equivalents, bank deposits, accounts and
notes receivable (trade or otherwise), prepaid expenses relating to the
operation of the Purchased Assets and any income, sales, payroll or other tax
receivables;
(f) The right, title and interest of Sellers and their
successors, assigns, Affiliates and/or Representatives in and to the names
"Pennsylvania Power & Light Company", "PP&L", "PPL", or any derivation
thereof, as well as any related or similar name, or any other trade names,
trademarks, service marks, corporate names and logos, or any part, derivation,
colorable imitation or combination thereof, including, without limitation, the
trademark or other rights with respect to the name "Stabil-Fill", other than
as specified in Section 2.1(k) hereof;
(g) All tariffs, agreements and arrangements to which any Seller
is a party for the purchase or sale of electric capacity and/or energy or for
the purchase or sale of transmission or ancillary services involving the
Purchased Assets or otherwise;
(h) Except in respect of Assumed Liabilities, the rights of
Sellers in and to any causes of action against third parties relating to any
Real Property, Tangible Personal Property, Silt Reserves Real Property,
Permits, Environmental Permits, Taxes or Sellers' Agreements, if any,
including any claims for refunds (other than those Tax refunds that are
covered by Section 2.2(i) below), prepayments, offsets, recoupment, insurance
proceeds, condemnation awards, judgments and the like, whether received as
payment or credit against future liabilities, relating specifically to Sunbury
Station, Lady Jane or the Sites and relating to any period on or prior to the
Closing Date;
(i) Any refunds of real property Taxes (including interest) paid
or due with respect to Sunbury Station, Lady Jane or the Sites, which refunds
are the result of proceedings that, prior to the Closing Date, were instituted
by Sellers or their Affiliates regardless of when actually paid;
(j) All personnel records other than Transferring Employee
Records or other records the disclosure of which is required by law;
(k) The minute books, stock transfer books, corporate seal and
other corporate records of Sellers;
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(l) The rights of any Seller in, to and under all contracts,
arrangements, permits or licenses of any nature, of which the obligations of
such Seller under such contracts, arrangements, permits or licenses are not
expressly assumed by Buyer pursuant to Section 2.3(a) hereof;
(m) Except as set forth in Section 6.10(g) hereof, all assets
owned or held by any Benefit Plan;
(n) All insurance policies relating to the operation of the
Purchased Assets;
(o) Any and all of any Sellers' rights in any contract or
arrangement representing an intercompany transaction between such Seller and
an Affiliate of such Seller, whether or not such transaction relates to the
provision of goods and services, payment arrangements, intercompany charges or
balances, or the like, other than the agreements described on Schedule 2.1(e);
(p) Any and all of Sellers' rights relating to Stott Mine #1;
(q) Any Improvements, equipment or other tangible personal
property owned or provided by any contractor or third party at Sunbury
Station, Lady Jane or the Silt Reserves Real Property, including, without
limitation, the Electronic Pitless Vehicle Scale, the Office/Lab Trailer, the
Storage Shed and the hand tools owned by Combustion Products Management, Inc.;
(r) All other assets and properties owned by Sellers or their
Affiliates which are not used in the operation of Sunbury Station or Lady
Jane; and
(s) Sellers' rights under this Agreement and the Additional
Agreements.
2.3 Assumed Liabilities. On the Closing Date, Buyer shall deliver to
-------------------
Sellers the Assignment and Assumption Agreement pursuant to which Buyer shall
assume and agree to pay, perform and discharge, without recourse to Sellers or
their Affiliates, the following Liabilities of Sellers and their Affiliates
which relate to the Purchased Assets and which arise on or after the Closing
(except as specifically provided below), other than Excluded Liabilities, in
accordance with the respective terms and subject to the respective conditions
thereof (collectively, "Assumed Liabilities"):
-------------------
(a) All Liabilities of Sellers and their Affiliates under the
Sellers' Agreements, the Intellectual Property identified in Schedule 2.1(o)
and the Transferable Permits in accordance with the terms thereof and the
contracts, licenses, agreements and personal property leases entered into by
Sellers or their Affiliates with respect to the Purchased Assets on or after
the date hereof consistent with the terms of this Agreement, except in each
case to the extent that such Liabilities, but for a breach or default by
Sellers or their Affiliates, would have been paid, performed or otherwise
discharged on or prior to the Closing Date or to the extent the same arise out
of any such breach or default or out of any event which after the giving of
notice would constitute a default by Sellers or their Affiliates;
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(b) All Liabilities associated with the Purchased Assets in
respect of Taxes for which Buyer is liable pursuant to Sections 3.5 or 6.8
hereof;
(c) All Liabilities with respect to the Transferred Union
Employees and the Transferred Non-Union Employees arising on and after the
Closing Date (including, without limitation, any Liabilities relating to the
hiring, employment or termination of employment by Buyer or its Affiliates of
any individual on or after the Closing Date);
(d) Any Liability or responsibility under or related to
Environmental Laws or the common law arising as a result of or in connection
with (i) any violation or alleged violation of Environmental Laws, whether
prior to, on or after the Closing Date, with respect to the ownership or
operation of any of the Purchased Assets; (ii) loss of life, injury to persons
or property or damage to natural resources (whether or not such loss, injury
or damage arose or was made manifest before the Closing Date or arises or
becomes manifest on or after the Closing Date) caused (or allegedly caused) by
the presence or Release of Hazardous Substances at, on, in, under, adjacent to
or migrating from the Purchased Assets prior to, on or after the Closing Date,
including, but not limited to, Hazardous Substances contained in building
materials at or adjacent to the Purchased Assets or in the soil, surface
water, sediments, groundwater, landfill cells, or in other environmental media
at or near the Purchased Assets; and (iii) the investigation and/or
Remediation (whether or not such investigation or Remediation commenced before
the Closing Date or commences on or after the Closing Date) of Hazardous
Substances that are present or have been Released prior to, on or after the
Closing Date at, on, in, under, adjacent to or migrating from, the Purchased
Assets or in the soil, surface water, sediments, groundwater, landfill cells
or in other environmental media at or adjacent to the Purchased Assets;
provided, that nothing set forth in this Section 2.3(d) shall require Buyer to
assume any Liabilities that are expressly excluded in Section 2.4(g), Section
2.4(h), Section 2.4(i) or Section 2.4(j) hereof;
(e) All Liabilities of Sellers with respect to the Purchased
Assets under the agreements or consent orders set forth on Schedule 4.6
arising on or after the Closing; and
(f) With respect to the Purchased Assets, any Tax that may be
imposed by any federal, state or local government on the ownership, sale,
operation or use of the Purchased Assets on or after the Closing Date, except
for any Income Taxes attributable to income received by Sellers.
2.4 Excluded Liabilities. Except for the Assumed Liabilities, Buyer
--------------------
shall not assume by virtue of this Agreement or the transactions contemplated
hereby, and shall have no liability for, any Liabilities of Sellers, including
without limitation any of the following Liabilities (the "Excluded
--------
Liabilities"):
- -----------
(a) Any Liabilities of Sellers or their Affiliates in respect of
any Excluded Assets or other assets of Sellers or their Affiliates which are
not Purchased Assets, except to the extent caused by the acts or omissions of
Buyer or its Affiliates or Buyer's or its Affiliates' ownership, operation or
use of the Purchased Assets;
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(b) Any Liabilities in respect of Taxes attributable to the
Purchased Assets for taxable periods ending before the Closing Date, except
for Taxes for which Buyer is liable pursuant to Sections 3.5 or 6.8 hereof;
(c) Any Liabilities of Sellers or their Affiliates arising from
the breach or default by Sellers or their Affiliates, prior to the Closing
Date, of any Sellers' Agreement, the Intellectual Property agreements
identified in Schedule 2.1(o), Transferable Permit or any other contract,
license, agreement or personal property lease entered into by Sellers or their
Affiliates with respect to the Purchased Assets;
(d) Any and all Liabilities to third parties for personal injury
or tort, or similar causes of action arising solely out of the ownership or
operation of the Purchased Assets prior to the Closing Date, other than any
Liabilities specifically assumed by Buyer under Section 2.3;
(e) Any fines or penalties imposed by a Governmental Authority
resulting from (i) an investigation or proceeding before a Governmental
Authority regarding acts which occurred prior to the Closing Date, or (ii)
illegal acts, willful misconduct or gross negligence of Sellers or their
Affiliates prior to the Closing Date, other than, in the case of either (i) or
(ii), any Liability specifically assumed by Buyer under Section 2.3;
(f) Any payment obligations of Sellers or their Affiliates for
goods delivered or services rendered prior to the Closing Date, including, but
not limited to, rental payments pursuant to personal property leases;
(g) Any Liability under or related to Environmental Laws or the
common law arising as a result of or in connection with loss of life, injury
to persons or property or damage to natural resources (whether or not such
loss, injury or damage arose or was made manifest before the Closing Date or
arises or becomes manifest on or after the Closing Date) caused (or allegedly
caused) by the off-Sites disposal, storage, transportation, discharge,
Release, or recycling of Hazardous Substances, or the arrangement for such
activities, prior to the Closing Date, in connection with the ownership or
operation of the Purchased Assets, provided that for purposes of this Section
2.4 "off-Sites" does not include any location to which Hazardous Substances
disposed of or Released at the Purchased Assets have migrated;
(h) Any Liability under or related to Environmental Laws or the
common law arising as a result of or in connection with the investigation
and/or Remediation (whether or not such investigation or Remediation commenced
before the Closing Date or commences on or after the Closing Date) of
Hazardous Substances that are disposed, stored, transported, discharged,
Released, recycled, or the arrangement of such activities, prior to the
Closing Date, in connection with the ownership or operation of the Purchased
Assets, at any off-Sites location, provided that for purposes of this Section
2.4 "off-Site" does not include any location to which Hazardous Substances
disposed of or Released at the Purchased Assets have migrated;
(i) Any Liability under or related to Environmental Laws or the
common law arising as a result of or in connection with PP&L's or its
Affiliate's, ownership, operation or use of
21
<PAGE>
the Transmission Assets prior to, on or after the Closing Date, except to the
extent caused by the acts or omissions of Buyer or its Affiliates or Buyer's
or its Affiliates's ownership, operation or use of the Purchased Assets;
(j) Any Liability under or related to Environmental Laws or the
common law arising as a result of or in connection with Sellers', or their
respective Affiliate's, ownership, operation or use of Stott Mine #1 prior to,
on or after the Closing Date, except to the extent caused by the acts or
omissions of Buyer or its Affiliates or Buyer's or its Affiliates' ownership,
operation or use of the Purchased Assets;
(k) Any Liabilities relating to any Benefit Plan maintained by
Sellers or any trade or business (whether or not incorporated) which is or
ever has been under common control, or which is or ever has been treated as a
single employer, with any Seller under Section 414(b), (c), (m) or (o) of the
Code ("ERISA Affiliate") or to which any Seller and any ERISA Affiliate
---------------
contributed thereunder (the "ERISA Affiliate Plans"), maintained by,
---------------------
contributed to, or obligated to contribute to, by Sellers or any ERISA
Affiliate, including any Liability (i) to the Pension Benefit Guaranty
Corporation under Title IV of ERISA; (ii) with respect to non-compliance with
the notice and benefit continuation requirements of COBRA; or (iii) with
respect to any noncompliance by Sellers with ERISA or any other applicable
laws, but not including any Liabilities specifically assumed pursuant to
Section 6.10 hereof;
(l) Any IBEW Grievances or any other Liabilities relating to the
employment or termination of employment, including discrimination, wrongful
discharge, unfair labor practices, or constructive termination by Sellers of
any individual, attributable to any actions or inactions by Sellers prior to
the Closing Date other than such actions or inactions taken at the direction
of Buyer or its Affiliates;
(m) Any Liability of any Seller arising from the making or
performance of this Agreement or the Additional Agreements or the transactions
contemplated hereby or thereby;
(n) Any Liabilities relating to any claim, action, suit or
proceeding regarding matters which arose prior to the Closing Date,
notwithstanding the disclosure thereof in any Schedule, or any subsequent
claim, action, suit or proceeding arising out of or relating to such matters;
(o) Any Income Taxes attributable to income received by Sellers;
and
(p) Any Liabilities relating to or arising from the fuel leak at
Sunbury SES which is described in Attachment A of the Chester Engineers
Letter; and
(q) Any Liabilities arising from the failure of Sellers to
comply with their obligations pursuant to Section 2.1(g) hereof.
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2.5 Control of Litigation. The Parties agree and acknowledge that
---------------------
Sellers shall be entitled exclusively to control, defend and settle any
litigation, administrative or regulatory proceeding, and any investigation or
Remediation activities (including without limitation any environmental
mitigation or Remediation activities), arising out of or related to any
Excluded Liabilities, and Buyer agrees to cooperate fully in connection
therewith; provided, however, that no Seller shall enter into any settlement
-------- -------
agreement or arrangement with respect to any IBEW Grievance that is reasonably
likely to cause a Material Adverse Effect at any time without the prior
written consent of Buyer.
ARTICLE III
THE CLOSING
-----------
3.1 Closing. The sale, assignment, conveyance, transfer and delivery
-------
of the Purchased Assets to Buyer, the payment of the Purchase Price to
Sellers, and the consummation of the other respective obligations of the
Parties contemplated by this Agreement shall take place at a closing (the
"Closing"), to be held at the offices of Skadden, Arps, Slate, Meagher & Flom
-------
LLP, 919 Third Avenue, New York, New York 10022, at 10:00 a.m. eastern
standard time, or another mutually acceptable time and location, on the date
that is fifteen (15) Business Days following the date on which the last of the
conditions precedent to Closing set forth in Article VII of this Agreement
have been either satisfied or waived by the Party for whose benefit such
conditions precedent exist or on such other date as may be mutually agreed
upon by the Parties. The date of Closing is hereinafter called the "Closing
-------
Date." The Closing shall be effective for all purposes as of 12:01 a.m. on
- ----
the Closing Date.
3.2 Payment of Purchase Price. Upon the terms and subject to the
-------------------------
satisfaction of the conditions contained in this Agreement, in consideration
of the aforesaid sale, assignment, conveyance, transfer and delivery of the
Purchased Assets, Buyer will pay or cause to be paid to Sellers at the Closing
an aggregate amount in U.S. dollars of $96,400,000 (the "Purchase Price") plus
--------------
or minus any adjustments pursuant to the provisions of this Agreement, by wire
transfer of immediately available funds denominated in U.S. dollars or by such
other means as are agreed upon by Sellers and Buyer.
3.3 Adjustment to Purchase Price. (a) Subject to Section 3.3(b), at
----------------------------
the Closing, the Purchase Price shall be adjusted to account for the items set
forth in this Section 3.3(a):
(i) The Purchase Price shall be increased to reflect the
fair market value of all Fuel Inventories held by Sellers as of the
Closing Date, calculated using the weighted average cost method
consistent with Sellers' past and current accounting practices.
(ii) The Purchase Price shall be adjusted to account for
the items prorated as of the Closing Date pursuant to Section 3.5.
(iii) The Purchase Price shall be increased by the amount
expended, or for which a commitment was made, by Sellers between the
date hereof and the Closing Date for
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capital additions to or replacements of property, plant and equipment
included in the Purchased Assets and other expenditures or repairs on
property, plant and equipment included in the Purchased Assets that
would be capitalized by Sellers in accordance with normal accounting
policies of Sellers and their Affiliates (together, "Capital
-------
Expenditures"), which Capital Expenditures either are (A) described on
------------
Schedule 6.1; (B) for facility upgrades or changes required by law or
regulation of general application (i.e., not Sunbury specific) enacted
after the date hereof which is applicable to the post-Closing period,
provided that Buyer shall have the opportunity to review and approve the
plans, specifications, and budget for such facility upgrades or changes,
which approval shall not be unreasonably withheld or delayed; or (C)
approved in writing by Buyer.
(b) At least ten (10) Business Days prior to the Closing Date,
Sellers shall prepare and deliver to Buyer an estimated closing statement (the
"Estimated Closing Statement") that shall set forth in reasonable detail
---------------------------
Sellers' best estimate of all estimated adjustments to the Purchase Price
required by Section 3.3(a) (the "Estimated Adjustment"), together with the
--------------------
assumptions and calculations used by Sellers to estimate such adjustments.
Within five (5) Business Days following the delivery of the Estimated Closing
Statement by Sellers to Buyer, Buyer may object in good faith to the Estimated
Adjustment in writing. If Buyer objects to the Estimated Adjustment, the
Parties shall attempt to resolve their differences by negotiation. If the
Parties are unable to do so within two (2) Business Days prior to the Closing
Date (or if Buyer does not object to the Estimated Adjustment), the Purchase
Price shall be adjusted (the "Closing Adjustment") for the Closing by the
------------------
amount of the Estimated Adjustment not in dispute. The disputed portion shall
be paid as a Post-Closing Adjustment to the extent required by Section 3.3(c).
(c) Within sixty (60) days following the Closing Date, Sellers
shall prepare and deliver to Buyer a final closing statement (the
"Post-Closing Statement") that shall set forth in reasonable detail all
----------------------
adjustments to the Purchase Price required by Section 3.3(a) (the "Proposed
--------
Post-Closing Adjustment"). Within thirty (30) days following the delivery of
- -----------------------
the Post-Closing Statement by Sellers to Buyer, Buyer may object to the
Proposed Post-Closing Adjustment in writing. Sellers agree to cooperate with
Buyer to provide Buyer and Buyer's Representatives information used to prepare
the Post-Closing Statement and information relating thereto. If Buyer objects
to the Proposed Post-Closing Adjustment, the Parties shall attempt to resolve
such dispute by negotiation. If the Parties are unable to resolve such
dispute within thirty (30) days of any objection by Buyer, the Parties shall
appoint an Independent Accounting Firm, which shall be instructed to review
the Proposed Post-Closing Adjustment and determine the appropriate adjustment
to the Purchase Price, if any, within thirty (30) days thereafter. The fees
and disbursements of such Independent Accounting Firm shall be allocated
between Buyer and Sellers such that Buyer's share of such fees and
disbursements shall be in the same proportion that the aggregate amount of
such remaining disputed amounts so submitted by Buyer to such Independent
Accounting Firm that is unsuccessfully disputed by Buyer (as finally
determined by such Independent Accounting Firm) bears to the total amount of
such remaining disputed amounts so submitted by Buyer. The finding of such
Independent Accounting Firm shall be binding on the Parties hereto. Upon
determination of the appropriate adjustment (the "Post-Closing Adjustment")
-----------------------
by agreement of the Parties or by binding determination of the Independent
Accounting Firm, if the Post-Closing Adjustment is more or less than the
Closing Adjustment, the Party owing the difference
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<PAGE>
shall deliver such difference to the other Party no later than two (2)
Business Days after such determination, by wire transfer of immediately
available funds denominated in U.S. dollars or in any other manner as
reasonably requested by the payee. Any amount paid under this Section 3.3(c)
to Buyer or Sellers shall be paid with interest for the period from, and
including, the Closing Date to, but excluding, the date of payment, calculated
at the "prime rate" for domestic banks as published in The Wall Street Journal
(Northeast Edition) in the "Money Rates" section on the Closing Date.
3.4 Allocation of Purchase Price. Buyer and Sellers shall use their
----------------------------
good faith best efforts to agree upon an allocation among the Purchased Assets
of the sum of the Purchase Price and the Assumed Liabilities consistent with
Section 1060 of the Code and the Treasury Regulations thereunder within sixty
(60) days of the date of this Agreement. In the event that the Parties cannot
agree on a mutually satisfactory allocation within said time period, the
Parties shall appoint an Independent Accounting Firm which shall, at Sellers'
and Buyer's equal expense, determine the appropriate allocation with respect
to the issues in dispute. The finding of such Independent Accounting Firm
shall be binding on the Parties. After determination of the allocation by
agreement of the Parties or by binding determination of the Independent
Accounting Firm, Buyer and Sellers agree to file, for the tax year in which
Closing occurs, Internal Revenue Service Form 8594, and all federal, state,
local and foreign Tax Returns, in accordance with such allocation. Buyer and
Sellers shall report the transactions contemplated by this Agreement for
federal Tax and all other Tax purposes in a manner consistent with the
allocation determined pursuant to this Section 3.4. Buyer and Sellers agree
to provide the other promptly with any information required to complete Form
8594. Buyer and Sellers shall notify and provide the other with reasonable
assistance in the event of an examination, audit or other proceeding regarding
the agreed upon allocation of the Purchase Price.
