SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported) August 22, 1995
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SOUTHWESTERN PUBLIC SERVICE COMPANY
(Exact name of registrant as specified in its charter)
1-3789
(Commission file number)
New Mexico 75-0575400
(State or other jurisdiction of (I.R.S. Employer
incorporation) Identification No.)
Tyler at Sixth, Amarillo, Texas 79101
(Address of principal executive offices) (Zip code)
(806) 378-2121
(Registrant's telephone number, including area code)
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NOT APPLICABLE
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(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS
Southwestern Public Service Company, a New Mexico corporation
("SPS"), Public Service Company of Colorado, a Colorado corporation ("PSC"), and
M-P New Co., a newly-formed Delaware corporation ("Newco"), have entered into an
Agreement and Plan of Reorganization, dated as of August 22, 1995 (the "Merger
Agreement"), which provides for a business combination as peer firms involving
SPS and PSC in a "merger-of-equals" transaction (the "Merger"). The Merger,
which was unanimously approved by the Boards of Directors of the constituent
companies, is expected to close shortly after all of the conditions to the
consummation of the Merger, including obtaining applicable regulatory approvals,
are met or waived. The regulatory approval process is expected to take
approximately 12 to 16 months.
The Merger Agreement and the press release issued in connection
therewith are filed as Exhibits 2 and 99 to this report and are incorporated
herein by reference. The description of the Merger Agreement set forth herein
does not purport to be complete and is qualified in its entirety by the
provisions of the Merger Agreement.
As part of the Merger, the holding company of the combined
enterprise will be registered under the Public Utility Holding Company Act of
1935, as amended (the "1935 Act"). Newco, which will serve as the holding
company, will be renamed at a later date and will be the parent company of
both SPS and PSC.
Under the terms of the Merger Agreement, New SPS will be merged with
and into SPS and New PSC will be merged with and into PSC. SPS and PSC shall be
the surviving corporations and shall continue their corporate existence under
the laws of the State of New Mexico and the State of Colorado, respectively.
Each outstanding share of Common Stock, par value $1.00 per share, of SPS will
be cancelled and converted into the right to receive 0.95 shares of Common
Stock, par value $1.00 per share, of Newco ("Newco Common Stock") and each
outstanding share of Common Stock, par value $5.00 per share, of PSC will
be cancelled and converted into the right to receive 1.0 shares of Newco Common
Stock. As of August 4, 1995, SPS had 40.9 million common shares outstanding
and PSC had 63.1 million common shares outstanding. Based on such
capitalization, the Merger would result in the common shareholders of SPS
receiving 38.1% of the common equity of Newco and the common shareholders of
PSC owning 61.9% of the common equity of Newco. The Merger Agreement and the
Merger will not affect the outstanding debt, including mortgage bonds, and
shares of preferred stock of SPS and PSC.
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It is anticipated that Newco will adopt the SPS dividend payment
level, adjusted for the exchange ratio. SPS currently pays $2.20 per share
annually, and PSC's annual dividend rate is currently $2.04 per share. Based on
the exchange ratio, the pro forma dividend for Newco would be $2.32 per share
on an annual basis, following completion of the Merger. Newco's common stock
dividend level will be dependent upon Newco's results of operations, financial
position, cash flows and other factors, and will be evaluated by the Board of
Directors.
The Merger is subject to customary closing conditions, including,
without limitation, the receipt of required shareholder approvals of SPS and
PSC; and the receipt of all necessary governmental approvals and the making of
all necessary governmental filings, including approvals or findings of state
utility regulators in Texas, Colorado, New Mexico, Wyoming, Oklahoma and Kansas,
the approval of the Federal Energy Regulatory Commission, the Securities and
Exchange Commission (the "SEC") under the 1935 Act and the Nuclear Regulatory
Commission, and the filing of the requisite notification with the Federal
Trade Commission and the Department of Justice under the Hart-ScottRodino
Antitrust Improvements Act of 1976, as amended, and the expiration of
the applicable waiting period thereunder. The Merger is also subject to
the receipt of opinions of counsel that the Merger will qualify as a tax-
free reorganization, and the assurances from the parties' independent
accountants that the Merger will qualify as a pooling of interests for
accounting purposes. In addition, the Merger is conditioned upon the
effectiveness of a registration statement to be filed by Newco with the SEC
with respect to shares of Newco Common Stock to be issued in the Merger and
the approval for listing of such shares on the New York Stock Exchange.
Shareholder meetings to vote upon the Merger will be convened as soon as
practicable and are expected to be held in the first quarter of 1996.
The Merger Agreement provides that, after the effectiveness of the
Merger (the "Effective Time"), the corporate offices of Newco will be located in
Denver, Colorado, and significant operating offices will be located in Amarillo,
Texas. SPS and PSC will maintain their company headquarters in Amarillo and
Denver, respectively. Newco's Board of Directors will consist of a total of 14
directors, 8 of whom will be designated by PSC and 6 of whom will be designated
by SPS. At the Effective Time, Delwin D. Hock, Chairman of the Board and Chief
Executive Officer ("CEO") of PSC, will retire. Mr. Bill D. Helton, the current
Chairman of the Board and CEO of SPS, will
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serve as CEO of Newco from the Effective Time until the later of (i) June 30,
1999 or (ii) 30 months from the Effective Time and will serve as Chairman of the
Board of Newco until May 31, 2001. Mr. Wayne H. Brunetti, the current President
and Chief Operating Officer of PSC, will serve as Vice Chairman, President and
Chief Operating Officer of Newco until the date when Mr. Helton ceases to be
CEO, at which time he will be entitled to assume the additional role of CEO. Mr.
Brunetti will assume the position of Chairman when Mr. Helton ceases to be
Chairman. The forms of employment agreement for Mr. Helton and Mr. Brunetti are
attached as exhibits to the Merger Agreement.
The Merger Agreement contains certain covenants of the parties
pending the consummation of the Merger. Generally, the parties must carry on
their businesses in the ordinary course consistent with past practice, may not
increase dividends on common stock beyond specified levels, and may not issue
capital stock beyond certain limits. The Merger Agreement also contains
restrictions on, among other things, charter and bylaw amendments, capital
expenditures, acquisitions, dispositions, incurrence of indebtedness, certain
increases in employee compensation and benefits, and affiliate transactions.
The Merger Agreement may be terminated under certain circumstances,
including (1) by mutual consent of the parties; (2) by PSC or SPS if the Merger
is not consummated by December 31, 1996 (provided, however, that such
termination date shall be extended to June 30, 1997 if all conditions to closing
the Merger, other than the receipt of statutory approvals by any of the parties,
are capable of being satisfied by December 31, 1996); (3) by PSC or SPS if the
approval of either SPS's or PSC's shareholders with respect to the Merger is not
obtained or if any state or federal law, rule or regulation or court order
prohibits the Merger or causes a material adverse effect on either SPS or PSC;
(4) by a non-breaching party if there exist breaches of any representations or
warranties contained in the Merger Agreement as of the date thereof, which,
individually or in the aggregate, would result in a material adverse effect on
the breaching party and which are not cured within twenty (20) days after
notice; (5) by a non-breaching party if there occur breaches of specified
covenants or material breaches of any other covenant or agreement which are not
cured within twenty (20) days after notice; (6) by either party if the Board of
Directors of the other party shall withdraw or adversely modify or fail to
reaffirm its recommendation of the Merger; or (7) by either party, under certain
circumstances, as
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a result of a third-party tender offer or business combination proposal which
such party's board of directors determines in good faith that their fiduciary
duties require be accepted (based on counsel's opinion), after the other party
has first been given an opportunity to make concessions and adjustments in the
terms of the Merger Agreement.
The Merger Agreement provides that if it is terminated pursuant to
the circumstances described in clause (4), (5) or (6) of the previous paragraph,
then, if such breach is not willful, the non-breaching or non-withdrawing party
is entitled to reimbursement of its out-of-pocket expenses, not to exceed $10
million. In the event of a willful breach or failure to comply, including under
the circumstances described in clause (6) of the previous paragraph, the
non-breaching or non-withdrawing party will be entitled to its out-of-pocket
expenses (which shall be limited to $10 million) and an additional fee equal to
$35 million. In addition, the Merger Agreement provides that if such agreement
is terminated under the circumstances described in clause (7) of the previous
paragraph, the party accepting the other offer shall pay to the other party an
amount equal to its out-of-pocket expenses, not to exceed $10 million, plus an
additional fee of $35 million, payable prior to entering into an agreement with
a third party. The Merger Agreement also requires payment of a termination fee
of $35 million (and reimbursement of out-of-pocket expenses not to exceed $10
million) by one party (the "Payor") to the other in certain circumstances, if
(i) the Merger Agreement is terminated (y) under circumstances described in
clause (2), (3), (4), (5) or (6) or (z) as a result of the Payor's material
failure to convene a shareholder meeting, distribute proxy materials and,
subject to its board of directors' fiduciary duties, recommend the Merger to its
shareholders; and (ii) at the time of such termination or prior to the meeting
of such party's shareholders there shall have been a third-party tender offer or
business combination proposal which shall not have been rejected by the Payor
and withdrawn by such third party. Such termination fee and out-of-pocket
expenses referred to in the previous sentence shall be paid upon termination. If
the Merger Agreement is terminated as provided in one of the first three
sentences of this paragraph and if any business combination involving the Payor
is accepted within one year of termination and is consummated within two and one
half years from the date of acceptance of such business combination, the Payor
shall pay to the other party an additional fee of $25 million. All payments made
as described in this paragraph, except reimbursement for out-of-pocket expenses,
shall be payable, to the
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extent not prohibited by law, in shares of common stock of the Payor. The
termination fees payable by SPS or PSC under these provisions may not exceed $60
million in the aggregate, excluding reimbursement of out-of-pocket expenses.
Based on fiscal 1994 results, Newco will have combined annual
revenues of approximately $3 billion and total assets of approximately $6
billion. The companies project a savings of approximately $770 million in the
first 10 years after the Merger is completed. The proposed allocation of the net
savings between ratepayers and shareholders of SPS and PSC will be submitted to
the various regulatory agencies later this year.
Newco will serve approximately 1.5 million electric customers in
Colorado, Texas, New Mexico, Wyoming, Oklahoma and Kansas and will provide
natural gas service to 933,000 customers in Colorado and Wyoming. The business
of Newco will consist of utility operations and various non-utility enterprises,
including independent power projects.
SPS recognizes that the divestiture of PSC's existing gas operations
is a possibility under the new registered holding company structure, but the
companies will seek approval from the SEC to maintain this business. If
divestiture is ultimately required, the SEC has historically allowed companies
sufficient time to accomplish divestitures in a manner that protects shareholder
value.
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ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) EXHIBITS. The following exhibits are filed herewith:
2 Agreement and Plan of Reorganization, dated as of August 22,
1995, by and among Public Service Company of Colorado,
Southwestern Public Service Company and M-P New Co.
99 Press Release, dated August 22, 1995, of South-
western Public Service Company and Public Ser-
vice Company of Colorado.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SOUTHWESTERN PUBLIC SERVICE COMPANY
(Registrant)
/s/ Doyle R. Bunch II
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Name: Doyle R. Bunch II
Title: Executive Vice President, Accounting
and Corporate Development
DATE: August 22, 1995
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EXHIBIT INDEX
Exhibit
Number
2 Agreement and Plan of Reorganization, dated as of August 22,
1995, by and among Public Service Company of Colorado,
Southwestern Public Service Company and M-P New Co.
99 Press Release, dated August 22, 1995, of Southwestern Public
Service Company and Public Service Company of Colorado.
AGREEMENT AND PLAN
OF REORGANIZATION
by and among
PUBLIC SERVICE COMPANY OF COLORADO,
SOUTHWESTERN PUBLIC SERVICE COMPANY
and
M-P NEW CO.
Dated as of August 22, 1995
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TABLE OF CONTENTS
Page
ARTICLE I
THE MERGERS
Section 1.1 Formation of Merger Subsidiaries .............................. 2
Section 1.2 Certain Other Actions ......................................... 2
Section 1.3 The Mergers ................................................... 2
Section 1.4 Effective Time of the Mergers ................................. 3
ARTICLE II
TREATMENT OF SHARES
Section 2.1 Effect of Mergers on Capital Stock ............................ 3
Section 2.2 Exchange of Common Stock Certificates ......................... 4
ARTICLE III
THE CLOSING
Section 3.1 Closing ....................................................... 7
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PSCo
Section 4.1 Organization and Qualification ................................ 7
Section 4.2 Subsidiaries .................................................. 8
Section 4.3 Capitalization ................................................ 8
Section 4.4 Authority; Non-Contravention; Statutory Approvals; Compliance 9
Section 4.5 Reports and Financial Statements ............................. 10
Section 4.6 Absence of Certain Changes or Events ......................... 11
Section 4.7 Litigation ................................................... 11
Section 4.8 Registration Statement and Proxy Statement ................... 11
Section 4.9 Tax Matters .................................................. 12
Section 4.10 Employee Matters; ERISA ...................................... 15
Section 4.11 Environmental Protection ..................................... 19
Section 4.12 Regulation as a Utility ...................................... 21
Section 4.13 Vote Required ................................................ 22
Section 4.14 Accounting Matters ........................................... 22
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Section 4.15 Opinion of Financial Advisor ................................. 22
Section 4.16 Insurance .................................................... 22
Section 4.17 Ownership of SPS Common Stock ................................ 22
Section 4.18 PSCo Rights Agreement ........................................ 22
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SPS
Section 5.1 Organization and Qualification ............................... 23
Section 5.2 Subsidiaries ................................................. 23
Section 5.3 Capitalization ............................................... 24
Section 5.4 Authority; Non-Contravention; Statutory Approvals; Compliance 24
Section 5.5 Reports and Financial Statements ............................. 25
Section 5.6 Absence of Certain Changes or Events ......................... 26
Section 5.7 Litigation ................................................... 26
Section 5.8 Registration Statement and Proxy Statement ................... 26
Section 5.9 Tax Matters .................................................. 27
Section 5.10 Employee Matters; ERISA ...................................... 30
Section 5.11 Environmental Protection ..................................... 34
Section 5.12 Regulation as a Utility ...................................... 35
Section 5.13 Vote Required ................................................ 35
Section 5.14 Accounting Matters ........................................... 35
Section 5.15 Opinion of Financial Advisor ................................. 35
Section 5.16 Insurance .................................................... 35
Section 5.17 Ownership of PSCo Common Stock ............................... 36
Section 5.18 SPS Rights Agreement ......................................... 36
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGERS
Section 6.1 Ordinary Course of Business .................................. 36
Section 6.2 Dividends .................................................... 37
Section 6.3 Issuance of Securities ....................................... 37
Section 6.4 Charter Documents ............................................ 37
Section 6.5 Acquisitions ................................................. 38
Section 6.6 No Dispositions .............................................. 38
Section 6.7 Indebtedness ................................................. 38
Section 6.8 Capital Expenditures ......................................... 38
Section 6.9 Compensation, Benefits ....................................... 39
Section 6.10 1935 Act ..................................................... 39
Section 6.11 Accounting ................................................... 39
Section 6.12 Pooling ...................................................... 39
Section 6.13 Tax-Free Status .............................................. 40
Section 6.14 Discharge of Liabilities ..................................... 40
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Section 6.15 Cooperation, Notification .................................... 40
Section 6.16 Rate Matters ................................................. 40
Section 6.17 Third-Party Consents ......................................... 40
Section 6.18 No Breach, Etc ............................................... 41
Section 6.19 Tax-Exempt Status ............................................ 41
Section 6.20 Transition Management ........................................ 41
Section 6.21 Insurance .................................................... 41
Section 6.22 Permits ...................................................... 41
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access to Information ........................................ 41
Section 7.2 Joint Proxy Statement and Registration Statement ............. 42
Section 7.3 Regulatory Matters ........................................... 43
Section 7.4 Shareholder Approvals ........................................ 44
Section 7.5 Directors' and Officers' Indemnification ..................... 44
Section 7.6 Disclosure Schedules ......................................... 46
Section 7.7 Public Announcements ......................................... 46
Section 7.8 Rule 145 Affiliates .......................................... 46
Section 7.9 Employee Agreements and Workforce Matters .................... 47
Section 7.10 Employee Benefit Plans ....................................... 47
Section 7.11 Incentive, Stock and Other Plans ............................. 48
Section 7.12 No Solicitations ............................................. 48
Section 7.13 Company Board of Directors ................................... 49
Section 7.14 Company Directors and Officers ............................... 50
Section 7.15 Employment Contracts ......................................... 50
Section 7.16 Corporate Offices ............................................ 50
Section 7.17 Expenses ..................................................... 50
Section 7.18 Further Assurances ........................................... 50
Section 7.19 Registration Rights .......................................... 51
Section 7.20 Charter and By-Law Amendments ................................ 52
ARTICLE VIII
CONDITIONS
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger to
Which it is Party .................................................. 52
Section 8.2 Conditions to Obligation of SPS to Effect the SPS Merger ..... 53
Section 8.3 Conditions to Obligation of PSCo to Effect the PSCo Merger ... 54
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ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination .................................................. 55
Section 9.2 Effect of Termination ........................................ 58
Section 9.3 Termination Fee; Expenses .................................... 58
Section 9.4 Amendment .................................................... 61
Section 9.5 Waiver ....................................................... 61
ARTICLE X
GENERAL PROVISIONS
SectionNon-Survival of Representations, Warranties, Covenants and
Agreements ....................................................... 61
Section 10.2 Brokers ..................................................... 61
Section 10.3 Notices ..................................................... 62
Section 10.4 Miscellaneous ............................................... 62
Section 10.5 Interpretation .............................................. 63
Section 10.6 Counterparts; Effect ........................................ 63
Section 10.7 Parties in Interest ......................................... 63
Section 10.8 Specific Performance ........................................ 64
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AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of August 22,
1995 (this "Agreement"), by and among Public Service Company of Colorado, a
corporation formed under the laws of the State of Colorado ("PSCo"),
Southwestern Public Service Company, a corporation formed under the laws of the
State of New Mexico ("SPS"), and M-P New Co., a corporation formed under the
laws of the State of Delaware, 50% of whose outstanding capital stock is owned
by PSCo and 50% of whose capital stock is owned by SPS (the "Company").
WHEREAS, PSCo and SPS have determined to engage in a business
combination as peer firms in a merger of equals;
WHEREAS, in furtherance thereof, the respective Boards of
Directors of PSCo, SPS and the Company have approved the consummation of a
reorganization provided for in this Agreement, pursuant to which two wholly
owned, newly formed subsidiaries of the Company will merge with and into PSCo
and SPS on the terms and conditions set forth in this Agreement (such
transactions are referred to herein individually as the PSCo Merger and the SPS
Merger (as defined in Section ) and collectively as the "Mergers"), as a result
of which the common shareholders of PSCo and SPS will together own all of the
outstanding shares of common stock of the Company and each share of each other
class of capital stock of PSCo and SPS shall be unaffected and remain
outstanding;
WHEREAS, for federal income tax purposes, it is intended that
the Mergers shall collectively qualify as a transaction described in Section 351
of the Internal Revenue Code of 1986, as amended (the "Code"), and that the
shareholders of PSCo and SPS will not recognize any gain or loss as a result
thereof, except with respect to any cash received; and
WHEREAS, the parties hereto intend to cause the organization
of a service company subsidiary of the Company and a subsidiary of the Company
which will hold the shares of existing non-utility subsidiaries of PSCo and SPS.
NOW THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound, hereby agree as follows:
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ARTICLE I
THE MERGERS
Section 1.1 Formation of Merger Subsidiaries. To effectuate
the transactions contemplated herein, upon receipt of any required approvals,
PSCo and SPS respectively, shall cause the following corporations (together, the
"Merger Subsidiaries") to be organized:
(a) PSCO Merger Corp., a corporation organized under the laws
of the State of Colorado ("Merger Sub A"), the articles of incorporation and
bylaws of which shall be in such forms as shall be determined by PSCo with the
consent of SPS, which consent shall not be unreasonably withheld, and the
authorized capital stock of which shall initially consist of 100 shares of
common stock, without par value, which shall be issued to the Company at a price
of $1.00 per share.
(b) SPS Merger Corp., a corporation organized under the laws
of the State of New Mexico ("Merger Sub B"), the articles of incorporation and
bylaws of which shall be in such forms as shall be determined by SPS with the
consent of PSCo, which consent shall not be unreasonably withheld, and the
authorized capital stock of which shall initially consist of 100 shares of
common stock, without par value, which shall be issued to the Company at a price
of $1.00 per share.
Section 1.2 Certain Other Actions. In connection with the
organization of the Merger Subsidiaries, as soon as practicable following the
creation of the Merger Subsidiaries, the Company shall: (a) designate the
respective directors and officers of the Merger Subsidiaries; (b) cause the
directors and officers of the Merger Subsidiaries to take such steps as may be
necessary or appropriate to complete the organization of the Merger
Subsidiaries; (c) adopt (as sole shareholder of each of the Merger Subsidiaries)
each of the Merger Agreements (as defined in Section 1.3); (d) cause each Merger
Agreement to be approved by the Merger Subsidiary party thereto; and (e) cause
each Merger Subsidiary to perform its obligations under the Merger Agreement to
which it is a party.
Section 1.3 The Mergers. Pursuant to agreements and plans of
merger, forms of which are attached hereto as Exhibit A and Exhibit B
(respectively, the "PSCo Merger Agreement" and the "SPS Merger Agreement" and,
together, the "Merger Agreements"), and upon the terms and subject to the
conditions of this Agreement, at the Effective Time (as defined in Section 1.4):
(a) Merger Sub A shall be merged with and into PSCo (the "PSCo
Merger") in accordance with the applicable provisions of the laws of the State
of Colorado. PSCo shall be the surviving corporation in the PSCo Merger and
shall continue its corporate existence under the laws of the State of Colorado.
As a result of the PSCo Merger, PSCo shall become a subsidiary of the Company.
The effects and consequences of the PSCo Merger shall be as set forth in the
PSCo Merger Agreement and in Section 7-111-106 of the Colorado Business
Corporation Act (the "CBCA").
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(b) Merger Sub B shall be merged with and into SPS (the "SPS
Merger") in accordance with the laws of the State of New Mexico. SPS shall be
the surviving corporation in the SPS Merger and shall continue its existence
under the laws of the State of New Mexico. As a result of the SPS Merger, SPS
shall become a subsidiary of the Company. The effects and consequences of the
SPS Merger shall be as set forth in the SPS Merger Agreement and in Section
53-14-6 of the New Mexico Business Corporation Act (the "NMBCA").
Section 1.4 Effective Time of the Mergers. On the Closing Date
(as defined in Section 3.1), articles of merger with respect to the PSCo Merger
shall be executed and filed by the parties hereto with the Department of State
of the State of Colorado pursuant to Section 7-111-105 of the CBCA and articles
of merger with respect to the SPS Merger shall be executed and filed by the
parties hereto with the Department of State of the State of New Mexico pursuant
to Section 53-14-4 of the NMBCA. The Mergers shall both become effective
simultaneously and at the time that PSCo and SPS shall agree as specified in the
articles of merger for the Mergers (the time the Mergers become effective being
hereinafter called the "Effective Time").
ARTICLE II
TREATMENT OF SHARES
Section 2.1 Effect of Mergers on Capital Stock. At the
Effective Time, by virtue of the Mergers and without any action on the part of
any holder of any capital stock of PSCo, SPS, Merger Sub A, Merger Sub B or the
Company:
(a) Cancellation of Certain Common Stock. Each share of PSCo
common stock, par value $5.00 per share ("PSCo Common Stock"), and each share of
SPS common stock, par value $1.00 per share ("SPS Common Stock"), together with
any PSCo Rights (as defined in Section 4.18) or SPS Rights (as defined in
Section 5.18), that are owned by PSCo or any of its subsidiaries (as defined in
Section 4.1) or by SPS or any of its subsidiaries, as the case may be, shall be
cancelled and shall cease to exist, and no consideration shall be delivered in
exchange therefor.
(b) Conversion of Certain Common Stock. Each share of PSCo
Common Stock issued and outstanding immediately prior to the Effective Time
(other than shares cancelled pursuant to Section 2.1(a) and shares with respect
to which the holder thereof duly exercises the right to dissent under applicable
law) shall be converted into the right to receive one share ("PSCo Conversion
Ratio") of Company common stock, par value $1.00 per share ("Company Common
Stock"), and each share of SPS Common Stock issued and outstanding immediately
prior to the Effective Time (other than shares cancelled pursuant to Section
2.1(a) and shares with respect to which the holder thereof duly exercises the
right to dissent under applicable law) shall be converted into the right to
receive 0.95 shares ("SPS Conversion Ratio") of Company Common Stock. Upon such
conversions as provided for
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herein and in the respective Merger Agreements, each holder of a certificate
formerly representing any such shares of PSCo Common Stock or SPS Common Stock
shall cease to have any rights with respect thereto, except the right to receive
the shares of Company Common Stock to be issued in consideration therefor (and
cash in lieu of fractional shares) upon the surrender of such certificate in
accordance with Section 2.2.
(c) Cancellation of Company Common Stock. Each share of
Company Common Stock issued and outstanding immediately prior to the Effective
Time shall be cancelled, and no consideration shall be delivered in exchange
therefor.
(d) Preferred Stock Unchanged. Each of the PSCo Preferred
Shares, par value $100.00 per share and each share of PSCo Preferred Stock, par
value $25.00 per share (collectively, "PSCo Preferred Stock"), and each share of
SPS Preferred Stock, par value $100.00 per share and each share of SPS Preferred
Stock, par value $25.00 per share (collectively, "SPS Preferred Stock") shall be
unchanged in and shall remain outstanding after the Mergers.
(e) Shares of Dissenting Holders. Any issued and outstanding
shares of SPS Common Stock, PSCo Common Stock, SPS Preferred Stock or PSCo
Preferred Stock held by a person who objects to the Merger and complies with all
applicable provisions of the CBCA or the NMBCA, as applicable, concerning the
right of such person to dissent from the Mergers and demand appraisal of such
shares ("Dissenting Holder") shall from and after the Effective Time represent
only the right to receive such consideration as may be determined to be due to
such Dissenting Holder with respect to such shares pursuant to the CBCA or the
NMBCA, as applicable, and, in the case of shares of SPS Common Stock and PSCo
Common Stock, shall not be converted as described in Section 2.1(b); provided,
however, that shares outstanding immediately prior to the Effective Time and
held by a Dissenting Holder who shall withdraw the demand for appraisal, or lose
the right of appraisal of such shares, pursuant to the CBCA or the NMBCA, as
applicable, shall (i) in the case of shares of SPS Common Stock or PSCo Common
Stock, be deemed to be converted, as of the Effective Time, into the right to
receive the Company Common Stock specified in Section 2.1(b) and cash in lieu of
fractional shares in accordance with Section 2.2, without interest, and (ii) in
the case of shares of SPS Preferred Stock or PSCo Preferred Stock, be unchanged
in and remain outstanding after the Mergers, without interest.
Section 2.2 Exchange of Common Stock Certificates.
(a) Deposit with Exchange Agent. As soon as practicable after
the Effective Time, the Company shall deposit with a bank, trust company or
other agent selected by PSCo and SPS ("Exchange Agent") certificates
representing shares of Company Common Stock required to effect the conversion of
PSCo or SPS, as the case may be, Common Stock into Company Common Stock referred
to in Section 2.1(b).