3.5 Prorations. (a) Buyer and Sellers agree that all of the items
----------
normally prorated, including those listed below (but not including Income
Taxes), relating to the business and operation of the Purchased Assets shall
be prorated as of the Closing Date, with Sellers liable to the extent such
items relate to any time period prior to the Closing Date, and Buyer liable to
the extent such items relate to periods commencing with the Closing Date
(measured in the same units used to compute the item in question, otherwise
measured by calendar days):
(i) Personal property, real estate and occupancy Taxes,
assessments and other charges, if any, on or with respect to the
business and operation of the Purchased Assets;
(ii) Rent, Taxes and all other items (including prepaid
services or goods not included in Inventory) payable by or to Sellers
under any of the Sellers' Agreements;
(iii) Any permit, license, registration, emission fees or
other fees with respect to any Transferable Permit; and
(iv) Sewer rents and charges for water, telephone,
electricity and other utilities.
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<PAGE>
(b) In connection with the prorations referred to in (a) above,
in the event that actual figures are not available at the Closing Date, the
proration shall be based upon the actual Taxes or other amounts accrued
through the Closing Date or paid for the most recent year (or other
appropriate period) for which actual Taxes or other amounts paid are
available. Such prorated Taxes or other amounts shall be re-prorated and paid
to the appropriate Party within sixty (60) days of the date that the
previously unavailable actual figures become available. Sellers and Buyer
agree to furnish each other with such documents and other records as may be
reasonably requested in order to confirm all adjustment and proration
calculations made pursuant to this Section 3.5.
Notwithstanding anything to the contrary herein, no proration
shall be made under this Section 3.5 with respect to (i) real property Tax
refunds described in Section 2.2(i) or (ii) transfer Taxes described in
Section 6.8(a).
3.6 Deliveries by Sellers. At the Closing, Sellers will deliver, or
---------------------
cause to be delivered, the following to Buyer:
(a) The Bill of Sale, duly executed by the appropriate Sellers;
(b) Copies of any and all governmental and other third party
consents, waivers or approvals obtained by Sellers with respect to the
transfer of the Purchased Assets, or the consummation of the transactions
contemplated by this Agreement and the Additional Agreements, to the extent
specifically required hereunder or thereunder;
(c) The Special Warranty Deeds, duly executed and acknowledged
by the appropriate Sellers and in recordable form;
(d) The Assignment and Assumption Agreement, duly executed by
the appropriate Sellers;
(e) A FIRPTA Affidavit, duly executed by the appropriate
Sellers;
(f) Copies, certified by the Secretary or Assistant Secretary of
each Seller, of corporate resolutions authorizing the execution and delivery
of this Agreement, each Additional Agreement and all of the other agreements
and instruments to be executed and delivered by such Seller in connection
herewith, and the consummation of the transactions contemplated hereby and
thereby;
(g) A certificate of the Secretary or Assistant Secretary of
each Seller identifying the name and title and bearing the signatures of the
officers of such Seller authorized to execute and deliver this Agreement, each
Additional Agreement and the other agreements and instruments contemplated
hereby;
(h) A copy of the certificate of incorporation and by-laws of
each Seller, certified by the Secretary or Assistant Secretary of such Seller,
and a copy of the certificate of incorporation of each Seller certified by the
Secretary of the Commonwealth of Pennsylvania;
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(i) To the extent available, originals of all Sellers'
Agreements and Transferable Permits and, if not available, true and correct
copies thereof;
(j) All releases necessary to terminate, discharge, or waive any
Encumbrances (other than Permitted Encumbrances) on the Purchased Assets, in
recordable form;
(k) Such affidavits and, to the extent consistent with and not
in addition to the terms hereof, indemnities reasonably requested by the title
insurance company issuing the Title Commitments;
(l) Each of the other Additional Agreements, duly executed and
in recordable form, if appropriate; provided, however, that Sellers will not
-------- -------
be required to deliver, or cause to be delivered, at the Closing, a duly
executed Generation Support Services Agreement or a duly executed Transition
Services Agreement if the Parties have not agreed upon mutually acceptable
terms and conditions therefor on or prior to the Closing Date as contemplated
in Section 6.13;
(m) All such other instruments of assignment or conveyance as
shall, in the reasonable opinion of Buyer and their counsel, be necessary to
transfer to Buyer the Purchased Assets, in accordance with this Agreement and
where necessary or desirable in recordable form; and
(n) Such other agreements, documents, instruments and writings
as are required to be delivered by Sellers at or prior to the Closing Date
pursuant to this Agreement or otherwise reasonably required in connection
herewith.
3.7 Deliveries by Buyer. At the Closing, Buyer will deliver, or
-------------------
cause to be delivered, the following to Sellers:
(a) The Purchase Price, as adjusted pursuant to Section 3.3(b),
by wire transfer of immediately available funds in accordance with Sellers'
instructions or by such other means as may be agreed to by Sellers and Buyer;
(b) The Assignment and Assumption Agreement, duly executed by
Buyer;
(c) Copies, certified by the Secretary or Assistant Secretary of
Buyer, of resolutions authorizing the execution and delivery of this
Agreement, each Additional Agreement and all of the other agreements and
instruments to be executed and delivered by Buyer in connection herewith, and
the consummation of the transactions contemplated hereby and thereby;
(d) A certificate of the Secretary or Assistant Secretary of
Buyer identifying the name and title and bearing the signatures of the
officers of such Buyer authorized to execute and deliver this Agreement, each
Additional Agreement and the other agreements and instruments contemplated
hereby;
(e) A copy of the articles of organization and by-laws (or
similar governing documents) of Buyer, certified by the Secretary or Assistant
Secretary of Buyer, and a copy of the
27
<PAGE>
articles of organization (or similar governing document) of Buyer certified by
the Secretary of the state of organization of Buyer;
(f) Each of the other Additional Agreements, duly executed and
in recordable form, if appropriate; provided, however, that Buyer will not be
-------- -------
required to deliver, or cause to be delivered, at the Closing, a duly executed
Generation Support Services Agreement or a duly executed Transition Services
Agreement if the Parties have not agreed upon mutually acceptable terms and
conditions therefor on or prior to the Closing Date as contemplated in
Section 6.13;
(g) All such other instruments of assumption as shall, in the
reasonable opinion of Sellers and their counsel, be necessary for Buyer to
assume the Assumed Liabilities in accordance with this Agreement;
(h) Copies of any and all governmental and other third party
consents, waivers or approvals obtained by Buyer with respect to the transfer
of the Purchased Assets, or the consummation of the transactions contemplated
by this Agreement and the Additional Agreements;
(i) Such other agreements, documents, instruments and writings
as are required to be delivered by Buyer at or prior to the Closing Date
pursuant to this Agreement or otherwise reasonably required in connection
herewith.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SELLERS
-----------------------------------------
PP&L and LJC each hereby represent and warrant to Buyer on a joint and
several basis and Resources hereby represents and warrants to Buyer as to
itself, to the extent applicable, as follows:
4.1 Incorporation; Qualification. Each Seller is a corporation duly
----------------------------
incorporated, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania and has all requisite corporate power and
authority to own, lease, and operate its properties and to carry on its
business as it is now being conducted. Each Seller is duly qualified to do
business as a foreign corporation and is in good standing under the laws of
each jurisdiction in which its business as now being conducted shall require
it to be so qualified, except where the failure to be so qualified would not
have a Material Adverse Effect.
4.2 Authority. Each Seller has full corporate power and authority to
---------
execute and deliver this Agreement and each of the Additional Agreements to
which it is a party and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement and each of the
Additional Agreements by the applicable Sellers and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action required on the part of each
such Seller. This Agreement has been duly and validly executed and delivered
by each Seller and subject to the receipt of Sellers' Required Regulatory
Approvals, this Agreement constitutes, and upon the execution and delivery by
the applicable Sellers of each of the Additional Agreements, each such
Additional Agreement will constitute, legal, valid
28
<PAGE>
and binding obligations of each such Seller, enforceable against each such
Seller in accordance with their terms, except that such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar laws affecting or relating to
enforcement of creditors' rights generally and general principles of equity
(regardless of whether enforcement is considered in a proceeding at law or in
equity).
4.3 Consents and Approvals; No Violation. (a) Except as set
------------------------------------
forth in Schedule 4.3(a), and subject to obtaining Sellers' Required
Regulatory Approvals, neither the execution and delivery of this Agreement and
the Additional Agreements by Sellers nor the consummation by Sellers of the
transactions contemplated hereby will (i) conflict with or result in any
breach of any provision of the Certificate of Incorporation or Bylaws of any
Seller; (ii) result in a default (or give rise to any right of termination,
cancellation or acceleration) under any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, material agreement or other instrument
or obligation to which any Seller is a party or by which it, or any of the
Purchased Assets, may be bound, except for such defaults (or rights of
termination, cancellation or acceleration) as to which requisite waivers or
consents have been obtained or which, would not, individually or in the
aggregate, create a Material Adverse Effect; or (iii) constitute violations of
any law, regulation, order, judgment or decree applicable to any Seller, which
violations, individually or in the aggregate, would create a Material Adverse
Effect.
(b) Except as set forth in Schedule 4.3(b), (the filings and
approvals referred to in Schedule 4.3(b) are collectively referred to as the
"Sellers' Required Regulatory Approvals"), no consent or approval of, filing
--------------------------------------
with, or notice to, any Governmental Authority is necessary for the execution
and delivery of this Agreement and the Additional Agreements by Sellers or the
consummation by Sellers of the transactions contemplated hereby or thereby,
other than (i) such consents, approvals, filings or notices which, if not
obtained or made, will not prevent Sellers from performing its material
obligations under this Agreement and the Additional Agreements and (ii) such
consents, approvals, filings or notices which become applicable to Sellers or
the Purchased Assets as a result of the specific regulatory status of the
Buyer (or any of its Affiliates) or as a result of any other facts that
specifically relate to the business or activities in which the Buyer (or any
of its Affiliates) is or proposes to be engaged.
4.4 Insurance. Except as set forth in Schedule 4.4, all material
---------
policies of fire, liability, workers' compensation and other forms of
insurance owned or held by, or on behalf of, Sellers and insuring the
Purchased Assets are in full force and effect, all premiums with respect
thereto covering all periods up to and including the date hereof have been
paid (other than retroactive premiums which may be payable with respect to
comprehensive general liability and workers' compensation insurance policies),
and no notice of cancellation or termination has been received with respect to
any such policy which was not replaced on substantially similar terms prior to
the date of such cancellation. Except as described in Schedule 4.4, as of the
date of this Agreement, none of the Sellers have been refused any insurance
with respect to the Purchased Assets nor have their respective coverages been
limited by any insurance carrier to which any of them have applied for
any such insurance or with which any of them have carried insurance during the
last twelve (12) months.
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4.5 Title and Related Matters. (a) Except as set forth in Schedule
-------------------------
4.5 and subject to Permitted Encumbrances, PP&L is the holder of record title
to the Real Property located at Sunbury Station and is the holder of the
surface rights to the Silt Reserves Real Property it is transferring and LJC
is the holder of the surface rights to the Real Property located at Lady Jane
it is transferring and PP&L or LJC, as applicable, has good and valid title to
the other Purchased Assets which it purports to own, free and clear of all
Encumbrances.
(b) Condition. The tangible assets (real and personal) at,
---------
related to, or used in connection with each of Sunbury SES, the CTGs, Lady
Jane, Buck Run, and Forrestville, in each case taken as a whole, (i) are in
good operating and usable condition and repair, free from any defects (except
for ordinary wear and tear, in light of their respective ages and historical
usages, and except for such defects as do not materially interfere with the
use thereof in the conduct of the normal operation and maintenance of the
Purchased Assets taken as a whole) and (ii) have been maintained consistent
with Good Utility Practices.
4.6 Environmental Matters. Except as disclosed in Schedule 4.6 or in
---------------------
any public filing made by Sellers or by any of their Affiliates pursuant to
the Securities Act or the Exchange Act or in the Environmental Report:
(a) Sellers hold, and are in substantial compliance with, all
permits, certificates, certifications, licenses and governmental
authorizations under Environmental Laws ("Environmental Permits") that are
---------------------
required for them to conduct the business and operations of the Purchased
Assets, and Sellers are otherwise in compliance with applicable Environmental
Laws with respect to the business and operations of the Purchased Assets,
except for such failures to hold or comply with required Environmental
Permits, or such failures to be in compliance with applicable Environmental
Laws, as would not, individually or in the aggregate, create a Material
Adverse Effect;
(b) No Seller has received any written request for information,
or been notified of any material violation, or that it is a potentially
responsible party, under CERCLA or any other Environmental Law for
contamination or air emissions at any of the Sites, except for such requests
or notices that would result in liabilities under such laws as would not be
reasonably likely to, individually or in the aggregate, create a Material
Adverse Effect and there are no claims, actions, proceedings or investigations
pending or, to the Knowledge of Sellers, threatened against any Seller before
any Governmental Authority or body acting in an adjudicative capacity relating
in any way to any Environmental Laws and concerning contamination or air
emissions at any of the Sites, except for such claims, actions, proceedings or
investigations as would not be reasonably likely to, individually or in the
aggregate, create a Material Adverse Effect, nor does any Seller have
Knowledge of any circumstances or facts that could reasonably be expected to
result in any such claims, actions, proceedings or investigations; and
(c) There are no outstanding judgments, decrees, or judicial
orders relating to the Purchased Assets regarding compliance with any
Environmental Law or to the investigation or cleanup of Hazardous Substances
under any Environmental Law relating to the Purchased Assets, except for such
consent decrees or orders, judgments, decrees or judicial orders as would not,
individually or in the aggregate, create a Material Adverse Effect.
30
<PAGE>
The representations and warranties made in this Section 4.6 are the
Sellers' exclusive representations and warranties relating to environmental
matters.
4.7 Labor Matters. Sellers have previously delivered to Buyer true
-------------
and correct copies of all collective bargaining agreements to which any Seller
is a party or is subject and which relate to the business and operations of
the Purchased Assets owned by it. With respect to the business or operations
of the Purchased Assets, except to the extent set forth in Schedule 4.7 and
except for such matters as will not, individually or in the aggregate, create
a Material Adverse Effect, (a) each Seller is in compliance with all
applicable Laws respecting employment and employment practices, terms and
conditions of employment and wages and hours; (b) no Seller has received
written notice of any unfair labor practice complaint against it pending
before the National Labor Relations Board; and (c) no arbitration proceeding
arising out of or under any collective bargaining agreements is pending
against any Seller.
4.8 Benefit Plans; ERISA. Schedule 4.8 lists all deferred
--------------------
compensation, profit-sharing, retirement and pension plans and all material
bonus, fringe benefit and other employee benefit plans maintained or with
respect to which contributions are made by PP&L or LJC in respect of the
current employees of PP&L and LJC connected with the Purchased Assets
("Benefit Plans"). No Benefit Plan is a "multiemployer plan," as defined in
Section 4001(a)(3) of ERISA. True and complete copies of all such Benefit
Plans have been made available to Buyer.
4.9 Real Property. Schedule 4.9 and Schedule 2.1(b) describes all of
-------------
the real property (including easements, if any) that are owned or used by any
Seller principally in connection with, or that are necessary for, the
ownership and operation of the Purchased Assets, substantially as presently
owned and operated by Sellers. To the Knowledge of Sellers, no fact or
condition exists which would prohibit or materially adversely affect the
ordinary rights of access to and from the Real Property or the Silt Reserves
Real Property from and to the existing highways and roads, as applicable, and
there is no pending, or to the Knowledge of Sellers, threatened restriction or
denial, governmental or otherwise, upon such ingress or egress except as
indicated on Schedule 4.10. Except as indicated on Schedule 4.9, the Sellers
have not received written notice that their occupation and use of the Real
Property or the Silt Reserves Real Property is in violation of any applicable
Law. Sellers have not received any written notice of any claim of adverse
possession or prescriptive rights involving any of the Real Property or the
Silt Reserves Real Property. To the Knowledge of Sellers, no public
improvements have been commenced and, Sellers have not received written notice
that any public improvements are planned, which in either case may result in
special assessments against any of the Real Property or the Silt Reserves Real
Property or otherwise create a Material Adverse Effect. Except as indicated
in Schedule 4.9, no Seller has any Knowledge of any order, writ, injunction,
or decree requiring repair or alteration of any existing condition materially
adversely affecting any Real Property, the Silt Reserves Real Property or the
Improvements thereat.
4.10 Condemnation. Except as set forth in Schedule 4.10, there are no
------------
pending or, to the Knowledge of Sellers, threatened proceedings or
governmental actions to condemn or take by power of eminent domain all or any
part of the Purchased Assets.
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<PAGE>
4.11 Contracts and Leases. (a) Schedule 4.11(a) lists all written
--------------------
contracts, licenses (other than Permits or Intellectual Property), agreements
or personal property leases which are material to the business or operations
of the Purchased Assets, other than contracts, licenses, agreements or
personal property leases which are listed or described on another Schedule or
which constitute Excluded Assets or which are expected to expire or terminate
prior to the Closing Date.
(b) Except as disclosed in Schedule 4.11(b), each Sellers'
Agreement (i) constitutes a legal, valid and binding obligation of each Seller
that is a party thereto and, to such Seller's Knowledge, constitutes a valid
and binding obligation of the other parties thereto, (ii) is in full force and
effect and no Seller has delivered or received any written notice of
termination thereunder, and (iii) may be transferred to Buyer pursuant to this
Agreement without the consent of the other parties thereto and will continue
in full force and effect thereafter, in each case without breaching the terms
thereof or resulting in the forfeiture or impairment of any rights thereunder.
(c) Except as set forth in Schedule 4.11(c), there is not
under any Sellers' Agreement any default or event which, with notice or lapse
of time or both, (i) would constitute a default on the part of any Seller that
is a party thereto or, to such Sellers' Knowledge, any other party thereto,
(ii) would constitute a default on the part of any Seller that is a party
thereto or, to such Sellers' Knowledge, any other party thereto which would
give rise to an automatic termination, or the right of discretionary
termination, thereof, or (iii) would cause the acceleration of any of the
Sellers' obligations thereunder or result in the creation of any Encumbrance
(other than any Permitted Encumbrance) on any of the Purchased Assets. There
are no claims, actions, proceedings or investigations pending or, to the
Knowledge of Sellers, threatened against any Seller or any other party to any
Sellers' Agreements, before any Governmental Authority or body acting in an
adjudicative capacity relating in any way to any of Sellers' Agreements or the
subject matter thereof. Sellers have no Knowledge of any defense, offset or
counterclaim arising under any Sellers' Agreement.
4.12 Legal Proceedings. Except as set forth in Schedule 4.12 or in any
-----------------
filing made by any Seller or any of their Affiliates pursuant to the
Securities Act or the Exchange Act, there are no actions or proceedings
pending or, to the Knowledge of Sellers, threatened against any Seller before
any court, arbitrator or Governmental Authority, which could, individually or
in the aggregate, reasonably be expected to create a Material Adverse Effect
or that question the validity of this Agreement or the Additional Agreements
or of any action taken or to be taken by any Seller or any of their respective
Affiliates pursuant to or in connection with the provisions of this Agreement
or the Additional Agreements. Except as set forth in Schedule 4.12 or in any
filing made by any Seller or any of their Affiliates pursuant to the
Securities Act or the Exchange Act, no Seller is subject to any outstanding
judgments, rules, orders, writs, injunctions or decrees of any court,
arbitrator or Governmental Authority which would, individually or in the
aggregate, create a Material Adverse Effect.
4.13 Permits. (a) PP&L and LJC have all permits, licenses, franchises
-------
and other governmental authorizations, consents and approvals (other than
Environmental Permits, which are addressed in Section 4.6 hereof)
(collectively, "Permits") necessary to own and operate the Purchased Assets
-------
except where the failure to have such Permits would not, individually or in
the
32
<PAGE>
aggregate, create a Material Adverse Effect. Except as disclosed in
Schedule 4.13(a) or in the Environmental Report, no Seller has received any
written notification that it is in violation, nor does any Seller have
Knowledge of any violations, of any such Permits, or any Law or judgment of
any Government Authority applicable to it with respect to the Purchased
Assets, except for violations which would not, individually or in the
aggregate, create a Material Adverse Effect.
(b) Schedule 4.13(b) sets forth all material Permits and
Environmental Permits, other than Transferable Permits (which are set forth on
Schedule 1.1(118)).
4.14 Taxes. Except as disclosed on Schedule 4.14, (i) Sellers have
-----
filed all Tax Returns that are required to be filed by them with respect to
any Tax, and Sellers have paid all Taxes that have become due as indicated
thereon, except where such Tax is being contested in good faith by appropriate
proceedings, or where the failure to so file or pay would not be reasonably
likely to create a Material Adverse Effect and (ii) there are no Encumbrances
for Taxes on the Purchased Assets that are not Permitted Encumbrances.
4.15 Year 2000. PP&L and LJC have put into effect practices and
---------
programs which PP&L and LJC reasonably believe will enable any of the
hardware, software and firmware products (including embedded microcontrollers
in non-computer equipment) which may be included in the Purchased Assets to be
transferred under this Agreement (the "Computer Systems") to be Year 2000
----------------
Ready by December 31, 1999. In addition, PP&L has put into effect practices
and programs which PP&L reasonably believes will enable the continuous
emissions monitoring system at Sunbury SES to be Year 2000 Compliant by
December 31, 1999. For purposes hereof, (i) "Year 2000 Ready" has the meaning
set forth in the Nuclear Regulatory Commission's Generic Letter 98-01,
entitled "Year 2000 Readiness of Computer Systems at Nuclear Power Plants,"
and (ii) "Year 2000 Compliant" means that the Computer Systems will correctly
differentiate between years, in different centuries, that end in the same two
digits, and will accurately process date/time data (including, but not limited
to, calculating, comparing, and sequencing) from, into, and between the
twentieth and twenty-first centuries, including leap year calculations.
4.16 Intellectual Property. Except as set forth on Schedule 4.16 or in
---------------------
Section 2.2(f), Sellers have, or will as of the Closing have, such ownership
of or such rights by license or other agreement to use all Intellectual
Property necessary to permit Sellers to conduct their business as currently
conducted, except where the failure to have such ownership, license or right
to use would not, individually or in the aggregate, have a Material Adverse
Effect. Except as disclosed in Schedule 4.16 or Schedule 2.1(o), (i) the
Sellers are not, nor have they received any notice that they are, in default
(or with the giving of notice or lapse of time or both, would be in default),
under any contract to use such Intellectual Property, (ii) there are no
material restrictions on the transfer of any material contract, or any
interest therein, held by Sellers in respect of such Intellectual Property,
and (iii) to Sellers' Knowledge, such Intellectual Property is not being
infringed by any other Person. No Seller has received notice that it is
infringing any Intellectual Property of any other Person in connection with
the operation or business of the Purchased Assets and neither Seller, to their
Knowledge, is infringing any Intellectual Property of any other Person the
effect of which, individually or in the aggregate, would have a Material
Adverse Effect.
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4.17 Compliance with Laws. Except as disclosed in Schedule 4.17,
--------------------
Sellers are in compliance with all applicable Laws with respect to the
ownership or operation of the Purchased Assets except where the failure to be
in compliance would not, individually or in the aggregate, create a Material
Adverse Effect.
4.18 Sufficiency of Purchased Assets. Except (i) as set forth on
-------------------------------
Schedule 4.18, (ii) for any real or personal property interests necessary for
or used in connection with the provision of any of the services listed on
Schedule 6.13, (iii) as stated in the Environmental Report and (iv) for any
real or personal property interests which are not material to the ownership,
operation and maintenance of the Purchased Assets as historically owned,
operated and maintained by Sellers, and subject to (A) change in applicable
Law or interpretation thereof, after the Closing Date, and (B) events beyond
the control of the Sellers which may occur after the Closing Date, no real
property interests (including flowage rights and seepage rights), buildings,
structures, machinery, equipment, supplies, materials, spares, vehicles,
boats, trailers, contracts, agreements, rights (except Permits which are not
Transferable Permits), books, records, or other real or personal property or
interests, other than the Purchased Assets, are necessary for Buyer to own,
operate, or maintain the Purchased Assets, substantially as historically
owned, operated and maintained by Sellers. Subject to Buyer's receipt of all
necessary consents and approvals and except as set forth on Schedule 4.18, the
Purchased Assets, together with the Additional Agreements, are sufficient to
allow Buyer, after the Closing, to deliver the output of the Sunbury Station
to the PJM transmission system by and through the Seller's transmission system
at the respective interconnection points specified in the Interconnection
Agreement. As of the Closing Date, the Purchased Assets will meet the
standards required thereof and will include all Interconnection Equipment (as
defined in the Interconnection Agreement) required, in each case, as of the
Closing Date under the Interconnection Agreement and the other Additional
Agreements. Notwithstanding any provision in this Section 4.18 to the
contrary, Sellers make no representations or warranties as to the sufficiency
of the Emission Allowances which will be transferred to Buyer.
4.19 Conveyance of Real Property. No state, municipal, or other
---------------------------
governmental approval regarding the division, platting, or mapping of real
estate is required as a prerequisite to the conveyance by Sellers to Buyer (or
as a prerequisite to the recording of any conveyance document) of any Real
Property and any Silt Reserves Real Property pursuant to the terms hereof.
4.20 Emission Allowances. Subject to Sections 2.1(g) and 6.1(a)(ii),
-------------------
Sellers hold, and will transfer to Buyer at Closing, all of their right, title
and interest in, free and clear of all Encumbrances (except Permitted
Encumbrances), the Emission Allowances set forth in Schedule 2.1(g). There
have been no emission increases at Sunbury Station on or prior to the Closing
Date for which Buyer will be required to hold or obtain Emission Reduction
Credits on or after the Closing Date.
4.21 CTGs. The Sellers have, or will have prior to the Closing Date,
----
taken all action necessary under all applicable Laws (including, without
limitation, 25 Pa. Code Section 127.11a), and have, or will have prior to the
Closing Date, obtained all Permits and Environmental Permits required, to
reactivate and operate the CTGs on a continuing basis, substantially as
historically operated by Sellers prior to the deactivation of the CTGs on
May 17, 1996.
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4.22 Copies. To the extent that Sellers provided Buyer with a copy of
------
any Permit, Environmental Permit or Sellers' Agreement, such copy was true,
correct and complete in all material respects. Sellers provided a true,
correct and complete copy of the Environmental Report to Buyer.
4.23 Reports. Since January 1, 1996, Sellers have filed or caused to
-------
be filed with the SEC or the FERC, as the case may be, all material forms,
statements, reports and documents (including all exhibits, amendments and
supplements thereto) required to be filed by Sellers with respect to the
business and operations of Sellers as it relates to the Purchased Assets under
each of the Securities Act, the Exchange Act, the Federal Power Act, and the
respective rules and regulations thereunder, all of which complied in all
material respects with all applicable requirements of the appropriate act or
acts governing each such filing and the rules and regulations thereunder in
effect on the date each such report was filed.
4.24 Information. (a) The PP&L historical information set forth on
-----------
Schedule 4.24 was prepared in good faith and, to PP&L's Knowledge, does not
contain any material errors. The total amount reflected in the Materials and
Supplies Inventory List as of April 30, 1999 for Sunbury SES provided by PP&L
to Buyer agrees with the amount reflected in PP&L's general ledger. Buyer
acknowledges that the information referred to in this Section 4.24(a) is
historical in nature and is not necessarily indicative of future events or
circumstances or the future performance of the Purchased Assets, and Sellers
do not make any representations to such effect.
(b) The Line Arrangement-Block Diagrams set forth in Schedule
2.1(d)-1 accurately reflect, in all material respects, the equipment
configurations they purport to represent.
(c) The anthracite silt reserve inventory level at Forrestville
reflected on PP&L's general ledger was calculated by multiplying: (i) 701,651
tons of anthracite silt by (ii) ninety-two (92) cents per ton.
4.25 DISCLAIMERS REGARDING PURCHASED ASSETS. EXCEPT FOR THE
--------------------------------------
REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS ARTICLE IV, THE PURCHASED
ASSETS ARE SOLD "AS IS, WHERE IS", AND SELLERS EXPRESSLY DISCLAIM ANY
REPRESENTATIONS OR WARRANTIES OF ANY KIND OR NATURE, EXPRESS OR IMPLIED, AS TO
LIABILITIES, OPERATIONS OF THE PURCHASED ASSETS, THE TITLE, CONDITION, VALUE
OR QUALITY OF THE PURCHASED ASSETS OR THE PROSPECTS (FINANCIAL AND OTHERWISE),
RISKS AND OTHER INCIDENTS OF THE PURCHASED ASSETS AND SELLERS SPECIFICALLY
DISCLAIM ANY REPRESENTATION OR WARRANTY OF MERCHANTABILITY, USAGE, SUITABILITY
OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO THE PURCHASED ASSETS, OR
ANY PART THEREOF, OR AS TO THE WORKMANSHIP THEREOF, OR THE ABSENCE OF ANY
DEFECTS THEREIN, WHETHER LATENT OR PATENT, OR COMPLIANCE WITH ENVIRONMENTAL
REQUIREMENTS, OR THE APPLICABILITY OF ANY GOVERNMENTAL REQUIREMENTS, INCLUDING
BUT NOT LIMITED TO ANY
35
<PAGE>
ENVIRONMENTAL LAWS, OR WHETHER SELLERS POSSESS SUFFICIENT REAL PROPERTY
OR PERSONAL PROPERTY TO OPERATE THE PURCHASED ASSETS. EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED HEREIN, SELLERS FURTHER SPECIFICALLY DISCLAIM ANY
REPRESENTATION OR WARRANTY REGARDING THE ABSENCE OF HAZARDOUS SUBSTANCES OR
LIABILITY OR POTENTIAL LIABILITY ARISING UNDER ENVIRONMENTAL LAWS WITH RESPECT
TO THE PURCHASED ASSETS. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING,
EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, SELLERS EXPRESSLY DISCLAIM ANY
REPRESENTATION OR WARRANTY OF ANY KIND REGARDING THE CONDITION OF THE
PURCHASED ASSETS OR THE SUITABILITY OF THE PURCHASED ASSETS FOR OPERATION AS A
POWER PLANT OR AS A FUEL PROCESSING FACILITY, AS APPLICABLE, AND NO SCHEDULE
OR EXHIBIT TO THIS AGREEMENT, NOR ANY OTHER MATERIAL OR INFORMATION PROVIDED
BY OR COMMUNICATIONS MADE BY SELLERS OR THEIR RESPECTIVE REPRESENTATIVES, OR
BY ANY BROKER OR INVESTMENT BANKER, WILL CAUSE OR CREATE ANY WARRANTY, EXPRESS
OR IMPLIED, AS TO THE TITLE, CONDITION, VALUE OR QUALITY OF THE PURCHASED
ASSETS.
IN ADDITION, SELLERS EXPRESSLY DISCLAIM ANY AND ALL REPRESENTATIONS AND
WARRANTIES WITH RESPECT TO THE NAMES "SUNBURY STATION" AND "LADY JANE",
INCLUDING, WITHOUT LIMITATION, ANY REPRESENTATIONS OR WARRANTIES OF (1) TITLE;
(2) LENGTH, NATURE, EXCLUSIVITY AND CONTINUITY OF USE; (3) STRENGTH OR FAME;
AND (4) NONINFRINGEMENT AND NONDILUTION OF TRADEMARK, SERVICE MARK, TRADE NAME
AND/OR OTHER PROPRIETARY RIGHTS OF ANY THIRD PARTY. MOREOVER, BUYER
ACKNOWLEDGES THAT "SUNBURY" HAS A GEOGRAPHIC CONNOTATION ASSOCIATED WITH THE
LOCATION OF CERTAIN OF THE PURCHASED ASSETS.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer hereby represents and warrants to Sellers as follows:
5.1 Organization. Buyer is a limited liability company duly
------------
organized, validly existing and in good standing under the laws of the State
of Delaware and has all requisite power and authority to own, lease or operate
its properties and to carry on its business as it is now being conducted.
Buyer is, or by the Closing will be, qualified to do business in the
Commonwealth of Pennsylvania. Buyer has heretofore delivered to Sellers
complete and correct copies of its articles of organization and by-laws (or
other similar governing documents) as currently in effect.
5.2 Authority. Buyer has full power and authority to execute and
---------
deliver this Agreement and each of the Additional Agreements and, subject to
receipt of Buyer's Required Regulatory Approvals, to consummate the
transactions contemplated by it hereby and thereby. The execution
36
<PAGE>
and delivery of this Agreement and each of the Additional Agreements by the
Buyer and the consummation of the transactions contemplated hereby and thereby
have been duly and validly authorized by all necessary action required on the
part of Buyer. This Agreement has been duly and validly executed and
delivered by Buyer and subject to the receipt of Buyer's Required Regulatory
Approvals, this Agreement constitutes, and upon the execution and delivery by
Buyer of each of the Additional Agreements, each such Additional Agreement
will constitute, legal, valid and binding obligations of Buyer, enforceable
against Buyer in accordance with their respective terms, except that such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, fraudulent conveyance, moratorium or other similar laws
affecting or relating to enforcement of creditors' rights generally and
general principles of equity (regardless of whether enforcement is considered
in a proceeding at law or in equity).
5.3 Consents and Approvals; No Violation.
------------------------------------
(a) Except as set forth in Schedule 5.3(a), and subject to
obtaining Buyer's Required Regulatory Approvals, neither the execution and
delivery of this Agreement and the Additional Agreements by Buyer nor the
consummation by Buyer of the transactions contemplated hereby and thereby will
(i) conflict with or result in any breach of any provision of the certificate
of incorporation or articles of organization, as applicable, or by-laws (or
other similar governing documents) of Buyer or its Affiliates; (ii) result in
a default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, material agreement or other instrument or
obligation to which Buyer, its Affiliates or any of their Subsidiaries is a
party or by which any of their respective assets may be bound, except for such
defaults (or rights of termination, cancellation or acceleration) as to which
requisite waivers or consents have been obtained or which would not,
individually or in the aggregate, have a material adverse effect on the
business, assets, operations or condition (financial or otherwise) of Buyer,
including any change or effect that is materially adverse to Buyer's ability
to own, operate, or use the Purchased Assets as so owned, operated and used by
the Sellers prior to the date hereof and any change or effect that is
materially adverse to Buyer's ability to perform its obligations under this
Agreement or any Additional Agreement ("Buyer Material Adverse Effect"); or
-----------------------------
(iii) constitute violations of any law, regulation, order, judgment or decree
applicable to Buyer, which violations, individually or in the aggregate, would
create a Buyer Material Adverse Effect.
(b) Except as set forth in Schedule 5.3(b) (the filings and
approvals referred to in such Schedule are collectively referred to as the
"Buyer's Required Regulatory Approvals"), no consent or approval of, filing
-------------------------------------
with, or notice to, any Governmental Authority is necessary for the execution
and delivery of this Agreement and the Additional Agreements by Buyer or the
consummation by Buyer of the transactions contemplated hereby and thereby,
other than such consents, approvals, filings or notices, which, if not
obtained or made, will not prevent Buyer from performing its obligations under
this Agreement and the Additional Agreements.
5.4 Availability of Funds. Buyer has sufficient funds and lines of
---------------------
credit available to it or has received binding written commitments from
creditworthy financial institutions, copies of which have been provided to
Sellers, to provide sufficient funds on the Closing Date to pay the Purchase
Price and to permit Buyer to timely perform all of its obligations (including,
without
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limitation, its obligations pursuant to Article VIII) under this Agreement and
the Additional Agreements.
5.5 Legal Proceedings. There are no actions or proceedings pending
-----------------
or, to the Knowledge of Buyer, threatened against Buyer before any court,
arbitrator or Governmental Authority, which could, individually or in the
aggregate, reasonably be expected to create a Buyer Material Adverse Effect or
that question the validity of this Agreement or the Additional Agreements or
of any action taken or to be taken pursuant to or in connection with the
provisions of this Agreement or the Additional Agreements. Buyer is not
subject to any outstanding judgments, rules, orders, writs, injunctions or
decrees of any court, arbitrator or Governmental Authority which would,
individually or in the aggregate, create a Buyer Material Adverse Effect.
5.6 Qualified Buyer. Buyer is qualified to obtain any Permits and
---------------
Environmental Permits necessary for Buyer to own and operate the Purchased
Assets as of the Closing.
5.7 WARN Act. Buyer does not intend to engage in a Plant Closing or
--------
Mass Layoff as such terms are defined in the WARN Act within sixty (60) days
of the Closing Date.
5.8 Equity Contribution Agreement. A true and correct copy of the
-----------------------------
Equity Contribution Agreement has been provided to Sellers. The execution and
delivery of the Equity Contribution Agreement by WPSR Capital and PDI and the
consummation of the transactions contemplated thereby has been duly and
validly authorized by all necessary corporate or other action required on the
part of each of WPSR Capital and PDI. The Equity Contribution Agreement has
been duly and validly executed and delivered by each of WPSR Capital and PDI
and constitutes the legal, valid and binding obligations of each of WPSR
Capital and PDI enforceable against each of WPSR Capital and PDI in accordance
with its terms, except that such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
other similar laws affecting or relating to enforcement of creditors' rights
generally and general principles of equity (regardless of whether enforcement
is considered in a proceeding at law or in equity).