(b) Exchange Procedures. As soon as practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which
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immediately prior to the Effective Time represented issued and outstanding
shares of PSCo or SPS, as the case may be, Common Stock ("Certificates") that
were converted ("Converted Shares") into the right to receive shares of Company
Common Stock ("Company Shares") pursuant to Section 2.1(b), (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon actual delivery of the
Certificates to the Exchange Agent) and (ii) instructions for use in effecting
the exchange of Certificates for certificates representing Company Shares. Upon
delivery of a Certificate to the Exchange Agent for exchange, together with a
duly executed letter of transmittal and such other documents as the Exchange
Agent shall require, the holder of such Certificate shall be entitled to receive
in exchange therefor a certificate representing that number of whole Company
Shares and the amount of cash in lieu of fractional share interests which such
holder has the right to receive pursuant to the provisions of this Article II.
In the event of a transfer of ownership of Converted Shares which is not
registered in the transfer records of PSCo or SPS, as the case may be, a
certificate representing the proper number of Company Shares may be issued to a
transferee if the Certificate representing such Converted Shares is presented to
the Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and by evidence satisfactory to the Exchange Agent that any
applicable stock transfer taxes have been paid. Until delivered as contemplated
by this Section 2.2, each Certificate shall be deemed at any time after the
Effective Time to represent only the right to receive upon such delivery the
certificate representing Company Shares and cash in lieu of any fractional
shares of Company Common Stock as contemplated by this Section 2.2.
(c) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the Effective Time with
respect to Company Shares with a record date after the Effective Time shall be
paid to the holder of any undelivered Certificate with respect to the Company
Shares represented thereby, and no cash payment in lieu of fractional shares
shall be paid to any such holder pursuant to Section 2.2(d), until the holder of
record of such Certificate (or a transferee as described in Section 2.2(b))
shall have delivered such Certificate as contemplated in Section 2.2(b). Subject
to the effect of unclaimed property, escheat and other applicable laws,
following delivery of any such Certificate, there shall be paid to the record
holder (or transferee) of the certificates representing whole Company Shares
issued in exchange therefor, without interest, (i) at the time of such delivery,
the amount of any cash payable in lieu of a fractional share of Company Common
Stock to which such holder (or transferee) is entitled pursuant to Section
2.2(d) and the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such whole Company
Shares and (ii) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time but prior to
delivery and a payment date subsequent to delivery payable with respect to such
whole Company Shares, as the case may be.
(d) No Fractional Shares. (i) No certificates or scrip
representing fractional shares of Company Common Stock shall be issued upon the
delivery for exchange of Certificates, and such fractional share interests will
not entitle the owner thereof to vote or to any rights of a shareholder of the
Company.
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(ii) As promptly as practicable following the Effective
Time, the Exchange Agent shall determine the excess of (x) the number of full
shares of Company Common Stock delivered to the Exchange Agent by the Company
pursuant to Section 2.2(a) over (y) the aggregate number of full shares of
Company Common Stock to be distributed to holders of PSCo or SPS, as the case
may be, Common Stock pursuant to Section 2.2(b) (such excess being herein called
the "Excess Shares"). As soon after the Effective Time as practicable, the
Exchange Agent, as agent for the holders of PSCo or SPS, as the case may be,
Common Stock, shall sell the Excess Shares at then prevailing prices on the New
York Stock Exchange ("NYSE"), all in the manner provided in Section 2.2(d)(iii).
(iii) The sale of the Excess Shares by the Exchange Agent
shall be executed on the NYSE through one or more member firms of the NYSE and
shall be executed in round lots to the extent practicable. Until the proceeds of
such sale or sales have been distributed to the holders of PSCo or SPS, as the
case may be, Common Stock, the Exchange Agent shall, until remitted pursuant to
Section 2.2(f), hold such proceeds in trust for the holders of PSCo or SPS, as
the case may be, Common Stock ("Common Shares Trust"). The Company shall pay all
commissions, transfer taxes and other out-of-pocket transaction costs, including
the expenses and compensation, of the Exchange Agent incurred in connection with
such sale of the Excess Shares. The Exchange Agent shall determine the portion
of the proceeds comprising the Common Shares Trust to which each holder of PSCo
or SPS, as the case may be, Common Stock shall be entitled, if any, by
multiplying the amount of the aggregate proceeds comprising the Common Shares
Trust by a fraction the numerator of which is the amount of the fractional share
interest to which such holder of PSCo or SPS, as the case may be, Common Stock
is entitled and the denominator of which is the aggregate amount of fractional
share interests to which all holders of PSCo or SPS, as the case may be, Common
Stock are entitled.
(iv) As soon as practicable after the sale of Excess
Shares pursuant to clause (iii) above and the determination of the amount of
cash, if any, to be paid to holders of PSCo or SPS, as the case may be, Common
Stock in lieu of any fractional share interests, the Exchange Agent shall
distribute such amounts to holders of PSCo or SPS, as the case may be, Common
Stock who have theretofore delivered Certificates for PSCo or SPS, as the case
may be, Common Stock for exchange pursuant to this Article II.
(e) Closing of Transfer Books. From and after the Effective
Time, the stock transfer books of PSCo with respect to shares of PSCo Common
Stock, and of SPS with respect to shares of SPS Common Stock, issued and
outstanding prior to the Effective Time shall be closed and no transfer of any
such shares shall thereafter be made. If, after the Effective Time, Certificates
are presented to the Company, they shall be cancelled and exchanged for
certificates representing the appropriate number of whole Company Shares and
cash in lieu of fractional shares of Company Common Stock as provided in this
Section 2.2.
(f) Termination of Exchange Agent. Any certificates
representing Company Shares deposited with the Exchange Agent pursuant to
Section 2.2(a) and not exchanged within one year after the Effective Time
pursuant to this Section 2.2 shall be
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returned by the Exchange Agent to the Company, which shall thereafter act as
Exchange Agent. All funds held by the Exchange Agent for payment to the holders
of undelivered Certificates and unclaimed at the end of one year from the
Effective Time shall be remitted to the Company, after which time any holder of
undelivered Certificates shall look as a general creditor only to the Company
for payment of such funds to which such holder may be due, subject to applicable
law. The Company shall not be liable to any person for such shares or funds
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar law.
ARTICLE III
THE CLOSING
Section 3.1 Closing. The closing (the "Closing") of the
Mergers shall take place at a place to be mutually agreed upon by the parties
hereto at 10:00 A.M., local time, on the second business day immediately
following the date on which the last of the conditions set forth in Article VIII
is fulfilled or waived, or at such other time and date as SPS and PSCo shall
mutually agree (the "Closing Date").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PSCo
PSCo represents and warrants to SPS as follows:
Section 4.1 Organization and Qualification. Except as
disclosed in Section 4.1 of the PSCo Disclosure Schedule (as defined in Section
7.6(ii)), each of PSCo and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, has all requisite corporate power and authority,
and has been duly authorized by all necessary regulatory approvals and orders,
to own, lease and operate its assets and properties and to carry on its business
as it is now being conducted, and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its assets and properties makes such qualification
necessary other than in such jurisdictions where the failure to be so qualified
and in good standing will not, when taken together with all other such failures,
have a material adverse effect on the business, operations, properties, assets,
condition (financial or otherwise), prospects or results of operations of PSCo
and its subsidiaries taken as a whole or on the consummation of this Agreement
or the PSCo Merger Agreement (any such material adverse effect being hereinafter
referred to as a "PSCo Material Adverse Effect"). As used in this Agreement the
term "subsidiary" with respect to any person shall mean any corporation or other
entity (including partnerships and other business associations) in which such
person directly or indirectly owns outstanding capital stock or other voting
securities having the power, under ordinary circumstances, to elect a
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majority of the directors or similar members of the governing body of such
corporation or other entity, or otherwise to direct the management and policies
of such corporation or other entity.
Section 4.2 Subsidiaries. Section 4.2 of the PSCo Disclosure
Schedule contains a description as of the date hereof of all subsidiaries and
joint ventures of PSCo, including the name of each such entity, the state or
jurisdiction of its incorporation, a brief description of the principal line or
lines of business conducted by each such entity and PSCo's interest therein.
Except as disclosed in Section 4.2 of the PSCo Disclosure Schedule, none of such
entities is a "public utility company", a "holding company", a "subsidiary
company" or an "affiliate" of any public utility company within the meaning of
Section 2(a)(5), 2(a)(7), 2(a)(8) or 2(a)(11) of the Public Utility Holding
Company Act of 1935, as amended (the "1935 Act"), respectively. Except as
disclosed in Section 4.2 of the PSCo Disclosure Schedule, all of the issued and
outstanding shares of capital stock of each subsidiary of PSCo are validly
issued, fully paid, nonassessable and free of preemptive rights and are owned
directly or indirectly by PSCo free and clear of any liens, claims,
encumbrances, security interests, equities, charges and options of any nature
whatsoever, and there are no outstanding subscriptions, options, calls,
contracts, voting trusts, proxies or other commitments, understandings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement, obligating any such subsidiary to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of its capital stock or
obligating it to grant, extend or enter into any such agreement or commitment.
As used in this Agreement, the term "joint venture" with respect to any person
shall mean any corporation or other entity (including partnerships and other
business associations and joint ventures) in which such person or one or more of
its subsidiaries owns an equity interest that is less than a majority of any
class of the outstanding voting securities or equity, other than equity
interests held for passive investment purposes that are less than 5% of any
class of the outstanding voting securities or equity.
Section 4.3 Capitalization. The authorized capital stock of
PSCo consists of 140,000,000 shares of PSCo Common Stock and 7,000,000 shares of
PSCo Preferred Stock. As of the close of business on July 31, 1995, 62,931,908
shares of PSCo Common Stock and 2,902,412 shares of PSCo Preferred Stock were
issued and outstanding. All of the issued and outstanding shares of the capital
stock of PSCo are validly issued, fully paid, nonassessable and free of
preemptive rights. Except as disclosed in Section 4.3 of the PSCo Disclosure
Schedule and except for the PSCo Rights (as defined in Section 4.18), as of the
date hereof, there are no outstanding subscriptions, options, calls, contracts,
voting trusts, proxies or other commitments, understandings, restrictions,
arrangements, rights or warrants, including any right of conversion or exchange
under any outstanding security, instrument or other agreement, obligating PSCo
or any of its subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of the capital stock or other voting
securities of PSCo or obligating PSCo or any of its subsidiaries to grant,
extend or enter into any such agreement or commitment.
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Section 4.4 Authority; Non-Contravention; Statutory
Approvals; Compliance.
(a) Authority. PSCo has all requisite power and authority to
enter into this Agreement and the PSCo Merger Agreement and, subject to the PSCo
Shareholders' Approvals (as defined in Section 4.13) and the PSCo Required
Statutory Approvals (as defined in Section 4.4(c)), to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the PSCo Merger Agreement and the consummation by PSCo of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of PSCo, subject to obtaining the PSCo
Shareholders' Approvals. This Agreement has been, and the PSCo Merger Agreement
will be, duly and validly executed and delivered by PSCo and, assuming the due
authorization, execution and delivery of this Agreement by SPS and the Company
and of the PSCo Merger Agreement by Merger Sub A, constitutes, or will
constitute, the legal, valid and binding obligation of PSCo enforceable against
PSCo in accordance with its terms.
(b) Non-Contravention. Except as disclosed in Section 4.4(b)
of the PSCo Disclosure Schedule, the execution and delivery of this Agreement by
PSCo do not, and the execution and delivery by PSCo of the PSCo Merger Agreement
and the consummation of the transactions contemplated hereby and thereby will
not, violate, conflict with or result in a breach of any provision of, or
constitute a default (with or without notice or lapse of time or both) under, or
result in the termination of, or accelerate the performance required by, or
result in a right of termination, cancellation or acceleration of any obligation
under or the loss of a material benefit under, or result in the creation of any
lien, security interest, charge or encumbrance upon any of the properties or
assets (any such violation, conflict, breach, default, right of termination,
cancellation or acceleration, loss or creation, a "Violation") of PSCo or any of
its subsidiaries or, to the best knowledge of PSCo, any of its joint ventures,
under any provisions of (i) the articles of incorporation, bylaws or similar
governing documents of PSCo or any of its subsidiaries or joint ventures, (ii)
subject to obtaining the PSCo Required Statutory Approvals and the receipt of
the PSCo Shareholders' Approvals, any statute, law, ordinance, rule, regulation,
judgment, decree, order, injunction, writ, permit or license of any court,
governmental or regulatory body (including a stock exchange or other
self-regulatory body) or authority, domestic or foreign (each, a "Governmental
Authority"), applicable to PSCo or any of its subsidiaries or joint ventures or
any of their respective properties or assets or (iii) subject to obtaining the
third-party consents or other approvals set forth in Section 4.4(b) of the PSCo
Disclosure Schedule (the "PSCo Required Consents"), any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, concession, contract,
lease or other instrument, obligation or agreement of any kind to which PSCo or
any of its subsidiaries or joint ventures is now a party or by which any of them
or any of their respective properties or assets may be bound or affected,
excluding from the foregoing clauses (ii) and (iii) such Violations as would not
have, in the aggregate, a PSCo Material Adverse Effect.
(c) Statutory Approvals. Except as disclosed in Section
4.4(c) of the PSCo Disclosure Schedule, no declaration, filing or registration
with, or notice to or authorization, consent, finding by or approval of, any
Governmental Authority is necessary for the
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execution and delivery of this Agreement or the PSCo Merger Agreement by PSCo or
the consummation by PSCo of the transactions contemplated hereby or thereby, the
failure to obtain, make or give which would have, in the aggregate, a PSCo
Material Adverse Effect (the "PSCo Required Statutory Approvals"), it being
understood that references in this Agreement to "obtaining" such PSCo Required
Statutory Approvals shall mean making such declarations, filings or
registrations; giving such notice; obtaining such consents or approvals; and
having such waiting periods expire as are necessary to avoid a violation of law.
(d) Compliance. Except as disclosed in Section 4.4(d) or 4.11
of the PSCo Disclosure Schedule or as disclosed in the PSCo SEC Reports (as
defined in Section 4.5), neither PSCo nor any of its subsidiaries nor, to the
best knowledge of PSCo, any of its joint ventures is in violation of or under
investigation with respect to, or has been given notice or been charged with any
violation of, any law, statute, order, rule, regulation, ordinance or judgment
(including, without limitation, any applicable Environmental Laws (as defined in
Section 4.11(g)) of any Governmental Authority, except for violations that, in
the aggregate, do not have, and, to the best knowledge of PSCo, are not
reasonably likely to have, a PSCo Material Adverse Effect. Except as disclosed
in Section 4.4(d) or 4.11 of the PSCo Disclosure Schedule, PSCo, its
subsidiaries and, to the best knowledge of PSCo, its joint ventures have all
permits, licenses, franchises and other governmental authorizations, consents
and approvals necessary to conduct their respective businesses as currently
conducted (collectively, "Permits"), except those the failure to obtain which,
in the aggregate, would not have a PSCo Material Adverse Effect.
Section 4.5 Reports and Financial Statements. The filings
required to be made by PSCo and its subsidiaries since January 1, 1990 under the
Securities Act of 1933, as amended (the "Securities Act"), the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), applicable Colorado and
Wyoming laws and regulations, the Federal Power Act (the "Power Act"), the
Natural Gas Act, the 1935 Act or the Atomic Energy Act of 1954, as amended (the
"Atomic Energy Act") have been filed with the Securities and Exchange Commission
(the "SEC"), the Colorado Public Utility Commission (the "Colorado Commission"),
the Wyoming Public Service Commission (the "Wyoming Commission"), the Federal
Energy Regulatory Commission (the "FERC") or the Nuclear Regulatory Commission
(the "NRC"), as the case may be, including all forms, statements, reports,
agreements (oral or written) and all documents, exhibits, amendments and
supplements appertaining thereto, and complied in all material respects with all
applicable requirements of the appropriate act and the rules and regulations
thereunder. PSCo has made available to SPS a true and complete copy of each
report, schedule, registration statement and definitive proxy statement filed by
PSCo with the SEC since January 1, 1990 and through the date hereof (as such
documents have since the time of their filing been amended, the "PSCo SEC
Reports"). The PSCo SEC Reports, including without limitation any financial
statements or schedules included therein, at the time filed, and any forms,
reports or other documents filed by PSCo with the SEC after the date hereof, did
not and will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
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were made, not misleading. The audited consolidated financial statements and
unaudited interim financial statements of PSCo included in the PSCo SEC Reports
(collectively, the "PSCo Financial Statements") have been prepared, and will be
prepared, in accordance with generally accepted accounting principles applied on
a consistent basis ("GAAP") (except as may be indicated therein or in the notes
thereto and except with respect to unaudited statements as permitted by Form
10-Q) and fairly present the consolidated financial position of PSCo as of the
respective dates thereof or the consolidated results of operations and cash
flows for the respective periods then ended, as the case may be, subject, in the
case of the unaudited interim financial statements, to normal, recurring audit
adjustments. True, accurate and complete copies of the articles of incorporation
and bylaws of PSCo, as in effect on the date hereof, have been delivered to SPS.
Section 4.6 Absence of Certain Changes or Events. Except as
disclosed in the PSCo SEC Reports filed prior to the date hereof or as disclosed
in Section 4.6 of the PSCo Disclosure Schedule, from December 31, 1994 through
the date hereof each of PSCo and each of its subsidiaries has conducted its
business only in the ordinary course of business consistent with past practice
and no event has occurred which has had, and no fact or condition exists that
would have or, to the best knowledge of PSCo, is reasonably likely to have, a
PSCo Material Adverse Effect. For purposes of this Section 4.6, the amount of
any fine or penalty imposed or assessed against PSCo after the date of this
Agreement may be taken into account in determining whether a PSCo Material
Adverse Effect has occurred regardless of whether or not the event, fact or
condition which lead to the imposition or assessment of the fine or penalty has
been disclosed in the PSCo SEC Reports or the PSCo Disclosure Schedule.
Section 4.7 Litigation. Except as disclosed in the PSCo SEC
Reports filed prior to the date hereof or as disclosed in Section 4.7, 4.9 or
4.11 of the PSCo Disclosure Schedule, (i) there are no claims, suits, actions or
proceedings pending or, to the best knowledge of PSCo, threatened, nor are there
any investigations or reviews pending or, to the best knowledge of PSCo,
threatened against, relating to or affecting PSCo or any of its subsidiaries,
(ii) there have not been any developments since December 31, 1994 with respect
to any such disclosed claims, suits, actions, proceedings, investigations or
reviews and (iii) there are no judgments, decrees, injunctions, rules or orders
of any court, governmental department, commission, agency, instrumentality or
authority or any arbitrator applicable to PSCo or any of its subsidiaries that
in the aggregate would have, or to the best knowledge of PSCo are reasonably
likely to have, a PSCo Material Adverse Effect.
Section 4.8 Registration Statement and Proxy Statement. None
of the information supplied or to be supplied by or on behalf of PSCo for
inclusion or incorporation by reference in (i) the registration statement on
Form S-4 to be filed with the SEC by the Company in connection with the issuance
of shares of Company Common Stock in the Merger (the "Registration Statement")
will, at the time the Registration Statement becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein not misleading and (ii) the joint proxy in definitive form,
relating to the meetings of
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the shareholders of SPS and PSCo to be held in connection with the Mergers and
the prospectus relating to the Company Common Stock to be issued in the Mergers
(the "Joint Proxy Statement") will, at the date mailed to such shareholders and,
as the same may be amended or supplemented, at the times of such meetings,
contain any untrue statement of a material fact or omit to state any material
fact necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The Registration
Statement and the Joint Proxy Statement will comply as to form in all material
respects with the provisions of the Securities Act and the Exchange Act and the
rules and regulations thereunder.
Section 4.9 Tax Matters. "Taxes", as used in this Agreement,
means any federal, state, county, local or foreign taxes, charges, fees, levies,
or other assessments, including all net income, gross income, sales and use, ad
valorem, transfer, gains, profits, excise, franchise, real and personal
property, gross receipts, capital stock, production, business and occupation,
disability, employment, payroll, license, estimated, stamp, custom duties,
severance or withholding taxes or charges imposed by any governmental entity,
and includes any interest and penalties (civil or criminal) on or additions to
any such taxes and any expenses incurred in connection with the determination,
settlement or litigation of any tax liability. "Tax Return", as used in this
Agreement, means a report, return or other information required to be supplied
to a governmental entity with respect to Taxes including, where permitted or
required, combined or consolidated returns for any group of entities that
includes PSCo or any of its subsidiaries on the one hand, or SPS or any of its
subsidiaries on the other hand.
(a) Filing of Timely Tax Returns. Except as disclosed in
Section 4.9(a) of the PSCo Disclosure Schedule, PSCo and each of its
subsidiaries have filed all Tax Returns required to be filed by each of them
under applicable law. All Tax Returns were in all material respects (and, as to
Tax Returns not filed as of the date hereof, will be) true, complete and correct
and filed on a timely basis.
(b) Payment of Taxes. PSCo and each of its subsidiaries have,
within the time and in the manner prescribed by law, paid (and until the Closing
Date will pay within the time and in the manner prescribed by law) all Taxes
that are currently due and payable except for those contested in good faith and
for which adequate reserves have been taken.
(c) Tax Reserves. PSCo and its subsidiaries have
established (and until the Closing Date will maintain) on their books and
records reserves adequate to pay all Taxes and reserves for deferred income
taxes in accordance with GAAP.
(d) Tax Liens. There are no Tax liens upon the assets of
PSCo or any of its subsidiaries except liens for Taxes not yet due.
(e) Withholding Taxes. PSCo and each of its subsidiaries
have complied (and until the Closing Date will comply) in all material respects
with the provisions of the Code relating to the payment and withholding of
Taxes, including, without limitation, the
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withholding and reporting requirements under Code sections1441 through 1464,
3401 through 3606, and 6041 and 6049, as well as similar provisions under any
other laws, and have, within the time and in the manner prescribed by law,
withheld from employee wages and paid over to the proper governmental
authorities all amounts required.
(f) Extensions of Time for Filing Tax Returns. Except as
disclosed in Section 4.9(f) of the PSCo Disclosure Schedule, neither PSCo nor
any of its subsidiaries has requested any extension of time within which to file
any Tax Return, which Tax Return has not since been filed.
(g) Waivers of Statute of Limitations. Except as disclosed in
Section 4.9(g) of the PSCo Disclosure Schedule, neither PSCo nor any of its
subsidiaries has executed any outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect to any
Taxes or Tax Returns.
(h) Expiration of Statute of Limitations. Except as disclosed
in Section 4.9(h) of the PSCo Disclosure Schedule, the statute of limitations
for the assessment of all Taxes has expired for all applicable Tax Returns of
PSCo and each of its subsidiaries or those Tax Returns have been examined by the
appropriate taxing authorities for all periods through the date hereof, and no
deficiency for any Taxes has been proposed, asserted or assessed against PSCo or
any of its subsidiaries that has not been resolved and paid in full.
(i) Audit, Administrative and Court Proceedings. Except as
disclosed in Section 4.9(i) of the PSCo Disclosure Schedule, no audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Tax Returns of PSCo or any of its subsidiaries.
(j) Powers of Attorney. Except as disclosed in Section 4.9(j)
of the PSCo Disclosure Schedule, no power of attorney currently in force has
been granted by PSCo or any of its subsidiaries concerning any Tax matter.
(k) Tax Rulings. Except as disclosed in Section 4.9(k) of the
PSCo Disclosure Schedule, neither PSCo nor any of its subsidiaries has received
a Tax Ruling (as defined below) or entered into a Closing Agreement (as defined
below) with any taxing authority that would have a continuing adverse effect
after the Closing Date. "Tax Ruling", as used in this Agreement, shall mean a
written ruling of a taxing authority relating to Taxes. "Closing Agreement", as
used in this Agreement, shall mean a written and legally binding agreement with
a taxing authority relating to Taxes.
(l) Availability of Tax Returns. PSCo and its subsidiaries
have made available to SPS complete and accurate copies, covering all years
ending on or after December 31, 1990, of (i) all Tax Returns, and any amendments
thereto, filed by PSCo or any of its subsidiaries, (ii) all audit reports
received from any taxing authority relating to any Tax Return filed by PSCo or
any of its subsidiaries and (iii) any Closing Agreements entered into by PSCo or
any of its subsidiaries with any taxing authority.
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(m) Tax Sharing Agreements. Except as disclosed in Section
4.9(m) of the PSCo Disclosure Schedule, no agreements relating to the allocation
or sharing of Taxes exist between or among PSCo and any of its subsidiaries.
(n) Code section 341(f). Neither PSCo nor any of its
subsidiaries has filed (or will file prior to the Closing) a consent pursuant to
Code section 341(f) or has agreed to have Code section 341(f)(2) apply to any
disposition of a subsection (f) asset (as such term is defined in Code section
341(f)(4)) owned by PSCo or any of its subsidiaries.
(o) Code section 168. Except as disclosed in Section 4.9(o) of
the PSCo Disclosure Schedule, no property of PSCo or any of its subsidiaries is
property that PSCo or any such subsidiary or any party to this transaction is or
will be required to treat as being owned by another person pursuant to the
provisions of Code section 168(f)(8) (as in effect prior to its amendment by the
Tax Reform Act of 1986) or is tax-exempt use property within the meaning of Code
section 168.
(p) Code section 481 Adjustments. Except as disclosed in
Section 4.9(p) of the PSCo Disclosure Schedule, neither PSCo nor any of its
subsidiaries is required to include in income any adjustment pursuant to Code
section 481(a) by reason of a voluntary change in accounting method initiated by
PSCo or any of its subsidiaries, and, to the best of the knowledge of PSCo, the
Internal Revenue Service (the "IRS") has not proposed any such adjustment or
change in accounting method.
(q) Code sections 6661 and 6662. Except as disclosed in
Section 4.9(q) of the PSCo Disclosure Schedule, all transactions that could give
rise to an understatement of federal income tax (within the meaning of Code
section 6661 for Tax Returns filed on or before December 31, 1989, and within
the meaning of Code section 6662 for tax returns filed after December 31, 1989)
that could reasonably be expected to result in a PSCo Material Adverse Effect
have been adequately disclosed (or, with respect to Tax Returns filed following
the Closing, will be adequately disclosed) on the Tax Returns of PSCo and its
subsidiaries in accordance with Code section 6661(b)(2)(B) for Tax Returns filed
on or prior to December 31, 1989, and in accordance with Code section
6662(d)(2)(B) for Tax Returns filed after December 31, 1989.
(r) Code section 280G. Except as disclosed in Section 4.9(r)
of the PSCo Disclosure Schedule, neither PSCo nor any of its subsidiaries is a
party to any agreement, contract, or arrangement that could reasonably be
expected to result, on account of the transactions contemplated hereunder,
separately or in the aggregate, in the payment of any "excess parachute payment"
within the meaning of Code section 280G.
(s) NOLS. As of December 31, 1993, PSCo and its subsidiaries
had net operating loss carryovers available to offset future income as disclosed
in Section 4.9(s) of the PSCo Disclosure Schedule. Section 4.9(s) of the PSCo
Disclosure Schedule discloses the amount of and year of expiration of each
company's net operating loss carryovers.
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(t) Credit Carryover. As of December 31, 1993, PSCo and its
subsidiaries had tax credit carryovers available to offset future tax liability
as disclosed in Section 4.9(t) of the PSCo Disclosure Schedule. Section 4.9(t)
of the PSCo Disclosure Schedule discloses the amount and year of expiration of
each company's tax credit carryovers.
(u) Code section 338 Elections. Except as disclosed in Section
4.9(u) of the PSCo Disclosure Schedule, no election under Code section 338 (or
any predecessor provision) has been made by or with respect to PSCo or any of
its subsidiaries or any of their respective assets or properties.
(v) Acquisition Indebtedness. Except as disclosed in Section
4.9(v) of the PSCo Disclosure Schedule, no indebtedness of PSCo or any of its
subsidiaries is "corporate acquisition indebtedness" within the meaning of Code
section 279(b).