ARTICLE VI
COVENANTS OF THE PARTIES
------------------------
6.1 Conduct of Business Relating to the Purchased Assets. (a) Except
----------------------------------------------------
as described in Schedule 6.1 or as expressly contemplated by this Agreement or
to the extent Buyer otherwise consents in writing, during the period from the
date of this Agreement to the Closing Date, Sellers will operate the Purchased
Assets in the ordinary course of business consistent with the past practices
of Sellers or their Affiliates and with Good Utility Practices and shall use
all Commercially Reasonable Efforts to preserve intact the Purchased Assets,
and endeavor to preserve the goodwill and relationships with customers,
suppliers and others having business dealings with it. Without limiting the
generality of the foregoing, and, except as contemplated in this Agreement or
as described in Schedule 6.1 or as required under applicable law or by any
Governmental Authority,
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between the date hereof and the Closing Date, without the prior written
consent of Buyer, Sellers shall not with respect to the Purchased Assets:
(i) Make any material change in the levels of Fuel
Inventories or Non-Fuel Inventories customarily maintained by Sellers or
their Affiliates with respect to the Purchased Assets;
(ii) Except as contemplated by Section 2.1(g), sell,
lease (as lessor), encumber, pledge, transfer or otherwise dispose of,
any Purchased Assets (except for Purchased Assets used, consumed or
replaced in the ordinary course of business consistent with past
practices of Sellers or their Affiliates and with Good Utility
Practices; provided, however, that except for such transfers as are
-------- -------
permitted pursuant to Section 10.6 hereof, prior to Closing, Sellers
shall not, and shall not enter into any agreements to, sell, encumber or
otherwise transfer any Emission Allowances to, or in favor of, any
Person who is not a Party to this Agreement) other than to encumber
Purchased Assets with Permitted Encumbrances;
(iii) Except for Permits and Environmental Permits
required to make the CTGs operational as required by Section 4.21 or as
otherwise indicated on Schedule 1.1(118) or Schedule 2.1(e), modify,
amend or voluntarily terminate prior to the expiration date any of the
Sellers' Agreements or any of the material Permits or Environmental
Permits in any material respect, other than (a) in the ordinary course
of business, to the extent consistent with the past practices of Sellers
or their Affiliates or with Good Utility Practices, (b) with cause, to
the extent consistent with past practices of Sellers or their Affiliates
or with Good Utility Practices, or (c) as may be required in connection
with transferring Sellers' rights or obligations thereunder to Buyer
pursuant to this Agreement; provided, however, that any material
-------- -------
modifications or amendments that Sellers propose to make pursuant to
clause (a), (b) or (c) of this Section 6.1(a)(iii) shall be in form and
substance reasonably satisfactory to Buyer;
(iv) Except as otherwise provided herein, enter into any
commitment for the purchase, sale, or transportation of fuel having a
term greater than six months and not terminable on or before the Closing
Date either (a) automatically or (b) by option of Sellers (or, after the
Closing, by Buyer) in their sole discretion;
(v) Except as otherwise provided herein, enter into any
contract, agreement, commitment or arrangement relating to the Purchased
Assets (other than Capital Expenditures) that individually exceeds
$25,000 or in the aggregate exceeds $500,000 unless it is terminable by
Sellers without penalty or premium upon no more than sixty (60) days
notice;
(vi) Except as otherwise required by the terms of the
IBEW Collective Bargaining Agreement, (a) materially increase salaries
or wages of employees employed in connection with the Purchased Assets
prior to the Closing, (b) take any action prior to the Closing to effect
a material change in the IBEW Collective Bargaining Agreement, or (c)
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take any action prior to the Closing to materially increase the
aggregate benefits payable to the employees employed in connection with
the Purchased Assets;
(vii) Make any Capital Expenditures except as permitted by
Section 3.3(a)(iii) or for Sellers' account;
(viii) Fail to maintain, by self insurance or with
financially responsible insurance companies, insurance in such amounts
and against such risks and losses as are customary for such assets and
related business;
(ix) Enter into, amend, terminate, extend or otherwise
modify any real or personal property Tax agreement, treaty or settlement
affecting the Purchased Assets;
(x) Make any material change in the quantity of
anthracite silt located at Buck Run or Forrestville;
(xi) Enter into any settlement agreement or arrangement
with respect to any IBEW Grievance that is reasonably likely to cause a
Material Adverse Effect; or
(xii) Except as otherwise provided herein, enter into any
written or oral contract, agreement, commitment or arrangement with
respect to any of the proscribed transactions set forth in the foregoing
paragraphs (i) through (xi).
6.2 Access to Information.
---------------------
(a) Between the date of this Agreement and the Closing Date,
Sellers will (i) during ordinary business hours and upon reasonable notice,
give Buyer and its Representatives reasonable access to all books, records,
plans, offices and other facilities and properties constituting the
Purchased Assets or the Assumed Liabilities; (ii) furnish Buyer with such
financial and operating data and other information with respect to the
Purchased Assets or the Assumed Liabilities as Buyer may from time to time
reasonably request; and (iii) furnish Buyer with a copy of each material
report, schedule, or other document filed or received by each Seller with the
SEC, FERC, PaPUC, or other Governmental Authority with respect to the
Purchased Assets or the Assumed Liabilities; and (iv) furnish Buyer with all
such other information as shall be reasonably necessary to enable Buyer to
verify the accuracy of the representations and warranties of Sellers contained
in this Agreement; provided, however, that (A) any such inspections and
investigations shall be conducted in such a manner as not to interfere
unreasonably with the operation of the Purchased Assets, (B) Sellers shall not
be required to take any action which would constitute a waiver of the
attorney-client or other privilege, and (C) Sellers need not supply Buyer with
any information which Sellers are under a legal or contractual obligation not
to supply. Notwithstanding anything in this Section 6.2 to the contrary,
prior to the Closing Date, Buyer shall not have the right to perform or
conduct any environmental sampling or testing at, in, on, or underneath the
Purchased Assets (except for such environmental sampling or testing as Buyer
may reasonably deem necessary to investigate (i) the validity of any claims,
actions, proceedings or investigations instigated by any Governmental
Authority on or after the date hereof with respect to any alleged violation of
Environmental Laws
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or (ii) any other environmental condition arising or occurring on or after the
date hereof which Buyer reasonably believes may constitute a violation of
Environmental Laws) and Sellers will only furnish or provide such access to
employee personnel records and files to the extent that such records and files
pertain to the following: (i) skill and development training; (ii) seniority
histories; (iii) salary and benefit information; (iv) Occupational, Safety and
Health Administration reports; (v) active medical restriction forms; and (vi)
disciplinary and attendance histories.
(b) All information furnished to or obtained by Buyer and
Buyer's Representatives pursuant to this Section 6.2 shall be Proprietary
Information. Each Party shall, and shall cause its Representatives to, (a)
keep all Proprietary Information of the other Party confidential and not
disclose or reveal any such Proprietary Information to any Person other than
such Party's Representatives and (b) not use such Proprietary Information
other than in connection with the consummation of the transactions
contemplated hereby. After the Closing Date, any Proprietary Information
solely related to the Purchased Assets shall no longer be subject to the
restrictions set forth herein. The obligations of the Parties under this
Section 6.2(b) shall be in full force and effect for three (3) years from the
date hereof and will survive the termination of this Agreement, the discharge
of all other obligations owed by the Parties to each other and the Closing of
the transactions contemplated by this Agreement.
(c) For a period of seven (7) years after the Closing Date, each
Party and its Representatives shall have reasonable access to all of the books
and records of the Purchased Assets, including all Transferring Employee
Records in the possession of the other Party to the extent that such access
may reasonably be required by such Party in connection with the Assumed
Liabilities or the Excluded Liabilities, or other matters relating to or
affected by the operation of the Purchased Assets. Such access shall be
afforded by the Party in possession of any such books and records upon receipt
of reasonable advance notice and during normal business hours. The Party
exercising this right of access shall be solely responsible for any costs or
expenses incurred by it or the other Party with respect to such access
pursuant to this Section 6.2(c). If the Party in possession of such books and
records shall desire to dispose of any books and records upon or prior to the
expiration of such seven-year period, such Party shall, prior to such
disposition, give the other Party a reasonable opportunity at such other
Party's expense, to segregate and remove such books and records as such other
Party may select.
(d) Notwithstanding the terms of Section 6.2(b) above, the
Parties agree that prior to the Closing, Buyer may reveal or disclose
Proprietary Information to any other Persons in connection with Buyer's
financing of its purchase of the Purchased Assets (provided that such Persons
agree in writing to maintain the confidentiality of the Proprietary
Information in accordance with this Agreement).
(e) Notwithstanding the terms of Section 6.2(b) above, any Party
may provide Proprietary Information of the other Parties to the PaPUC, the
SEC, the FERC or any other Governmental Authority with jurisdiction or any
stock exchange, as may be necessary to obtain Sellers' Required Regulatory
Approvals or Buyer's Required Regulatory Approvals, respectively, or to comply
generally with any relevant Laws. The disclosing Party will seek confidential
treatment for the Proprietary Information provided to any Governmental
Authority and the disclosing Party
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will notify the other Parties as far in advance as is practicable of its
intention to release to any Governmental Authority any Proprietary
Information.
(f) Except as specifically provided herein or in the
Confidentiality Agreement, nothing in this Section shall impair or modify any
of the rights or obligations of Buyer or its Affiliates under the
Confidentiality Agreement, all of which remain in effect until termination of
such agreement in accordance with its terms.
(g) Except as may be permitted in the Confidentiality Agreement,
Buyer agrees that, prior to the Closing Date, it will not contact any vendors,
suppliers, employees, or other contracting parties of Sellers or their
Affiliates with respect to any aspect of the Purchased Assets or the
transactions contemplated hereby, without the prior written consent of
Sellers, which consent shall not be unreasonably withheld.
(h) A committee comprised of one Representative designated by
Sellers and one Representative designated by Buyer, and such additional
Representatives as may be appointed by the Representatives originally
appointed to such committee (the "Transition Committee") will be established,
--------------------
as soon after the execution of this Agreement as is practicable, to examine
the business issues affecting the Purchased Assets, including the operations
thereof, giving emphasis to cooperation between Buyer and Sellers after the
execution of this Agreement. From time to time, the Transition Committee
shall report its findings to the senior management of each of Sellers and
Buyer.
(i) The Parties agree that between the date hereof and the
Closing Date, at the sole responsibility and expense of Buyer, Sellers will
permit designated Representatives ("Observers") of Buyer to regularly observe,
---------
in the presence of personnel of Sellers and at Buyer's reasonable discretion,
all operations of Sellers that relate specifically to the Purchased Assets,
and the operation thereof, and to observe material discussions with third
parties relating specifically to the Purchased Assets; provided, however, that
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(A) any such observations shall be conducted in such a manner as not to
interfere unreasonably with the operation of the Purchased Assets, (B) Buyer
shall not be entitled to observe any discussions between any Seller and its
legal counsel or accountants and shall not otherwise be entitled to observe
any activities or discussions which may constitute a waiver of the
attorney-client or other privilege, and (C) Sellers need not permit the
Observers to observe or participate in discussions concerning any information
which Sellers are under a legal or contractual obligation not to disclose.
The Observers may recommend or suggest that actions be taken or not be taken
by Sellers; provided, however, that Sellers will be under no obligation to
-------- -------
follow any such recommendations or suggestions (except as required to remain
in compliance with Sellers' obligations pursuant to Section 6.1 hereof) and
that Sellers shall be entitled, subject to the terms of this Agreement, to
conduct their business in accordance with their own judgment and discretion.
The Observers shall have no authority to bind or make agreements on behalf of
Sellers, to conduct discussions with or make representations to third parties
on behalf of Sellers or to issue instructions to or direct or exercise
authority over Sellers or any of their respective officers, employees,
advisors or agents.
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6.3 Public Statements. Subject to the requirements imposed by
-----------------
any Governmental Authority or stock exchange, prior to the Closing Date, no
press release or other public announcement or public statement or comment in
response to any inquiry relating to the transactions contemplated by this
Agreement or the Additional Agreements shall be issued or made by any Party
without the prior approval of the other Parties (which approval shall not be
unreasonably withheld). The Parties agree to cooperate in preparing such
announcements.
6.4 Expenses. Except to the extent specifically provided herein,
--------
whether or not the transactions contemplated hereby are consummated, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be borne by the Party incurring such costs and
expenses. Notwithstanding anything to the contrary herein, Sellers will be
responsible for (a) all costs and expenses associated with the obtaining of
any title insurance policy and all endorsements thereto that Buyer obtain
pursuant to Section 6.12, (b) all Survey costs and expenses, (c) all real
estate transfer taxes required pursuant to the transactions contemplated
hereby (including, without limitation, the Pennsylvania transfer tax on
conveyances of interests in real property), and (d) all filing fees under the
HSR Act, in each case within a reasonable time of Sellers' receipt of
documentation of such expenses satisfactory to Sellers.
6.5 Further Assurances.
------------------
(a) Subject to the terms and conditions of this Agreement,
each of the Parties hereto shall use its best efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary,
proper or advisable under applicable Laws to consummate and make effective the
purchase and sale of the Purchased Assets pursuant to this Agreement, the
assumption of the Assumed Liabilities and the execution and delivery of each
Additional Agreement, including, without limitation, using its best efforts to
ensure satisfaction of the conditions precedent to each Party's obligations
hereunder, including obtaining all necessary consents, approvals, and
authorizations of third parties required to be obtained in order to consummate
the transactions hereunder, and to effectuate a transfer of the Transferable
Permits to Buyer. Sellers shall cooperate with Buyer in its efforts to obtain
all other Permits and Environmental Permits necessary for Buyer to operate the
Purchased Assets. Buyer agrees to perform all conditions required of Buyer in
connection with the Sellers' Required Regulatory Approvals. Neither of the
Parties hereto shall, without prior written consent of the other Party, take
or fail to take any action, which might reasonably be expected to prevent or
materially impede, interfere with or delay the transactions contemplated by
this Agreement.
(b) In the event that any Purchased Asset shall not have been
conveyed to Buyer at the Closing, Sellers shall, subject to Sections 6.5(c)
and 6.5(d), convey such asset to Buyer as promptly as is practicable after the
Closing.
(c) To the extent that Sellers' rights under any Sellers'
Agreement may not be assigned without the consent of another Person which
consent has not been obtained by the Closing Date, this Agreement shall not
constitute an agreement to assign the same, if an attempted assignment would
constitute a breach thereof or be unlawful. Sellers and Buyer agree that if
any consent to an assignment of any Sellers' Agreement shall not be obtained
or if any attempted
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assignment would be ineffective or would impair Buyer's rights and obligations
under the Sellers' Agreement in question, so that Buyer would not in effect
acquire the benefit of all such rights and obligations, Sellers, at their
option and to the maximum extent permitted by law and such Sellers' Agreement,
shall, after the Closing Date, (i) appoint Buyer to be Sellers' agent with
respect to such Sellers' Agreement or (ii) to the maximum extent permitted by
law and such Sellers' Agreement, enter into such reasonable arrangements with
Buyer or take such other actions as are necessary to provide Buyer with the
same or substantially similar rights and obligations of such Sellers'
Agreement. Sellers and Buyer shall cooperate and shall each use Commercially
Reasonable Efforts prior to and after the Closing Date to obtain an assignment
of such Sellers' Agreement to Buyer.
(d) To the extent that Sellers' rights under any warranty or
guaranty described in Section 2.1(j) may not be assigned without the consent
of another Person, which consent has not been obtained by the Closing Date,
this Agreement shall not constitute an agreement to assign the same, if an
attempted assignment would constitute a breach thereof or be unlawful.
Sellers and Buyer agree that if any consent to an assignment of any such
warranty or guaranty shall not be obtained or if any attempted assignment
would be ineffective or would impair Buyer's rights and obligations under the
warranty or guaranty in question, so that Buyer would not in effect acquire
the benefit of all such rights and obligations, Sellers shall use Commercially
Reasonable Efforts to the extent permitted by law and such warranty or
guaranty, to enforce such warranty or guaranty for the benefit of Buyer to the
maximum extent possible so as to provide Buyer with the benefits and
obligations of such warranty or guaranty. Notwithstanding the foregoing,
Sellers shall not be obligated to bring or file suit against any third party,
provided that if Sellers shall determine not to bring or file suit after being
requested by Buyer to do so, Seller shall assign, to the extent permitted by
law or any applicable agreement or contract, its rights in respect of the
claims so that Buyer may bring or file such suit.
(e) Notwithstanding the foregoing, nothing in this Section 6.5
shall require Sellers or Buyer to waive any conditions to Closing set forth in
Section 7.1 and 7.2 or to waive any other provision of this Agreement.
6.6 Consents and Approvals.
----------------------
(a) As promptly as possible, and in any case within thirty (30)
days, after the date of this Agreement, Sellers and Buyer shall each file, or
cause to be filed, with the Federal Trade Commission and the United States
Department of Justice any initial notifications required to be filed under the
HSR Act and the rules and regulations promulgated thereunder with respect to
the transactions contemplated hereby. The Parties shall use their respective
best efforts to respond promptly to any requests for additional information
made by either of such agencies, and to cause the waiting periods under the
HSR Act to terminate or expire at the earliest possible date after the date
of filing. Sellers will pay all filing fees under the HSR Act, but each
Party will bear its own costs of the preparation of any filing.
(b) As promptly as possible, and in any case within thirty (30)
days, after the date of this Agreement, Sellers and Buyer shall each file, or
cause to be filed, with the PaPUC, the FERC and any other Governmental
Authority, any initial filings required to be made with respect to the
44
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transactions contemplated hereby. The Parties shall respond promptly to any
requests for additional information made by such agencies, and use their
respective best efforts to cause regulatory approval to be obtained at the
earliest possible date after the date of filing. Each Party will bear its own
costs of the preparation of any such filing.
(c) Sellers and Buyer shall cooperate with each other and
promptly prepare and file notifications with, and request Tax clearances from,
state and local taxing authorities in jurisdictions in which a portion of the
Purchase Price may be required to be withheld or in which Buyer would
otherwise be liable for any Tax liabilities of Sellers pursuant to such state
and local Tax law.
(d) As promptly as possible, and in any case within thirty (30)
days after the date of this Agreement, Buyer and Sellers shall initiate all
necessary measures, including filing all necessary applications, and Buyer
shall post all necessary performance, surety or other bonds to effectuate (i)
the transfer of all Environmental Permits and (ii) the release of any
performance, surety or other bonds provided by any Seller with respect to any
of the Purchased Assets.
(e) Sellers and Buyer shall have the right to review in advance
all characterizations of the information relating to the transactions
contemplated by this Agreement or in any of the Additional Agreements which
will appear in any filing made in connection with the transactions
contemplated hereby or thereby.
(f) Notwithstanding anything herein to the contrary, Sellers
shall use Commercially Reasonable Efforts to assist Buyer in obtaining all
third party consents (including, without limitation, consents to the
collateral assignment in favor of Buyer's lenders of contracts or agreements
included in the Purchased Assets), agreements, certificates, opinions, and
other documents or instruments reasonably requested by Buyer's lenders in
connection with the financing, on a non- or limited recourse basis or
otherwise, of Buyer's acquisition of the Purchased Assets hereunder, all of
which shall be at Buyer's sole cost and expense to the extent that any such
items are not otherwise required of Sellers hereunder or under any of the
Additional Agreements. From time to time after the date hereof, the Sellers
will, execute and/or deliver such consents (including, without limitation,
consents to the collateral assignment in favor of Buyer's lenders of the
Additional Agreements), agreements, certificates, opinions, and other
documents or instruments to Buyer's lenders as Buyer's lenders may reasonably
request in connection with the financing, on a non- or limited recourse basis
or otherwise, of Buyer's acquisition of the Purchased Assets hereunder;
provided, however, that Buyer will reimburse Seller for all reasonable,
out-of-pocket expenses incurred in connection therewith.
6.7 Fees and Commissions. Sellers and Buyer represent and
--------------------
warrant to the other that, except for J.P. Morgan Securities Inc., which is
acting for and at the expense of Sellers, and Pricewaterhouse Coopers
Securities LLC which is acting for and at the expense of Buyer, no broker,
finder or other Person is entitled to any brokerage fees, commissions or
finder's fees in connection with the transaction contemplated hereby by reason
of any action taken by the Party making such representation. Sellers, on the
one hand, and Buyer, on the other hand, will pay to the other or otherwise
discharge, and will indemnify and hold the other harmless from and against,
any and all
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claims or liabilities for all brokerage fees, commissions and finder's fees
(other than the fees, commissions and finder's fees payable to the parties
listed above) incurred by reason of any action taken by the indemnifying
party.
6.8 Tax Matters.
-----------
(a) Other than real estate transfer taxes as provided in Section
6.4 hereof, all transfer, excise, documentary, filing, recordation and similar
taxes shall be borne 50% by Buyer and 50% by Sellers. All sales taxes
incurred in connection with this Agreement and the transactions contemplated
hereby (including, without limitation, Pennsylvania sales tax) shall be borne
by Buyer. Sellers shall file, to the extent required by, or permissible
under, applicable law, all necessary Tax Returns and other documentation with
respect to all such transfer and sales taxes, and, if required by applicable
law, Buyer shall join in the execution of any such Tax Returns and other
documentation. Prior to the Closing Date, to the extent applicable, Buyer
shall provide to Sellers appropriate certificates of Tax exemption from each
applicable taxing authority.