(w) Intercompany Transactions. Except as disclosed in Section
4.9(w) of the PSCo Disclosure Schedule, neither PSCo nor any of its subsidiaries
have engaged in any intercompany transactions within the meaning of Treasury
Regulations section 1.1502-13 for which any income or gain will remain
unrecognized as of the close of the last taxable year prior to the Closing Date.
Section 4.10 Employee Matters; ERISA.
(a) Benefit Plans. Section 4.10(a) of the PSCo Disclosure
Schedule contains a true and complete list of: (i) each employee benefit plan,
program or arrangement covering employees, former employees or directors of PSCo
(or any of its subsidiaries) or any of their dependents or beneficiaries, or
providing benefits to such persons in respect of services provided to any such
entity, including, but not limited to, any "employee benefit plan" within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA") (whether or not terminated, if PSCo or any of its
subsidiaries could have statutory or contractual liability with respect thereto
on or after the date hereof); (ii) each management, employment, deferred
compensation, severance (including any payment, right or benefit resulting from
a change in control), bonus or other contract for personal services with or
covering any current officer, key employee or director or any consulting
contract with any person who prior to entering into such contract was a director
or officer of PSCo or any of its subsidiaries (whether or not terminated, if
PSCo or any of its subsidiaries could have statutory or contractual liability
with respect thereto on or after the date hereof); (iii) each "employee pension
benefit plan" (within the meaning of ERISA section 3(2)) subject to Title IV of
ERISA or the minimum funding requirements of Code section 412 maintained or
contributed to by PSCo or any entity required to be aggregated therewith
pursuant to Code section 414(b) or (c) (a "PSCo ERISA Affiliate") at any time
during the seven-year period immediately preceding the date hereof
(collectively, the "PSCo Benefit Plans") and (iv) with respect to each PSCo
Benefit Plan, the source or sources of benefit payments under the plan
(including, where applicable, the identity of any trust (whether or not a
grantor trust), insurance contract, custodial account, agency agreement, or
other arrangement
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that holds the assets of, or serves as a funding vehicle or source of benefits
for, such PSCo Benefit Plan).
(b) Contributions. Except as disclosed in Section 4.10(b) of
the PSCo Disclosure Schedule, all material contributions and other payments
required to have been made by PSCo or any of its subsidiaries pursuant to any
PSCo Benefit Plan (or to any person pursuant to the terms thereof) have been
timely made or the amount of such payment or contribution obligation has been
reflected in the PSCo Financial Statements.
(c) Qualification; Compliance. Except as disclosed in Section
4.10(c) of the PSCo Disclosure Schedule, each PSCo Benefit Plan that is intended
to be "qualified" within the meaning of Code section 401(a) has been determined
by the IRS to be so qualified, and, to the best knowledge of PSCo, no event or
condition exists or has occurred that could reasonably be expected to result in
the revocation of any such determination. PSCo and each of its subsidiaries are
in compliance with, and each PSCo Benefit Plan is and has been operated in
compliance with, all applicable laws, rules and regulations governing such plan,
including, without limitation, ERISA and the Code, except for violations that
could not reasonably be expected to have a PSCo Material Adverse Effect. To the
best knowledge of PSCo, no individual or entity has engaged in any transaction
with respect to any PSCo Benefit Plan as a result of which PSCo or any of its
subsidiaries could reasonably expect to be subject to liability pursuant to
ERISA section 409 or section 502, or subject to an excise tax pursuant to Code
section 4975. To the best knowledge of PSCo, (i) no PSCo Benefit Plan is subject
to any ongoing audit, investigation, or other administrative proceeding of the
Internal Revenue Service, the Department of Labor, or any other federal, state,
or local governmental entity, and (ii) no PSCo Benefit Plan is the subject of
any pending application for administrative relief under any voluntary compliance
program of any governmental entity (including, without limitation, the IRS's
Voluntary Compliance Resolution Program or Walk-in Closing Agreement Program, or
the Department of Labor's Delinquent Filer Voluntary Compliance Program).
(d) Liabilities. With respect to the PSCo Benefit Plans,
individually and in the aggregate, no termination or partial termination of any
PSCo Benefit Plan or other event has occurred, and, to the best knowledge of
PSCo, there exists no condition or set of circumstances, that could subject PSCo
or any of its subsidiaries to any liability arising under the Code, ERISA or any
other applicable law (including, without limitation, any liability to or under
any such plan or to the Pension Benefit Guaranty Corporation (the "PBGC"), or
under any indemnity agreement to which PSCo, any of its subsidiaries or any PSCo
ERISA Affiliate is a party, which liability, excluding liability for benefit
claims and funding obligations payable in the ordinary course and liability for
PBGC insurance premiums payable in the ordinary course, could reasonably be
expected to have a PSCo Material Adverse Effect.
(e) Welfare Plans. Except as disclosed in Section 4.10(e) of
the PSCo Disclosure Schedule, no PSCo Benefit Plan that is a "welfare plan"
(within the meaning of
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ERISA section 3(1)) provides benefits for any retired or former employees (other
than as required pursuant to ERISA section 601).
(f) Documents Made Available. PSCo has made available to SPS a
true and correct copy of each collective bargaining agreement to which PSCo is a
party or under which PSCo has obligations and, with respect to each PSCo Benefit
Plan, as applicable (i) the current plan document (including all amendments
adopted since the most recent restatement) and its most recently prepared
summary plan description and all summaries of material modifications prepared
since the most recent summary plan description, (ii) the most recently prepared
annual report (IRS Form 5500 Series) including financial statements, (iii) each
related trust agreement, insurance contract, service provider or investment
management agreement (including all amendments to each such document), (iv) the
most recent IRS determination letter with respect to the qualified status under
Code section 401(a) of such plan and a copy of any application for an IRS
determination letter filed since the most recent IRS determination letter was
issued, and (v) the most recent actuarial report or valuation.
(g) Payments Resulting from Mergers. Other than as set forth
in Section 7.11 or disclosed in Section 4.10(g) of the PSCo Disclosure Schedule,
the consummation or announcement of any transaction contemplated by this
Agreement will not (either alone or upon the occurrence of any additional or
further acts or events) result in any (i) payment (whether of severance pay or
otherwise) becoming due from the Company or PSCo or any of its subsidiaries
under any applicable PSCo Benefit Plans to any officer, employee, former
employee or director thereof or to the trustee under any "rabbi trust" or
similar arrangement, or (ii) benefit under any PSCo Benefit Plan being
established or becoming accelerated, vested or payable, except for a payment or
benefit that would have been payable under the same terms and conditions without
regard to the transactions contemplated by this Agreement.
(h) Funded Status of Plans. Except as disclosed in Section
4.10(h) of the PSCo Disclosure Schedule, each PSCo Benefit Plan that is subject
to either or both of the minimum funding requirements of ERISA section 302 or to
Title IV of ERISA has assets that, as of the date hereof, have a fair market
value equal to or exceeding the present value of the accrued benefit obligations
thereunder on a termination basis, as of the date hereof based on the actuarial
methods, tables and assumptions theretofore utilized by such plan's actuary in
preparing such plan's most recently prepared actuarial valuation report, except
to the extent that applicable law would require the use of different actuarial
assumptions if such plan was to be terminated as of the date hereof. No PSCo
Benefit Plan subject to the minimum funding requirements of ERISA section 302
has incurred any "accumulated funding deficiency" (within the meaning of ERISA
section 302).
(i) Multiemployer Plans. Except as disclosed in Section
4.10(i) of the PSCo Disclosure Schedule, no PSCo Benefit Plan is or was a
"multiemployer plan" (within the meaning of ERISA section 4001(a)(3)), a
multiple employer plan described in Code section 413(c), or a "multiple employer
welfare arrangement" (within the meaning of ERISA section 3(40)); and none of
PSCo, any subsidiary thereof or any PSCo ERISA Affiliate has been obligated to
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contribute to, or otherwise has or has had any liability with respect to, any
multiemployer plan, multiple employer plan, or multiple employer welfare
arrangement. With respect to any PSCo Benefit Plan that is listed in Section
4.10(i) of the PSCo Disclosure Schedule as a multiemployer plan, PSCo and its
subsidiaries have not made or incurred a "complete withdrawal" or a "partial
withdrawal," as such terms are defined in ERISA sections4203 and 4205, therefrom
at any time during the five calendar year period immediately preceding the date
of this Agreement and the transactions contemplated by the Agreement will not,
in and of themselves, give rise to such a "complete withdrawal" or "partial
withdrawal."
(j) Modification or Termination of Plans. Except as disclosed
in Section 4.10(j) of the PSCo Disclosure Schedule: (i) neither PSCo nor any
subsidiary of PSCo is subject to any legal, contractual, equitable or other
obligation to establish as of any date any employee benefit plan of any nature,
including (without limitation) any pension, profit sharing, welfare,
post-retirement welfare, stock option, stock or cash award, non-qualified
deferred compensation or executive compensation plan, policy or practice; and
(ii) to the best knowledge of PSCo, after review of all PSCo Benefit Plan
documents, the Company, PSCo or one or more of its subsidiaries may, in any
manner, and without the consent of any employee, beneficiary or dependent,
employees' organization or other person, terminate, modify or amend any PSCo
Benefit Plan or any other employee benefit plan, policy, program or practice (or
its participation in any such PSCo Benefit Plan or other employee benefit plan,
policy, program or practice) at any time sponsored, maintained or contributed to
by PSCo or any of its subsidiaries, effective as of any date before, on or after
the Effective Time except to the extent that any retroactive amendment would be
prohibited by ERISA section 204(g).
(k) Reportable Events; Claims. Except as disclosed in Section
4.10(k) of the PSCo Disclosure Schedule, (i) no event constituting a "reportable
event" (within the meaning of ERISA section 4043(b)) for which the 30-day notice
requirement has not been waived by the PBGC has occurred with respect to any
PSCo Benefit Plan and (ii) no liability, claim, action or litigation has been
made, commenced or, to the best knowledge of PSCo, threatened, by or against
PSCo or any of its subsidiaries with respect to any PSCo Benefit Plan (other
than for benefits or PBGC premiums payable in the ordinary course) that could
reasonably be expected to have to a PSCo Material Adverse Effect.
(l) Labor Agreements. To the best knowledge of PSCo, as of the
date hereof, there is no current labor union representation question involving
employees of PSCo or any of its subsidiaries, nor does PSCo or any of its
subsidiaries know of any activity or proceeding of any labor organization (or
representative thereof) or employee group (or representative thereof) to
organize any such employees. Except as disclosed in the PSCo SEC Reports or as
disclosed in Section 4.10(l) of the PSCo Disclosure Schedule: (i) neither PSCo
nor any of its subsidiaries is a party to any collective bargaining agreement or
other labor agreement with any union or labor organization; (ii) there is no
unfair labor practice charge or grievance arising out of a collective bargaining
agreement or other grievance procedure against PSCo or any of its subsidiaries
pending, or to the best knowledge of PSCo, threatened, that has, or reasonably
may be expected by PSCo to have, a PSCo
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Material Adverse Effect; (iii) there is no complaint, lawsuit or proceeding in
any forum by or on behalf of any present or former employee, any applicant for
employment or classes of the foregoing alleging breach of any express or implied
contract of employment, any law or regulation governing employment or the
termination thereof or other discriminatory, wrongful or tortious conduct in
connection with the employment relationship against PSCo or any of its
subsidiaries pending, or to the best knowledge of PSCo, threatened, that has, or
reasonably may be expected by PSCo to have, a PSCo Material Adverse Effect; (iv)
there is no strike, dispute, slowdown, work stoppage or lockout pending, or to
the best knowledge of PSCo, threatened, against or involving PSCo or any of its
subsidiaries that has or, insofar as reasonably can be foreseen, could have, a
PSCo Material Adverse Effect; (v) PSCo and each of its subsidiaries are in
compliance with all applicable laws respecting employment and employment
practices, terms and conditions of employment, wages, hours of work and
occupational safety and health, except for non-compliance that, in the
aggregate, does not, and insofar as reasonably can be foreseen, will not, have a
PSCo Material Adverse Effect; and (vi) there is no proceeding, claim, suit,
action or governmental investigation pending or, to the best knowledge of PSCo,
threatened in respect to which any director, officer, employee or agent of PSCo
or any of its subsidiaries is or may be entitled to claim indemnification from
PSCo or any of its subsidiaries pursuant to their respective articles of
incorporation or bylaws or as provided in the indemnification agreements listed
on Section 4.10(l) of the PSCo Disclosure Schedule.
Section 4.11 Environmental Protection.
(a) Compliance. Except as disclosed in Section 4.11(a) of the
PSCo Disclosure Schedule, or as disclosed in the PSCo SEC Reports, each of PSCo
and each of its subsidiaries is in material compliance with all applicable
Environmental Laws (as hereinafter defined in Section 4.11(g)), except where the
failure to be so in material compliance would not in the aggregate have a PSCo
Material Adverse Effect. Except as disclosed in Section 4.11(a) of the PSCo
Disclosure Schedule, neither PSCo nor any of its subsidiaries has received any
written notice from any person or Governmental Authority that alleges that PSCo
or any of its subsidiaries is not in material compliance with applicable
Environmental Laws, except where the failure to be so in material compliance
would not in the aggregate have a PSCo Material Adverse Effect.
(b) Environmental Permits. Except as disclosed in Section
4.11(b) of the PSCo Disclosure Schedule, or as disclosed in the PSCo SEC
Reports, PSCo and each of its subsidiaries has obtained or has applied for all
material environmental, health and safety permits and authorizations
(collectively, "Environmental Permits") necessary for the construction of their
facilities and the conduct of their operations, and all such Environmental
Permits are in good standing or, where applicable, a renewal application has
been timely filed and is pending agency approval, and PSCo and its subsidiaries
are in material compliance with all terms and conditions of all such
Environmental Permits and are not required to make any material expenditures in
connection with any renewal application pending agency approval, except where
the failure to obtain or be in such compliance and the
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requirement to make such expenditures would not have in the aggregate a PSCo
Material Adverse Effect.
(c) Environmental Claims. Except as disclosed in Section
4.11(c) of the PSCo Disclosure Schedule, or as disclosed in the PSCo SEC
Reports, to the best knowledge of PSCo, there is no Environmental Claim (as
hereinafter defined in Section 4.11(g)) pending, or to the best knowledge of
PSCo, threatened (i) against PSCo or any of its subsidiaries or joint ventures,
(ii) against any person or entity whose liability for any Environmental Claim
PSCo or any of its subsidiaries or joint ventures has or may have retained or
assumed either contractually or by operation of law or (iii) against any real or
personal property or operations that PSCo or any of its subsidiaries or joint
ventures owns, leases or manages, in whole or in part, that, if adversely
determined, would have in the aggregate a PSCo Material Adverse Effect.
(d) Releases. Except as disclosed in Section 4.11(c) or
4.11(d) of the PSCo Disclosure Schedule, or as disclosed in the PSCo SEC
Reports, to the best knowledge of PSCo, there has been no Release (as
hereinafter defined in Section 4.11(g)) of any Hazardous Material (as
hereinafter defined in Section 4.11(g)) that would be reasonably likely to form
the basis of any Environmental Claim against PSCo or any subsidiary or joint
venture of PSCo, or against any person or entity whose liability for any
Environmental Claim PSCo or any subsidiary or joint venture of PSCo has or may
have retained or assumed either contractually or by operation of law, except for
Releases of Hazardous Materials the liability for which would not have in the
aggregate a PSCo Material Adverse Effect.
(e) Predecessors. Except as disclosed in Section 4.11(e) of
the PSCo Disclosure Schedule, or as disclosed in the PSCo SEC Reports, to the
best knowledge of PSCo, with respect to any predecessor of PSCo or any
subsidiary or joint venture of PSCo, there are no Environmental Claims pending
or threatened, or any Releases of Hazardous Materials that would be reasonably
likely to form the basis of any Environmental Claims that would have, or that
PSCo reasonably believes would have, in the aggregate a PSCo Material Adverse
Effect.
(f) Disclosure. To the best knowledge of PSCo, PSCo has
disclosed to SPS all material facts that PSCo reasonably believes form the basis
of a PSCo Material Adverse Effect arising from (i) the cost of pollution control
equipment currently required or known to be required in the future, (ii) current
investigatory, removal, remediation or response costs or investigatory, removal,
remediation or response costs known to be required in the future, in each case,
both on-site and off-site and (iii) any other environmental matter affecting
PSCo or its subsidiaries that would have, or that PSCo reasonably believes would
have, in the aggregate a PSCo Material Adverse Effect.
(g) As used in this Agreement:
(i) "Environmental Claim" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters,
directives, claims, liens,
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investigations, proceedings or notices of noncompliance or violation by
any person or entity (including, without limitation, any Governmental
Authority) alleging potential liability (including, without limitation,
potential liability for enforcement costs, investigatory costs, cleanup
costs, response costs, removal costs, remedial costs, natural resources
damages, property damages, personal injuries, fines or penalties)
arising out of, based on or resulting from (A) the presence, or Release
or threatened Release of any Hazardous Materials at any location,
whether or not owned, operated, leased or managed by PSCo or any of its
subsidiaries or joint ventures (for purposes of this Section 4.11
only), or by SPS or any of its subsidiaries or joint ventures (for
purposes of Section 5.11 only), (B) circumstances forming the basis of
any violation, or alleged violation, of any Environmental Law or (C)
any and all claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive relief
resulting from the presence or Release of any Hazardous Materials.
(ii) "Environmental Laws" means all federal, state and local
laws, rules and regulations relating to pollution or protection of
human health or the environment (including, without limitation, ambient
air, surface water, groundwater, land surface or subsurface strata),
including, without limitation, laws and regulations relating to
Releases or threatened Releases of Hazardous Materials or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of Hazardous Materials.
(iii) "Hazardous Materials" means (A) any petroleum or petroleum
products or petroleum wastes (including crude oil or any fraction
thereof), radioactive materials, friable asbestos or friable
asbestos-containing material, urea formaldehyde foam insulation, and
transformers or other equipment that contain dielectric fluid
containing polychlorinated biphenyls, (B) any chemicals, materials or
substances which are now defined as or included in the definition of
"hazardous substances", "hazardous wastes", "hazardous materials",
"extremely hazardous wastes", "restricted hazardous wastes", "toxic
substances", "toxic pollutants", or words of similar import, under any
Environmental Law and (C) any other chemical, material, substance or
waste, exposure to which is now prohibited, limited or regulated under
any Environmental Law in a jurisdiction in which PSCo or any of its
subsidiaries or joint ventures operates (for purposes of this Section
4.11 only) or in which SPS or any of its subsidiaries or joint ventures
operates (for purposes of Section 5.11 only).
(iv) "Release" means any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching or
migration into the atmosphere, soil, surface water, groundwater or
property (indoors or outdoors).
Section 4.12 Regulation as a Utility. PSCo is regulated as a
public utility in the State of Colorado and one of its wholly owned subsidiaries
is regulated as a public utility in the State of Wyoming. Except as disclosed in
Section 4.12 of the PSCo Disclosure Schedule, neither PSCo nor any subsidiary
company or affiliate of PSCo is subject to regulation as a public utility or
public service company (or similar designation) by any other
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state in the United States, by the United States or any agency or
instrumentality of the United States or by any foreign country. As used in this
Section 4.12 and in Section 5.12, the terms "subsidiary company" and "affiliate"
shall have the respective meanings ascribed to them in the 1935 Act. PSCo is a
holding company exempt from all provisions of the 1935 Act except Section
9(a)(2) pursuant to Section 3(a)(2) of the 1935 Act.
Section 4.13 Vote Required. The approval of the PSCo Merger by
two-thirds of all votes entitled to be cast by all holders of PSCo Common Stock
and PSCo Preferred Stock voting together as a single class (the "PSCo
Shareholders' Approvals") are the only votes of the holders of any class or
series of the capital stock of PSCo required to approve this Agreement, the
Merger Agreements, the Mergers and the other transactions contemplated hereby.
Section 4.14 Accounting Matters. PSCo has not, through the
date hereof, taken or agreed to take any action that would prevent the Company
from accounting for the business combination to be effected by the Mergers as a
pooling-of-interests in accordance with GAAP and applicable SEC regulations.
Section 4.15 Opinion of Financial Advisor. PSCo has received
the opinion of Barr Devlin & Co. Incorporated, dated the date hereof, to the
effect that, as of the date hereof, the PSCo Conversion Ratio is fair from a
financial point of view to the holders of PSCo Common Stock.
Section 4.16 Insurance. Except as disclosed in Section 4.16 of
the PSCo Disclosure Schedule, each of PSCo and each of its subsidiaries is, and
has been continuously since January 1, 1990, insured in such amounts and against
such risks and losses as are customary for companies conducting the respective
businesses conducted by PSCo and its subsidiaries during such time period.
Except as disclosed in Section 4.16 of the PSCo Disclosure Schedule, neither
PSCo nor any of its subsidiaries has received any notice of cancellation or
termination with respect to any material insurance policy thereof. All material
insurance policies of PSCo and its subsidiaries are valid and enforceable
policies.
Section 4.17 Ownership of SPS Common Stock. PSCo does not
"beneficially own" (as such term is defined in Rule 13d-3 under the Exchange
Act) any shares of SPS Common Stock.
Section 4.18 PSCo Rights Agreement. PSCo shall take all
necessary action with respect to all of the outstanding rights to purchase
common stock of PSCo (the "PSCo Rights") issued pursuant to the Rights
Agreement, dated as of February 26, 1991 (the "PSCo Rights Agreement"), between
PSCo and Mellon Bank, N.A., as Rights Agent, so that PSCo, as of the time
immediately prior to the Effective Time, will have no obligations under the PSCo
Rights or the PSCo Rights Agreement, except for the payment of any redemption
price, if required, and so that the holders of the PSCo Rights will have no
rights under the PSCo Rights or the PSCo Rights Agreement except for the payment
of any redemption price, if required. Assuming the accuracy of the
representation contained in Section 5.17, the
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execution, delivery and performance of this Agreement will not result in a
distribution of, or otherwise, trigger, the PSCo Rights under the PSCo Rights
Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SPS
SPS represents and warrants to PSCo as follows:
Section 5.1 Organization and Qualification. Except as
disclosed in Section 5.1 of the SPS Disclosure Schedule (as defined in Section
7.6(i)), each of SPS and each of its subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation, has all requisite corporate power and authority,
and has been duly authorized by all necessary regulatory approvals and orders,
to own, lease and operate its assets and properties and to carry on its business
as it is now being conducted, and is duly qualified and in good standing to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its assets and properties makes such qualification
necessary other than in such jurisdictions where the failure to be so qualified
and in good standing will not, when taken together with all other such failures,
have a material adverse effect on the business, operations, properties, assets,
condition (financial or otherwise), prospects or results of operations of SPS
and its subsidiaries taken as a whole or on the consummation of this Agreement
or the SPS Merger Agreement (any such material adverse effect being hereinafter
referred to as a "SPS Material Adverse Effect").
Section 5.2 Subsidiaries. Section 5.2 of the SPS Disclosure
Schedule contains a description as of the date hereof of all subsidiaries and
joint ventures of SPS, including the name of each such entity, the state or
jurisdiction of its incorporation, a brief description of the principal line or
lines of business conducted by each such entity and SPS's interest therein.
Except as disclosed in Section 5.2 of the SPS Disclosure Schedule, none of such
entities is a "public utility company", a "holding company", a "subsidiary
company" or an "affiliate" of any public utility company within the meaning of
Section 2(a)(5), 2(a)(7), 2(a)(8) or 2(a)(11) of the 1935 Act, respectively.
Except as disclosed in Section 5.2 of the SPS Disclosure Schedule, all of the
issued and outstanding shares of capital stock of each subsidiary of SPS are
validly issued, fully paid, nonassessable and free of preemptive rights and are
owned directly or indirectly by SPS free and clear of any liens, claims,
encumbrances, security interests, equities, charges and options of any nature
whatsoever, and there are no outstanding subscriptions, options, calls,
contracts, voting trusts, proxies or other commitments, understandings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement, obligating any such subsidiary to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of its capital stock or
obligating it to grant, extend or enter into any such agreement or commitment.
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Section 5.3 Capitalization. The authorized capital stock of
SPS consists of 100,000,000 shares of SPS Common Stock and 5,000,000 shares of
SPS Preferred Stock. As of the close of business on July 31, 1995, (i)
40,917,908 shares of SPS Common Stock and 1,416,800 shares of SPS Preferred
Stock were issued and outstanding. All of the issued and outstanding shares of
the capital stock of SPS are validly issued, fully paid, nonassessable and free
of preemptive rights. Except as disclosed in Section 5.3 of the SPS Disclosure
Schedule and except for the SPS Rights (as defined in Section 5.18), as of the
date hereof, there are no outstanding subscriptions, options, calls, contracts,
voting trusts, proxies or other commitments, understandings, restrictions,
arrangements, rights or warrants, including any right of conversion or exchange
under any outstanding security, instrument or other agreement, obligating SPS or
any of its subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of the capital stock or other voting
securities of SPS or obligating SPS or any of its subsidiaries to grant, extend
or enter into any such agreement or commitment.
Section 5.4 Authority; Non-Contravention; Statutory Approvals;
Compliance.
(a) Authority. SPS has all requisite power and authority to
enter into this Agreement and the SPS Merger Agreement and, subject to the SPS
Shareholders' Approvals (as defined in Section 5.13) and the SPS Required
Statutory Approvals (as defined in Section 5.4(c), to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the SPS Merger Agreement and the consummation by SPS of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of SPS, subject to obtaining the SPS
Shareholders' Approvals. This Agreement has been, and the SPS Merger Agreement
will be, duly and validly executed and delivered by SPS and, assuming the due
authorization, execution and delivery hereof by PSCo and the Company and of the
SPS Merger Agreement by Merger Sub B, constitutes, or will constitute, the
legal, valid and binding obligation of SPS enforceable against SPS in accordance
with its terms.
(b) Non-Contravention. Except as disclosed in Section 5.4(b)
of the SPS Disclosure Schedule the execution and delivery of this Agreement by
SPS do not, and the execution and delivery of the SPS Merger Agreement and the
consummation of the transactions contemplated hereby and thereby will not result
in any Violation by SPS or any of its subsidiaries or, to the best knowledge of
SPS, any of its joint ventures under any provisions of (i) the articles of
incorporation, bylaws or similar governing documents of SPS or any of its
subsidiaries or joint ventures, (ii) subject to obtaining the SPS Required
Statutory Approvals and the receipt of the SPS Shareholders' Approvals, any
statute, law, ordinance, rule, regulation, judgment, decree, order, injunction,
writ, permit or license of any Governmental Authority applicable to SPS or any
of its subsidiaries or joint ventures or any of their respective properties or
assets, or (iii) subject to obtaining the third-party consents or other
approvals disclosed in Section 5.4(b) of the SPS Disclosure Schedule (the "SPS
Required Consents"), any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, concession, contract, lease or other instrument,
obligation or agreement of any kind to which SPS or any of its subsidiaries or
joint ventures is now a party or by which
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any of them or any of their respective properties or assets may be bound or
affected, excluding from the foregoing clauses (ii) and (iii) such Violations as
would not have, in the aggregate, a SPS Material Adverse Effect.