(b) With respect to Taxes to be prorated in accordance with
Section 3.5 of this Agreement, Buyer shall prepare and timely file all Tax
Returns required to be filed after the Closing Date with respect to the
Purchased Assets, if any, and shall duly and timely pay all such Taxes shown
to be due on such Tax Returns. Buyer's preparation of any such Tax Returns
shall be subject to Sellers' approval, which approval shall not be
unreasonably withheld. Buyer shall make such Tax Returns available for
Sellers' review and approval no later than fifteen (15) Business Days prior to
the due date for filing each such Tax Return.
(c) Buyer and Sellers shall provide the other with such
assistance as may reasonably be requested by the other Party in connection
with the preparation of any Tax Return, any audit or other examination by any
taxing authority, or any judicial or administrative proceedings relating to
liability for Taxes, and each shall retain and provide the requesting party
with any records or information which may be relevant to such return, audit,
examination or proceedings. Any information obtained pursuant to this Section
6.8(c) or pursuant to any other Section hereof providing for the sharing of
information or review of any Tax Return or other instrument relating to Taxes
shall be kept confidential by the parties hereto.
(d) Disputes. In the event that a dispute arises between
--------
any Seller and Buyer regarding Taxes, or any amount due under this Section
6.8, the affected Parties shall attempt in good faith to resolve such dispute
and any agreed upon amount shall be paid to the appropriate Party. If such
dispute is not resolved within thirty (30) days, the affected Parties shall
submit the dispute to an Independent Accounting Firm for resolution within
thirty (30) days thereafter, which resolution shall be final, conclusive and
binding on such Parties. Notwithstanding anything in this Agreement to the
contrary, the fees and expenses of the Independent Accounting Firm in
resolving the dispute shall be borne 50% by the affected Seller and 50% by
Buyer. Any payment required to be made as a result of the resolution of the
dispute by the Independent Accounting Firm shall be made within ten (10) days
after such resolution, together with any interest, as required for the
applicable Tax.
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6.9 Advice of Changes. (a) Prior to the Closing, each Party will
-----------------
advise the other in writing with respect to any matter arising after execution
of this Agreement of which that Party obtains Knowledge and which, if existing
or occurring at the date of this Agreement, would have been required to be set
forth in this Agreement, including any of the Schedules hereto.
(b) Prior to the Closing Date, each Party shall supplement or
amend the Schedules required by this Agreement with respect to any matter
relating to the subject matter thereof hereafter arising which, if existing or
occurring at the date of this Agreement, would have been required to be set
forth or described in the Schedules by such Party. No supplement or amendment
of any Schedule made pursuant to this Section 6.9(b) shall be deemed to cure
any breach of, or expand or limit the scope of, or otherwise modify or affect
any representation or warranty made in this Agreement unless the Parties agree
thereto in writing.
(c) Without limiting the generality of the provisions of
Sections 6.2 and 6.9(a), each Party will advise the other in writing, promptly
upon obtaining Knowledge thereof but in any event within a reasonable period
of time prior thereto, of any hearings or proceedings before any Governmental
Authority which concern any of the Sellers' Required Regulatory Approvals or
the Buyer's Required Regulatory Approvals. Each Party agrees that the other
Parties hereto shall be permitted to participate in any such hearings or
proceedings and to use Commercially Reasonable Efforts to cooperate with such
other Parties in the advancement of any position reasonably taken by such
other Parties to protect their respective interests, and in any case shall not
take any position that may create a Material Adverse Effect or a Buyer
Material Adverse Effect in any such hearing or proceeding.
6.10 Employees.
---------
(a) Buyer shall have the right to offer employment, effective as
of the Closing Date, to any of those employees of PP&L employed at Sunbury SES
as of the Closing Date who are covered by the IBEW Collective Bargaining
Agreement (the "Union Employees"). Each person who becomes employed by Buyer
---------------
pursuant to this Section 6.10(a) shall be referred to herein as a "Transferred
-----------
Union Employee".
- --------------
(b) In order to encourage those Union Employees to whom Buyer
offers employment pursuant to Section 6.10(a) to accept Buyer's offer, Buyer
shall, concurrent with the offer of employment, offer a transition bonus equal
to $5,000 to each Union Employee who accepts employment with Buyer. Such
bonus shall be payable on the date which is fourteen (14) Business Days after
Closing.
(c) Any Union Employee who is not offered employment with Buyer
or who refuses an offer of employment from Buyer will be treated by PP&L, at
PP&L's expense, as a displaced employee under the terms of the IBEW Collective
Bargaining Agreement.
(d) (i) Schedule 6.10(d) sets forth a list of the collective
bargaining agreements and amendments thereto, to which PP&L is a party with
the IBEW in connection with the Purchased Assets (collectively, the "IBEW
----
Collective Bargaining Agreement"). Transferred Union Employees
- -------------------------------
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shall retain their seniority and receive full credit for service with PP&L in
connection with entitlement to vacation and all other benefits and rights
under the IBEW Collective Bargaining Agreement to which seniority or years of
service are applicable. On the Closing Date, Buyer shall, subject to the terms
and conditions of the IBEW Memorandum of Understanding (as hereinafter
defined), assume the IBEW Collective Bargaining Agreement for the duration of
its term as it relates to Transferred Union Employees and other employees to
be employed at Sunbury Station in positions covered by the IBEW Collective
Bargaining Agreement and shall comply with all applicable obligations under
the IBEW Collective Bargaining Agreement. Buyer shall be required to establish
a pension plan and benefit programs for the duration of the term of the IBEW
Collective Bargaining Agreement which are substantially equivalent to PP&L's
plans and provide at least the same level of benefits or coverage as do PP&L's
plans as of the Closing Date in accordance with any restrictions contained in
the IBEW Collective Bargaining Agreement, as modified by the IBEW Memorandum
of Understanding (as defined in Section 7.1(q)). Buyer further agree to
recognize the IBEW as the collective bargaining agent for the employees in
positions covered by the IBEW Collective Bargaining Agreement.
(e) Buyer shall also have the right to offer employment,
effective as of the Closing Date, to each employee of Sellers who is listed on
Schedule 6.10(e) (the "Non-Union Employees"). Each person who becomes employed
-------------------
by Buyer pursuant to this Section 6.10(e) shall be referred to herein as a
"Transferred Non-Union Employee". All such offers of employment shall be
------------------------------
subject to the following requirements:
(i) Each Non-Union Employee who is offered employment by
Buyer shall be offered a full time position with Buyer for a minimum
period of two years after the Closing Date (the "Employment Term");
---------------
provided, however, that nothing herein shall prevent Buyer from
-------- -------
terminating any Non-Union Employee for wilful misconduct as that term
has been construed under the Pennsylvania Unemployment Compensation Act.
(ii) During the Employment Term, Buyer shall pay each
Transferred Non-Union Employee such annual salary and opportunity for
bonuses or other incentive compensation and provide each Transferred
Non-Union Employee with such benefits that are not less, in the
aggregate, than the annual salary and opportunity for bonuses or other
incentive compensation and benefits that such Transferred Non-Union
Employee received from Sellers with respect to the calendar year ended
December 31, 1998.
(iii) Transferred Non-Union Employees shall be given credit
for all service with Sellers and their Affiliates under all employee
benefit plans, programs, and fringe benefit plans programs, and fringe
benefit arrangements of Buyer ("Buyer's Benefit Plans") in which they
---------------------
become participants; provided, however, that such service shall not
-------- -------
be required to be recognized to the extent that such recognition would
result in a duplication of benefits.
(iv) As of the Closing Date, all Transferred Non-Union
Employees shall cease to participate in the employee welfare benefit
plans (as such term is defined in ERISA) maintained or sponsored by
Sellers or their Affiliates (the "Prior Welfare Plans") and shall
-------------------
commence to participate in welfare benefit plans of Buyer or its
Affiliates (the "Replacement
-----------
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Welfare Plans"). Buyer shall (i) waive all limitations as to
-------------
pre-existing condition exclusions and waiting periods with respect
to the Transferred Non-Union Employees under the Replacement Welfare
Plans, other than, but only to the extent of, limitations or waiting
periods that were in effect with respect to such employees under the
Prior Welfare Plans and that have not been satisfied as of the Closing
Date, and (ii) provide each Transferred Non-Union Employee with credit
for any co-payments and deductibles paid prior to the Closing Date in
satisfying any deductible or out-of-pocket requirements under the
Replacement Welfare Plans (on a pro-rata basis in the event of a
difference in plan years).
(v) Buyer shall pay each Transferred Non-Union Employee a
transition bonus equal to $5,000 on the date which is fourteen (14)
Business Days after Closing. In addition, Buyer shall pay each such
Transferred Non-Union Employee a retention bonus equal to $5,000 upon
the fifth anniversary of such Transferred Non-Union Employee's
employment with Buyer.
(vi) If a Transferred Non-Union Employee is terminated by
Buyer (other than for wilful misconduct) prior to the third anniversary
of such Transferred Non-Union Employee's employment with Buyer, then (i)
with respect to all such Non-Union Employees who were not employees of
LJC as of the Closing Date, PP&L or an Affiliate of PP&L, will either,
at its sole discretion and at its expense, (A) treat the employee as a
displaced manager under PP&L's then current policies or (B) consider the
employee for reemployment with PP&L or an Affiliate of PP&L (but with no
obligation to hire such employee), and (ii) with respect to all such
Non-Union Employees who were employees of LJC as of the Closing Date,
PP&L or an Affiliate of PP&L, at its expense, will treat the employee as
a terminated employee pursuant to the terms of any severance agreement
or policy in effect for such employees as of the Closing Date. Any
severance obligations on the part of PP&L or an Affiliate of PP&L will,
however, be reduced by the amount of any severance payments made by
Buyer.
(f) Any Non-Union Employees who are not LJC employees as of the
Closing Date, and who are not offered or do not accept employment offers from
Buyer, will be treated as displaced employees under current PP&L policies at
PP&L's expense. Any Non-Union Employees who are LJC employees as of the
Closing Date, and who are not offered or do not accept employment offers from
Buyer, will receive severance under the severance agreement or policy in
effect for such employees as of the Closing Date, at PP&L's expense. Neither
Buyer nor any of its Affiliates will hire any employee who receives severance
from PP&L or LJC for a period of one year from the date of termination giving
rise to such severance.
(g) As soon as practicable after, and in any event within ninety
(90) days after, and effective as of, the Closing Date, Buyer shall establish
a defined benefit pension plan (or plans) and trust (or trusts) intended to
qualify under Section 401(a) and Section 501(a) of the Code (such plan or
plans referred to as "Buyer's Pension Plan"). As soon as practicable
--------------------
following receipt by Sellers of written evidence of the adoption of Buyer's
Pension Plan and the trust (or trusts) thereunder by Buyer and either (A) the
receipt by Sellers of a copy of a favorable determination letter issued by the
Internal Revenue Service with respect to Buyer's Pension Plan or (B) an
opinion,
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<PAGE>
satisfactory to Sellers' counsel, of Buyer's counsel to the effect that the
terms of Buyer's Pension Plan and its related trust qualify under
Section 401(a) and Section 501(a) of the Code, Sellers shall direct the
trustee or trustees of the PP&L Retirement Plan ("Sellers' Pension Plan") to
---------------------
transfer from the trust or trusts under Sellers' Pension Plan to the trust or
trusts under Buyer's Pension Plan, an amount determined by the certified
actuary of the Sellers' Pension Plan ("Sellers' Actuary"), which shall be
----------------
equal to (i) the present value of all accrued benefits, including all
ancillary benefits, under Sellers' Pension Plan as of the Closing Date, in
respect of those Transferred Union Employees and Transferred Non-Union
Employees who are participants in Sellers' Pension Plan as of the Closing Date
and who become employees of Buyer or any subsidiary immediately following the
Closing Date ("Transferred Pension Employees") plus (ii) interest accrued from
-----------------------------
the Closing Date to the date of transfer on the amount of assets to be
transferred, determined at a rate reasonably determined by Sellers' Actuary.
The calculation of the present value of the benefits described in clause (i)
of the preceding sentence shall be determined on an ongoing basis utilizing
the current assumptions used by the Sellers for accounting purposes (Financial
Accounting Standard 87) under Sellers' Pension Plan, except that the discount
rate used shall be 5.75%. The determination by Sellers' Actuary shall be
final and binding (it being understood, however, that Sellers' Actuary shall
consult in good faith with an actuary selected by the Buyer prior to making
any final determination). Transferred Pension Employees shall cease to accrue
benefits under Sellers' Pension Plan as of the Closing Date. At the time of
transfer of the amount set forth in this Section 6.10(g), Buyer's Pension Plan
shall assume all liabilities for all accrued benefits, including all ancillary
benefits, under Sellers' Pension Plan in respect of Transferred Pension
Employees and Sellers' Pension Plan shall be relieved of all liabilities for
such benefits. Notwithstanding any other provisions in this Section 6.10(g),
the amount of assets to be transferred pursuant to this Section shall satisfy
the applicable requirements of Section 414(l) of the Code and it is expected
that the amount described in this Section 6.10(g) will satisfy such Code
requirements.
Buyer and Sellers shall provide each other with such records and
information as may be necessary or appropriate to carry out their obligations
under this Section 6.10(g) for the purposes of administration of Buyer's
Pension Plan, and they shall cooperate in the filing of documents required by
the transfer of assets and liabilities described herein. Notwithstanding
anything contained herein to the contrary, no such transfer shall take place
until the 31st day following the filing of all required Forms 5310-A in
connection therewith.
(h) To the extent allowable by Law, Buyer shall take any and all
necessary action to cause the trustee of Buyer's defined contribution plan, if
requested to do so by a Transferred Union Employee or a Transferred Non-Union
Employee, to accept a direct "rollover" of all or a portion of said employee's
distribution from any tax qualified defined contribution plan or plans of
Sellers or any Affiliate thereof, into the tax qualified defined contribution
plan maintained by Buyer or an Affiliate of Buyer.
(i) Sellers shall be responsible, with respect to the Purchased
Assets, for performing and discharging all requirements under the WARN Act and
under applicable state and local laws and regulations for the notification of
its employees of any "employment loss" within the meaning of the WARN Act
which occurs prior to the Closing Date.
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6.11 Risk of Loss.
------------
(a) From the date hereof through the Closing Date, all risk of
loss or damage to the property included in the Purchased Assets shall be borne
by Sellers, other than loss or damage caused by the acts or negligence of
Buyer or any of their respective Representatives, which loss or damage shall
be the responsibility of Buyer.
(b) If, before the Closing Date, all or any portion of the
Purchased Assets is (i) taken by eminent domain or is the subject of a pending
or (to the Knowledge of Sellers) contemplated taking which has not been
consummated, or (ii) damaged or destroyed by fire or other casualty, Sellers
shall notify Buyer promptly in writing of such fact, and (x) in the case of a
condemnation, Sellers shall assign or pay, as the case may be, any proceeds
thereof to Buyer at the Closing and (y) in the case of a casualty, Sellers
shall either restore the damage to the reasonable satisfaction of Buyer or
assign the insurance proceeds therefor to Buyer at the Closing.
Notwithstanding the above, if such casualty or loss results in a Material
Adverse Effect, Buyer and Sellers shall negotiate to settle the loss resulting
from such taking (and such negotiation shall include, without limitation, the
negotiation of a fair and equitable adjustment to the Purchase Price). If no
such settlement is reached within sixty (60) days after Sellers have notified
Buyer of such casualty or loss, then Buyer or Sellers may terminate this
Agreement pursuant to Section 9.1(h).
6.12 Real Property Title; Title Insurance; Surveys.
---------------------------------------------
(a) Sellers shall deliver to Buyer a complete set of surveys
("Surveys") and title insurance commitments ("Title Commitments") for the Real
------- -----------------
Property (excluding the Silt Reserves Real Property) meeting the requirements
of this Section 6.12 within ninety (90) days after the date hereof but in any
event not less than thirty (30) days prior to the Closing Date.
(b) The Title Commitments referred to herein shall be issued by
Chicago Title Insurance Company (or another nationally recognized title
insurer selected by Sellers and reasonably acceptable to Buyer), to the extent
that Chicago Title Insurance Company (or such other title insurer) agrees to
issue to Buyer standard form owner's policies of title insurance with respect
to all Real Property (excluding the Silt Reserves Real Property), together
with a copy of each document to which reference is made in such Title
Commitments, to the extent available. Such policies shall be standard ALTA
form 1992 owner's policies in the full amount of the fair value of the Real
Property allocated respectively to each subject parcel of Real Property under
Section 3.4 hereof, insuring good and marketable title (or good and valid
leasehold estate, as the case may be) thereto (expressly including all
easements and other appurtenances) subject to Permitted Encumbrances.
(c) The Surveys shall be prepared in accordance with ALTA/ACSM
1997 urban (in the case of the Real Property identified as "Sunbury SES" in
Schedule 4.9) or mountain (in the case of the Real Property identified as
"Lady Jane" in Schedule 4.9) standards (including Table A items 1, 2, 3, 4, 5,
6, 7(a), 8, 9, 10, 11(a), 11(b), 11(d) (Sunbury SES only (excluding electric
utility facilities)), 14 (Sunbury SES only) and 15 (Lady Jane only), and any
other item reasonably agreeable between Buyer and Sellers to be omitted), each
dated no more than one hundred and eighty (180) days prior to Closing, and
each detailing the legal description, the perimeter boundaries, all
51
<PAGE>
improvements located thereon, all easements and encroachments affecting each
such parcel of Real Property and such other matters as may be reasonably
requested by Buyer or the title insurance companies, each containing a
surveyor certificate reasonably acceptable to Buyer and the title insurance
companies, and each prepared by a registered land surveyor in the jurisdiction
where the Real Property is located reasonably satisfactory to Buyer.
(d) Sellers and Buyer agree that the aggregate out-of-pocket
cost of obtaining the Title Commitments, final policy coverage (including the
endorsements referred to in Section 7.1(r) hereof) for the Real Property and
the Surveys shall be paid by Sellers, and that such Surveys shall run to the
benefit of Sellers and Buyer.
6.13 Post-Closing Services. As promptly as possible, and in any case
---------------------
within sixty (60) days after the date of this Agreement, Buyer shall send PP&L
written notification regarding which of those services listed in Schedule 6.13
hereto Buyer would like to have provided by PP&L, or an Affiliate of PP&L,
after the Closing Date and the approximate period(s) of time for which such
services are desired. Buyer and PP&L agree to cooperate and negotiate in good
faith to arrive upon mutually acceptable terms and conditions pursuant to
which PP&L, or an Affiliate of PP&L, will provide such services to Buyer and
to incorporate such terms and conditions into a Generation Support Services
Agreement and/or a Transition Services Agreement to be executed and delivered
by the respective parties thereto at Closing; provided, however, that nothing
-------- -------
herein shall obligate Buyer to purchase (or PP&L, or any Affiliate of PP&L, to
provide) any such services if Buyer and PP&L are unable to agree upon
mutually acceptable terms and conditions for the provision thereof and;
provided, further, that the Parties' inability to agree upon mutually
- -------- -------
acceptable terms and conditions for the provision of any such services shall
not relieve any Party of its obligations to consummate the transactions
otherwise contemplated by this Agreement. Buyer and Sellers agree and
acknowledge that certain of the Sellers' Agreements and Intellectual Property
will not be transferred to Buyer at Closing if those Sellers' Agreements or
Intellectual Property are necessary for or duplicative of the performance by
PP&L, or an Affiliate of PP&L, of the services agreed to between Buyer and
PP&L pursuant to this Section 6.13.
6.14 Easement Agreement. Between the date hereof and the Closing Date,
------------------
Buyer and Sellers agree to cooperate to revise the Form of Easement Agreement
attached as Schedule IV hereto, solely to separate the final Easement
Agreement into two documents, each of which shall substantially reflect the
terms and conditions in the Form of Easement Agreement except that one shall
contain the Parties' agreements with respect to Lady Jane and the other shall
contain the Parties' agreements with respect to Sunbury Station.