(c) Statutory Approvals. Except as disclosed in Section 5.4(c)
of the SPS Disclosure Schedule, no declaration, filing or registration with, or
notice to or authorization, consent, finding by or approval of, any Governmental
Authority, is necessary for the execution and delivery of this Agreement or the
SPS Merger Agreement by SPS or the consummation by SPS of the transactions
contemplated hereby or thereby, the failure to obtain, make or give which would
have, in the aggregate, a SPS Material Adverse Effect (the "SPS Required
Statutory Approvals"), it being understood that references in this Agreement to
"obtaining" such SPS Required Statutory Approvals shall mean making such
declarations, filings or registrations; giving such notice; obtaining such
consents or approvals; and having such waiting periods expire as are necessary
to avoid a violation of law.
(d) Compliance. Except as disclosed in Section 5.4(d) or 5.11
of the SPS Disclosure Schedule or as disclosed in the SPS SEC Reports (as
defined in Section 5.5), neither SPS nor any of its subsidiaries nor, to the
best knowledge of SPS, any of its joint ventures, is in violation of or under
investigation with respect to, or has been given notice or been charged with any
violation of, any law, statute, order, rule, regulation, ordinance or judgment
(including, without limitation, any applicable Environmental Laws), of any
Governmental Authority, except for violations that, in the aggregate, do not
have, and, to the best knowledge of SPS, are not reasonably likely to have, a
SPS Material Adverse Effect. Except as disclosed in Section 5.4(d) or 5.11 of
the SPS Disclosure Schedule, SPS, its subsidiaries and, to the best knowledge of
SPS, its joint ventures have all Permits, except those the failure to obtain
which would not, in the aggregate, have a SPS Material Adverse Effect.
Section 5.5 Reports and Financial Statements. The filings
required to be made by SPS and its subsidiaries since January 1, 1990 under the
Securities Act, the Exchange Act, applicable New Mexico, Texas, Oklahoma and
Kansas laws and regulations or the Power Act have been filed with the SEC, the
New Mexico Public Utility Commission (the "New Mexico Commission"), the Public
Utility Commission of Texas (the "Texas Commission"), the Corporation Commission
of Oklahoma (the "Oklahoma Commission"), the Kansas Corporation Commission (the
"Kansas Commission"), or the FERC, as the case may be, including all forms,
statements, reports, agreements (oral or written) and all documents, exhibits,
amendments and supplements appertaining thereto, and complied in all material
respects with all applicable requirements of the appropriate act and the rules
and regulations thereunder. No filings by SPS or its subsidiaries have been
required under the 1935 Act, the Natural Gas Act or the Atomic Energy Act. SPS
has made available to PSCo a true and complete copy of each report, schedule,
registration statement and definitive proxy statement filed by SPS with the SEC
since January 1, 1990 and through the date hereof (as such documents have since
the time of their filing been amended, the "SPS SEC Reports"). The SPS SEC
Reports, including without limitation any financial statements or schedules
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included therein, at the time filed, and any forms, reports or other documents
filed by SPS with the SEC after the date hereof, did not and will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. The
audited consolidated financial statements and unaudited interim financial
statements of SPS included in the SPS SEC Reports (collectively, the "SPS
Financial Statements") have been prepared, and will be prepared in accordance
with GAAP (except as may be indicated therein or in the notes thereto and except
with respect to unaudited statements as permitted by Form 10-Q) and fairly
present the consolidated financial position of SPS as of the respective dates
thereof or the consolidated results of operations and cash flows for the
respective periods then ended, as the case may be, subject, in the case of the
unaudited interim financial statements, to normal, recurring audit adjustments.
True, accurate and complete copies of the articles of incorporation and bylaws
of SPS, as in effect on the date hereof, have been delivered to PSCo.
Section 5.6 Absence of Certain Changes or Events. Except as
disclosed in the SPS SEC Reports filed prior to the date hereof or as disclosed
in Section 5.6 of the SPS Disclosure Schedule, from December 31, 1994 through
the date hereof each of SPS and each of its subsidiaries has conducted its
business only in the ordinary course of business consistent with past practice
and no event has occurred which has had, and no fact or condition exists that
would have or, to the best knowledge of SPS, is reasonably likely to have, a SPS
Material Adverse Effect. For purposes of the Section 5.6, the amount of any fine
or penalty imposed or assessed against SPS after the date of this Agreement may
be taken into account in determining whether a SPS Material Adverse Effect has
occurred regardless of whether or not the event, fact or condition which lead to
the imposition or assessment of the fine or penalty has been disclosed in the
SPS SEC Reports or the SPS Disclosure Schedule.
Section 5.7 Litigation. Except as disclosed in the SPS SEC
Reports filed prior to the date hereof or as disclosed in Section 5.7, 5.9 or
5.11 of the SPS Disclosure Schedule, (i) there are no claims, suits, actions or
proceedings pending or, to the best knowledge of SPS, threatened, nor are there
any investigations or reviews pending or, to the best knowledge of SPS,
threatened against, relating to or affecting SPS or any of its subsidiaries,
(ii) there have not been any developments since December 31, 1994 with respect
to any such disclosed claims, suits, actions, proceedings, investigations or
reviews, and (iii) there are no judgments, decrees, injunctions, rules or orders
of any court, governmental department, commission, agency, instrumentality or
authority or any arbitrator applicable to SPS or any of its subsidiaries that in
the aggregate would have, or to the best knowledge of SPS are reasonably likely
to have, a SPS Material Adverse Effect.
Section 5.8 Registration Statement and Proxy Statement. None
of the information supplied or to be supplied by or on behalf of SPS for
inclusion or incorporation by reference in (i) the Registration Statement will,
at the time the Registration Statement becomes effective under the Securities
Act, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
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statements therein not misleading and (ii) the Joint Proxy Statement will, at
the date mailed to the shareholders of SPS and PSCo and, as the same may be
amended or supplemented, at the times of the meetings of such shareholders to be
held in connection with the Mergers, contain any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Registration Statement and the Joint Proxy Statement will comply
as to form in all material respects with the provisions of the Securities Act
and the Exchange Act and the rules and regulations thereunder.
Section 5.9 Tax Matters.
(a) Filing of Timely Tax Returns. Except as disclosed in
Section 5.9(a) of the SPS Disclosure Schedule, SPS and each of its subsidiaries
have filed all Tax Returns required to be filed by each of them under applicable
law. All Tax Returns were in all material respects (and, as to Tax Returns not
filed as of the date hereof, will be) true, complete and correct and filed on a
timely basis.
(b) Payment of Taxes. SPS and each of its subsidiaries have,
within the time and in the manner prescribed by law, paid (and until the Closing
Date will pay within the time and in the manner prescribed by law) all Taxes
that are currently due and payable except for those contested in good faith and
for which adequate reserves have been taken.
(c) Tax Reserves. SPS and its subsidiaries have established
(and until the Closing Date will maintain) on their books and records reserves
adequate to pay all Taxes and reserves for deferred income taxes in accordance
with GAAP.
(d) Tax Liens. There are no Tax liens upon the assets of SPS
or any of its subsidiaries except liens for Taxes not yet due.
(e) Withholding Taxes. SPS and each of its subsidiaries have
complied (and until the Closing Date will comply) in all material respects with
the provisions of the Code relating to the payment and withholding of Taxes,
including, without limitation, the withholding and reporting requirements under
Code sections 1441 through 1464, 3401 through 3606, and 6041 and 6049, as well
as similar provisions under any other laws, and have, within the time and in the
manner prescribed by law, withheld from employee wages and paid over to the
proper governmental authorities all amounts required.
(f) Extensions of Time for Filing Tax Returns. Except as
disclosed in Section 5.9(f) of the SPS Disclosure Schedule, neither SPS nor any
of its subsidiaries has requested any extension of time within which to file any
Tax Return, which Tax Return has not since been filed.
(g) Waivers of Statute of Limitations. Except as disclosed in
Section 5.9(g) of the SPS Disclosure Schedule, neither SPS nor any of its
subsidiaries has executed
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any outstanding waivers or comparable consents regarding the application of the
statute of limitations with respect to any Taxes or Tax Returns.
(h) Expiration of Statute of Limitations. Except as disclosed
in Section 5.9(h) of the SPS Disclosure Schedule, the statute of limitations for
the assessment of all Taxes has expired for all applicable Tax Returns of SPS
and each of its subsidiaries or those Tax Returns have been examined by the
appropriate taxing authorities for all periods through the date hereof, and no
deficiency for any Taxes has been proposed, asserted or assessed against SPS or
any of its subsidiaries that has not been resolved and paid in full.
(i) Audit, Administrative and Court Proceedings. Except as
disclosed in Section 5.9(i) of the SPS Disclosure Schedule, no audits or other
administrative proceedings or court proceedings are presently pending with
regard to any Taxes or Tax Returns of SPS or any of its subsidiaries.
(j) Powers of Attorney. Except as disclosed in Section 5.9(j)
of the SPS Disclosure Schedule, no power of attorney currently in force has been
granted by SPS or any of its subsidiaries concerning any Tax matter.
(k) Tax Rulings. Except as disclosed in Section 5.9(k) of the
SPS Disclosure Schedule, neither SPS nor any of its subsidiaries has received a
Tax Ruling or entered into a Closing Agreement with any taxing authority that
would have a continuing adverse effect after the Closing Date.
(l) Availability of Tax Returns. SPS and its subsidiaries have
made available to PSCo complete and accurate copies covering all years ending on
or after December 31, 1990, of (i) all Tax Returns, and any amendments thereto,
filed by SPS or any of its subsidiaries, (ii) all audit reports received from
any taxing authority relating to any Tax Return filed by SPS or any of its
subsidiaries and (iii) any Closing Agreements entered into by SPS or any of its
subsidiaries with any taxing authority.
(m) Tax Sharing Agreements. Except as disclosed in Section
5.9(m) of the SPS Disclosure Schedule, no agreements relating to the allocation
or sharing of Taxes exist between or among SPS and any of its subsidiaries.
(n) Code section 341(f). Neither SPS nor any of its
subsidiaries has filed (or will file prior to the Closing) a consent pursuant to
Code section 341(f) or has agreed to have Code section 341(f)(2) apply to any
disposition of a subsection (f) asset (as such term is defined in Code section
341(f)(4)) owned by SPS or any of its subsidiaries.
(o) Code section 168. Except as disclosed in Section 5.9(o) of
the SPS Disclosure Schedule, no property of SPS or any of its subsidiaries is
property that SPS or any such subsidiary or any party to this transaction is or
will be required to treat as being owned by another person pursuant to the
provisions of Code section 168(f)(8) (as in effect prior to
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its amendment by the Tax Reform Act of 1986) or is tax-exempt use property
within the meaning of Code section 168.
(p) Code section 481 Adjustments. Except as disclosed in
Section 5.9(p) of the SPS Disclosure Schedule, neither SPS nor any of its
subsidiaries is required to include in income any adjustment pursuant to Code
section 481(a) by reason of a voluntary change in accounting method initiated by
SPS or any of its subsidiaries, and to the best of the knowledge of SPS, the IRS
has not proposed any such adjustment or change in accounting method.
(q) Code sections 6661 and 6662. Except as disclosed in
Section 5.9(q) of the SPS Disclosure Schedule, all transactions that could give
rise to an understatement of federal income tax (within the meaning of Code
section 6661 for Tax Returns filed on or before December 31, 1989, and within
the meaning of Code section 6662 for tax returns filed after December 31, 1989)
that could reasonably be expected to result in a SPS Material Adverse Effect
have been adequately disclosed (or, with respect to Tax Returns filed following
the Closing will be adequately disclosed) on the Tax Returns of SPS and its
subsidiaries in accordance with Code section 6661(b)(2)(B) for Tax Returns filed
on or prior to December 31, 1989, and in accordance with Code section
6662(d)(2)(B) for Tax Returns filed after December 31, 1989.
(r) Code section 280G. Except as disclosed in Section 5.9(r)
of the SPS Disclosure Schedule, neither SPS nor any of its subsidiaries is a
party to any agreement, contract, or arrangement that could reasonably be
expected to result, on account of the transactions contemplated hereunder,
separately or in the aggregate, in the payment of any "excess parachute payment"
within the meaning of Code section 280G.
(s) NOLS. As of December 31, 1993, SPS and its subsidiaries
had net operating loss carryovers available to offset future income as disclosed
in Section 5.9(s) of the SPS Disclosure Schedule. Section 5.9(s) of the SPS
Disclosure Schedule discloses the amount of and year of expiration of each
company's net operating loss carryovers.
(t) Credit Carryover. As of December 31, 1993, SPS and its
subsidiaries had tax credit carryovers available to offset future tax liability
as disclosed in Section 5.9(t) of the SPS Disclosure Schedule. Section 5.9(t) of
the SPS Disclosure Schedule discloses the amount and year of expiration of each
company's tax credit carryovers.
(u) Code section 338 Elections. Except as disclosed in Section
5.9(u) of the SPS Disclosure Schedule, no election under Code section 338 (or
any predecessor provision) has been made by or with respect to SPS or any of its
subsidiaries or any of their respective assets or properties.
(v) Acquisition Indebtedness. Except as disclosed in Section
5.9(v) of the SPS Disclosure Schedule, no indebtedness of SPS or any of its
subsidiaries is "corporate acquisition indebtedness" within the meaning of Code
section 279(b).
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(w) Intercompany Transactions. Except as disclosed in Section
5.9(w) of the SPS Disclosure Schedule, neither SPS nor any of its subsidiaries
have engaged in any intercompany transactions within the meaning of Treasury
Regulations section 1.1502-13 for which any income or gain will remain
unrecognized as of the close of the last taxable year prior to the Closing Date.
Section 5.10 Employee Matters; ERISA.
(a) Benefit Plans. Section 5.10(a) of the SPS Disclosure
Schedule contains a true and complete list of: (i) each employee benefit plan,
program or arrangement covering employees, former employees or directors of SPS
(or any of its subsidiaries) or any of their dependents or beneficiaries, or
providing benefits to such persons in respect of services provided to any such
entity, including, but not limited to, any "employee benefit plan" within the
meaning of ERISA section 3(3) (whether or not terminated, if SPS or any of its
subsidiaries could have statutory or contractual liability with respect thereto
on or after the date hereof); (ii) each management, employment, deferred
compensation, severance (including any payment, right or benefit resulting from
a change in control), bonus or other contract for personal services with or
covering any current officer, key employee or director or any consulting
contract with any person who prior to entering into such contract was a director
or officer of SPS or any of its subsidiaries (whether or not terminated, if SPS
or any of its subsidiaries could have statutory or contractual liability with
respect thereto on or after the date hereof); (iii) each "employee pension
benefit plan" (within the meaning of ERISA section 3(2)) subject to Title IV of
ERISA or the minimum funding requirements of Code section 412 maintained or
contributed to by SPS or any entity required to be aggregated therewith pursuant
to Code section 414(b) or (c) (a "SPS ERISA Affiliate") at any time during the
seven-year period immediately preceding the date hereof (collectively, the "SPS
Benefit Plans") and (iv) with respect to each SPS Benefit Plan, the source or
sources of benefit payments under the plan (including, where applicable, the
identity of any trust (whether or not a grantor trust), insurance contract,
custodial account, agency agreement, or other arrangement that holds the assets
of, or serves as a funding vehicle or source of benefits for, such SPS Benefit
Plan).
(b) Contributions. Except as disclosed in Section 5.10(b) of
the SPS Disclosure Schedule, all material contributions and other payments
required to have been made by SPS or any of its subsidiaries pursuant to any SPS
Benefit Plan (or to any person pursuant to the terms thereof) have been timely
made or the amount of such payment or contribution obligation has been reflected
in the SPS Financial Statements.
(c) Qualification; Compliance. Except as disclosed in Section
5.10(c) of the SPS Disclosure Schedule, each SPS Benefit Plan that is intended
to be "qualified" within the meaning of Code section 401(a) has been determined
by the IRS to be so qualified, and, to the best knowledge of SPS, no event or
condition exists or has occurred that could reasonably be expected to result in
the revocation of any such determination. SPS and each of its subsidiaries are
in compliance with, and each SPS Benefit Plan is and has been operated in
compliance with, all applicable laws, rules and regulations governing such plan,
including,
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without limitation, ERISA and the Code, except for violations that could not
reasonably be expected to have a SPS Material Adverse Effect. To the best
knowledge of SPS, no individual or entity has engaged in any transaction with
respect to any SPS Benefit Plan as a result of which SPS or any of its
subsidiaries could reasonably expect to be subject to liability pursuant to
ERISA section 409 or section 502, or subject to an excise tax pursuant to Code
section 4975. To the best knowledge of SPS, (i) no SPS Benefit Plan is subject
to any ongoing audit, investigation, or other administrative proceeding of the
Internal Revenue Service, the Department of Labor, or any other federal, state,
or local governmental entity, and (ii) no SPS Benefit Plan is the subject of any
pending application for administrative relief under any voluntary compliance
program of any governmental entity (including, without limitation, the IRS's
Voluntary Compliance Resolution Program or Walk-in Closing Agreement Program, or
the Department of Labor's Delinquent Filer Voluntary Compliance Program).
(d) Liabilities. With respect to the SPS Benefit Plans,
individually and in the aggregate, no termination or partial termination of any
SPS Benefit Plan or other event has occurred, and, to the best knowledge of SPS,
there exists no condition or set of circumstances, that could subject SPS or any
of its subsidiaries to any liability arising under the Code, ERISA or any other
applicable law (including, without limitation, any liability to or under any
such plan or to the PBGC), or under any indemnity agreement to which SPS, any of
its subsidiaries or any SPS ERISA Affiliate is a party, which liability,
excluding liability for benefit claims and funding obligations payable in the
ordinary course and liability for PBGC insurance premiums payable in the
ordinary course, could reasonably be expected to have a SPS Material Adverse
Effect.
(e) Welfare Plans. Except as disclosed in Section 5.10(e) of
the SPS Disclosure Schedule, no SPS Benefit Plan that is a "welfare plan"
(within the meaning of ERISA section 3(1)) provides benefits for any retired or
former employees (other than as required pursuant to ERISA section 601).
(f) Documents Made Available. SPS has made available to PSCo a
true and correct copy of each collective bargaining agreement to which SPS is a
party or under which SPS has obligations and, with respect to each SPS Benefit
Plan, as applicable (i) the current plan document (including all amendments
adopted since the most recent restatement) and its most recently prepared
summary plan description and all summaries of material modifications prepared
since the most recent summary plan description, (ii) the most recently prepared
annual report (IRS Form 5500 Series) including financial statements, (iii) each
related trust agreement, insurance contract, service provider or investment
management agreement (including all amendments to each such document), (iv) the
most recent IRS determination letter with respect to the qualified status under
Code section 401(a) of such plan and a copy of any application of an IRS
determination letter filed since the most recent IRS determination letter was
issued, and (v) the most recent actuarial report or valuation.
(g) Payments Resulting from Mergers. Other than as set forth
in Section 7.11 or disclosed in Section 5.10(g) of the SPS Disclosure Schedule,
the consummation or announcement of any transaction contemplated by this
Agreement will not
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(either alone or upon the occurrence of any additional or further acts or
events) result in any (i) payment (whether of severance pay or otherwise)
becoming due from the Company or SPS or any of its subsidiaries under any
applicable SPS Benefit Plans to any officer, employee, former employee or
director thereof or to the trustee under any "rabbi trust" or similar
arrangement, or (ii) benefit under any SPS Benefit Plan being established or
becoming accelerated, vested or payable, except for a payment or benefit that
would have been payable under the same terms and conditions without regard to
the transactions contemplated by this Agreement.
(h) Funded Status of Plans. Except as disclosed in Section
5.10(h) of the SPS Disclosure Schedule, each SPS Benefit Plan that is subject to
either or both of the minimum funding requirements of ERISA section 302 or to
Title IV of ERISA has assets that, as of the date hereof, have a fair market
value equal to or exceeding the present value of the accrued benefit obligations
thereunder on a termination basis, as of the date hereof based on the actuarial
methods, tables and assumptions theretofore utilized by such plan's actuary in
preparing such plan's most recently prepared actuarial valuation report, except
to the extent that applicable law would require the use of different actuarial
assumptions if such plan was to be terminated as of the date hereof. No SPS
Benefit Plan subject to the minimum funding requirements of ERISA section 302
has incurred any "accumulated funding deficiency" (within the meaning of ERISA
section 302).
(i) Multiemployer Plans. Except as disclosed in Section
5.10(i) of the SPS Disclosure Schedule, no SPS Benefit Plan is or was a
"multiemployer plan" (within the meaning of ERISA section 4001(a)(3)), a
multiple employer plan described in Code section 413(c), or a "multiple employer
welfare arrangement" (within the meaning of ERISA section 3(40)); and none of
SPS, any subsidiary thereof or any SPS ERISA Affiliate has been obligated to
contribute to, or otherwise has or has had any liability with respect to, any
multiemployer plan, multiple employer plan, or multiple employer welfare
arrangement. With respect to any SPS Benefit Plan that is listed in Section
5.10(i) of the SPS Disclosure Schedule as a multiemployer plan, SPS and its
subsidiaries have not made or incurred a "complete withdrawal" or a "partial
withdrawal," as such terms are defined in ERISA sections 4203 and 4205,
therefrom at any time during the five calendar year period immediately preceding
the date of this Agreement and the transactions contemplated by the Agreement
will not, in and of themselves, give rise to such a "complete withdrawal" or
"partial withdrawal."
(j) Modification or Termination of Plans. Except as disclosed
in Section 5.10(j) of the SPS Disclosure Schedule: (i) neither SPS nor any
subsidiary of SPS is subject to any legal, contractual, equitable or other
obligation to establish as of any date any employee benefit plan of any nature,
including (without limitation) any pension, profit sharing, welfare,
post-retirement welfare, stock option, stock or cash award, non-qualified
deferred compensation or executive compensation plan, policy or practice; and
(ii) to the best knowledge of SPS after review of all SPS Benefit Plan
documents, the Company, SPS or one or more of its subsidiaries may, in any
manner, and without the consent of any employee, beneficiary or dependent,
employees' organization or other person, terminate, modify or amend any SPS
Benefit Plan or any other employee benefit plan, policy, program or practice
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(or its participation in any such SPS Benefit Plan or other employee benefit
plan, policy, program or practice) at any time sponsored, maintained or
contributed to by SPS or any of its subsidiaries, effective as of any date
before, on or after the Effective Time except to the extent that any retroactive
amendment would be prohibited by ERISA section 204(g).
(k) Reportable Events; Claims. Except as disclosed in Section
5.10(k) of the SPS Disclosure Schedule, (i) no event constituting a "reportable
event" (within the meaning of ERISA section 4043(b)) for which the 30-day notice
requirement has not been waived by the PBGC has occurred with respect to any SPS
Benefit Plan and (ii) no liability, claim, action or litigation has been made,
commenced or, to the best knowledge of SPS, threatened, by or against SPS or any
of its subsidiaries with respect to any SPS Benefit Plan (other than for
benefits or PBGC premiums payable in the ordinary course) that could reasonably
be expected to have a SPS Material Adverse Effect.
(l) Labor Agreements. To the best knowledge of SPS, as of the
date hereof, there is no current labor union representation question involving
employees of SPS or any of its subsidiaries, nor does SPS or any of its
subsidiaries know of any activity or proceeding of any labor organization (or
representative thereof) or employee group (or representative thereof) to
organize any such employees. Except as disclosed in the SPS SEC Reports or as
disclosed in Section 5.10(l) of the SPS Disclosure Schedule: (i) neither SPS nor
any of its subsidiaries is a party to any collective bargaining agreement or
other labor agreement with any union or labor organization; (ii) there is no
unfair labor practice charge or grievance arising out of a collective bargaining
agreement or other grievance procedure against SPS or any of its subsidiaries
pending, or to the best knowledge of SPS, threatened, that has, or reasonably
may be expected by SPS to have, a SPS Material Adverse Effect; (iii) there is no
complaint, lawsuit or proceeding in any forum by or on behalf of any present or
former employee, any applicant for employment or classes of the foregoing
alleging breach of any express or implied contract of employment, any law or
regulation governing employment or the termination thereof or other
discriminatory, wrongful or tortious conduct in connection with the employment
relationship against SPS or any of its subsidiaries pending, or to the best
knowledge of SPS, threatened, that has, or reasonably may be expected by SPS to
have, a SPS Material Adverse Effect; (iv) there is no strike, dispute, slowdown,
work stoppage or lockout pending, or to the best knowledge of SPS, threatened,
against or involving SPS or any of its subsidiaries that has or, insofar as
reasonably can be foreseen, could have, a SPS Material Adverse Effect; (v) SPS
and each of its subsidiaries are in compliance with all applicable laws
respecting employment and employment practices, terms and conditions of
employment, wages, hours of work and occupational safety and health, except for
non-compliance that, in the aggregate, does not, and insofar as reasonably can
be foreseen, will not, have a SPS Material Adverse Effect; and (vi) there is no
proceeding, claim, suit, action or governmental investigation pending or, to the
best knowledge of SPS, threatened in respect to which any director, officer,
employee or agent of SPS or any of its subsidiaries is or may be entitled to
claim indemnification from SPS or any of its subsidiaries pursuant to their
respective articles of incorporation or bylaws or as provided in the
indemnification agreements listed on Section 5.10(l) of the SPS Disclosure
Schedule.
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Section 5.11 Environmental Protection.
(a) Compliance. Except as disclosed in Section 5.11(a) of the
SPS Disclosure Schedule or as disclosed in the SPS SEC Reports, each of SPS and
each of its subsidiaries is in material compliance with all applicable
Environmental Laws, except where the failure to be so in material compliance
would not in the aggregate have a SPS Material Adverse Effect. Except as
disclosed in Section 5.11(a) of the SPS Disclosure Schedule, neither SPS nor any
of its subsidiaries has received any written notice from any person or
Governmental Authority that alleges that SPS or any of its subsidiaries is not
in material compliance with applicable Environmental Laws, except where the
failure to be so in material compliance would not in the aggregate have a SPS
Material Adverse Effect.
(b) Environmental Permits. Except as disclosed in Section
5.11(b) of the SPS Disclosure Schedule or as disclosed in the SPS SEC Reports,
each of SPS and each of its subsidiaries has obtained or has applied for all
material Environmental Permits necessary for the construction of their
facilities and the conduct of their operations, and all such Environmental
Permits are in good standing or, where applicable, a renewal application has
been timely filed and is pending agency approval, and SPS and its subsidiaries
are in compliance with all terms and conditions of all such Environmental
Permits and are not required to make any material expenditures in connection
with any renewal application pending agency approval, except where the failure
to obtain or be in such compliance and the requirement to make such expenditures
would not have in the aggregate a SPS Material Adverse Effect.
(c) Environmental Claims. Except as disclosed in Section
5.11(c) of the SPS Disclosure Schedule or as disclosed in the SPS SEC Reports,
to the best knowledge of SPS, there is no Environmental Claim (as defined in
Section 4.11(g)) pending, or to the best knowledge of SPS, threatened (i)
against SPS or any of its subsidiaries or joint ventures, (ii) against any
person or entity whose liability for any Environmental Claim SPS or any of its
subsidiaries or joint ventures has or may have retained or assumed either
contractually or by operation of law or (iii) against any real or personal
property or operations that SPS or any of its subsidiaries or joint ventures
owns, leases or manages, in whole or in part, that, if adversely determined,
would have in the aggregate a SPS Material Adverse Effect.
(d) Releases. Except as disclosed in Section 5.11(c) or
5.11(d) of the SPS Disclosure Schedule or as disclosed in the SPS SEC Reports,
to the best knowledge of SPS, there has been no Release of any Hazardous
Material that would be reasonably likely to form the basis of any Environmental
Claim against SPS or any subsidiary or joint venture of SPS, or against any
person or entity whose liability for any Environmental Claim SPS or any
subsidiary or joint venture of SPS has or may have retained or assumed either
contractually or by operation of law, except for Releases of Hazardous Materials
the liability for which would not have in the aggregate a SPS Material Adverse
Effect.
(e) Predecessors. Except as disclosed in Section 5.11(e) of
the SPS Disclosure Schedule or as disclosed in the SPS SEC Reports, to the best
knowledge of SPS
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with respect to any predecessor of SPS or any subsidiary or joint venture of
SPS, there are no Environmental Claims pending or threatened, or any Releases of
Hazardous Materials that would be reasonably likely to form the basis of any
Environmental Claims that would have, or that SPS reasonably believes would
have, in the aggregate, a SPS Material Adverse Effect.
(f) Disclosure. To the best knowledge of SPS, SPS has
disclosed to PSCo all material facts that SPS reasonably believes form the basis
of a SPS Material Adverse Effect arising from (i) the cost of pollution control
equipment currently required or known to be required in the future, (ii) current
investigatory, removal, remediation or response costs or investigatory, removal,
remediation or response costs known to be required in the future, in each case,
both on-site and offsite and (iii) any other environmental matter affecting SPS
or its subsidiaries that would have, or that SPS reasonably believes would have,
in the aggregate a SPS Material Adverse Effect.
Section 5.12 Regulation as a Utility. SPS is regulated as a
public utility in the States of Texas, New Mexico, Oklahoma and Kansas and in no
other state. Except as disclosed in Section 5.12 of the SPS Disclosure Schedule,
neither SPS nor any subsidiary company or affiliate of SPS is subject to
regulation as a public utility or public service company (or similar
designation) by any other state in the United States, by the United States or
any agency or instrumentality of the United States or by any foreign country.
SPS is not a holding company under the 1935 Act.
Section 5.13 Vote Required. The approval of the SPS Merger by
two-thirds of all votes entitled to be cast by all holders of SPS Common Stock
and two-thirds of all votes entitled to be cast by all holders of SPS Preferred
Stock, each voting as a separate class (the "SPS Shareholders' Approval"), are
the only votes of the holders of any class or series of the capital stock of SPS
required to approve this Agreement, the Merger Agreement, the Mergers and the
other transactions contemplated hereby.
Section 5.14 Accounting Matters. SPS has not, through the date
hereof, taken or agreed to take any action that would prevent the Company from
accounting for the business combination to be effected by the Mergers as a
pooling-of-interests in accordance with GAAP and applicable SEC regulations.
Section 5.15 Opinion of Financial Advisor. SPS has received
the opinion of Dillon, Read & Co. Inc. dated the date hereof, to the effect
that, as of the date hereof, the SPS Conversion Ratio and consideration to be
received by the holders of SPS Common Stock are fair from a financial point of
view to the holders of SPS Common Stock.
Section 5.16 Insurance. Except as disclosed in Section 5.16 of
the SPS Disclosure Schedule, each of SPS and each of its subsidiaries is, and
has been continuously since January 1, 1990, insured in such amounts and against
such risks and losses as are customary for companies conducting the respective
businesses conducted by SPS and its subsidiaries during such time period. Except
as disclosed in Section 5.16 of the SPS
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Disclosure Schedule, neither SPS nor any of its subsidiaries has received any
notice of cancellation or termination with respect to any material insurance
policy thereof. All material insurance policies of SPS and its subsidiaries are
valid and enforceable policies.
Section 5.17 Ownership of PSCo Common Stock. SPS does not
"beneficially own" (as such term is defined in Rule 13d-3 under the Exchange
Act) any shares of PSCo Common Stock.
Section 5.18 SPS Rights Agreement. SPS shall take all
necessary action with respect to all of the outstanding rights to purchase
common stock of SPS (the "SPS Rights") issued pursuant to the Rights Agreement
dated as of July 23, 1991 between SPS and Ameritrust Company National
Association, as Rights Agent (the "SPS Rights Agreement"), so that SPS, as of
the time immediately prior to the Effective Time, will have no obligations under
the SPS Rights or the SPS Rights Agreement, except for the payment of any
redemption price, if required, and so that the holders of the SPS Rights will
have no rights under the SPS Rights or the SPS Rights Agreement except for the
payment of any redemption price, if required. Assuming the accuracy of the
representation contained in Section 4.17, the execution, delivery and
performance of this Agreement will not result in a distribution of, or
otherwise, trigger, the SPS Rights under the SPS Rights Agreement.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGERS
PSCo and SPS have each delivered to the other a budget for the
years 1995 through 1999 (respectively, the "PSCo Budget" and the "SPS Budget"),
which PSCo or SPS, as the case may be, may update or otherwise modify in writing
for purposes of this Article VI only with the consent in writing of SPS or PSCo,
as the case may be. After the date hereof and prior to the Effective Time or
earlier termination of this Agreement, each of PSCo and SPS agrees as to itself
and its subsidiaries, except as expressly contemplated or permitted in this
Agreement, or to the extent the other party shall otherwise consent in writing,
as follows:
Section 6.1 Ordinary Course of Business. Each of PSCo and SPS
shall, and each shall cause its respective subsidiaries to, carry on their
respective businesses in the usual, regular and ordinary course consistent with
past practice and use all commercially reasonable efforts to preserve intact
their present business organizations and goodwill, preserve the goodwill and
relationships with customers, suppliers and others having business dealings with
them and, subject to prudent management of workforce needs and ongoing or
planned programs relating to downsizing, re-engineering and similar matters,
keep available the services of their present officers and employees, to the end
that their goodwill and ongoing businesses shall not be impaired in any material
respect at the Effective Time.
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Section 6.2 Dividends. Neither PSCo nor SPS shall, nor shall
either permit any of its subsidiaries to: (a) declare or pay any dividends on or
make other distributions in respect of any of their capital stock other than (i)
to such party or its wholly-owned subsidiaries, (ii) stated dividends on PSCo
Preferred Stock or SPS Preferred Stock, (iii) regular dividends on PSCo Common
Stock with usual record and payment dates not in excess of an annual rate of
$2.04, provided that such annual rate may be increased by up to $0.16 and (iv)
regular dividends on SPS Common Stock with usual record and payment dates not in
excess of an annual rate of $2.20 per share; (b) split, combine or reclassify
any of their capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of, or in substitution for, shares of
its capital stock; or (c) redeem, repurchase or otherwise acquire any shares of
their capital stock other than (i) redemptions, repurchases and other
acquisitions of shares of capital stock in the ordinary course of business
consistent with past practice including, without limitation, (A) repurchases,
redemptions and other acquisitions in connection with the administration of
employee benefit and dividend reinvestment plans as in effect on the date hereof
in the ordinary course of the operation of such plans and (B) redemptions,
purchases or acquisitions required by the respective terms of any series of PSCo
Preferred Stock or SPS Preferred Stock and (C) in connection with refunding of
PSCo Preferred Stock or SPS Preferred Stock at a lower cost of funds as
permitted pursuant to Section 6.7, (ii) intercompany acquisitions of capital
stock and (iii) the redemption, if required, of the PSCo Rights and the SPS
Rights pursuant to the PSCo Rights Agreement and the SPS Rights Agreement,
respectively.
Section 6.3 Issuance of Securities. Except as provided in the
PSCo Budget or the SPS Budget, as the case may be, neither PSCo nor SPS shall,
nor shall either permit any of its subsidiaries to, issue, deliver or sell, or
authorize or propose the issuance, delivery or sale of, any shares of their
capital stock of any class or any securities convertible into or exchangeable
for, or any rights, warrants or options to acquire, any such shares or
convertible or exchangeable securities, other than (a) the issuance of common
stock or stock appreciation or similar rights, as the case may be, pursuant to
(i) the PSCo Dividend Reinvestment and Share Purchase Plan, Employee Savings and
Stock Ownership Plan, Omnibus Incentive Plan, Annual Incentive Plan and Long
Term Incentive Plan or (ii) the Dividend Reinvestment and Cash Payment Plan for
Shareholders of SPS, the Dividend Reinvestment and Cash Payment Plan for
Employees of SPS, the SPS 1989 Stock Incentive Plan, the SPS Employee Investment
Plan, the SPS Non-Qualified Salary Deferral Plan and the SPS Directors' Deferred
Compensation Plan, in each case consistent in kind and amount with past practice
and in the ordinary course of business under such plans substantially in
accordance with their present terms, (b) the issuance by a wholly-owned
subsidiary of shares of its capital stock to its parent and (c) preferred stock
to the extent disclosed in Section 6.7 of the PSCo Disclosure Schedule or the
SPS Disclosure Schedule, provided that subject to Section 6.9, the type and
amount of annual awards under the SPS 1989 Stock Incentive Plan may vary from
year to year in accordance with the terms of such plan.
Section 6.4 Charter Documents. Except as disclosed in Section
6.4 of the PSCo Disclosure Schedule or the SPS Disclosure Schedule, neither PSCo
nor SPS shall
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amend or propose to amend its articles of incorporation or by-laws, except as
contemplated herein, in any way adverse to the other party.
Section 6.5 Acquisitions. Except as disclosed in Section 6.5
of the PSCo Disclosure Schedule or the SPS Disclosure Schedule, and except for
acquisitions not exceeding $50,000,000 in the aggregate in the case of, on the
one hand, PSCo and its subsidiaries and, on the other hand, SPS and its
subsidiaries, neither PSCo nor SPS shall, nor shall either permit any of its
subsidiaries to, acquire or agree to acquire, by merging or consolidating with,
or by purchasing a substantial equity interest in or a substantial portion of
the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof, or
otherwise acquire or agree to acquire any assets; provided that Quixx
Corporation, a subsidiary of SPS, shall be permitted to carry on its business of
making investments in and developing cogeneration and energy-related projects
within the limitations of funding Quixx Corporation by SPS imposed by the
applicable regulatory authorities or as approved by the Boards of Directors of
Quixx Corporation and SPS.
Section 6.6 No Dispositions. Except as disclosed in Section
6.6 of the PSCo Disclosure Schedule or the SPS Disclosure Schedule, and other
than (a) dispositions not exceeding $5 million in the aggregate, in the case of,
on the one hand, PSCo and its subsidiaries and, on the other hand, SPS and its
subsidiaries, (b) as may be required by law to consummate the transactions
contemplated hereby or (c) in the ordinary course of business consistent with
past practice, neither PSCo nor SPS shall, nor shall either permit any of its
subsidiaries to, sell, lease, license, encumber or otherwise dispose of, any of
its assets that are material, individually or in the aggregate, to such party
and its subsidiaries taken as a whole.
Section 6.7 Indebtedness. Except as disclosed in Section 6.7
of the PSCo Disclosure Schedule or the SPS Disclosure Schedule and except as
provided in the PSCo Budget and the SPS Budget, as the case may be, neither PSCo
nor SPS shall, nor shall either permit any of its subsidiaries to, incur or
guarantee any indebtedness (including any debt borrowed or guaranteed or
otherwise assumed, including, without limitation, the issuance of debt
securities or warrants or rights to acquire debt) other than (a) short-term
indebtedness in the ordinary course of business consistent with past practice,
(b) long-term indebtedness in connection with the refinancing of existing
indebtedness either at its stated maturity or at a lower cost of funds, (c)
long-term indebtedness in connection with the refunding of PSCo Preferred Stock
or SPS Preferred Stock at a lower cost of funds, and (d) additional indebtedness
aggregating in any year not more than 110% of the amount provided therefor in
the PSCo Budget with respect to PSCo and its subsidiaries and in the SPS Budget
with respect to SPS and its subsidiaries.
Section 6.8 Capital Expenditures. Except as disclosed in
Section 6.8 of the PSCo Disclosure Schedule or the SPS Disclosure Schedule or as
required by law, neither PSCo nor SPS shall, nor shall either permit any of its
subsidiaries to, make any capital expenditures, other than (a) capital
expenditures incurred in connection with the construction
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of new facilities, (b) capital expenditures to repair or replace facilities
destroyed or damaged due to casualty or accident (whether or not covered by
insurance) and (c) additional capital expenditures in any year of not more than
110% of the amount provided therefor in the PSCo Budget for that year with
respect to PSCo and its subsidiaries and in the SPS Budget for that year with
respect to SPS and its subsidiaries.
Section 6.9 Compensation, Benefits. Except as disclosed in
Section 6.9 of the PSCo Disclosure Schedule or the SPS Disclosure Schedule,
neither PSCo nor SPS shall, nor shall either permit any of its subsidiaries to,
(i) enter into, adopt or amend (except as may be required by applicable law), or
increase the amount or accelerate the payment or vesting of any benefit or
amount payable under, any employee benefit plan or other contract, agreement,
commitment, arrangement, plan or policy maintained by, contributed to or entered
into by such party or any of its subsidiaries, or increase, or enter into any
contract, agreement, commitment or arrangement to increase in any manner, the
compensation or fringe benefits, or otherwise to extend, expand or enhance the
engagement, employment or any related rights, of any director, officer or other
employee of such party or any of its subsidiaries, except pursuant to binding
legal commitments and except for normal (including incentive) increases,
extensions, expansions, enhancements, amendments or adoptions in the ordinary
course of business consistent with past practice that, in the aggregate, do not
result in a material increase in benefits or compensation expense to such party
and its subsidiaries taken as a whole or (ii) enter into or amend any
employment, severance, special pay arrangement with respect to termination of
employment or other similar contract, agreement or arrangement with any director
or officer other than in the ordinary course of business consistent with past
practice.
Section 6.10 1935 Act. None of the parties hereto shall, nor
shall any such party permit any of its subsidiaries to, except as required or
contemplated by this Agreement, engage in any activities that would cause a
change in its status, or that of its subsidiaries, under the 1935 Act, or that
would impair the ability of PSCo or SPS, respectively, to claim an exemption
from all provisions of the 1935 Act except Section 9(a)(2) under Section 3(a)(2)
pursuant to Rule 2 of the 1935 Act, other than (i) the application to the SEC
under the 1935 Act contemplated by this Agreement for approval to the extent
required of the transactions contemplated hereby and (ii) the registration of
the Company pursuant to the 1935 Act.
Section 6.11 Accounting. Neither PSCo nor SPS shall, nor shall
either permit any of its subsidiaries to, make any changes in their accounting
methods, except as required by law, rule, regulation or GAAP.
Section 6.12 Pooling. Neither PSCo nor SPS shall, nor shall
either permit any of its subsidiaries to, take any actions that would, or would
be reasonably likely to, prevent the parties from accounting for the Mergers as
a pooling of interests in accordance with GAAP and applicable SEC regulations.
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Section 6.13 Tax-Free Status. Neither PSCo nor SPS shall, nor
shall either permit any of its subsidiaries to, take any actions that would, or
would be reasonably likely to, adversely affect the qualification of the Mergers
as a transaction described in Code section 351.
Section 6.14 Discharge of Liabilities. Neither PSCo nor SPS
shall pay, discharge or satisfy any material claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction, in the ordinary course of business
consistent with past practice (which includes the payment of final and
unappealable judgments and the refinancing of existing indebtedness for borrowed
money either at its stated maturity or at a lower cost of funds) or in
accordance with their terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements (or the notes
thereto) of such party included in such party's reports filed with the SEC, or
incurred in the ordinary course of business consistent with past practice or as
disclosed in Section 6.7 of the PSCo Disclosure Schedule or the SPS Disclosure
Schedule.
Section 6.15 Cooperation, Notification. Each of PSCo and SPS
shall: (a) confer on a regular and frequent basis with one or more
representatives of the other to discuss the general status of its ongoing
operations; (b) promptly notify the other of any significant changes in its
business, properties, assets, condition (financial or other), prospects or
results of operations; (c) advise the other of any change or event that has had
or, insofar as reasonably can be foreseen, is reasonably likely to result in, a
PSCo Material Adverse Effect or a SPS Material Adverse Effect, as the case may
be; and (d) promptly provide the other with copies of all filings made by it or
any of its subsidiaries with any state or federal court, administrative agency,
commission or other Governmental Authority in connection with this Agreement and
the transactions contemplated hereby.
Section 6.16 Rate Matters. Other than currently pending rate
filings, each of PSCo and SPS shall, and shall cause its subsidiaries to,
discuss with the other any changes in its or its subsidiaries' regulated rates
or charges (other than fuel and gas rates or charges), standards of service or
accounting from those in effect on the date hereof and consult with the other
parties prior to making any filing (or any amendment thereto), or effecting any
agreement, commitment, arrangement or consent, whether written or oral, formal
or informal, with respect thereto, and neither shall make any filing to change
its rates on file with the public utility commission of any state or FERC that
would have a material adverse effect on the benefits associated with the
Mergers.
Section 6.17 Third-Party Consents. PSCo shall, and shall cause
its subsidiaries to, use all commercially reasonable efforts to obtain all PSCo
Required Consents. PSCo shall promptly notify SPS of any failure or anticipated
failure to obtain any such consents and, if requested by SPS, shall provide
copies of all PSCo Required Consents obtained by PSCo to SPS. SPS shall, and
shall cause its subsidiaries to, use all commercially reasonable efforts to
obtain all SPS Required Consents. SPS shall promptly notify PSCo of any failure
or anticipated failure to obtain any such consents and, if requested by PSCo,
shall provide copies of all SPS Required Consents obtained by SPS to PSCo.
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Section 6.18 No Breach, Etc. No party shall, nor shall any
party permit any of its subsidiaries to, take any action that would or is
reasonably likely to result in a material breach of any provision of this
Agreement or in any of its representations and warranties set forth in this
Agreement being untrue on and as of the Closing Date.
Section 6.19 Tax-Exempt Status. No party hereto shall, nor
shall any party permit any subsidiary to, take any action that would likely
jeopardize the qualification of the outstanding revenue bonds issued for the
benefit of PSCo (or any subsidiary thereof) or for the benefit of SPS (or any
subsidiary thereof) that qualify on the date hereof under Code section142(a) as
"exempt facility bonds" or as tax-exempt industrial development bonds under
Section 103(b)(4) of the Internal Revenue Code of 1954, as amended prior to the
Tax Reform Act of 1986.
Section 6.20 Transition Management. PSCo and SPS shall create
a special transition management task force (the "Task Force") to be headed by
Wayne H. Brunetti (or an individual designated by him who shall be reasonably
satisfactory to the other Task Force head) and Bill D. Helton (or an individual
designated by him and reasonably satisfactory to the other Task Force head). The
Task Force shall report its findings to the Board of Directors of each of PSCo
and SPS. After the date hereof and prior to the Effective Time, Wayne H.
Brunetti shall frequently attend meetings of SPS's Board of Directors and Bill
D. Helton shall frequently attend meetings of PSCo's Board of Directors as they
deem appropriate in consultation with each other.
Section 6.21 Insurance. Each of PSCo and SPS shall, and shall
cause its subsidiaries to, maintain with financially responsible insurance
companies insurance in such amounts and against such risks and losses as are
customary for companies engaged in the utility industry and employing methods of
generating electric power and fuel sources similar to those methods employed and
fuels used by such party or such party's subsidiaries.
Section 6.22 Permits. Each party shall, and shall cause its
subsidiaries to, use reasonable efforts to maintain in effect all existing
Permits (as defined in Section 4.4) pursuant to which such party or such party's
subsidiaries operate.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access to Information. Upon reasonable notice and
during normal business hours, each party shall, and shall cause its subsidiaries
to, afford to the officers, directors, employees, accountants, counsel,
investment banker, financial advisor and other representatives of the other
(collectively, "Representatives") reasonable access, during normal business
hours throughout the period prior to the Effective Time, to all of its
properties, books, contracts, commitments and records (including, but not
limited to, Tax Returns) and, during such period, each party shall, and shall
cause its subsidiaries to, furnish
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promptly to the other (i) a copy of each reasonably available report, schedule
and other document filed or received by it or any of its subsidiaries pursuant
to the requirements of federal or state securities laws or filed with the SEC,
the FERC, the NRC, the Department of Justice, the Federal Trade Commission, the
Colorado Commission, the Wyoming Commission, the New Mexico Commission, the
Texas Commission, the Oklahoma Commission, the Kansas Commission or any other
federal or state regulatory agency or commission, and (ii) all information
concerning themselves, their subsidiaries, directors, officers and shareholders
and such matters as may be reasonably requested by the other party in connection
with any filings, applications or approvals required or contemplated by this
Agreement. All documents and information furnished pursuant to this Section 7.1
shall be subject to the Confidentiality Agreement. The party requesting copies
of any documents from any other party hereto shall be responsible for all
out-of-pocket expenses incurred by the party to whom such request is made in
complying with such request, including any cost of reproducing and delivering
any required information.
Section 7.2 Joint Proxy Statement and Registration Statement.
(a) Preparation and Filing. As promptly as reasonably
practicable after the date hereof, the parties shall prepare and file with the
SEC the Registration Statement and the Joint Proxy Statement (together the
"Joint Proxy/Registration Statement"). The parties shall take such actions as
may be reasonably required to cause the Registration Statement to be declared
effective under the Securities Act as promptly as practicable after such filing.
The parties shall also take such action as may be reasonably required to cause
the shares of Company Common Stock issuable in connection with the Mergers to be
registered or to obtain an exemption from registration under applicable state
"blue sky" or securities laws; provided, however, that none of the Company, SPS
or PSCo shall be required to register or qualify as a foreign corporation or to
take any other action that would subject it to general service of process in any
jurisdiction in which the Company will not, following the Mergers, be so
subject. Each of the parties shall furnish all information concerning itself
that is required or customary for inclusion in the Joint Proxy/Registration
Statement. No representation, covenant or agreement contained in this Agreement
is made by any party hereto with respect to information supplied by any other
party hereto for inclusion in the Joint Proxy/Registration Statement. The Joint
Proxy/Registration Statement shall comply as to form in all material respects
with the Securities Act and the rules and regulations thereunder. The parties
shall take such action as may be reasonably required to cause the shares of
Company Common Stock to be issued in the Mergers to be approved for listing on
the NYSE and any other stock exchanges agreed to by the parties, each upon
official notice of issuance.
(b) Letter of PSCo's Accountants. Following receipt by Arthur
Andersen LLP, PSCo's independent auditors, of an appropriate request from SPS
pursuant to SAS No. 72, PSCo shall use best efforts to cause to be delivered to
the Company and SPS a letter of Arthur Andersen LLP, dated a date within two
business days before the effective date of the Registration Statement, and
addressed to the Company and SPS, in form and substance reasonably satisfactory
to the Company and SPS and customary in scope and substance for
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"cold comfort" letters delivered by independent public accountants in connection
with registration statements and proxy statements similar to the Joint
Proxy/Registration Statement.
(c) Letter of SPS's Accountants. Following receipt by Deloitte
& Touche, LLP, SPS's independent auditors, of an appropriate request from PSCo
pursuant to SAS No. 72, SPS shall use best efforts to cause to be delivered to
the Company and PSCo a letter of Deloitte & Touche, LLP, dated a date within two
business days before the effective date of the Registration Statement, and
addressed to the Company and PSCo, in form and substance satisfactory to the
Company and PSCo and customary in scope and substance for "cold comfort" letters
delivered by independent public accountants in connection with registration
statements and proxy statements similar to the Joint Proxy/Registration
Statement.
(d) Fairness Opinions. It shall be a condition to the mailing
of the Joint Proxy Statement to the shareholders of SPS and PSCo that (i) PSCo
shall have received an opinion from Barr Devlin & Co. Incorporated, dated the
date of the Joint Proxy Statement, to the effect that, as of the date thereof,
the PSCo Conversion Ratio is fair to the holders of PSCo Common Stock, and (ii)
SPS shall have received an opinion from Dillon, Read & Co. Inc., dated the date
of the Joint Proxy Statement, to the effect that, as of the date thereof, the
SPS Conversion Ratio is fair to the holders of SPS Common Stock.
Section 7.3 Regulatory Matters.
(a) HSR Filings. Each party hereto shall file or cause to be
filed with the Federal Trade Commission and the Department of Justice any
notifications required to be filed by their respective "ultimate parent"
companies under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), and the rules and regulations promulgated thereunder
with respect to the transactions contemplated hereby. Such parties will use all
commercially reasonable efforts to make such filings promptly and shall respond
promptly to any requests for additional information made by either of such
agencies.
(b) Other Regulatory Approvals. Each party hereto shall
cooperate and use its best efforts to promptly prepare and file all necessary
documentation, to effect all necessary applications, notices, petitions, filings
and other documents, and to use all commercially reasonable efforts to obtain
all necessary permits, consents, approvals and authorizations of all
Governmental Authorities and all other persons necessary or advisable to
consummate the transactions contemplated by this Agreement and the Merger
Agreements, including, without limitation, the PSCo Required Statutory Approvals
and the SPS Required Statutory Approvals. SPS shall have the right to review and
approve in advance all characterizations of the information relating to SPS, on
the one hand, and PSCo shall have the right to review and approve in advance all
characterizations of the information relating to PSCo, on the other hand, in
either case, which appear in any filing made in connection with the transactions
contemplated by this Agreement, the Merger Agreements or the Mergers. PSCo and
SPS shall each consult with the other with respect to the obtaining of all such
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necessary or advisable permits, consents, approvals and authorizations of
Governmental Authorities.
Section 7.4 Shareholder Approvals.
(a) Approval of SPS Shareholders. SPS shall, as promptly as
reasonably practicable after the date hereof (i) take all steps reasonably
necessary to call, give notice of, convene and hold a special meeting of its
shareholders (the "SPS Special Meeting") for the purpose of securing the SPS
Shareholders' Approvals, (ii) distribute to its shareholders the Joint Proxy
Statement in accordance with applicable federal and state law and with its
articles of incorporation and bylaws, (iii) recommend to its shareholders the
approval of the SPS Merger, this Agreement, the SPS Merger Agreement and the
transactions contemplated hereby and thereby (provided that nothing contained in
this Section 7.4 shall require the Board of Directors of SPS to take any action
or refrain from taking any action that such Board determines in good faith and
with the advice of counsel as set forth in a written, reasoned opinion would
result in a breach of its fiduciary duties under applicable law), and (iv)
cooperate and consult with PSCo with respect to each of the foregoing matters.
(b) Approval of PSCo Shareholders. PSCo shall, as promptly as
reasonably practicable after the date hereof (i) take all steps reasonably
necessary to call, give notice of, convene and hold a special meeting of its
shareholders (the "PSCo Special Meeting") for the purpose of securing the PSCo
Shareholders' Approvals, (ii) distribute to its shareholders the Joint Proxy
Statement in accordance with applicable federal and state law and its articles
of incorporation and bylaws, (iii) recommend to its shareholders the approval of
the PSCo Merger, this Agreement, the PSCo Merger Agreement and the transactions
contemplated hereby and thereby (provided that nothing contained in this Section
7.4 shall require the Board of Directors of PSCo to take any action or refrain
from taking any action that such Board determines in good faith and with the
advice of counsel as set forth in a written, reasoned opinion would result in a
breach of its fiduciary duties under applicable law), and (iv) cooperate and
consult with SPS with respect to each of the foregoing matters.
(c) Meeting Date. The PSCo Special Meeting and the SPS Special
Meeting shall be held on the same day unless otherwise agreed by PSCo and SPS.
(d) Fairness Opinions Not Withdrawn. It shall be a condition
to the obligation of PSCo to hold the PSCo Special Meeting that the opinion of
Barr Devlin & Co. Incorporated referred to in Section 7.2(d) shall not have been
withdrawn, and it shall be a condition to the obligation of SPS to hold the SPS
Special Meeting that the opinion of Dillon, Read & Co. Inc. referred to in
Section 7.2(d) shall not have been withdrawn.
Section 7.5 Directors' and Officers' Indemnification.