6.15 Other Covenants of Buyer. Within thirty (30) days after the
------------------------
Closing Date, Buyer shall inform the Susquehanna River Basin Commission, in
writing, of the change in ownership of the rights described in Section 2.1(h)
and shall take all steps necessary to register such change in ownership.
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ARTICLE VII
CONDITIONS
----------
7.1 Conditions to Obligations of Buyer. The obligation of Buyer to
----------------------------------
effect the purchase of the Purchased Assets and the other transactions
contemplated by this Agreement shall be subject to the fulfillment at or prior
to the Closing Date (or the waiver by Buyer) of the following conditions:
(a) The waiting period under the HSR Act applicable to the
consummation of the sale of the Purchased Assets contemplated hereby shall
have expired or been terminated;
(b) No preliminary or permanent injunction or other order or
decree by any federal or state court or Governmental Authority which prevents
the consummation of the sale of the Purchased Assets contemplated herein shall
have been issued and remain in effect (each Party agreeing to use its
reasonable best efforts to have any such injunction, order or decree lifted)
and no statute, rule or regulation shall have been enacted by any state or
federal government or Governmental Authority which prohibits the consummation
of the sale of the Purchased Assets;
(c) Buyer shall have received all of Buyer's Required Regulatory
Approvals in form and substance reasonably satisfactory (including no unduly
burdensome conditions) to Buyer;
(d) Sellers shall have performed and complied in all material
respects with the covenants and agreements contained in this Agreement which
are required to be performed and complied with by Sellers on or prior to the
Closing Date;
(e) The representations and warranties of Sellers and their
Affiliates, as applicable, set forth in this Agreement and in the Additional
Agreements shall be true and correct in all material respects as of the
Closing Date as though made at and as of the Closing Date (except to the
extent that such representations and warranties may be modified in connection
with the transaction contemplated in Section 10.6 hereof);
(f) Buyer shall have received certificates from an authorized
officer of Sellers, dated the Closing Date, to the effect that, to such
officer's Knowledge, the conditions set forth in Section 7.1(d) and (e) have
been satisfied by Sellers;
(g) Buyer shall have received an opinion from Sellers' counsel
or counsels, including in-house counsel, reasonably acceptable to Buyer, dated
the Closing Date and reasonably satisfactory in form and substance to Buyer
and its counsel, substantially to the effect that:
(i) Each Seller is a corporation duly incorporated,
validly existing and in good standing under the laws of the state of its
incorporation and each Seller has the corporate power and authority to
execute and deliver this Agreement and each Additional Agreement to
which it is a party and to consummate the transactions contemplated by
it hereby and thereby; and the execution and delivery by each Seller of
this Agreement and each Additional Agreement to which it is a party and
the consummation of the sale of the
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Purchased Assets contemplated hereby and thereby have been duly and
validly authorized by all necessary corporate action required on the part
of such Seller;
(ii) This Agreement and each Additional Agreement has been
duly and validly executed and delivered by each Seller or their
respective Affiliates, as applicable, that is a party hereto and thereto
and constitutes a valid and binding agreement of each such Seller or
Affiliate, enforceable in accordance with its respective terms, except
that such enforceability may be limited by applicable bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium or other
similar laws affecting or relating to enforcement of creditors' rights
generally and general principles of equity (regardless of whether
enforcement is considered in a proceeding at law or in equity);
(iii) The execution, delivery and performance of this
Agreement and each Additional Agreement by each Seller that is a party
hereto and thereto does not (A) conflict with the Certificate of
Incorporation or Bylaws of any such Seller or (B) to the Knowledge of
such counsel, constitute a violation of or default under any agreement
or instrument which is material to the business or financial condition
of any such Seller;
(iv) The Bill of Sale and other transfer instruments
described in Section 3.6 are in proper form to transfer to Buyer such
title as was held by the applicable Seller to the Purchased Assets;
(v) No consent or approval of, filing with, or notice to,
any Governmental Authority is necessary for the execution and delivery
of this Agreement by Sellers or the consummation by Sellers of the
transactions contemplated hereby, other than (A) such consents,
approvals, filings or notices which, if not obtained or made, will not
prevent Sellers from performing its material obligations hereunder and
(B) such consents, approvals, filings or notices which become applicable
to Sellers or the Purchased Assets as a result of the specific
regulatory status of the Buyer (or any of its Affiliates) or as a result
of any other facts that specifically relate to the business or
activities in which the Buyer (or any of its Affiliates) is or proposes
to be engaged.
(h) Sellers shall have delivered, or caused to be delivered, to
Buyer at the Closing, Sellers' closing deliveries described in Section 3.6;
(i) There shall not have occurred and be continuing a Material
Adverse Effect;
(j) The Purchased Assets shall be free and clear of all
Encumbrances except Permitted Encumbrances;
(k) The Sellers shall have delivered to Buyer Title Commitments
and Surveys meeting the requirements of Section 6.12;
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(l) There shall not be any injunction, judgment, decree, order,
ruling or Law in effect preventing consummation of any of the transactions
contemplated by this Agreement or the Additional Agreements, except as shall
not have a Material Adverse Effect;
(m) Buyer shall have been accepted for membership in PJM
effective on or before the Closing Date and shall have been granted or
obtained the benefit of all necessary approvals and agreements with PJM (other
than credit approval or support) as reasonably necessary for Buyer to buy and
sell energy, capacity and available ancillary services within or through PJM;
(n) Sellers shall have transferred to Buyer (or Buyer shall have
acquired satisfactory substitutes for) each of the Permits listed on Schedule
7.1(n);
(o) Sellers shall have received all of the consents or
approvals necessary to assign each of the Sellers' Agreements and Intellectual
Property listed on Schedule 7.1(o) to Buyer (except for those consents or
approvals which Sellers shall not be required to obtain due to the fact that
Sellers will be providing certain services to Buyer pursuant to Section 6.13);
(p) Buyer shall have received all of the consents and approvals
listed on Schedule 7.1(p);
(q) A Memorandum of Understanding or other written document in
form reasonably acceptable to Buyer and PP&L (the "IBEW Memorandum of
------------------
Understanding") shall be executed and delivered by the IBEW in favor (and for
- -------------
the benefit) of Buyer and PP&L acknowledging and agreeing that (i) Buyer is
only assuming the IBEW Collective Bargaining Agreement for purposes of Sunbury
Station, that Buyer's obligations under the IBEW Collective Bargaining
Agreement shall extend only to Buyer's operation of Sunbury Station and that
any provisions in the IBEW Collective Bargaining Agreement which relate to
generating facilities or other locations or assets of the Sellers which are
not included as Purchased Assets or which describe inter-location rights
within the PP&L system shall have no application to Buyer as a result of
Buyer's acquisition of Sunbury Station or assumption of the IBEW Collective
Bargaining Agreement in connection therewith, (ii) for the duration of the
IBEW Collective Bargaining Agreement, Buyer will provide employee benefit
programs that, in the aggregate, are substantially equivalent to the benefit
programs provided by PP&L as of the Closing Date to its employees represented
by the IBEW, and (iii) Buyer's assumption of the IBEW Collective Bargaining
Agreement as clarified by the IBEW Memorandum of Understanding fully satisfies
the requirement, set forth in the IBEW Collective Bargaining Agreement, that
Buyer assumes the terms and conditions of the IBEW Collective Bargaining
Agreement as a condition to the sale of Sunbury Station to Buyer. In order to
facilitate the fulfillment of the foregoing condition and otherwise to
facilitate the transition of ownership from Sellers to Buyer, Sellers shall
arrange such meetings between or among the IBEW, Buyer, and PP&L, prior to the
Closing Date, as Buyer may reasonably request. Nothing in this Agreement
shall constitute a warranty or other assurance by Sellers that the IBEW's
agreement to the IBEW Memorandum of Understanding can be obtained;
(r) All title policies obtained pursuant to the Title
Commitments procured in accordance with Section 6.12 shall insure title in
accordance with the representations and warranties
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set forth in this Agreement with respect thereto and shall be subject only to
such conditions and exceptions as Buyer is required to take title subject to
pursuant to the provisions of this Agreement and shall contain the following
endorsements: (i) an endorsement over rights of creditors; (ii) a "gap"
endorsement; (iii) an access endorsement; (iv) a location endorsement; (v) a
comprehensive endorsement; and (vi) a tax parcel endorsement, to the extent
available. Without limiting the foregoing, such policies shall contain a
current survey reading, no exception for parties in possession except pursuant
to the Easements and the Control House Lease and no exceptions for mechanics'
liens or statutory liens for Taxes or, in the alternative, shall insure that
such liens shall not be collected out of or enforced against the Real
Property; and
(s) Sellers shall have received all of Sellers' Required
Regulatory Approvals in form and substance reasonably satisfactory (including
no unduly burdensome conditions) to Sellers.
7.2 Conditions to Obligations of Sellers. The obligation of Sellers
------------------------------------
to effect the sale of the Purchased Assets and the other transactions
contemplated by this Agreement shall be subject to the fulfillment at or prior
to the Closing Date (or the waiver by Sellers) of the following conditions:
(a) The waiting period under the HSR Act applicable to the
consummation of the sale of the Purchased Assets contemplated hereby shall
have expired or been terminated;
(b) No preliminary or permanent injunction or other order or
decree by any federal or state court which prevents the consummation of the
sale of the Purchased Assets contemplated herein shall have been issued and
remain in effect (each Party agreeing to use its reasonable best efforts to
have any such injunction, order or decree lifted) and no statute, rule or
regulation shall have been enacted by any state or federal government or
Governmental Authority in the United States which prohibits the consummation
of the sale of the Purchased Assets;
(c) Sellers shall have received all of Sellers' Required
Regulatory Approvals in form and substance reasonably satisfactory (including
no unduly burdensome conditions) to Sellers;
(d) Sellers shall have obtained all of the consents and
approvals for the consummation of the sale of the Purchased Assets listed on
Schedule 7.2(d);
(e) Buyer shall have performed and complied in all material
respects with the covenants and agreements contained in this Agreement which
are required to be performed and complied with by Buyer on or prior to the
Closing Date;
(f) The representations and warranties of Buyer set forth in
this Agreement and in the Additional Agreements shall be true and correct in
all material respects as of the Closing Date as though made at and as of the
Closing Date;
(g) Sellers shall have received a certificate from an authorized
officer of Buyer, dated the Closing Date, to the effect that, to such
officer's Knowledge, the conditions set forth in Sections 7.2(e) and (f) have
been satisfied by Buyer;
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(h) Buyer shall have assumed, as set forth in Section 6.10 and
subject to the terms and conditions of the IBEW Memorandum of Understanding,
all of the applicable obligations under the IBEW Collective Bargaining
Agreement as they relate to Transferred Union Employees;
(i) Sellers shall have received an opinion from Buyer's counsel
reasonably acceptable to Sellers, dated the Closing Date and satisfactory in
form and substance to Sellers and their counsel, substantially to the effect
that:
(i) Buyer is a limited liability company duly organized,
validly existing and in good standing under the laws of the state of
Delaware and is qualified to do business in the Commonwealth of
Pennsylvania and has the full power and authority to execute and deliver
this Agreement and the Additional Agreements and to consummate the
transactions contemplated hereby and thereby; and the execution and
delivery by Buyer of this Agreement and the Additional Agreements and
the consummation of the transactions contemplated thereby have been duly
authorized by all necessary action required on the part of Buyer;
(ii) This Agreement and the Additional Agreements have been
duly and validly executed and delivered by Buyer, and constitute valid
and binding agreements of Buyer, enforceable against Buyer in accordance
with their terms, except that such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other similar laws affecting or relating to
enforcement of creditor's rights generally and general principles of
equity (regardless of whether enforcement is considered in a proceeding
at law or in equity);
(iii) The execution, delivery and performance of this
Agreement and the Additional Agreements by Buyer does not (A) conflict
with the articles of organization or by-laws (or other organizational
documents), as currently in effect, of Buyer or (B) to the Knowledge of
such counsel, constitute a violation of or default under any agreements
and instruments which are material to the business or financial
condition of Buyer;
(iv) The Assignment and Assumption Agreement and other
transfer instruments described in Section 3.7 are in proper form for
Buyer to assume the Assumed Liabilities; and
(v) No consent or approval of, filing with, or notice to,
any Governmental Authority is necessary for Buyer's execution and
delivery of this Agreement and the Additional Agreements or the
consummation by Buyer of the transactions contemplated hereby and
thereby, other than such consents, approvals, filings or notices, which,
if not obtained or made, will not prevent Buyer from performing its
obligations under the Agreement and the Additional Agreements.
(j) Buyer shall have delivered, or caused to be delivered, to
Sellers at the Closing, Buyer's closing deliveries described in Section 3.7;
and
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(k) There shall not be any injunction, judgment, decree, order,
ruling or Law in effect preventing consummation of any of the transactions
contemplated by this Agreement or the Additional Agreements, except as shall
not have a Material Adverse Effect.
ARTICLE VIII
INDEMNIFICATION
---------------
8.1 Indemnification.
---------------
(a) Buyer shall indemnify, defend and hold harmless each Seller
and its Affiliates, and the respective officers, directors, employees,
shareholders, Representatives and agents of each (each, a "Sellers'
--------
Indemnitee"), from and against any and all claims, demands, suits, losses,
- ----------
liabilities, penalties, damages, obligations, payments, costs and expenses
(including, without limitation, the costs and expenses of any and all actions,
suits, proceedings, assessments, judgments, settlements and compromises
relating thereto and reasonable attorneys' fees and reasonable disbursements
in connection therewith) (each, an "Indemnifiable Loss"), asserted against or
------------------
suffered by any Sellers' Indemnitee relating to, resulting from or arising out
of (i) any breach by Buyer of any representation, warranty, covenant or
agreement of Buyer contained in this Agreement (including, without
limitation, any breach by Buyer of their obligation to post any performance,
surety or other bonds required pursuant to Section 6.6(d)) , (ii) the Assumed
Liabilities, (iii) any loss or damages resulting from or arising out of any
Inspection, or (iv) any Third Party Claims against a Sellers' Indemnitee
arising out of or in connection with Buyer's ownership or operation of Sunbury
Station, Lady Jane and the other Purchased Assets on or after the Closing
Date.
(b) Sellers shall indemnify, defend and hold harmless Buyer and
its Affiliates, and the respective officers, directors, employees,
shareholders, Representatives and agents of each (each, a "Buyer's
-------
Indemnitee"), from and against any and all Indemnifiable Losses asserted
- ----------
against or suffered by any Buyer's Indemnitee relating to, resulting from or
arising out of (i) the Excluded Liabilities, (ii) any Third Party Claims
against a Buyer's Indemnitee arising out of or in connection with Sellers'
ownership or operation of the Excluded Assets, (iii) any breach by Sellers of
any representation, warranty, covenant or agreement of Sellers contained in
this Agreement or (iv) noncompliance by Sellers with any bulk sales or
transfer laws as provided in Section 10.12.
(c) Except as otherwise provided in Section 8.1(b), (i) Buyer,
for itself and on behalf of its Representatives and Affiliates, does hereby
release, hold harmless and forever discharge Sellers and each other Sellers'
Indemnitee from any and all Indemnifiable Losses of any kind or character,
whether known or unknown, hidden or concealed, resulting from or arising out
of any Environmental Condition or violation of Environmental Law relating to
the Purchased Assets other than any liabilities or obligations described in
Section 2.4(g), Section 2.4(h), Section 2.4(i) or Section 2.4(j) and (ii)
Buyer hereby waives any and all rights and benefits with respect to such
Indemnifiable Losses that it now has, or in the future may have conferred upon
it by virtue of any statute or common law principle which provides that a
general release does not extend to claims which a party does not know or
suspect to exist in its favor at the time of executing the release, if
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knowledge of such claims would have materially affected such party's
settlement with the obligor. In this connection, Buyer hereby acknowledges
that it is aware that factual matters now unknown to it may have given or may
hereafter give rise to Indemnifiable Losses to which this release relates that
are presently unknown, unanticipated and unsuspected, and it further agrees
that this release has been negotiated and agreed upon in light of that
awareness and they nevertheless hereby intend to release Sellers and each
other Sellers' Indemnitee from the Indemnifiable Losses described in the first
sentence of this paragraph.
(d) The amount of any Indemnifiable Loss shall be reduced (i) to
the extent that any Person entitled to receive indemnification under this
Agreement (an "Indemnitee") receives any insurance proceeds with respect to
----------
such Indemnifiable Loss, (ii) to take into account any net Tax benefit
realized by the Indemnitee arising from the recognition of such Indemnifiable
Loss (but only to the extent that the Parties, following good faith
negotiations for a period of thirty (30) days, jointly agree that such Tax
benefit would be realized by the Indemnitee) and (iii) by the amount of any
payment actually received by the Indemnitee with respect to an Indemnifiable
Loss.
(e) The expiration or termination of any covenant, agreement,
representation or warranty shall not affect the Parties' obligations under
this Section 8.1 if the Indemnitee provided the Person required to provide
indemnification under this Agreement (the "Indemnifying Party") with proper
------------------
notice of the claim or event for which indemnification is sought prior to such
expiration, termination or extinguishment.
(f) Except to the extent otherwise provided in Article IX, the
rights and remedies of Sellers and Buyer under this Article VIII are exclusive
and in lieu of any and all other rights and remedies which Sellers and Buyer
may have under this Agreement or otherwise for declaratory, injunctive or
monetary relief, with respect to (i) any breach of or failure to perform any
representation, warranty, covenant or agreement set forth in this Agreement,
after the occurrence of the Closing, or (ii) the Assumed Liabilities or the
Excluded Liabilities, as the case may be.
(g) Each Party waives any provision of law to the extent that it
would limit or restrict the agreements contained in this Section 8.1. Nothing
herein shall prevent either Party from terminating this Agreement in
accordance with Article IX. Notwithstanding any provisions in this Agreement
to the contrary, each Party to this Agreement shall retain its remedies at law
or in equity with respect to willful, knowing or intentional
misrepresentations or breaches of this Agreement, including a failure to
consummate the Closing hereunder when and if required to do so.
(h) Notwithstanding anything to the contrary herein, no party
(including an Indemnitee) shall be entitled to recover from any other party
(including an Indemnifying Party) for any liabilities, damages, obligations,
payments, losses, costs, or expenses under this Agreement or any amount in
excess of the actual compensatory damages, court costs and reasonable
attorney's fees suffered by such party. Buyer and Sellers waive any right to
recover punitive, special, exemplary and consequential damages arising in
connection with or with respect to this Agreement. The provisions of this
Section 8.1(h) shall not apply to indemnification for a Third Party Claim.
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(i) Except for any willful, knowing or intentional breach or
misrepresentation, as to which claims may be brought without limitation as to
amount: (i) neither Buyer nor Sellers, as the case may be, shall have any
liability to an Indemnitee for breaches of representations or warranties
pursuant to this Section 8.1 until the aggregate indemnification obligation of
Buyer or Sellers, as the case may be, for breaches of representations or
warranties pursuant to this Section 8.1 exceeds $250,000, and then only to the
extent that the aggregate amount of such indemnification obligation exceeds
$250,000 and (ii) the liability of Buyer or Sellers, as the case may be, for
breaches of representations or warranties pursuant to this Section 8.1 shall
not exceed, in the aggregate, fifty percent (50%) of the Purchase Price, plus
or minus any adjustments to the Purchase Price pursuant to this Agreement.
(j) The rights and obligations of indemnification under this
Section 8.1 shall not be limited or subject to set-off based on any violation
or alleged violation of any obligation under this Agreement or otherwise,
including but not limited to breach or alleged breach by the Indemnitee of any
representation, warranty, covenant or agreement contained in this Agreement.
8.2 Defense of Claims.
-----------------
(a) If any Indemnitee receives notice of the assertion of any
claim or of the commencement of any claim, action, or proceeding made or
brought by any Person who is not a party to this Agreement or any Affiliate of
a Party to this Agreement (a "Third Party Claim") with respect to which
-----------------
indemnification is to be sought from an Indemnifying Party, the Indemnitee
shall give such Indemnifying Party reasonably prompt written notice thereof,
but in any event such notice shall not be given later than twenty (20)
calendar days after the Indemnitee's receipt of notice of such Third Party
Claim. Such notice shall describe the nature of the Third Party Claim in
reasonable detail and shall indicate the estimated amount, if practicable, of
the Indemnifiable Loss that has been or may be sustained by the Indemnitee.
The Indemnifying Party will have the right to participate in or, by giving
written notice to the Indemnitee, to elect to assume the defense of any Third
Party Claim at such Indemnifying Party's expense and by such Indemnifying
Party's own counsel, provided that the counsel for the Indemnifying Party who
shall conduct the defense of such Third Party Claim shall be reasonably
satisfactory to the Indemnitee. The Indemnitee shall cooperate in good faith
in such defense at such Indemnitee's own expense. If an Indemnifying Party
elects not to assume the defense of any Third Party Claim, the Indemnitee may
compromise or settle such Third Party Claim over the objection of the
Indemnifying Party, which settlement or compromise shall conclusively
establish the Indemnifying Party's liability pursuant to this Agreement.
(b) If, within twenty (20) calendar days after an Indemnitee
provides written notice to the Indemnifying Party of any Third Party Claims,
the Indemnitee receives written notice from the Indemnifying Party that such
Indemnifying Party has elected to assume the defense of such Third Party Claim
as provided in Section 8.2(a), the Indemnifying Party will not be liable for
any legal expenses subsequently incurred by the Indemnitee in connection with
the defense thereof; provided, however, that if the Indemnifying Party shall
fail to take reasonable steps necessary to defend diligently such Third Party
Claim within twenty (20) calendar days after receiving notice from the
Indemnitee that the Indemnitee believes the Indemnifying Party has failed to
take such steps, the Indemnitee may assume its own defense and the
Indemnifying Party shall be liable for all
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reasonable expenses thereof. Without the prior written consent of the
Indemnitee, the Indemnifying Party shall not enter into any settlement of any
Third Party Claim which would lead to liability or create any financial or
other obligation on the part of the Indemnitee for which the Indemnitee is not
entitled to indemnification hereunder. If a firm offer is made to settle a
Third Party Claim without leading to liability or the creation of a financial
or other obligation on the part of the Indemnitee for which the Indemnitee is
not entitled to indemnification hereunder and the Indemnifying Party desires
to accept and agree to such offer, the Indemnifying Party shall give written
notice to the Indemnitee to that effect. If the Indemnitee fails to consent
to such firm offer within ten (10) calendar days after its receipt of such
notice, the Indemnifying Party shall be relieved of its obligations to defend
such Third Party Claim and the Indemnitee may contest or defend such Third
Party Claim. In such event, the maximum liability of the Indemnifying Party
as to such Third Party Claim will be the amount of such settlement offer plus
reasonable costs or expenses paid or incurred by Indemnitee up to the date of
said notice.
(c) Any claim by an Indemnitee on account of an Indemnifiable
Loss which does not result from a Third Party Claim (a "Direct Claim") shall
------------
be asserted by giving the Indemnifying Party reasonably prompt written notice
thereof, stating the nature of such claim in reasonable detail and indicating
the estimated amount, if practicable, but in any event such notice shall not
be given later than twenty (20) calendar days after the Indemnitee becomes
aware of such Direct Claim, and the Indemnifying Party shall have a period of
thirty (30) calendar days within which to respond to such Direct Claim. If
the Indemnifying Party does not respond within such thirty (30) calendar day
period, the Indemnifying Party shall be deemed to have accepted such claim.
If the Indemnifying Party rejects such claim, the Indemnitee will be free to
seek enforcement of its right to indemnification under this Agreement.
(d) If the amount of any Indemnifiable Loss, at any time
subsequent to the making of an indemnity payment in respect thereof, is
reduced by recovery, settlement or otherwise under or pursuant to any
insurance coverage, or pursuant to any claim, recovery, settlement or payment
by, from or against any other entity, the amount of such reduction, less any
costs, expenses or premiums incurred in connection therewith (together with
interest thereon from the date of payment thereof at the publicly announced
prime rate then in effect of Mellon Bank of Philadelphia) shall promptly be
repaid by the Indemnitee to the Indemnifying Party.
(e) A failure to give timely notice as provided in this Section
8.2 shall not affect the rights or obligations of any Party hereunder except
if, and only to the extent that, as a result of such failure, the Party which
was entitled to receive such notice was actually prejudiced as a result of
such failure.
ARTICLE IX
TERMINATION
-----------
9.1 Termination. (a) This Agreement may be terminated at any time
-----------
prior to the Closing Date by mutual written consent of Sellers and Buyer.
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(b) This Agreement may be terminated by Sellers or Buyer if (i)
any federal or state court of competent jurisdiction shall have issued an
order, judgment or decree permanently restraining, enjoining or otherwise
prohibiting the Closing, and such order, judgment or decree shall have become
final and nonappealable or (ii) any statute, rule, order or regulation shall
have been enacted or issued by any Governmental Authority which, directly or
indirectly, prohibits the consummation of the Closing; or (iii) the Closing
contemplated hereby shall have not occurred on or before the day which is nine
(9) months from the date of this Agreement (the "Termination Date"); provided,
---------------- --------
however, that the right to terminate this Agreement under this Section 9.1(b)
- -------
(iii) 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 Closing to occur on or before such date; and provided, further,
-------- -------
that if on the day which is nine (9) months from the date of this Agreement
the conditions to the Closing set forth in Section 7.1(c), (n), (o) or (p) or
7.2(c) or (d) shall not have been fulfilled but all other conditions to the
Closing shall be fulfilled or shall be capable of being fulfilled, then the
Termination Date shall be the day which is eighteen (18) months from the date
of this Agreement.
(c) Except as otherwise provided in this Agreement, this
Agreement may be terminated by the Buyer if any of the Buyer's Required
Regulatory Approvals, the receipt of which is a condition to the obligation of
the Buyer to consummate the Closing as set forth in Section 7.1(c), shall have
been denied (and a petition for rehearing or refiling of an application
initially denied without prejudice shall also have been denied) and such
denial was not caused by a breach of this Agreement by Buyer.
(d) This Agreement may be terminated by Sellers, if any of the
Sellers' Required Regulatory Approvals, the receipt of which is a condition to
the obligation of Sellers to consummate the Closing as set forth in Section
7.2(c), shall have been denied (and a petition for rehearing or refiling of an
application initially denied without prejudice shall also have been denied)
and such denial was not caused by a breach of this Agreement by any Seller.
(e) This Agreement may be terminated by Buyer if there has been
a material violation or breach by Sellers of any covenant, representation or
warranty contained in this Agreement which has rendered the satisfaction of
any condition to the obligations of Buyer to effect the Closing impossible and
such violation or breach is not cured by the earlier of the Closing Date
or the date fifteen (15) days after receipt by Sellers of notice specifying
particularly such violation or breach, and such violation or breach has not
been waived by Buyer.
(f) This Agreement may be terminated by Sellers, if there has
been a material violation or breach by Buyer of any covenant, representation
or warranty contained in this Agreement which has rendered the satisfaction of
any condition to the obligations of Sellers to effect the Closing impossible
and such violation or breach is not cured by the earlier of the Closing Date
or the date fifteen (15) days after receipt by Buyer of notice specifying
particularly such violation or breach, and such violation or breach has not
been waived by Sellers.
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(g) This Agreement may be terminated by Sellers if there shall
have occurred any event or events which materially adversely affect Buyer's
ability to satisfy its obligations pursuant to this Agreement or Buyer's, WPSR
Capital's or PDI's ability to satisfy their respective obligations pursuant to
the Equity Contribution Agreement.
(h) This Agreement may be terminated by Sellers or Buyer in
accordance with the provisions of Section 6.11(b).
(i) This Agreement may be terminated by Sellers or Buyer if the
IBEW Memorandum of Understanding, containing the acknowledgments and
agreements described in Section 7.1(q), is not executed and delivered by the
IBEW within ninety (90) days after the date of this Agreement.
(j) This Agreement may be terminated by Sellers if the Equity
Contribution Agreement ceases to be in effect.
9.2 Procedure and Effect of No-Default Termination. In the event of
----------------------------------------------
termination of this Agreement by any of the Parties pursuant to Section 9.1,
written notice thereof shall forthwith be given by the terminating Party to
the other Party, whereupon, if this Agreement is terminated pursuant to any of
Sections 9.1(a) through (d) and 9.1(g) through (i), the liabilities of the
Parties hereunder will terminate, except as otherwise expressly provided in
this Agreement, and thereafter neither Party shall have any recourse against
the other by reason of this Agreement.
ARTICLE X
MISCELLANEOUS PROVISIONS
------------------------
10.1 Amendment and Modification. Subject to applicable Law, this
--------------------------
Agreement may be amended, modified or supplemented only by written agreement
of Sellers and Buyer.
10.2 Waiver of Compliance; Consents. Except as otherwise specifically
------------------------------
provided in this Agreement, any failure of any of the Parties to comply with
any obligation, covenant, agreement or condition herein may be waived by the
Party entitled to the benefits thereof only by a written instrument signed by
the Party granting such waiver, but such waiver of such obligation, covenant,
agreement or condition shall not operate as a waiver of, or estoppel with
respect to, any subsequent failure to comply therewith.
10.3 No Survival. Subject to the provisions of Section 9.2, each and
-----------
every representation, warranty and covenant contained in this Agreement (other
than (a) the representations, warranties or covenants contained in Sections
2.5, 3.3(c), 3.4, 3.5(b), 5.4, 5.7, 6.2, 6.4, 6.5, 6.6, 6.7, 6.8, 6.10, 6.13,
6.15 and in Article VIII (and any other covenant which by its terms shall
survive the Closing), which provisions shall survive the Closing in accordance
with their terms and (b) the representations and warranties contained in
Articles IV and V, which representations and warranties shall survive the
Closing for a period of one (1) year (other than the representations and
warranties contained in
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(i) Sections 4.1, 4.2, 4.3, 4.5(a), 5.1, 5.2, 5.3 and 5.8, which
representations and warranties shall continue indefinitely; (ii) the
representation and warranty in Section 4.14, which representation and
warranty shall survive for the applicable statute of limitations and (iii)
the representation and warranty in Section 4.6, which representation and
warranty shall survive for three (3) years from the Closing)) shall expire
with, and be terminated and extinguished by the consummation of the sale of
the Purchased Assets and the transfer of the Assumed Liabilities pursuant to
this Agreement and such representations, warranties and covenants shall not
survive the Closing Date; and none of Sellers, Buyer or any officer, director,
trustee or Affiliate of any of them shall be under any liability whatsoever
with respect to any such representation, warranty or covenant.
10.4 Notices. All notices and other communications hereunder shall be
-------
in writing and shall be deemed given if delivered personally or by facsimile
transmission, or mailed by overnight courier or registered or certified mail
(return receipt requested), postage prepaid, to the recipient Party at its
address (or at such other address or facsimile number for a Party as shall be
specified by like notice; provided, however, that notices of a change of
-------- -------
address shall be effective only upon receipt thereof):
(a) If to Sellers, to:
PP&L, Inc.
2 North Ninth Street
Allentown, PA 18101
Attention: Robert J. Grey, Esq.
Facsimile: (610) 774-4455
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
1440 New York Avenue, N.W.
Washington, D.C. 20005
Attention: Michael P. Rogan, Esq.
Facsimile: (202) 393-5760
(b) if to Buyer, to:
Sunbury Holdings, LLC
c/o WPS Power Development, Inc.
677 Baeten Road
Green Bay, WI 54304
Attention: Gerald L. Mroczkowski, Vice President
Facsimile: (920) 490-5999
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with a copy to:
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, WI 53202-5367
Attention: Mary Ann C. Halloin, Esq.
Facsimile: (414) 297-4900
10.5 Assignment. This Agreement and all of the provisions hereof shall
----------
be binding upon and inure to the benefit of the Parties hereto and their
respective successors and permitted assigns, but neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
Party hereto, including by operation of law, without the prior written consent
of the other Party, nor is this Agreement intended to confer upon any other
Person except the Parties hereto any rights, interests, obligations or
remedies hereunder. No provision of this Agreement shall create any third
party beneficiary rights in any employee or former employee of Sellers
(including any beneficiary or dependent thereof) in respect of continued
employment or resumed employment, and no provision of this Agreement shall
create any rights in any such Persons in respect of any benefits that may be
provided, directly or indirectly, under any employee benefit plan or
arrangement except as expressly provided for thereunder. Notwithstanding the
foregoing, (i)(a) Sellers may assign all or any portion of its rights and
obligations hereunder to any one or more Affiliates and (b) Buyer may assign
all or any portion of their rights and obligations hereunder to any one or
more wholly owned Subsidiaries (direct or indirect) and upon Buyer's or
Sellers', as applicable, receipt of notice from Sellers or Buyer, as
applicable, of any such assignment, such assignee will be deemed to have
assumed, ratified, agreed to be bound by and perform all such obligations, and
all references herein to "Sellers" or "Buyer", as applicable shall thereafter
be deemed to be references to such assignee in each case without the necessity
for further act or evidence by the Parties hereto or such assignee, and (ii)
Buyer may assign its rights hereunder and under any Additional Agreement to
any bank, financial institution or other lender providing financing to Buyer
(on a non- or limited recourse basis or otherwise) from time to time as
collateral security for such financing; provided, however, that no assignment
-------- -------
pursuant to clause (i)(a), (i)(b) or (ii) hereof shall relieve or discharge
Buyer or Sellers, as the case may be, from any of its obligations hereunder.
10.6 Transfer of Certain Purchased Assets to Affiliates of PP&L. Prior
----------------------------------------------------------
to Closing, PP&L may sell, assign, convey, transfer and deliver to Resources
or any other Affiliate of PP&L, all or any portion of its rights, title and
interest in, to and under the Purchased Assets (the "Interim Asset Transfer").
----------------------
In such event, PP&L, Resources or such other Affiliate of PP&L, as applicable,
and Buyer shall enter into a supplemental agreement pursuant to which (i)
Resources or such other Affiliate of PP&L shall make the representation set
forth in Section 4.5 (Title and Related Matters) or Section 4.20 (Emission
Allowances), as applicable, with respect to the Purchased Assets transferred
to it, as of the date of the Interim Asset Transfer and (ii) Resources or
such other Affiliate of PP&L shall agree to execute and deliver all documents
of conveyance which are necessary and appropriate for the effective transfer
of the Purchased Assets to Buyer at Closing.
10.7 Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the law of the Commonwealth of Pennsylvania (without giving
effect to conflict of law
65
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principles) as to all matters, including but not limited to matters of
validity, construction, effect, performance and remedies. The parties hereto
agree that venue in any and all actions and proceedings related to the subject
matter of this agreement shall be in the state and federal courts in and for
the Commonwealth of Pennsylvania which courts shall have exclusive
jurisdiction for such purpose, and the parties hereto irrevocably submit to
the exclusive jurisdiction of such courts and irrevocably waive the defense of
an inconvenient forum to the maintenance of any such action or proceeding.
Service of process may be made in any manner recognized by such courts. Each
of the parties hereto irrevocably waives its right to a jury trial with
respect to any action or claim arising out of any dispute in connection with
this agreement or the transactions contemplated hereby.
10.8 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
10.9 Interpretation. The article and section headings contained in
--------------
this Agreement are solely for the purpose of reference, are not part of the
agreement of the parties and shall not in any way affect the meaning or
interpretation of this Agreement.
10.10 Schedules. Except as otherwise provided in this Agreement, all
---------
Schedules referred to herein are intended to be and hereby are specifically
made a part of this Agreement.
10.11 Entire Agreement. This Agreement, the Confidentiality
----------------
Agreement, and the Additional Agreements including the Schedules, exhibits,
documents, certificates and instruments referred to herein or therein, embody
the entire agreement and understanding of the Parties hereto in respect of the
transactions contemplated by this Agreement. There are no restrictions,
promises, representations, warranties, covenants or undertakings, other than
those expressly set forth or referred to herein or therein. It is expressly
acknowledged and agreed that there are no restrictions, promises,
representations, warranties, covenants or undertakings contained in any
material made available to Buyer pursuant to the terms of the Confidentiality
Agreement (including the Offering Memorandum dated November 1998, previously
made available to Buyer by Sellers and J.P. Morgan Securities, Inc.). This
Agreement supersedes all prior agreements and understandings between the
Parties other than the Confidentiality Agreement with respect to such
transactions.
10.12 Bulk Sales Laws. Buyer acknowledges that, notwithstanding
---------------
anything in this Agreement to the contrary, Sellers will not comply with the
provision of the bulk sales laws of any jurisdiction in connection with the
transactions contemplated by this Agreement. Buyer hereby waives compliance
by Sellers with the provisions of the bulk sales laws of all applicable
jurisdictions.
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10.13 U.S. Dollars. Unless otherwise stated, all dollar amounts set
------------
forth herein are United States (U.S.) dollars.
[signature pages follow]
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IN WITNESS WHEREOF, Sellers and Buyer have caused this Agreement
to be signed by their respective duly authorized officers as of the date first
above written.
Sellers
-------
PP&L, INC.
By: /s/ Joseph J. McCabe
-------------------------------------
Name: Joseph J. McCabe
Title: Vice President and Controller
PP&L RESOURCES, INC.
By: /s/ Joseph J. McCabe
-------------------------------------
Name: Joseph J. McCabe
Title: Vice President and Controller
LADY JANE COLLIERIES, INC.
By: /s/ Robert J. Shovlin
-------------------------------------
Name: Robert J. Shovlin
Title: President
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Buyer
-----
SUNBURY HOLDINGS, LLC
By: WPS Power Development, Inc.,
as the sole member of Sunbury
Holdings, LLC
By: /s/ Gerald L. Mroczkowski
--------------------------------------
Name: Gerald L. Mroczkowski
Title: Vice President
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EXHIBIT 10-2
WPS RESOURCES CORPORATION
1999 STOCK OPTION PLAN
SECTION 1. PURPOSE
The purpose of the WPS Resources Corporation 1999 Stock Option
Plan (the "Plan") is to promote the best interests of WPS Resources
Corporation and its subsidiaries (together with any successor thereto, the
"Company"), its shareholders and any entities of which at least 20% of the
equity interest is held directly or indirectly by the Company (together
"Affiliates"), by encouraging and providing for the acquisition of an equity
interest in the success of the Company by employees.
SECTION 2. EFFECTIVE DATE
The Plan shall become effective on February 11, 1999, provided
that any grant made prior to the date on which the shareholders of the Company
approve the Plan shall be contingent upon such approval. In the event
shareholder approval is not obtained by June 30, 1999, the Plan and all
contingent grants previously made shall be cancelled.
SECTION 3. ADMINISTRATION
The Plan shall be administered by the Compensation Committee
(the "Committee") of the Board of Directors of WPS Resources Corporation (the
"Board"), which shall consist of not less than two directors, each of whom
shall qualify as a "non-employee director" within the meaning of Rule 16b-3
("Rule 16b-3") under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") and as an "outside director" under Section 162(m)(4)(C) of the
Internal Revenue Code of 1986, as amended (the "Code"). If at any time the
Committee shall not be in existence, the Board shall administer the Plan. To
the extent permitted by applicable law, the Board may delegate to another
committee of the Board or to one or more senior officers of the Company any or
all of the authority and responsibility of the Committee with respect to the
Plan, other than with respect to participants who are subject to Section 16 of
the Exchange Act ("Section 16 participants"). To the extent that the Board
has delegated to such other committee or one or more officers the authority
and responsibility of the Committee, all references to the Committee herein
shall include such other committee or one or more officers.