(a) Indemnification. To the extent, if any, not provided by an
existing right of indemnification or other agreement or policy, from and after
the Effective Time, the Company shall, to the fullest extent not prohibited by
applicable law, indemnify, defend and
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hold harmless the present and former directors, officers and management
employees of the parties hereto and their respective subsidiaries (each an
"Indemnified Party" and, collectively, the "Indemnified Parties") against (i)
all losses, expenses (including reasonable attorneys' fees and expenses),
claims, damages, costs, liabilities, judgments or (subject to the proviso of the
next succeeding sentence) amounts that are paid in settlement of or in
connection with any claim, action, suit, proceeding or investigation based in
whole or in part on or arising in whole or in part out of the fact that such
person is or was a director, officer or management employee of such party or any
subsidiary thereof, whether pertaining to any matter existing or occurring at or
prior to or after the Effective Time and whether asserted or claimed prior to,
at or after the Effective Time and (ii) all liabilities based in whole or in
part on, or arising in whole or in part out of, or pertaining to this Agreement,
the Merger Agreements or the transactions contemplated hereby or thereby. In the
event of any such loss, expense, claim, damage, cost, liability, judgment or
settlement (whether or not arising before the Effective Time), (x) the Company
shall pay the reasonable fees and expenses of counsel selected by the
Indemnified Parties, which counsel shall be reasonably satisfactory to the
Company, promptly after statements therefor are received, and otherwise advance
to the Indemnified Parties upon request reimbursement of documented expenses
reasonably incurred, in either case to the extent not prohibited by the laws of
the State of Delaware, as applicable, (y) the Company shall cooperate in the
defense of any such matter and (z) any determination required to be made with
respect to whether an Indemnified Party's conduct complies with the standards
under applicable law or as set forth in the Company's certificate of
incorporation or bylaws shall be made by independent counsel mutually acceptable
to the Company and the Indemnified Party; provided, however, that the Company
shall not be liable for any settlement effected without its written consent
(which consent shall not be unreasonably withheld or delayed). The Indemnified
Parties as a group may retain only one law firm (other than local counsel) with
respect to each related matter except to the extent there is, in the sole
opinion of counsel to an Indemnified Party, under applicable standards of
professional conduct, a conflict on any significant issue between positions of
any two or more Indemnified Parties, in which case each Indemnified Party with a
conflicting position on a significant issue shall be entitled to separate
counsel. In the event any Indemnified Party is required to bring any action to
enforce rights or to collect moneys due under this Agreement and is successful
in such action, the Company shall reimburse such Indemnified Party for all of
its expenses in bringing and pursuing such action. Each Indemnified Party shall
be entitled to the advancement of expenses to the full extent contemplated in
this Section 7.5(a) in connection with any such action.
(b) Insurance. For a period of six (6) years after the
Effective Time, the Company shall cause to be maintained in effect the policies
of directors' and officers' liability insurance maintained by PSCo and SPS;
provided that the Company may substitute therefor policies of at least the same
coverage containing terms that are no less advantageous with respect to matters
occurring at or prior to the Effective Time to the extent such liability
insurance can be maintained annually at a cost to the Company not greater than
200 percent of the current annual premiums for the policies currently maintained
by PSCo and SPS for their directors' and officers' liability insurance; provided
further, that if such insurance cannot be so maintained or obtained at such
cost, the Company shall maintain or obtain as
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much of such insurance for each of PSCo and SPS as can be so maintained or
obtained at a cost equal to 200 percent of the respective current annual
premiums of each of PSCo and SPS for their directors' and officers' liability
insurance and other indemnity agreements.
(c) Successors. In the event the Company or any of its
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then and in either such case, proper
provision shall be made so that the successors and assigns of the Company shall
assume the obligations set forth in this Section 7.5.
(d) Survival of Indemnification. To the fullest extent not
prohibited by law, from and after the Effective Time, all rights to
indemnification now existing in favor of the employees, agents, directors or
officers of PSCo, SPS and their respective subsidiaries with respect to their
activities as such prior to or at the Effective Time, as provided in their
respective articles of incorporation or bylaws or indemnification agreements in
effect on the date of such activities or otherwise in effect on the date hereof,
shall survive the Mergers and shall continue in full force and effect for a
period of not less than six years from the Effective Time.
Section 7.6 Disclosure Schedules. On or before the date of
this Agreement, (i) SPS has delivered to PSCo a schedule (the "SPS Disclosure
Schedule") accompanied by a certificate signed by the chief financial officer of
SPS stating that the Disclosure Schedule is being delivered pursuant to this
Section 7.6(i) and (ii) PSCo has delivered to SPS a schedule (the "PSCo
Disclosure Schedule") accompanied by a certificate signed by the chief financial
officer of PSCo stating that the PSCo Disclosure Schedule is being delivered
pursuant to this Section 7.6(ii). The SPS Disclosure Schedule and the PSCo
Disclosure Schedule are collectively referred to herein as the "Disclosure
Schedules". The Disclosure Schedules constitute an integral part of this
Agreement and modify the respective representations, warranties, covenants or
agreements of the parties hereto contained herein to the extent that such
representations, warranties, covenants or agreements expressly refer to the
Disclosure Schedules. Any and all statements, representations, warranties or
disclosures set forth in the Disclosure Schedules shall be deemed to have been
made on and as of the date of this Agreement.
Section 7.7 Public Announcements. PSCo and SPS shall cooperate
with each other in the development and distribution of all news releases and
other public information disclosures with respect to this Agreement, the Merger
Agreements or any of the transactions contemplated hereby or thereby and,
subject to each party's disclosure obligations imposed by law or any applicable
national securities exchange, shall not issue any public announcement or
statement prior to consultation with the other party.
Section 7.8 Rule 145 Affiliates. SPS shall identify in a
letter to PSCo, and PSCo shall identify in a letter to SPS, all persons who are,
at the Closing Date, "affiliates" of SPS and PSCo, respectively, as such term is
used in Rule 145 under the Securities Act.
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SPS and PSCo shall use their respective best efforts to cause their respective
affiliates to deliver to the Company on or prior to the Closing Date a written
agreement substantially in the form attached as Exhibit C (each, an "Affiliate
Agreement").
Section 7.9 Employee Agreements and Workforce Matters.
(a) Certain Employee Agreements. Subject to Section 7.10 and
Section 7.15, the Company and its subsidiaries shall honor, without
modification, all contracts, agreements, collective bargaining agreements and
commitments of the parties that apply to any current or former employees or
current or former directors of the parties hereto; provided, however, that this
undertaking is not intended to prevent the Company from enforcing such
contracts, agreements, collective bargaining agreements and commitments in
accordance with their terms or from exercising any right to amend, modify,
suspend, revoke or terminate any such contract, agreement, collective bargaining
agreement or commitment.
(b) Workforce Matters. Subject to applicable collective
bargaining agreements, for a period of two (2) years following the Effective
Time, any reductions in workforce in respect of employees of the Company shall
be made on a fair and equitable basis, in light of the circumstances and the
objectives to be achieved without regard to whether employment was with PSCo or
its subsidiaries or SPS or its subsidiaries, and any employees whose employment
is terminated or jobs are eliminated by the Company or any of its subsidiaries
during such period shall be entitled to participate on a fair and equitable
basis in the job opportunity and employment placement programs offered by the
Company or any of its subsidiaries. Any workforce reductions carried out
following the Effective Time by the Company and its subsidiaries shall be done
in accordance with all applicable collective bargaining agreements, and all laws
and regulations governing the employment relationship thereof including, without
limitation, the Worker Adjustment and Retraining Notification Act and
regulations promulgated thereunder, and any comparable state or local law.
However, no provision contained in this Section 7.9 shall be deemed to
constitute an employment contract between the Company and any individual, or a
waiver of the Company's right to discharge any employee at any time, with or
without cause.
Section 7.10 Employee Benefit Plans.
Each of the SPS Benefit Plans and PSCo Benefit Plans (other
than plans specifically provided for in Section 7.11), in effect on the date
hereof (or as amended in accordance with or as permitted by this Agreement)
shall be maintained in effect with respect to the employees or former employees
of SPS and any of its subsidiaries and of PSCo and any of its subsidiaries,
respectively, who are covered by such plans immediately prior to the Closing
Date until the Company determines otherwise on or after the Effective Time;
provided, however, that nothing herein contained, other than the provisions of
Section 6.9, shall limit any reserved right contained in any such SPS Benefit
Plan or PSCo Benefit Plan to amend, modify, suspend, revoke or terminate any
such plan. Without limiting the foregoing, each participant in any SPS Benefit
Plan or PSCo Benefit Plan shall receive credit for
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purposes of eligibility to participate, vesting and eligibility to receive
benefits under any benefit plan of the Company or any of its subsidiaries or
affiliates for service credited for the corresponding purpose under any such
benefit plan; provided, however, that such crediting of service shall not
operate to duplicate any benefit to any such participant or the funding for any
such benefit. However, no provision contained in this Section 7.10 shall be
deemed to constitute an employment contract between the Company and any
individual, or a waiver of the Company's right to discharge any employee at any
time, with or without cause.
Section 7.11 Incentive, Stock and Other Plans. With respect to
each of (i) the PSCo Employee Savings and Stock Ownership Plan, Omnibus
Incentive Plan, Annual Incentive Plan and Long Term Incentive Plan and (ii) the
SPS 1989 Stock Incentive Plan, the SPS Employee Investment Plan, the SPS
Non-Qualified Salary Deferral Plan and the SPS Directors' Deferred Compensation
Plan and each other employee benefit plan, program or arrangement under which
the delivery of SPS Common Stock, PSCo Common Stock or Company Common Stock, as
the case may be, is required to be used for purposes of the payment of benefits,
grant of awards or exercise of options (each a "Stock Plan"), (i) PSCo and SPS
shall take such action as may be necessary so that, after the Effective Time,
such Stock Plan shall provide for the issuance only of Company Common Stock and
(ii) the Company shall (x) take all corporate action necessary or appropriate to
obtain shareholder approval with respect to such Stock Plan to the extent such
approval is required for purposes of the Code or other applicable law, or, to
the extent the Company deems it desirable, to enable such Stock Plan to comply
with Rule 16b-3 promulgated under the Exchange Act, (y) reserve for issuance
under such Stock Plan or otherwise provide a sufficient number of shares of
Company Common Stock for delivery upon payment of benefits, grants of awards or
exercise of options under such Stock Plan and (z) as soon as practicable after
the Effective Time, file one or more registration statements under the
Securities Act with respect to the shares of Company Common Stock subject to
such Stock Plan to the extent such filing is required under applicable law and
use its best efforts to maintain the effectiveness of such registration
statement(s) (and the current status of the prospectuses contained therein or
related thereto) so long as such benefits, grants or awards remain payable or
such options remain outstanding, as the case may be. With respect to those
individuals who subsequent to the Mergers will be subject to the reporting
requirements under section 16(a) of the Exchange Act, the Company shall
administer the Stock Plans, where applicable, in a manner that complies with
Rule 16b-3 under the Exchange Act. Each of PSCo and SPS shall obtain any
shareholder approvals that may be necessary for the deduction of any
compensation payable under any Stock Plan or other compensation arrangement.
Section 7.12 No Solicitations. No party hereto shall, and each
such party shall cause its subsidiaries not to, permit any of its
Representatives to, and shall use its best efforts to cause such persons not to,
directly or indirectly, initiate, solicit or encourage, or take any action to
facilitate the making of any offer or proposal that constitutes or is reasonably
likely to lead to any Takeover Proposal (as defined below), or, in the event of
any unsolicited Takeover Proposal, engage in negotiations or provide any
confidential information or data to any person relating to any Takeover
Proposal. SPS and PSCo shall notify the other orally and in writing of any such
inquiries, offers or proposals (including, without limitation, the
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terms and conditions of any such proposal and the identity of the person making
it) within 24 hours of the receipt thereof and shall give the other five days'
advance notice of any agreement to be entered into with or any information to be
supplied to any person making such inquiry, offer or proposal. Each party hereto
shall immediately cease and cause to be terminated all existing discussions and
negotiations, if any, with any other persons conducted heretofore with respect
to any Takeover Proposal. Notwithstanding anything in this Section 7.12 to the
contrary, in the event of an unsolicited Takeover Proposal, unless the PSCo
Shareholders' Approvals and the SPS Shareholders' Approvals have all been
obtained, PSCo or SPS may, to the extent that the Board of Directors of such
party is advised in a written, reasoned opinion of outside counsel that a
failure to do so would result in a breach of its fiduciary duties under
applicable law, participate in discussions or negotiations with, furnish
information to, and afford access to the properties, books and records of such
party and its subsidiaries to any person in connection with a possible Takeover
Proposal with respect to such party by such person. As used in this Section
7.12, "Takeover Proposal" shall mean any tender or exchange offer, proposal for
a merger, consolidation or other business combination involving any party or any
of its material subsidiaries, or any proposal or offer to acquire in any manner
a substantial equity interest in, or a substantial portion of the assets of, any
party or any of its material subsidiaries, other than pursuant to the
transactions contemplated by this Agreement and the Merger Agreements.
Section 7.13 Company Board of Directors.
(a) PSCo's and SPS's respective Boards of Directors will take
such action as may be necessary to cause the number of directors comprising the
full Board of Directors of the Company at the Effective Time to be 14 persons,
eight of whom shall be designated by PSCo prior to the Effective Time and six of
whom shall be designated by SPS prior to the Effective Time. The initial
designation of such directors among the three classes of the Board of Directors
of the Company shall be agreed to by PSCo and SPS, the PSCo Designees and the
SPS Designees (each as defined in Section 10.7) to be divided as equally as
possible among such classes; provided, however, that if, prior to the Effective
Time and until the date that is four and one-half years from the Effective Time,
any of the PSCo Designees or SPS Designees shall decline or be unable to serve,
the party which designated such person or the remaining PSCo Designees or SPS
Designees, respectively, shall designate or nominate for any election by the
stockholders another person to serve in that person's place and the Company
shall use its best efforts to the fullest extent permitted by law to cause the
election of such nominated person as a director of the Company by the
stockholders. The Board of Directors of the Company will have at least four (4)
committees consisting of an audit committee, a compensation committee, a finance
committee, a nominating and civic responsibility committee and such other
committees as the Board of Directors of the Company may determine is appropriate
under the circumstances. Two of the above-named committees will be chaired by
directors nominated by PSCo and two of the above-named committees will be
chaired by directors nominated by SPS. In addition to the chairman, the
membership of each committee shall consist of four members, two of whom shall be
directors nominated by PSCo and two of whom shall be nominated by SPS.
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(b) During the period from the Effective Time until four and
one-half years after the Effective Time, (i) the provisions of Section 7.13(a),
Section 7.13(b)(i), Section 7.15 and Section 7.16 shall not be modified unless
and until the terms of such modification are approved by, and no committees
other than the four committees listed in Section 7.13(a) shall be created except
by, the affirmative vote of two-thirds (662/3%) of the members of the Board of
Directors of the Company (i.e., 10 of the 14 members of the Board of Directors
of the Company), (ii) and the provisions of Section 7.13(b)(ii) and Section 7.14
shall not be modified unless and until the terms of such modification are
approved by at least 10 of the members of the Board of Directors of the Company.
Section 7.14 Company Directors and Officers. At the Effective
Time, pursuant to the terms hereof and of the employment contracts referred to
in Section 7.15: (a) Mr. Helton shall hold the position of Chairman of the Board
of Directors and Chief Executive Officer of the Company until the later of (i)
June 30, 1999 or (ii) 30 months from the Effective Time (the "Initial Period"),
and shall continue to hold the position of Chairman of the Board of Directors of
the Company until May 31, 2001, and (b) Mr. Brunetti shall serve as President,
Chief Operating Officer and Vice Chairman of the Board of Directors of the
Company until the end of the Initial Period, at which time he shall be entitled
to hold the position of Chief Executive Officer of the Company. In addition,
beginning June 1, 2001, Mr. Brunetti shall serve as Chairman of the Board of
Directors of the Company until his successor is elected or appointed and shall
have qualified in accordance with the General Corporation Law of Delaware, the
Certificate of Incorporation and the By-Laws of the Company. If either of such
persons is unable or unwilling to hold such offices for the periods set forth
above, his successor shall be selected by the affirmative vote of 10 of the
members of the Board of Directors of the Company.
Section 7.15 Employment Contracts. The Company shall, as of or
prior to the Effective Time, enter into employment contracts with Mr. Helton and
Mr. Brunetti in the forms set forth in Exhibit D and Exhibit E, respectively.
Section 7.16 Corporate Offices. Following the Effective Time,
the Company shall maintain its corporate offices in Denver, Colorado and
significant operating offices in Amarillo, Texas.
Section 7.17 Expenses. Subject to Section 7.1 and Section 9.3,
all costs and expenses incurred in connection with this Agreement and the Merger
Agreements and the transactions contemplated hereby and thereby shall be paid by
the party incurring such expenses, except that those expenses incurred in
connection with printing the Joint Proxy/Registration Statement, as well as the
filing fee relating thereto, shall be shared equally by PSCo, on the one hand,
and SPS, on the other hand.
Section 7.18 Further Assurances.
(a) Each of SPS and PSCo shall, and shall cause its
subsidiaries to, execute such further documents and instruments and take such
further actions as may reasonably be
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requested by the other in order to consummate the Mergers and other transactions
contemplated by this Agreement and the Merger Agreements, and to 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 and regulations
to consummate and make effective the Mergers and the other transactions
contemplated hereby (subject to the votes of its shareholders described in
Sections 4.13 and 5.13, respectively), including fully cooperating with the
other in obtaining the SPS Required Statutory Approvals, the PSCo Required
Statutory Approvals and all other approvals and authorizations of any
Governmental Authorities necessary or advisable to consummate the transactions
contemplated hereby.
(b) SPS and PSCo shall be responsible for the taking of any
action necessary or advisable to obtain the SPS Required Statutory Approvals and
to obtain the PSCo Required Statutory Approvals, respectively. SPS and PSCo
agree to cooperate in obtaining the necessary approvals from the NRC, the FERC
and the SEC under the 1935 Act, the Securities Act and the Exchange Act and from
the applicable state authorities under state "blue sky" or securities laws. SPS
and PSCo shall each provide the other with copies of any filings made with any
Governmental Authorities in connection with the foregoing.
(c) It may be preferable to effectuate a business combination
between PSCo and SPS by means of an alternative structure in light of the
conditions set forth in Sections 8.1(e), 8.2(f) and 8.3(f). Accordingly, if the
only conditions to the parties' obligations to consummate the Mergers that are
not satisfied or waived are receipt of any one or more of the PSCo Required
Consents, PSCo Statutory Approvals, SPS Required Consents and SPS Statutory
Approvals, and the adoption of an alternative structure (that otherwise
substantially preserves for PSCo and SPS the economic benefits of the Mergers)
would result in such conditions being satisfied or waived, then the parties
shall use their respective best efforts to effect a business combination among
themselves by means of a mutually agreed upon structure other than the Mergers
that so preserves such benefits; provided that prior to closing any such
restructured transaction, all material third party and Governmental Authority
declarations, filings, registrations, notices, authorizations, consents or
approvals necessary for the effectuation of such alternative business
combination shall have been obtained and all other conditions to the parties'
obligations to consummate the Mergers, as applied to such alternative business
combination, shall have been satisfied or waived.
Section 7.19 Registration Rights. Upon the receipt of a
written notice within a period of three years after the Closing Date from an
affiliate or affiliates of the Company requesting the Company to register, under
the Securities Act, Company Common Stock received by such affiliate in the
Mergers, the Company shall use its reasonable best efforts to cause the offering
of all shares designated in such a request (the "Shares") to be registered, one
time at the Company's expense and all other times at the expense of such
affiliate, under the Securities Act and any state securities or Blue-Sky laws
necessary to effect a resale of such Shares; provided that (i) no fewer than
20,000 Shares are to be registered pursuant to such a request; (ii) such shares
are not immediately saleable in the open market at the time in the opinion of
counsel for the holder pursuant to an exemption under the Securities Act without
limitation as to the number of shares which may be sold, the price at which the
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shares may be sold or the ability of the purchaser of such shares to immediately
resell them in the open market; and (iii) the Board of Directors has not
determined, in its reasonable good faith judgment, that such registration and
sale would materially interfere with any financing, acquisition, corporate
reorganization or other material transaction involving the Company then under
consideration.
Section 7.20 Charter and By-Law Amendments. Prior to the
Closing: (a) PSCo and SPS shall agree upon amendments to be effected to the
Certificate of Incorporation of the Company, including to change the name of the
Company to a name agreed upon by PSCo and SPS (the "Company Charter
Amendments"), and the by-laws of the Company, and (b) the Company shall take all
actions necessary so that the Company Charter Amendments and such amendments to
the Company by-laws become effective no later than the Effective Time.
ARTICLE VIII
CONDITIONS
Section 8.1 Conditions to Each Party's Obligation to Effect
the Merger to Which it is Party. The respective obligations of each party to
effect the Merger to which it is party shall be subject to the satisfaction on
or prior to the Closing Date of the following conditions, except, to the extent
permitted by applicable law, that such conditions may be waived in writing
pursuant to Section 9.5:
(a) Shareholder Approvals. The SPS Shareholders' Approvals and
the PSCo Shareholders' Approval shall have been obtained.
(b) No Injunction. No temporary restraining order or
preliminary or permanent injunction or other order by any federal or state court
preventing consummation of either or both of the Mergers shall have been issued
and continuing in effect, and the Mergers and the other transactions
contemplated hereby shall not have been prohibited under any applicable federal
or state law or regulation.
(c) Registration Statement. The Registration Statement shall
have become effective in accordance with the provisions of the Securities Act,
and no stop order suspending such effectiveness shall have been issued and
remain in effect.
(d) Listing of Shares. The shares of Company Common Stock
issuable in the Mergers pursuant to Article II shall have been approved for
listing on the NYSE upon official notice of issuance.
(e) Pooling. Each of PSCo and SPS shall have received a letter
of its independent public accountants, dated the Closing Date, in form and
substance reasonably
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satisfactory to SPS and PSCo, respectively, stating that the Mergers will
qualify as a pooling-of-interests transaction under GAAP and applicable SEC
regulations.
(f) Statutory Approvals. The PSCo Required Statutory
Approvals, the SPS Required Statutory Approvals and the finding of the Texas
Commission that the transactions contemplated by the Agreement are in the public
interest shall have been obtained at or prior to the Effective Time, such
approvals shall have become Final Orders (as hereinafter defined), and no Final
Order shall impose terms or conditions that would have, or would be reasonably
likely to have, a material adverse effect on the business, operations,
properties, assets, condition (financial or otherwise), prospects or results of
operations of PSCo or a material adverse effect on the business, operations,
properties, assets, condition (financial or otherwise), prospects or results of
operations of SPS. A "Final Order" means action by the relevant regulatory
authority that has not been reversed, stayed, enjoined, set aside, annulled or
suspended, with respect to which any waiting period prescribed by law before the
transactions contemplated hereby may be consummated has expired, and as to which
all conditions to the consummation of such transactions prescribed by law,
regulation or order have been satisfied, and as to which all opportunities for
rehearing are exhausted (whether or not any appeal thereof is pending).
(g) The number of shares of PSCo Common Stock and PSCo
Preferred Stock held by Dissenting Holders shall not constitute in the aggregate
more than 5% of the number of issued and outstanding shares of PSCo Common Stock
and PSCo Preferred Stock taken together as a single class for this purpose. The
number of shares of SPS Common Stock and SPS Preferred Stock held by Dissenting
Holders shall not in the aggregate constitute more than 5% of the number of
issued and outstanding shares of SPS Common Stock and SPS Preferred Stock taken
together as a single class for this purpose.
Section 8.2 Conditions to Obligation of SPS to Effect the SPS
Merger. The obligation of SPS to effect the SPS Merger shall be further subject
to the satisfaction, on or prior to the Closing Date, of the following
conditions, except as may be waived by SPS in writing pursuant to Section 9.5:
(a) Performance of Obligations of PSCo. PSCo shall have
performed in all material respects its agreements and covenants contained in or
contemplated by this Agreement required to be performed by it at or prior to the
Effective Time.
(b) Representations and Warranties. The representations and
warranties of PSCo set forth in this Agreement shall be true and correct in all
material respects as of the date hereof and as of the Closing Date as if made on
and as of the Closing Date, except as otherwise contemplated by this Agreement.
(c) Closing Certificates. SPS shall have received a
certificate signed by the Chief Executive Officer and Chief Financial Officer of
PSCo, dated the Closing Date, to the effect that, to the best of each such
officer's knowledge, the conditions set forth in Section 8.2(a) and Section
8.2(b) have been satisfied.
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(d) PSCo Material Adverse Effect. No PSCo Material Adverse
Effect shall have occurred and there shall exist no fact or circumstance that
would have, or would be reasonably likely to have, a PSCo Material Adverse
Effect.
(e) Tax Opinion. SPS shall have received an opinion of
counsel, in form and substance satisfactory to SPS, dated the Closing Date,
which opinion may be based on appropriate representations of PSCo, SPS and the
Company that are in form and substance reasonably satisfactory to such counsel,
to the effect that the Mergers, taken together, will be treated as a non-taxable
exchange described in Code section 351.
(f) PSCo Required Consents. The material PSCo Required
Consents shall have been obtained.
(g) Affiliate Certificates. The Company shall have received a
certificate dated the Closing Date from each person who is an affiliate of PSCo
to the effect that: (i) such person has no present plan or intention to
transfer, sell or otherwise dispose of any Company Common Stock such person may
receive as a result of the PSCo Merger; (ii) until such time as financial
results covering at least thirty days of post-closing combined operations of
SPS, PSCo and the Company have been published, such person shall not sell such
Company Common Stock in any transaction, private or public, or in any other way
reduce such person's risk relative to any Company Common Stock that such person
receives as a result of the PSCo Merger, except to the extent permitted pursuant
to SAB No. 76; (iii) any future disposition by such person of any Company Common
Stock such person receives as the result of the PSCo Merger will be accomplished
in accordance with Rule 145(d) under the Securities Act or as provided in
Section 7.19; and (iv) such person agrees that appropriate legends shall be
placed upon the certificates evidencing ownership of the Company Common Stock
that such person receives as a result of the PSCo Merger.
Section 8.3 Conditions to Obligation of PSCo to Effect the
PSCo Merger. The obligation of PSCo to effect the PSCo Merger shall be further
subject to the satisfaction, on or prior to the Closing Date, of the following
conditions, except as may be waived by PSCo in writing pursuant to Section 9.5:
(a) Performance of Obligations of SPS. SPS shall have
performed in all material respects its agreements and covenants contained in or
contemplated by this Agreement required to be performed by it at or prior to the
Effective Time.
(b) Representations and Warranties. The representations and
warranties of SPS set forth in this Agreement shall be true and correct in all
material respects as of the date hereof and as of the Closing Date as if made on
and as of the Closing Date, except as otherwise contemplated by this Agreement.
(c) Closing Certificates. PSCo shall have received a
certificate signed by the Chief Executive Officer and Chief Financial Officer of
SPS, dated the Closing Date, to
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the effect that, to the best of each such officer's knowledge, the conditions
set forth in Section 8.3(a) and Section 8.3(b) have been satisfied.
(d) SPS Material Adverse Effect. No SPS Material Adverse
Effect shall have occurred and there shall exist no fact or circumstance that
would have, or would be reasonably likely to have, a SPS Material Adverse
Effect.
(e) Tax Opinion. PSCo shall have received an opinion of
counsel, in form and substance satisfactory to PSCo, dated the Closing Date,
which opinion may be based on appropriate representations of PSCo, SPS and the
Company that are in form and substance reasonably satisfactory to such counsel,
to the effect that the Mergers, taken together, will be treated as a non-taxable
exchange described in Code section 351.
(f) SPS Required Consents. The material SPS Required Consents
shall have been obtained.
(g) Affiliate Certificates. The Company shall have received a
certificate dated the Closing Date from each person who is an affiliate of SPS
to the effect that: (i) such person has no present plan or intention to
transfer, sell or otherwise dispose of any Company Common Stock such person may
receive as a result of the SPS Merger; (ii) until such time as financial results
covering at least thirty days of post-closing combined operations of SPS, PSCo
and Sub have been published, such person shall not sell such Company Common
Stock in any transaction, private or public, or in any other way reduce such
person's risk relative to any Company Common Stock that such person receives as
a result of the SPS Merger, except to the extent permitted pursuant to SAB No.
76; (iii) any future disposition by such person of any Company Common Stock such
person receives as the result of the SPS Merger will be accomplished in
accordance with Rule 145(d) under the Securities Act or as provided in Section
7.19; and (iv) such person agrees that appropriate legends shall be placed upon
the certificates evidencing ownership of the Company Common Stock that such
person receives as a result of the SPS Merger.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination. This Agreement and the Merger
Agreements may be terminated at any time prior to the Closing Date, whether
before or after approval by the shareholders of the respective parties hereto
contemplated by this Agreement:
(a) by mutual written consent of the Boards of Directors of
PSCo and SPS;
(b) by PSCo or SPS, by written notice to the other, if the
Effective Time shall not have occurred on or before December 31, 1996; provided,
however, that such date shall automatically be extended to June 30, 1997 if, on
December 31, 1996: (i) the condition
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set forth in Section 8.1(f) has not been satisfied or waived; (ii) the other
conditions to the consummation of the transactions contemplated hereby are then
capable of being satisfied; and (iii) any approvals required by Section 8.1(f)
that have not yet been obtained are being pursued with diligence; provided
further, that the right to terminate this Agreement under this Section 9.1(b)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before the termination date;
(c) by PSCo or SPS, by written notice to the other party, if
the PSCo Shareholders' Approvals shall not have been obtained at a duly held
PSCo Special Meeting, including any adjournments thereof, or the SPS
Shareholders' Approvals shall not have been obtained at a duly held SPS Special
Meeting, including any adjournments thereof;
(d) by PSCo or SPS, if any state or federal law, order, rule
or regulation is adopted or issued, that has the effect, as supported by the
written, reasoned opinion of outside counsel for such party, of prohibiting
either or both of the Mergers or causing a PSCo Material Adverse Effect or SPS
Material Adverse Effect, or by any party hereto, if any court of competent
jurisdiction in the United States or any State shall have issued an order,
judgment or decree permanently restraining, enjoining or otherwise prohibiting
either or both of the Mergers or causing a PSCo Material Adverse Effect or SPS
Material Adverse Effect, and such order, judgment or decree shall have become
final and nonappealable;
(e) by SPS, upon two days' prior notice to PSCo, if, as a
result of a tender offer by a party other than PSCo or any of its affiliates or
any written offer or proposal with respect to a merger, sale of a material
portion of its assets or other business combination (each, a "Business
Combination") by a party other than PSCo or any of its affiliates, the Board of
Directors of SPS determines in good faith that the fiduciary obligations of such
directors under applicable law require that such tender offer or other written
offer or proposal be accepted; provided, however, that (i) the Board of
Directors of SPS shall have been advised in a written, reasoned opinion by
outside counsel that, notwithstanding a binding commitment to consummate an
agreement of the nature of this Agreement entered into in the proper exercise of
their applicable fiduciary duties, and notwithstanding all concessions that may
be offered by PSCo in negotiations entered into pursuant to clause (ii) below,
such fiduciary duties would also require the directors to reconsider such
commitment as a result of such tender offer or such written offer or proposal
and (ii) prior to any such termination, SPS shall, and shall cause its
respective financial and legal advisors to, negotiate with PSCo to make such
adjustments in the terms and conditions of this Agreement as would enable SPS to
proceed with the transactions contemplated herein; provided further, that PSCo
and SPS acknowledge and affirm that, notwithstanding anything in this Section
9.1(e) to the contrary, PSCo and SPS intend this Agreement to be an exclusive
agreement and, accordingly, nothing in this Agreement is intended to constitute
a solicitation of an offer or proposal for a Business Combination, it being
acknowledged and agreed that any such offer or proposal would interfere with the
strategic advantages and benefits that PSCo and SPS expect to derive from the
Mergers and other transactions contemplated hereby;
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(f) by PSCo, upon two days' prior notice to SPS, if, as a
result of a tender offer by a party other than SPS or any of its affiliates or
any written offer or proposal with respect to a Business Combination by a party
other than SPS or any of its affiliates, the Board of Directors of PSCo
determines in good faith that the fiduciary obligations of such directors under
applicable law require that such tender offer or other written offer or proposal
be accepted; provided, however, that (i) the Board of Directors of PSCo shall
have been advised in a written, reasoned opinion by outside counsel that,
notwithstanding a binding commitment to consummate an agreement of the nature of
this Agreement entered into in the proper exercise of their applicable fiduciary
duties, and notwithstanding all concessions that may be offered by SPS in
negotiations entered into pursuant to clause (ii) below, such fiduciary duties
would also require the directors to reconsider such commitment as a result of
such tender offer or such written offer or proposal and (ii) prior to any such
termination, PSCo shall, and shall cause its respective financial and legal
advisors to, negotiate with SPS to make such adjustments in the terms and
conditions of this Agreement as would enable PSCo to proceed with the
transactions contemplated herein; provided further, that PSCo and SPS
acknowledge and affirm that, notwithstanding anything in this Section 9.1(f) to
the contrary, PSCo and SPS intend this Agreement to be an exclusive agreement
and, accordingly, nothing in this Agreement is intended to constitute a
solicitation of an offer or proposal for a Business Combination, it being
acknowledged and agreed that any such offer or proposal would interfere with the
strategic advantages and benefits that PSCo and SPS expect to derive from the
Mergers and other transactions contemplated hereby;
(g) by SPS, by written notice to PSCo, if (i) there exist
breaches of the representations and warranties of PSCo made herein as of the
date hereof which breaches, individually or in the aggregate, would or would be
reasonably likely to result in a PSCo Material Adverse Effect, and such breaches
shall not have been remedied within twenty (20) days after receipt by PSCo of
notice in writing from SPS, specifying the nature of such breaches and
requesting that they be remedied, (ii) PSCo (and/or its appropriate
subsidiaries) shall not have performed and complied with its agreements and
covenants contained in Section 6.2 (Dividends), Section 6.3 (Issuance of
Securities) and Section 6.7 (Indebtedness) or shall have failed to perform and
comply with, in all material respects, its other agreements and covenants
hereunder and such failure to perform or comply with shall not have been
remedied within twenty (20) days after receipt by PSCo of a notice in writing
from SPS, specifying the nature of such failure and requesting that it be
remedied; or (iii) the Board of Directors of PSCo or any committee thereof (A)
shall withdraw or modify in any manner adverse to SPS its approval or
recommendation of this Agreement or the PSCo Merger, (B) shall fail to reaffirm
such approval or recommendation upon SPS's request, (C) shall approve or
recommend any acquisition of PSCo or a material portion of PSCo's assets or any
tender offer for shares of capital stock of PSCo, in each case, by a party other
than SPS or any of its affiliates or (D) shall resolve to take any of the
actions specified in clause (A), (B) or (C).
(h) by PSCo, by written notice to SPS, if (i) there exist
breaches of the representations and warranties of SPS made herein as of the date
hereof which breaches, individually or in the aggregate, would or would be
reasonably likely to result in a SPS
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Material Adverse Effect, and such breaches shall not have been remedied within
twenty (20) days after receipt by PSCo of notice in writing from PSCo,
specifying the nature of such breaches and requesting that they be remedied,
(ii) PSCo (and/or its appropriate subsidiaries) shall not have performed and
complied with its agreements and covenants contained in Section 6.2 (Dividends),
Section 6.3 (Issuance of Securities) and Section 6.7 (Indebtedness) or shall
have failed to perform and comply with, in all material respects, its other
agreements and covenants hereunder and such failure to perform or comply with
shall not have been remedied within twenty (20) days after receipt by SPS of a
notice in writing from PSCo, specifying the nature of such failure and
requesting that it be remedied; or (iii) the Board of Directors of SPS or any
committee thereof (A) shall withdraw or modify in any manner adverse to PSCo its
approval or recommendation of this Agreement or the SPS Merger, (B) shall fail
to reaffirm such approval or recommendation upon PSCo's request, (C) shall
approve or recommend any acquisition of SPS or a material portion of SPS's
assets or any tender offer for shares of capital stock of SPS, in each case, by
a party other than PSCo or any of its affiliates or (D) shall resolve to take
any of the actions specified in clause (A), (B) or (C).
Section 9.2 Effect of Termination. In the event of termination
of this Agreement by either PSCo or SPS pursuant to Section 9.1, there shall be
no liability on the part of either PSCo or SPS or their respective officers or
directors hereunder, except that Section 7.17 and Section 9.3 and the agreement
contained in the second to the last sentence of Section 7.1 shall survive any
such termination.
Section 9.3 Termination Fee; Expenses.
(a) Expenses Payable upon Breach. If this Agreement and the
Merger Agreements are terminated pursuant to one (but not both) of Section
9.1(g)(i), (ii) or (iii) or Section 9.1(h)(i), (ii) or (iii), then (i) the
breaching party or the withdrawing or modifying party (the "Nonterminating
Party") shall promptly (but not later than five business days after receipt of
notice of the amount due from the other party) pay to the terminating party an
amount equal to all documented out-of-pocket expenses and fees incurred by such
terminating party (including, without limitation, fees and expenses payable to
all legal, accounting, financial, public relations and other professional
advisors arising out of, in connection with or related to the Mergers or the
transactions contemplated by this Agreement) not to exceed $10 million in the
aggregate ("Out-of-Pocket Expenses") in the form provided in Section 9.3(e);
provided, however, that, if this Agreement is terminated by a party as a result
of a willful breach or failure to perform or comply with agreements and
covenants by the Nonterminating Party (including without limitation the actions
set forth in Section 9.1(g)(iii) and 9.1(h)(iii)), the Nonterminating Party
shall promptly (but not later than five business days after receipt of notice of
the amount due from the other party) pay to such terminating party an additional
$35 million in the form provided in Section 9.3(e).
(b) Expenses Payable upon Acceptance of a Proposal. If this
Agreement and the Merger Agreements are terminated pursuant to one of Section
9.1(e) or Section
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9.1(f) but not the other on the basis of a good faith determination made as
provided in such Section 9.1(e) or Section 9.1(f) that the fiduciary obligations
of the directors of the terminating party under applicable law require
acceptance of a tender offer or other written offer or proposal with respect to
a Business Combination and such terminating party (or an affiliate thererof)
enters into an agreement (whether or not such agreement is embodied in a
definitive manner) to consummate a Business Combination with the third party
that made such proposal or with a subsidiary or affiliate thereof within one
year of such termination, then the terminating party shall promptly (but not
later than five business days after receipt of notice of the amount due from the
other party), but prior to entering into such agreement with the third party,
pay to the other party an amount equal to Out-of-Pocket Expenses plus $35
million in the form provided in Section 9.3(e).
(c) Termination Fee In Certain Other Events. If: (i) this
Agreement and the Merger Agreements are terminated (x) pursuant to Section
9.1(g)(i), (ii) or (iii), Section 9.1(h)(i), (ii) or (iii), Section 9.1(b) or
Section 9.1(d), (y) following a failure of the share- holders of SPS or PSCo to
grant the necessary approvals described in Section 4.13 and Section 5.13, as the
case may be (a "Shareholder Disapproval"), or (z) as a result of a material
breach of Section 7.4; (ii) at the time of such termination (or, in the case of
any termination following a Shareholder Disapproval, prior to the shareholder
meeting at which such Shareholder Disapproval occurred), there shall have been a
third-party tender offer for shares of, or a third-party offer or proposal with
respect to a Business Combination involving, SPS or PSCo (as the case may be,
the "Target Party") or the affiliates thereof which, at the time of such
termination (or of the meeting of the Target Party's shareholders, as the case
may be) shall not have been (A) rejected by the Target Party and its Board of
Directors and (B) withdrawn by the third party, then promptly (but not later
than five business days after receipt of notice of the amount due from the other
party) after the termination of this Agreement (1) if PSCo is the Target Party,
PSCo shall pay to SPS a termination fee equal to $35 million plus Out-of-Pocket
Expenses in the form provided in Section 9.3(e) and (2) if SPS is the Target
Party, SPS shall pay to PSCo a termination fee equal to $35 million plus
Out-of-Pocket Expenses in the form provided in Section 9.3(e); provided,
however, that no such amounts shall be payable if and to the extent the party to
make such payment shall have paid such amounts pursuant to Section 9.3(a).
(d) Additional Termination Fee. If Section 9.3 (a), (b) or (c)
is applicable and if any Business Combination involving the Target Party (or any
affiliate thereof) is accepted within one year of the termination of this
Agreement and is consummated within two and one-half years from the date of the
acceptance of such Business Combination by the Target Party (or such affiliate),
if PSCo is the Target Party, PSCo shall pay to SPS and if SPS is the Target
Party, SPS shall pay to PSCo, an additional $25 million in the form provided in
Section 9.3(e).
(e) All payments made pursuant to Section 9.3, other than
payments for Out-of-Pocket Expenses shall be payable in shares of PSCo Common
Stock or SPS Common Stock, as the case may be, the aggregate fair market value
(as defined below) of which shall equal the amount due; provided, however, that
if such stock cannot, in the opinion of the
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payor's counsel, be legally and validly issued within six months from the date
of the receipt of notice of the amount due for the payee, such payments shall be
made in cash. If such opinion is issued by the payor's counsel, the payor shall
use its best efforts to ensure that the stock is issued to the payee. In the
event, that notwithstanding the fact that an opinion was obtained from the
payor's counsel, the stock of the payor has not been issued to the payee during
the six month period provided for above, all amounts owed pursuant to Section
9.3 shall become immediately due and payable in cash. For the purposes of
Section 9.3, the fair market value of the PSCo Common Stock or the SPS Common
Stock, as the case may be, shall be the average closing price during the twenty
trading day period prior to the date of the written notice from the payee.
(f) The holder of any stock issued pursuant to Section 9.3
shall have the right, during the three year period from the date of issuance, to
require the issuer to effect the registration of such stock under the Securities
Act and the issuer shall use its reasonable best efforts to effect such
registration; provided that (i) only one such registration shall be at the
issuer's expense, (ii) such shares are not immediately saleable in the open
market at the time in the opinion of counsel for the holder pursuant to an
exemption under the Securities Act without limitation as to the number of shares
which may be sold, the price at which the shares may be sold or the ability of
the purchaser of such shares to immediately resell them in the open market,
(iii) the Board of Directors has not determined, in its good faith judgment,
that such registration and sale would materially interfere with any financing,
acquisition, corporate reorganization or other material transaction involving
the issuer then under consideration, and (iv) the issuer shall have the right to
delay for up to 120 days any request for registration hereunder if the issuer
intends to proceed with a registration to be sold by the issuer. In the event of
a delay in the sales of the shares pursuant to clause (iii) or (iv) of this
Section 9.3(f), the period in which the holder shall have a right to require
registration shall be extended by the amount of the delay.
(g) Expenses. The parties agree that the agreements contained
in this Section 9.3 are an integral part of the transactions contemplated by
this Agreement and the Merger Agreements and constitute liquidated damages and
not a penalty. If one party fails to promptly pay to the other any fees due
hereunder, such defaulting party shall pay the costs and expenses (including
legal fees and expenses) in connection with any action, including the filing of
any lawsuit or other legal action, taken to collect payment, together with
interest on the amount of any unpaid fee at the publicly announced prime rate of
Bank of America National Trust and Savings Association in effect from time to
time from the date such fee was required to be paid.
(h) Limitation of Fees. Notwithstanding anything herein to the
contrary, the aggregate amount payable by PSCo and its affiliates pursuant to
Section 9.3(a), Section 9.3(b), Section 9.3(c) and Section 9.3(d) shall not
exceed $60 million (excluding Out-of-Pocket Expenses) and the aggregate amount
payable by SPS and its affiliates pursuant to Section 9.3(a), Section 9.3(b),
Section 9.3(c) and Section 9.3(d) shall not exceed $60 million (excluding
Out-of-Pocket Expenses).
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Section 9.4 Amendment. This Agreement and the Merger
Agreements may be amended by the parties hereto or thereto pursuant to action of
the respective Boards of Directors of each of PSCo and SPS, at any time before
or after approval hereof by the shareholders of PSCo and SPS and prior to the
Effective Time, but after such approvals, no such amendment shall (a) alter or
change the amount or kind of shares, rights or any of the proceedings of the
exchange and/or conversion under Article II, (b) alter or change any of the
terms and conditions of this Agreement if any of the alterations or changes,
alone or in the aggregate, would materially and adversely affect the rights of
holders of PSCo Common Stock or SPS Common Stock or (c) alter or change any term
of the certificate of incorporation of the Company, except for alterations or
changes that could otherwise be adopted by the Board of Directors of the
Company, without the further approval of such shareholders, as applicable.
Neither this Agreement nor either of the Merger Agreements may be amended except
by an instrument in writing signed on behalf of each of the parties hereto or
thereto.
Section 9.5 Waiver. At any time prior to the Effective Time,
the parties hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement to any such extension
or waiver shall be valid only if set forth in an instrument in writing signed by
a duly authorized officer of each party.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Non-Survival of Representations, Warranties,
Covenants and Agreements. All representations, warranties, covenants and
agreements in this Agreement shall not survive the Mergers, except the covenants
and agreements contained in this Section 10.1 and in Article II (Treatment of
Shares), the second to the last sentence of Section 7.1 (Access to Information),
Section 7.5 (Directors' and Officers' Indemnification), Section 7.9 (Employee
Agreements and Workforce Matters), Section 7.10 (Employee Benefit Plans),
Section 7.11 (Incentive, Stock and Other Plans), Section 7.13 (Company Board of
Directors), Section 7.14 (Company Officers), Section 7.15 (Employment
Contracts), Section 7.16 (Corporate Offices), Section 7.17 (Expenses) and
Section 10.7 (Parties in Interest), each of which shall survive in accordance
with its terms.
Section 10.2 Brokers. PSCo represents and warrants that,
except for Barr Devlin Associates, its investment banking firm, no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the Mergers or the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of PSCo. SPS
represents and warrants that, except for Dillon, Read & Co. Inc., its investment
banking firm, no broker, finder or investment banker is entitled to any
brokerage,
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finder's or other fee or commission in connection with the Mergers or the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of SPS.
Section 10.3 Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given (a) if delivered
personally, or (b) if sent by overnight courier service (receipt confirmed in
writing), or (c) if delivered by facsimile transmission (with receipt
confirmed), or (d) five days after being mailed by registered or certified mall
(return receipt requested) to the parties, in each case to the following
addresses (or at such other address for a party as shall be specified by like
notice):
(i) If to SPS, to:
Southwestern Public Service Company
Tyler at Sixth
Amarillo, Texas 79101
Attention: Bill D. Helton
with a copy to:
Cahill Gordon & Reindel
80 Pine Street
New York, New York 10005
Attention: Gary W. Wolf, Esq.
(ii) If to PSCo, to:
Public Service Company of Colorado
1227 Seventeenth Street
Denver, Colorado 80202
Attention: D. D. Hock
with a copy to:
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, New York 10019
Attention: Douglas W. Hawes, Esq.
Steven H. Davis, Esq.
Section 10.4 Miscellaneous. This Agreement (including the
documents and instruments referred to herein): (a) constitutes the entire
agreement and supersedes all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof other than the Confidentiality Agreement; and (b) shall not be
assigned by operation of law or otherwise. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York applicable
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to contracts executed in and to be fully performed in such State, without giving
effect to its conflicts of laws statutes, rules or principles. The invalidity or
unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement, which shall
remain in full force and effect. The parties hereto shall negotiate in good
faith to replace any provision of this Agreement so held invalid or
unenforceable with a valid provision that is as similar as possible in substance
to the invalid or unenforceable provision.
Section 10.5 Interpretation. When reference is made in this
Agreement to Articles, Sections or Exhibits, such reference shall be to an
Article, Section or Exhibit of this Agreement, as the case may be, unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes and shall not affect in any way the meaning
or interpretation of this Agreement. Whenever the words "include", "includes",
or "including" are used in this Agreement, they shall be deemed to be followed
by the words "without limitation." Whenever "or" is used in this Agreement it
shall be construed in the nonexclusive sense.
Section 10.6 Counterparts; Effect. This Agreement may be
executed in one or more counterparts, each of which shall be deemed to be an
original, but all of which shall constitute one and the same agreement.
Section 10.7 Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of each party hereto, and, except
for rights of Indemnified Parties as set forth in Section 7.5 (Directors' and
Officers' Indemnification), nothing in this Agreement, express or implied, is
intended to confer upon any person any rights or remedies of any nature
whatsoever under or by reason of this Agreement. Notwithstanding the foregoing
and any other provision of this Agreement, and in addition to any other required
action of the Board of Directors of the Company, (a) a majority of the SPS
Designees (or their successors) serving on the Board of Directors of the Company
who are designated by SPS pursuant to Section 7.13 (Company Board of Directors)
shall be entitled during the four and one-half year period commencing at the
Effective Time (the "Applicable Period") to enforce the provisions of Section
7.9 (Employee Agreements and Workforce Matters), Section 7.10 (Employee Benefit
Plans), Section 7.11 (Incentive, Stock and Other Plans), and Section 7.15
(Employment Contracts) on behalf of the SPS officers, directors and employees,
as the case may be, and (b) a majority of the PSCo Designees (or their
successors) serving on the Board of Directors of the Company who are designated
by PSCo pursuant to Section 7.13 (Company Board of Directors) shall be entitled
during the Applicable Period to enforce the provisions of Section 7.9 (Employee
Agreements and Workforce Matters), Section 7.10 (Employee Benefit Plans),
Section 7.11 (Incentive, Stock and Other Plans) and Section 7.15 (Employment
Contracts) on behalf of the PSCo officers, directors and employees, as the case
may be. Such directors' rights and remedies under the preceding sentence are
cumulative and are in addition to any other rights and remedies they may have at
law or in equity, but in no event shall this Section 10.7 be deemed to impose
any additional duties on any such directors. The Company shall pay, at the time
they are incurred, or shall advance upon reasonable request, all reasonable
costs, fees and expenses of such directors incurred in
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<PAGE>
<PAGE>
connection with the assertion of any rights or remedies on behalf of any of the
persons set forth above pursuant to this Section 10.7. For purposes of this
Section 10.7 and Section 7.13 (Company Board of Directors), a "SPS Designee" or
"PSCo Designee", as the case may be, shall at any time mean a person who at such
time is a member of the Board of Directors of the Company who either (i) was
designated a member of the Board of Directors of the Company by SPS or by PSCo,
as the case may be, pursuant to Section 7.13(a) or (ii) was designated (before
his or her initial election as a member of the Board of Directors of the
Company) as a "SPS Designee" or a "PSCo Designee" by a majority of the then SPS
Designees or PSCo Designees, as the case may be.
Section 10.8 Specific Performance. The parties hereto agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties hereto shall
be entitled to an injunction or injunctions to prevent breaches of this
Agreement and to enforce specifically the terms and provisions hereof in any
court of the United States or any state having jurisdiction, this being in
addition to any other remedy to which they are entitled at law or in equity.
-64-
<PAGE>
<PAGE>
IN WITNESS WHEREOF, PSCo, SPS and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first above written.
PUBLIC SERVICE COMPANY OF COLORADO
By
Name: D. D. Hock
Title: Chairman and
Chief Executive Officer
SOUTHWESTERN PUBLIC SERVICE COMPANY
By
Name: Bill D. Helton
Title: Chairman and Chief Executive
Officer
M-P NEW CO.
By
Name: Doyle R. Bunch, II
Title: Chairman and Secretary
And By
Name: Richard C. Kelly
Title: President and Treasurer
-65-
<PAGE>
<PAGE>
INDEX OF DEFINED TERMS
Term Page
Affiliate Agreement........................................................47
Agreement ..........................................................1
Applicable Period .........................................................63
Atomic Energy Act .........................................................10
Business Combination.......................................................56
CBCA ..........................................................2
Certificates ..........................................................5
Closing ..........................................................7
Closing Agreement .........................................................13
Closing Date ..........................................................7
Code ..........................................................1
Colorado Commission........................................................10
Common Shares Trust.........................................................6
Company ..........................................................1
Company Charter Amendments.................................................52
Company Common Stock........................................................3
Company Shares ..........................................................5
Converted Shares ..........................................................5
Disclosure Schedules.......................................................46
Dissenting Holder ..........................................................4
Effective Time ..........................................................3
Environmental Claim........................................................20
Environmental Laws.........................................................21
Environmental Permits......................................................19
ERISA .........................................................15
Excess Shares ..........................................................6
Exchange Act .........................................................10
Exchange Agent ..........................................................4
FERC .........................................................10
Final Order .........................................................53
GAAP .........................................................11
Governmental Authority......................................................9
Hazardous Materials........................................................21
HSR Act .........................................................43
Indemnified Parties........................................................45
Indemnified Party .........................................................45
IRS .........................................................14
Joint Proxy Statement......................................................12
Joint Proxy/Registration Statement.........................................42
Joint venture ..........................................................8
Kansas Commission .........................................................25
-v-
<PAGE>
<PAGE>
Term Page
Merger Agreements ..........................................................2
Merger Sub A ..........................................................2
Merger Sub B ..........................................................2
Merger Subsidiaries.........................................................2
Mergers ..........................................................1
New Mexico Commission......................................................25
1935 Act ..........................................................8
NMBCA ..........................................................3
Non-terminating Party......................................................58
NRC .........................................................10
NYSE ..........................................................6
Oklahoma Commission........................................................25
Out-of-Pocket Expenses.....................................................58
PBGC .........................................................16
Permits .........................................................10
Power Act .........................................................10
PSCo ..........................................................1
PSCo Benefit Plans.........................................................15
PSCo Common Stock ..........................................................3
PSCo Conversion Ratio.......................................................3
PSCo Designee .........................................................64
PSCo Disclosure Schedule...................................................46
PSCo ERISA Affiliate.......................................................15
PSCo Financial Statements..................................................11
PSCo Material Adverse Effect................................................7
PSCo Merger ..........................................................2
PSCo Merger Agreement.......................................................2
PSCo Preferred Stock........................................................4
PSCo Required Consents......................................................9
PSCo Required Statutory Approvals..........................................10
PSCo Rights .........................................................22
PSCo Rights Agreement......................................................22
PSCo SEC Reports .........................................................10
PSCo Shareholders' Approvals...............................................22
PSCo Special Meeting.......................................................44
Registration Statement.....................................................11
Release .........................................................21
Representatives .........................................................41
SEC .........................................................10
Securities Act .........................................................10
Shareholder Disapproval....................................................59
Shares .........................................................51
SPS ..........................................................1
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<PAGE>
<PAGE>
Term Page
SPS Benefit Plans .........................................................30
SPS Common Stock ..........................................................3
SPS Conversion Ratio........................................................3
SPS Designee .........................................................64
SPS Disclosure Schedule....................................................46
SPS ERISA Affiliate........................................................30
SPS Financial Statements...................................................26
SPS Material Adverse Effect................................................23
SPS Merger ..........................................................3
SPS Merger Agreement........................................................2
SPS Preferred Stock.........................................................4
SPS Required Consents......................................................24
SPS Required Statutory Approvals...........................................25
SPS Rights .........................................................36
SPS Rights Agreement.......................................................36
SPS SEC Reports .........................................................25
SPS Shareholders' Approval.................................................35
SPS Special Meeting........................................................44
Stock Plan .........................................................48
Subsidiary ..........................................................7
Takeover Proposal .........................................................49
Target Party .........................................................59
Task Force .........................................................41
Tax Return .........................................................12
Tax Ruling .........................................................13
Taxes .........................................................12
Texas Commission .........................................................25
Violation ..........................................................9
Wyoming Commission.........................................................10
-vii-
<PAGE>
<PAGE>
Exhibit A
PLAN OF MERGER
PLAN OF MERGER (the "Plan of Merger"), dated as of _____,
199_, by and among Public Service Company of Colorado, a Colorado corporation,
("PSCO"), [M-P New Co.], a Delaware corporation (the "Company") and PSCO Merger,
Inc., a Colorado corporation and wholly owned subsidiary of the Company ("Merger
Sub A"). The parties to this Plan of Merger are hereinafter sometimes
collectively referred to as the "Constituent Corporations".