Subject to the terms of the Plan and applicable law, the
Committee shall have full power and authority to interpret and administer the
Plan and any instrument or agreement relating to, or made under, the Plan; to
establish, amend, suspend, or waive rules and regulations for the
administration of the Plan; appoint such agents as it shall deem appropriate
for the proper administration of the Plan; and to make any other determination
and take any other action that the Committee deems necessary or desirable for
the administration of the Plan. The Committee's decisions and determinations
under the Plan need not be uniform and may be made selectively among
participants, whether or not they are similarly situated. A majority of the
members of the Committee shall constitute a quorum and all determinations of
the Committee shall be made by a majority of its members at the meeting. Any
determination of the Committee under the Plan may be made without notice or
meeting of the Committee by a writing signed by a majority of the Committee
members.
<PAGE>
SECTION 4. ELIGIBILITY AND PARTICIPATION
Participants in the Plan shall be selected by the Committee
from among those employees of the Company and its Affiliates as the Committee
may designate from time to time. The Committee shall consider such factors as
it deems appropriate in selecting participants and in determining the type and
amount of their respective benefits. The Committee's designation of a
participant in any year shall not require the Committee to designate such
person to receive a benefit in any other year.
SECTION 5. STOCK SUBJECT TO PLAN
5.1. Number. Subject to adjustment as provided in Section
------
5.3, the total number of shares of Common Stock of the Company, par value of
$1.00 per share (the "Stock") which may be issued under the Plan shall not
exceed 1,500,000. No participant shall be granted options for more than
400,000 shares of Stock during any five year period. The shares to be
delivered under the Plan may consist, in whole or in part, of authorized but
unissued Stock or treasury Stock.
5.2. Unused Stock: Unexercised Rights. If, after the
---------------------------------
effective date of the Plan, any shares of Stock covered by an option granted
under the Plan are forfeited or if an option otherwise terminates, expires or
is canceled prior to the delivery of all of the shares of Stock or of other
consideration issuable or payable pursuant to such option, then the number of
shares of Stock counted against the number of shares available under the Plan
in connection with the grant of such option, shall again be available for the
granting of additional options under the Plan to the extent determined to be
appropriate by the Committee.
5.3. Adjustment in Capitalization. In the event that the
----------------------------
Committee shall determine that any dividend or other distribution (whether in
the form of cash, Stock, other securities or other property),
recapitalization, stock split, reverse stock split, reorganization, merger,
consolidation, split-up, spin-off, combination, repurchase or exchange of
Stock or other securities of the Company, issuance of warrants or other rights
to purchase Stock or other securities of the Company, or other similar
corporate transaction or event affects the Stock such that an adjustment is
determined by the Committee to be appropriate in order to prevent dilution or
enlargement of the benefits or potential benefits intended to be made
available under the Plan, then the Committee may, in such manner as it may
deem equitable, adjust any or all of (a) the number and type of shares of
Stock subject to the Plan and which thereafter may be made the subject of
options under the Plan; (b) the number and type of shares of Stock subject to
outstanding options; and (c) the grant, purchase or option price with respect
to any option, or, if deemed appropriate, make provision for a cash payment to
the holder of an outstanding option; provided, however, that the number of
shares of Stock subject to any award payable or denominated in Stock shall
always be a whole number.
SECTION 6. TERM OF THE PLAN
No award shall be granted under the Plan after February 10,
2004. However, unless otherwise expressly provided in the Plan or in an
applicable option, any option theretofore granted may extend beyond such date
and, to the extent set forth in the Plan, the authority of the
-2-
<PAGE>
Committee to amend, alter, adjust, suspend, discontinue or terminate any such
award, or to waive any conditions or restrictions with respect to any such
option, and the authority of the Board to amend the Plan, shall extend beyond
such date.
SECTION 7. STOCK OPTIONS
7.1. Grant of Options. Options may be granted to participants
----------------
at any time and from time to time as shall be determined by the Committee.
The Committee shall have complete discretion in determining the number, terms
and conditions of options granted to a participant. All options granted under
the Plan shall be nonqualified stock options. Such options may be granted for
or without consideration as determined by the Committee in its sole
discretion. If the Committee grants options in exchange for consideration,
the Committee may establish, in its sole discretion, any rules with respect to
the form, manner and timing of the payment of the consideration for such
options, and may establish any additional rules or conditions with respect to
the receipt of options in exchange for such consideration.
7.2. Exercise of Stock Options. Options will be exercisable
-------------------------
at purchase prices of not less than One Hundred percent (100%) of the Fair
Market Value of the Stock on the date of grant, unless otherwise determined by
the Committee. Options will be exercisable as determined by the Committee and
shall terminate at such time as the Committee shall determine.
7.3. Option Agreement. Each option shall be evidenced by an
----------------
option agreement that shall specify the date of grant, the option price, the
duration of the option, the number of shares of Stock to which the option
pertains and such other provisions as the Committee shall determine.
7.4. Fair Market Value. The Fair Market Value of the Stock
-----------------
shall be determined by such methods or procedures as shall be established from
time to time by the Committee; provided, however, that the Fair Market Value
shall not be less than the par value of the Stock; and provided further, that
so long as the Stock is traded on a public market, Fair Market Value means the
closing price of a share of Stock on the relevant date as reported on the
composite list used by the Wall Street Journal for reporting stock prices, or
if no such sale shall have been made on that day, on the last preceding day on
which there was such a sale.
7.5. Payment. The Committee shall determine the methods and
-------
the forms for payment of the purchase price of options, including (a) by
delivery of cash or other shares or securities of the Company having a then
Fair Market Value equal to the purchase price of such shares; or (b) by
delivery (including by fax) to the Company or its designated agent of an
executed irrevocable option exercise form together with irrevocable
instructions to a broker-dealer to sell or margin a sufficient portion of the
Stock and deliver the sale or margin loan proceeds directly to the Company to
pay the purchase price.
SECTION 8. TRANSFERABILITY
Each award granted under the Plan shall not be transferable
other than by will or the laws of descent and distribution, except that a
participant may transfer any award to the extent allowed by, and in a manner
specified by, the Committee.
-3-
<PAGE>
SECTION 9. RIGHTS OF EMPLOYEES
Nothing in the Plan shall interfere with or limit in any way
the right of the Company or any Affiliate to terminate any participant's
employment at any time nor confer upon any participant any right to continue
in the employ of the Company or any Affiliate.
SECTION 10. CHANGE OF CONTROL
(a) In the event of a "Change of Control" (as defined in the
WPS Resources Corporation Deferred Compensation Plan, or any successor plan
thereto):
(1) Any nonvested portion of an option issued
to a participant who is employed by the Company or an
Affiliate on the date immediately preceding the Change
of Control shall become immediately and fully vested;
(2) Each holder of an option shall have the
right at any time thereafter to exercise the vested
option whether or not the option was theretofore
exercisable, subject to the expiration of the exercise
period as provided in the option agreement; and
(3) If, as a result of the Change of Control,
the Company is not the surviving corporation (or
survives only as a subsidiary of another corporation),
the Committee may determine that all outstanding
options that are not exercised shall be replaced with
comparable options by the surviving corporation.
(b) The Committee may, in its sole and absolute discretion,
amend, modify or rescind the provisions of this Section 10 if it determines
that the operation of this Section 10 may prevent a transaction in which the
Company or any Affiliate is a party from being accounted for on a
pooling-of-interests basis.
(c) Notwithstanding any other provision of this Plan, unless
otherwise determined by the Committee, if any portion of the payments or
benefits described in this Plan or under any other agreement with or plan of
the Company (in the aggregate, "Total Payments"), would constitute an "excess
parachute payment," then the Total Payments to be made to the participant
shall be reduced such that the value of the aggregate Total Payments that the
participant is entitled to receive shall be one dollar ($1.00) less than the
maximum amount that the participant may receive without becoming subject to
the tax imposed by Section 4999 of the Code or which the Company may pay
without loss of deduction under section 280G(a) of the Code; provided that
this Section 10(c) shall not apply in the case of a participant who has in
effect a valid employment contract providing that the Total Payments to the
participant shall be determined without regard to the maximum amount allowable
under Section 280G of the Code. The terms "excess parachute payment" and
"parachute payment" shall have the meanings assigned to them in Section 280G
of the Code, and such "parachute payments" shall be valued as provided
therein. Present value shall be calculated in accordance with Section
280G(d)(4) of the Code. Within forty (40) days following delivery of notice
by the Company to the
-4-
<PAGE>
participant of its belief that there is a payment or benefit due the
participant which will result in an excess parachute payment, the participant
and the Company, at the Company's expense, shall obtain the opinion (which
need not be unqualified) of a nationally recognized tax counsel selected by
the Company's independent auditors (which may be regular outside counsel of
the Company), which opinion sets forth (i) the amount of the Base Period
Income; (ii) the amount and present value of the Total Payments; and
(iii) the amount and present value of any excess parachute payments determined
without regard to the limitations of this Section 10(c). As used herein, the
term "Base Period Income" means an amount equal to the participant's
"annualized includible compensation for the base period" as defined in Section
280G(d)(1) of the Code. For purposes of such opinion, the value of any
noncash benefits or any deferred payments or benefit shall be determined by
the Company's independent auditors in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code, which determination shall be
evidenced in a certificate of such auditors addressed to the Company and the
participant and shall be binding upon the Company and the participant. If
such opinion determines that there would be an excess parachute payment, the
benefits granted hereunder or any other payment or benefit determined by such
counsel to be includible in Total Payments shall be reduced, cancelled or
eliminated as specified by the participant in writing delivered to the Company
within thirty (30) days of his receipt of such opinion or, if the participant
fails to so notify the Company, then as the Company shall reasonably
determine, so that under the bases of calculations set forth in such opinion
there will be no excess parachute payments. If such legal counsel so requests
in connection with the opinion required by this Section 10(c), the participant
and the Company shall obtain, at the Company's expense, and the legal counsel
may rely on in providing the opinion, the advice of a firm or recognized
executive compensation consultants as to the reasonableness of any item of
compensation to be received by the participant. If the provisions of Sections
280G and 4999 of the Code are repealed without succession, then this Section
10(c) shall be of no further force or effect. All references to sections of
the Code shall include any successor provision thereto.
SECTION 11. CANCELLATION OF OPTIONS
Notwithstanding anything herein to the contrary, the Committee may, in
its sole and absolute discretion, cancel any option granted hereunder,
including options to which the Participant has a vested interest, if the
Committee determines that such cancellation is necessary to permit a
transaction, in which the Company or any Affiliate is a party, to be accounted
for on a pooling-of-interests basis.
SECTION 12. AMENDMENT, MODIFICATION AND TERMINATION OF PLAN
12.1. Amendments and Termination. The Board may at any time
--------------------------
amend, alter, suspend, discontinue or terminate the Plan; provided, however,
that shareholder approval of any amendment of the Plan shall be obtained if
otherwise required by (a) the Code in order to enable the Company to comply
with the provisions of Section 162(m) of the Code, or (b) the listing
requirements of the principal securities exchange or market on which the Stock
is then traded (in order to maintain the listing or quotation of the Stock
thereon). To the extent permitted by applicable law, the Committee may also
amend the Plan, provided that any such amendments
-5-
<PAGE>
shall be reported to the Board. Termination of the Plan shall not affect the
rights of participants with respect to options previously granted to them, and
all unexpired options shall continue in force and effect after termination of
the Plan except as they may lapse or be terminated by their own terms and
conditions, or be cancelled pursuant to Section 11.
12.2. Waiver of Conditions. The Committee may, in whole or in
--------------------
part, waive any conditions or other restrictions with respect to any option
granted under the Plan.
SECTION 13. TAXES
The Company or any Affiliate shall be entitled to withhold the
amount of any tax attributable to shares of Stock deliverable under the Plan
after giving the person entitled to receive such shares of Stock notice as far
in advance as practicable, including withholding from the compensation
otherwise payable to the participant, and the Company may defer making
delivery if any such tax may be pending unless and until indemnified to its
satisfaction. The Committee may, in its discretion and subject to such rules
as it may adopt, permit or require a participant to pay all or a portion of
the federal, state and local withholding taxes arising in connection with the
exercise of a nonqualified stock option, by (a) having the Company withhold
shares of Stock otherwise issuable, (b) tendering back shares of Stock
received in connection with such benefit, or (c) delivering other previously
owned shares of Stock, having a Fair Market Value equal to the amount to be
withheld; provided, however, that the amount to be withheld shall not exceed
the participant's estimated total federal, state and local tax obligations
associated with the transaction. If the Committee provides that a participant
may elect the method of withholding, the election must be made on or before
the date as of which the amount of tax to be withheld is determined and
otherwise as required by the Committee. The Fair Market Value of fractional
shares of Stock remaining after payment of the withholding taxes shall be paid
to the participant in cash.
SECTION 14. MISCELLANEOUS
14.1. Other Provisions. The grant of any option under the
----------------
Plan may also be subject to other provisions (whether or not applicable to the
benefit awarded to any other participant) as the Committee determines
appropriate, including, without limitation, provisions for (a) the purchase of
Stock under options in installments; (b) the financing of the purchase of
Stock under the options in the form of a promissory note issued to the Company
by a participant on such terms and conditions as the Committee determines; (c)
restrictions on resale or other disposition; and (d) compliance with federal
or state securities laws and stock exchange or market requirements.
14.2. Option Agreement. No person shall have any rights under
----------------
any option granted under the Plan unless and until the Company and the
participant to whom the award was granted shall have executed an option
agreement in such form as shall have been approved by the Committee.
SECTION 15. LEGAL CONSTRUCTION
15.1. Requirements of Law. The granting of options under the
-------------------
Plan and the issuance of shares of Stock in connection with an option, shall
be subject to all applicable laws,
-6-
<PAGE>
rules and regulations, and to such approvals by any governmental agencies or
national securities exchanges as may be required.
15.2. Governing Law. The Plan, and all agreements hereunder,
-------------
shall be construed in accordance with and governed by the laws of the State of
Wisconsin.
15.3. Severability. If any provision of the Plan or any
------------
option agreement is or becomes or is deemed to be invalid, illegal or
unenforceable in any jurisdiction, or as to any person or option, or would
disqualify the Plan, under any law deemed applicable by the Committee, such
provision shall be construed or deemed amended to conform to applicable laws,
or if it cannot be so construed or deemed amended without, in the
determination of the Committee, materially altering the intent of the Plan,
any option agreement or the option, such provision shall be stricken as to
such jurisdiction, person or option, and the remainder of the Plan, any such
option agreement and any such option shall remain in full force and effect.
-7-
<PAGE>
<TABLE>
EXHIBIT 11
WPS RESOURCES CORPORATION
<CAPTION>
=======================================================================================================
INFORMATION WITH RESPECT TO THE COMPUTATION
OF EARNINGS PER SHARE OF COMMON STOCK Three Months Ended Six Months Ended
(Thousands) June 30 June 30
1999 1998 1999 1998
=======================================================================================================
<S> <C> <C> <C> <C>
Shares of common stock at beginning of period 26,580 26,515 26,502 26,519
Shares of common stock purchased for deferred
compensation trust -
Date of Deferred Number
Compensation Trust Purchase of Shares
- --------------------------- ---------
January 20, 1998 1 1
February 23, 1998 1 1
March 23, 1998 2 2
April 20, 1998 1 1 1
May 20, 1998 1 1 1
June 23, 1998 2 2 2
January 20, 1999 1 1
February 22, 1999 1 1
March 22, 1999 2 2
April 20, 1999 1 1 1
May 20, 1999 1 1 1
June 21, 1999 2 2 2
Shares of Common Stock Issued Number
During this Period of Shares
- ----------------------------- ---------
January 25, 1999 12 12
February 25, 1999 16 16
March 25, 1999 54 54
April 23, 1999 16 16 16
May 24, 1999 16 16 16
June 24, 1999 51 51 51
- -------------------------------------------------------------------------------------------------------
Shares of common stock at end of period 26,659 26,511 26,659 26,511
=======================================================================================================
Computation of daily weighted average
shares:
Shares of common stock at
beginning of period -
Number Number
of of
Days Shares
------ ------
June 30, 1998 19 26,519 503,861
June 30, 1998 19 26,515 503,785
June 30, 1999 19 26,502 503,538
June 30, 1999 19 26,580 505,020
Shares of common stock after
purchase for deferred compensation trust -
Number Number
of of
Days Shares
------ ------
June 30, 1998 34 26,517 901,578
June 30, 1998 28 26,516 742,448
June 30, 1998 28 26,515 742,420
June 30, 1998 30 26,514 795,420 795,420
June 30, 1998 34 26,513 901,442 901,442
June 30, 1998 8 26,511 212,088 212,088
June 30, 1999 5 26,501 132,505
June 30, 1999 28 26,513 742,364
June 30, 1999 3 26,512 79,536
June 30, 1999 25 26,528 663,200
June 30, 1999 3 26,526 79,578
June 30, 1999 26 26,580 691,080
June 30, 1999 3 26,579 79,737 79,737
June 30, 1999 27 26,595 718,065 718,065
June 30, 1999 4 26,594 106,376 106,376
June 30, 1999 28 26,611 745,108 745,108
June 30, 1999 3 26,608 79,824 79,824
June 30, 1999 7 26,659 186,613 186,613
- -------------------------------------------------------------------------------------------------------
Total days - weighted 2,420,743 2,412,735 4,807,524 4,799,257
=======================================================================================================
Average number of shares of common
stock based on daily
weighted average computations 26,601 26,512 26,561 26,514
=======================================================================================================
Earnings on common stock, as set forth
in statements of income $10,041 $10,465 $32,793 $28,417
=======================================================================================================
Earnings per share of common stock based on
weighted average shares $0.38 $0.39 $1.23 $1.07
=======================================================================================================
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> UT EXHIBIT 27
<CIK> 0000916863
<NAME> WPS RESOURCES CORPORATION
<SUBSIDIARY>
<NUMBER> 1
<NAME> WISCONSIN PUBLIC SERVICE CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,116,759
<OTHER-PROPERTY-AND-INVEST> 76,806
<TOTAL-CURRENT-ASSETS> 205,240
<TOTAL-DEFERRED-CHARGES> 64,052
<OTHER-ASSETS> 139,676
<TOTAL-ASSETS> 1,602,533
<COMMON> 26,659
<CAPITAL-SURPLUS-PAID-IN> 168,465
<RETAINED-EARNINGS> 335,866
<TOTAL-COMMON-STOCKHOLDERS-EQ> 530,990
0
51,198
<LONG-TERM-DEBT-NET> 340,883
<SHORT-TERM-NOTES> 10,100
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 65,813
<LONG-TERM-DEBT-CURRENT-PORT> 772
0
<CAPITAL-LEASE-OBLIGATIONS> 73,823
<LEASES-CURRENT> 297
<OTHER-ITEMS-CAPITAL-AND-LIAB> 528,657
<TOT-CAPITALIZATION-AND-LIAB> 1,602,533
<GROSS-OPERATING-REVENUE> 551,386
<INCOME-TAX-EXPENSE> 17,502
<OTHER-OPERATING-EXPENSES> 489,861
<TOTAL-OPERATING-EXPENSES> 489,861<F1>
<OPERATING-INCOME-LOSS> 61,525<F2>
<OTHER-INCOME-NET> 6,110
<INCOME-BEFORE-INTEREST-EXPEN> 67,635<F3>
<TOTAL-INTEREST-EXPENSE> 16,047
<NET-INCOME> 34,349<F4>
1,556
<EARNINGS-AVAILABLE-FOR-COMM> 32,793
<COMMON-STOCK-DIVIDENDS> 26,300
<TOTAL-INTEREST-ON-BONDS> 15,413
<CASH-FLOW-OPERATIONS> 114,337
<EPS-BASIC> 1.23
<EPS-DILUTED> 1.23
<FN>
<F1>Operating expenses exclude income taxes of $17,502.
<F2>Operating income is before income taxes of $17,502.
<F3>Income before interest expense is before income taxes of
$17,502.
<F4>Net income includes minority interest of $(263).
</FN>
</TABLE>