WHEREAS, Merger Sub A is a corporation duly organized, validly
existing and in good standing under the laws of the State of Colorado. As of the
date hereof the outstanding capital stock of Merger Sub A consisted solely of [
] shares of common stock, par value $[ ] per share ("Merger Sub A Common
Stock");
WHEREAS, PSCO is a corporation duly organized, validly
existing and in good standing under the laws of the State of Colorado. As of the
date hereof the authorized capital stock of PSCO consisted solely of 140,000,000
shares of common stock, par value $5 per share (the "PSCO Common Stock"), of
which [ ] shares were outstanding on _______________, ____, 199_, 4,000,000
shares of Cumulative Preferred Stock, par value $25 per share (the "PSCO $25
Preferred Stock"), of which [ ] shares were outstanding on ______________ ___,
199_, and 3,000,000 shares of Cumulative Preferred Stock, par value $100 per
share (the "PSCO $100 Preferred Stock" and, together with the PSCO $25 Preferred
Stock, the "PSCO Preferred Stock"), of which [ ] shares were outstanding on
_______________ ___, 199_; and
WHEREAS, PSCO, [Plain], a New Mexico corporation, and the
Company have entered into an Agreement and Plan of Reorganization dated as of
August _____, 1995, setting forth representations, warranties, covenants,
conditions and other terms in connection with the merger of equals and other
transactions contemplated thereby and hereby (the "Reorganization Agreement").
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements herein contained, the parties hereto agree as
follows:
ARTICLE I.
THE MERGER
Section 1.1 The Merger. In accordance with the provisions of
this Plan of Merger and the Colorado Business Corporation Act (the "CBCA"), at
the Effective Time (as defined in Section 1.2 hereof), Merger Sub A shall be
merged with and into PSCO (the "Merger") and the separate corporate existence of
Merger Sub A shall cease. PSCO shall be the surviving corporation in the Merger
(sometimes hereinafter referred to as the "Surviving
<PAGE>
<PAGE>
Corporation") and shall continue its corporate existence under the laws of the
State of Colorado. The name of the Surviving Corporation shall continue to be
"Public Service Company of Colorado". The Merger shall have the effects set
forth in the CBCA. In furtherance of and not in limitation of the foregoing, at
the Effective Time, the Surviving Corporation shall have all the rights,
privileges, immunities and powers and shall be subject to all the duties and
liabilities of a corporation organized under the CBCA; the Surviving Corporation
shall then and thereafter possess all the rights, privileges, immunities, and
franchises, of a public as well as of a private nature, of each of Merger Sub A
and PSCO; and all property, real, personal, and mixed, and all debts due on
whatever account and all other choses in action, and every other interest
belonging to or due to each of Merger Sub A and PSCO so merged shall be taken
and deemed to be transferred to and vested in the Surviving Corporation without
further act or deed; the Surviving Corporation shall then be liable for all the
liabilities and obligations of each of Merger Sub A and PSCO so merged. In
addition, any reference to either of the merging corporations in any contract,
instrument or document, whether executed or taking effect before or after the
Effective Time, shall be considered a reference to the Surviving Corporation if
not inconsistent with the other provisions of the contract, instrument or
document.
Section 1.2 Effective Time; Conditions. The Merger shall be
effective (the "Effective Time") upon delivery of a copy of the Articles of
Merger with the Secretary of State for the State of Colorado pursuant to Section
7-111-105 of the CBCA. If the Reorganization Agreement and this Plan of Merger
are duly approved by the shareholders of each of the Constituent Corporations,
the other conditions precedent set forth in Article VIII of the Reorganization
Agreement are satisfied or (where permissible) waived, and this Plan of Merger
is not terminated under Section 3.1 hereof, articles of merger complying with
Section 7-111-105 of the CBCA shall be delivered to the Secretary of State of
the State of Colorado in accordance with Section 7-111-105 of the CBCA.
Section 1.3 Articles of Incorporation and By-Laws. The
Articles of Incorporation (the "Articles") and By-laws of PSCO following the
Effective Time shall be such Articles and By-Laws of PSCO as are in effect
immediately prior to the Effective Time.
Section 1.4 Directors and Officers. (a) The following persons
shall be the initial directors of the Surviving Corporation until their
respective successors are duly elected and qualified:
[LIST NAMES]
(b) The following persons shall, form and after the Effective
Time, be the officers of the Surviving Corporation, to serve in accordance with
the By-laws thereof, until their respective successors are duly elected or
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Articles of Incorporation and
By-Laws:
[LIST NAMES]
<PAGE>
<PAGE>
ARTICLE II.
CONVERSION OF SHARES
Section 2.1 Conversion of Shares. At the Effective Time, by
virtue of the Merger and without any action on the part of PSCO, Merger Sub A or
the holder of any securities of PSCO or Merger Sub A:
(a) PSCO Common Stock. Each share of PSCO Common Stock which
shall be outstanding immediately before the Effective Time (other than shares
with respect to which the holder thereof has properly perfected dissenters
rights) shall be converted into [ ] share[s] of common stock, par value $[ ] per
share, of the Company, and PSCO shall thereafter be a wholly owned subsidiary of
the Company.
(b) PSCO Preferred Stock. Each share of PSCO $25 Preferred
Stock and each share of PSCO $100 Preferred Stock which shall be outstanding
immediately before the Effective Time (other than shares with respect to which
the holder thereof has properly perfected dissenters rights) shall remain
outstanding as a share of preferred stock of the Surviving Corporation.
(c) Merger Sub A Common Stock. Each share of Merger Sub A
Common Stock which shall be outstanding immediately before the Effective time
shall be converted into one share of the Surviving Corporation (the "Surviving
Corporation Common Stock"). Each certificate which immediately before the
Effective Time represented outstanding shares of Merger Sub A Common Stock
shall, on and after the Effective Time, be deemed for all purposes to represent
the number of shares of Surviving Corporation Common Stock into which the shares
of Merger Sub A Common Stock represented by such certificate shall have been
converted pursuant to this Section 2.1(c).
Section 2.2 Exchange of PSCO Common Stock Certificates.
------------------------------------------
(a) Deposit with Exchange Agent. As soon as practicable after
the Effective Time, the Company shall deposit with a bank, trust company or
other agent ("Exchange Agent") certificates representing shares of Company
Common Stock required to effect the conversion of PSCO Common Stock into Company
Common Stock referred to in Section 2.1(a).
(b) Exchange Procedures. As soon as practicable after the
Effective Time, the Exchange Agent shall mail to each holder of record of a
certificate or certificates which immediately prior to the Effective Time
represented issued and outstanding shares of PSCO Common Stock ("Certificates")
that were converted ("Converted Shares") into the right to receive shares of
Company Common Stock ("Company Shares"), (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon actual deliver of the Certificates to the
Exchange Agent) and (ii) instructions for use in effecting the exchange of
Certificates for certificates representing
<PAGE>
<PAGE>
Company Shares. Upon delivery of a Certificate to the Exchange Agent for
exchange, together with a duly executed letter of transmittal and such other
documents as the Exchange Agent shall require, the holder of such Certificate
shall be entitled to receive in exchange therefor a certificate representing
that number of whole Company Shares and the amount of cash in lieu of fractional
share interests which such holder has the right to receive pursuant to the
provisions of this Article II. In the event of a transfer of ownership of
Converted Shares which is not registered in the transfer records of PSCO, a
certificate to a transferee if the Certificate representing such Converted
Shares is presented to the Exchange Agent, accompanied by all documents required
to evidence and effect such transfer and by evidence satisfactory to the
Exchange Agent that any applicable stock transfer taxes have been paid. Until
delivered as contemplated by this Section 2.2, each Certificate shall be deemed
at any time after the Effective Time to represent only the right to receive upon
such delivery the certificate representing Company Shares and cash in lieu of
any fractional shares of Company Common Stock as contemplated by this Section
2.2.
(c) Distributions with Respect to Unexchanged Shares. No
dividends or other distributions declared or made after the Effective Time with
respect to Company Shares with a record date after the Effective Time shall be
paid to the holder of any undelivered Certificate with respect to the Company
Shares represented thereby, and no cash payment in lieu of fractional shares
shall be paid to any such holder pursuant to Section 2.2(d), until the holder of
record of such Certificate (or a transferee as described in Section 2.2(b))
shall have delivered such Certificate as contemplated in Section 2.2(b). Subject
to the effect of unclaimed property, escheat and other applicable laws,
following delivery of any such Certificate, there shall be paid to the record
holder (or transferee) of the certificates representing whole Company Shares
issued in exchange therefor, without interest, (i) at the time of such delivery,
the amount of any cash payable in lieu of a fractional share of Company Common
Stock to which such holder (or transferee) is entitled pursuant to Section
2.2(d) and the amount of dividends or other distributions with a record date
after the Effective Time theretofore paid with respect to such whole Company
Shares and (ii) at the appropriate payment date, the amount of dividends or
other distributions with a record date after the Effective Time but prior to
delivery and payment date subsequent to delivery payable with respect to such
whole Company Shares, as the case may be.
(d) No Fractional Shares. (i) No certificates or scrip
representing fractional shares of Company Common Stock shall be issued upon the
delivery for exchange of Certificates, and such fractional share interests will
not entitle the owner thereof to vote or to any rights of a shareholder of the
Company.
(ii) As promptly as practicable following the Effective
Time, the Exchange Agent shall determine the excess of (x) the number of full
shares of Company Common Stock delivered to the Exchange Agent by the Company
pursuant to Section 2.2(a) of the Reorganization Agreement over (y) the
aggregate number of full shares of Company Common Stock to be distributed to
holders of PSCO Common Stock and Plain Common Stock(as defined in the
Reorganization Agreement) pursuant to Section 2.2(b) of the Reorganization
Agreement (such excess being herein called the "Excess Shares"). As soon after
the Effective Time as practicable, the Exchange Agent, as agent for the holders
of the Excess Shares at then prevailing
<PAGE>
<PAGE>
prices on the New York Stock Exchange ("NYSE"), all in the manner provided in
Section 2.2(d)(iii).
(iii) The sale of the Excess shares by the Exchange Agent
shall be executed on they NYSE through one or more member firms of the NYSE and
shall be executed in round lots to the extent practicable. Until the proceeds of
such sale or sales have been distributed to the holders of PSCO Common Stock and
Plain Common Stock, the Exchange Agent shall, until remitted pursuant to Section
2.2(f), hold such proceeds in trust for the holders of PSCO Common Stock and
Plain Common Stock ("Common Shares Trust"). The Company shall pay all
commissions, transfer taxes and other out-of-pocket transaction costs, including
the expenses and compensation, of the Exchange Agent incurred in connection with
such sale of the Excess Shares. The Exchange Agent shall determine the portion
of the proceeds comprising the Common Shares Trust to which each holder of PSCO
Common Stock shall be entitled, if any, by multiplying the amount of the
aggregate proceeds comprising the Common Shares Trust by a fraction the
numerator of which is the amount of the fractional share interest to which such
holder of PSCO Common Stock is entitled and the denominator of which is the
aggregate amount of fractional share interests to which all holders of PSCO
Common Stock and Plain Common Stock are entitled.
(iv) As soon as practicable after the sale of Excess
Shares pursuant to clause (iii) above and the determination of the amount of
cash, if any, to be paid to holders of PSCO Common Stock in lieu of any
fractional share interests, the Exchange Agent shall distribute such amounts to
holders of PSCO Common Stock who have theretofore delivered Certificates for
PSCO Common Stock for exchange pursuant to this Article II.
(e) Closing of Transfer Books. From and after the Effective
Time, the stock transfer books of PSCO with respect to shares of PSCO Common
Stock, issued and outstanding prior to the Effective Time shall be closed and no
transfer of any shares shall thereafter be made. If, after the Effective Time,
Certificates are presented to the Company, they shall be cancelled and exchanged
for certificates representing the appropriate number of whole Company Shares and
cash in lieu of fractional shares of Company Common Stock as provided in this
Section 2.2.
(f) Termination of Exchange Agent. Any certificates
representing Company Shares deposited with the Exchange Agent pursuant to
Section 2.2(a) and not exchanged within one year after the Effective Time
pursuant to this Section 2.2 shall be returned by the Exchange Agent to the
Company, which shall thereafter act as Exchange Agent. All funds held by the
Exchange Agent for payment to the holders of undelivered Certificates and
unclaimed at the end of one year from the Effective Time shall be remitted to
the Company, after which time any holder of undelivered Certificates shall look
as a general creditor only to the Company for payment of such funds to which
such holder may be due, subject to applicable law. The Company shall not be
liable to any person for such shares or funds delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
<PAGE>
<PAGE>
ARTICLE III.
TERMINATION AND AMENDMENT
Section 3.1 Termination. Notwithstanding the approval and
adoption of this Plan of Merger by the shareholders of PSCO, the Company and
Merger Sub A, this Plan of Merger shall terminate forthwith in the event that
the Reorganization Agreement shall be terminated as therein provided and may be
terminated as otherwise provided in the Reorganization Agreement. In the event
of the termination of this Plan of Merger as provided above, this Plan of Merger
shall forthwith become void and there shall be no liability on the part of any
of the parties hereto except as otherwise provided in the Reorganization
Agreement.
Section 3.2 Amendment. This Plan of Merger shall not be
amended except in accordance with the provisions of Section 9.4 of the
Reorganization Agreement.
ARTICLE IV.
MISCELLANEOUS
Section 4.1 Governing Law. This Plan of Merger shall be
governed by the laws of the State of Colorado.
Section 4.2 Counterparts. This Plan of Merger may be executed
in two or more counterparts, each of which shall be deemed to be an original,
but all of which shall constitute one and the same agreement.
Section 4.3 Authorized Officers. The chairman of the board,
president, vice president, secretary and assistant secretary of each of the
merging corporations are each authorized by it in its name to execute and
deliver or cause to be executed and delivered any articles of merger,
agreements, certificates, appointments, or other instruments, and to do anything
else that he or they deem to be necessary or desirable in connection with the
Merger.
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Plan
of Merger to be signed by their respective officers thereunto duly authorized as
of the date first written above.
PUBLIC SERVICE COMPANY OF COLORADO
By:
PSCO MERGER, INC.
By:
[M-P NEW CO.]
By:
<PAGE>
<PAGE>
Exhibit B
PLAN OF MERGER
PLAN OF MERGER (the "Plan of Merger"), dated as of , 199_, by and
among Southwestern Public Service Company, a New Mexico corporation ("SPS"), M-P
New Co., a Delaware corporation (the "Company") and SPS Merger, Inc., a New
Mexico corporation and wholly owned subsidiary of the Company ("Merger Sub B").
The parties to this Plan of Merger are hereinafter sometimes collectively
referred to as the "Constituent Corporations".
WHEREAS, Merger Sub B is a corporation duly organized, validly
existing and in good standing under the laws of the State of New Mexico. As of
the date hereof the outstanding capital stock of Merger Sub B consisted solely
of [ ] shares of common stock, par value $[ ] per share ("Merger Sub B Common
Stock");
WHEREAS, Southwestern Public Service Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
New Mexico. As of the date hereof the outstanding capital stock of SPS consisted
solely of 100,000,000 shares of common stock, par value $1 per share (the "SPS
Common Stock"), of which [ ] shares were outstanding on , 199_, 3,000,000 shares
of Cumulative Preferred Stock, par value $25 per share (the "SPS $25 Preferred
Stock"), of which [ ] shares were outstanding on
, 199_, and 2,000,000 shares of Cumulative Preferred Stock, par value
$100 per share (the "SPS $100 Preferred Stock" and, together with the SPS $25
Preferred Stock, the "SPS Preferred Stock"), of which [ ] shares were
outstanding on , 199_; and
WHEREAS, SPS, [Mountain], a Colorado corporation, and the Company have
entered into an Agreement and Plan of Reorganization dated as of August , 1995,
setting forth representations, warranties, covenants, conditions and other terms
in connection with the merger of equals and other transactions contemplated
thereby and hereby (the "Reorganization Agreement").
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, the parties hereto agree as follows:
<PAGE>
<PAGE>
-2-
ARTICLE I
THE MERGER
Section 1.1 The Merger. In accordance with the provisions of this
Plan of Merger and the New Mexico Business Corporation Act (the "NMBCA"), at the
Effective Time (as defined in Section 1.2 hereof), Merger Sub B shall be merged
with and into SPS (the "Merger") and the separate corporate existence of Merger
Sub B shall cease. SPS shall be the surviving corporation in the Merger
(sometimes hereinafter referred to as the "Surviving Corporation") and shall
continue its corporate existence under the laws of the State of New Mexico. The
name of the Surviving Corporation shall continue to be "Southwestern Public
Service Company". The Merger shall have the effects set forth in the NMBCA. In
furtherance of and not in limitation of the foregoing, at the Effective Time,
the Surviving Corporation shall have all the rights, privileges, immunities and
powers and shall be subject to all the duties and liabilities of a corporation
organized under the NMBCA; the Surviving Corporation shall then and thereafter
possess all the rights, privileges, immunities, and franchises, of a public as
well as of a private nature, of each of Merger Sub B and SPS; and all property,
real, personal and mixed, and all debts due on whatever account and all other
choses in action, and every other interest belonging to or due to each of Merger
Sub B and SPS so merged shall be taken and deemed to be transferred to and
vested in the Surviving Corporation without further act or deed; the Surviving
Corporation shall then be liable for all the liabilities and obligations of each
of Merger Sub B and SPS so merged. In addition, any reference to either of the
merging corporations in any contract, instrument or document, whether executed
or taking effect before or after the Effective Time, shall be considered a
reference to the Surviving Corporation if not inconsistent with the other
provisions of the contract, instrument or document.
Section 1.2 Effective Time; Conditions. The Merger shall be
effective (the "Effective Time") upon delivery1 of a copy of the Articles of
Merger with the State Corporation Commission for the State of New Mexico
pursuant to Section 53-14-4
-------------------
1 The statute permits companies to provide for a specific date for
effectiveness, no more than 30 days after delivery of the Articles to the
commission.
<PAGE>
<PAGE>
-3-
of the NMBCA. If the Reorganization Agreement and this Plan of Merger are duly
approved by the shareholders of each of the Constituent Corporations, the other
conditions precedent set forth in Article VIII of the Reorganization Agreement
are satisfied or (where permissible) waived, and this Plan of Merger is not
terminated under Section 3.1 hereof, articles of merger complying with Section
53-14-4 of the NMBCA shall be delivered to the State Corporation Commission of
the State of New Mexico in accordance with Section 53-14-4 of the NMBCA.
Section 1.3 Articles of Incorporation and By-Laws. The Articles of
Incorporation (the "Articles") and By-laws of SPS following the Effective Time
shall be such Articles and By-laws of SPS as are in effect immediately prior to
the Effective Time.
Section 1.4 Directors and Officers. (a) The following persons shall
be the initial directors of the Surviving Corporation until their respective
successors are duly elected and qualified:
[LIST NAMES]
(b) The following persons shall, from and after the Effective Time,
be the officers of the Surviving Corporation, to serve in accordance with the
By-laws thereof, until their respective successors are duly elected or appointed
and qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Articles of Incorporation and By-Laws:
[LIST NAMES]
ARTICLE II
CONVERSION OF SHARES
Section 2.1 Conversion of Shares. At the Effective Time, by virtue of
the Merger and without any action on the
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part of SPS, Merger Sub B or the holder of any securities of SPS or Merger Sub
B:
(a) SPS Common Stock. Each share of SPS Common Stock which shall be
outstanding immediately before the Effective Time (other than shares with
respect to which the holder thereof has properly perfected dissenters' rights)
shall be converted into [ ] share[s] of common stock, par value $[ ] per share,
of the Company, and SPS shall thereafter be a wholly owned subsidiary of the
Company.
(b) SPS Preferred Stock. Each share of SPS $25 Preferred Stock and
each share of SPS $100 Preferred Stock which shall be outstanding immediately
before the Effective Time (other than shares with respect to which the holder
thereof has properly perfected dissenters' rights) shall remain outstanding as a
share of preferred stock of the Surviving Corporation.
(c) Merger Sub B Common Stock. Each share of Merger Sub B Common
Stock which shall be outstanding immediately before the Effective Time shall be
converted into one share of the Surviving Corporation (the "Surviving
Corporation Common Stock"). Each certificate which immediately before the
Effective Time represented outstanding shares of Merger Sub B Common Stock
shall, on and after the Effective Time, be deemed for all purposes to represent
the number of shares of Surviving Corporation Common Stock into which the shares
of Merger Sub B Common Stock represented by such certificate shall have been
converted pursuant to this Section 2.1(c).
Section 2.2 Exchange of SPS Common Stock Certificates.
(a) Deposit with Exchange Agent. As soon as practicable after the
Effective Time, the Company shall deposit with a bank, trust company or other
agent ("Exchange Agent") certificates representing shares of Company Common
Stock required to effect the conversion of SPS Common Stock into Company Common
Stock referred to in Section 2.1(a).
(b) Exchange Procedures. As soon as practicable after the Effective
Time, the Exchange Agent shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented issued
and outstanding shares of SPS Common Stock ("Certificates") that were converted
("Converted Shares") into the right to receive shares of Company Common Stock
("Company Shares"), (i) a letter of
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transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass, only upon actual delivery of the
Certificates to the Exchange Agent) and (ii) instructions for use in effecting
the exchange of Certificates for certificates representing Company Shares. Upon
delivery of a Certificate to the Exchange Agent for exchange, together with a
duly executed letter of transmittal and such other documents as the Exchange
Agent shall require, the holder of such Certificate shall be entitled to receive
in exchange therefor a certificate representing that number of whole Company
Shares and the amount of cash in lieu of fractional share interests which such
holder has the right to receive pursuant to the provisions of this Article II.
In the event of a transfer of ownership of Converted Shares which is not
registered in the transfer records of SPS, a certificate representing the proper
number of Company Shares may be issued to a transferee if the Certificate
representing such Converted Shares is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer and
by evidence satisfactory to the Exchange Agent that any applicable stock
transfer taxes have been paid. Until delivered as contemplated by this Section
2.2, each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such delivery the certificate
representing Company Shares and cash in lieu of any fractional shares of Company
Common Stock as contemplated by this Section 2.2.
(c) Distributions with Respect to Unexchanged Shares. No dividends
or other distributions declared or made after the Effective Time with respect to
Company Shares with a record date after the Effective Time shall be paid to the
holder of any undelivered Certificate with respect to the Company Shares
represented thereby, and no cash payment in lieu of fractional shares shall be
paid to any such holder pursuant to Section 2.2(d), until the holder of record
of such Certificate (or a transferee as described in Section 2.2(b)) shall have
delivered such Certificate as contemplated in Section 2.2(b). Subject to the
effect of unclaimed property, escheat and other applicable laws, following
delivery of any such Certificate, there shall be paid to the record holder (or
transferee) of the certificates representing whole Company Shares issued in
exchange therefor, without interest, (i) at the time of such delivery, the
amount of any cash payable in lieu of a fractional share of Company Common Stock
to which such holder (or transferee) is entitled pursuant to Section 2.2(d) and
the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such
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whole Company Shares and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time but
prior to delivery and a payment date subsequent to delivery payable with respect
to such whole Company Shares, as the case may be.
(d) No Fractional Shares. (i) No certificates or scrip representing
fractional shares of Company Common Stock shall be issued upon the delivery for
exchange of Certificates, and such fractional share interests will not entitle
the owner thereof to vote or to any rights of a shareholder of the Company.
(ii) As promptly as practicable following the Effective Time,
the Exchange Agent shall determine the excess of (x) the number of full shares
of Company Common Stock delivered to the Exchange Agent by the Company pursuant
to Section 2.2(a) of the Reorganization Agreement over (y) the aggregate number
of full shares of Company Common Stock to be distributed to holders of SPS
Common Stock and Mountain Common Stock (as defined in the Reorganization
Agreement) pursuant to Section 2.2(b) of the Reorganization Agreement (such
excess being herein called the "Excess Shares"). As soon after the Effective
Time as practicable, the Exchange Agent, as agent for the holders of SPS Common
Stock and Mountain Common Stock, shall sell the Excess Shares at then prevailing
prices on the New York Stock Exchange ("NYSE"), all in the manner provided in
Section 2.2(d)(iii).
(iii) The sale of the Excess Shares by the Exchange Agent
shall be executed on the NYSE through one or more member firms of the NYSE and
shall be executed in round lots to the extent practicable. Until the proceeds of
such sale or sales have been distributed to the holders of SPS Common Stock and
Mountain Common Stock, the Exchange Agent shall, until remitted pursuant to
Section 2.2(f), hold such proceeds in trust for the holders of SPS Common Stock
and Mountain Common Stock ("Common Shares Trust"). The Company shall pay all
commissions, transfer taxes and other out-of-pocket transaction costs, including
the expenses and compensation, of the Exchange Agent incurred in connection with
such sale of the Excess Shares. The Exchange Agent shall determine the portion
of the proceeds comprising the Common Shares Trust to which each holder of SPS
Common Stock shall be entitled, if any, by multiplying the amount of the
aggregate proceeds comprising the Common Shares Trust by a fraction the
numerator of which is the amount of the fractional share interest to which such
holder of
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SPS Common Stock is entitled and the denominator of which is the aggregate
amount of fractional share interests to which all holders of SPS Common Stock
and Mountain Common Stock are entitled.
(iv) As soon as practicable after the sale of Excess Shares
pursuant to clause (iii) above and the determination of the amount of cash, if
any, to be paid to holders of SPS Common Stock in lieu of any fractional share
interests, the Exchange Agent shall distribute such amounts to holders of SPS
Common Stock who have theretofore delivered Certificates for SPS Common Stock
for exchange pursuant to this Article II.
(e) Closing of Transfer Books. From and after the Effective Time,
the stock transfer books of SPS with respect to shares of SPS Common Stock,
issued and outstanding prior to the Effective Time shall be closed and no
transfer of any shares shall thereafter be made. If, after the Effective Time,
Certificates are presented to the Company, they shall be cancelled and exchanged
for certificates representing the appropriate number of whole Company Shares and
cash in lieu of fractional shares of Company Common Stock as provided in this
Section 2.2.
(f) Termination of Exchange Agent. Any certificates representing
Company Shares deposited with the Exchange Agent pursuant to Section 2.2(a) and
not exchanged within one year after the Effective Time pursuant to this Section
2.2 shall be returned by the Exchange Agent to the Company, which shall
thereafter act as Exchange Agent. All funds held by the Exchange Agent for
payment to the holders of undelivered Certificates and unclaimed at the end of
one year from the Effective Time shall be remitted to the Company, after which
time any holder of undelivered Certificates shall look as a general creditor
only to the Company for payment of such funds to which such holder may be due,
subject to applicable law. The Company shall not be liable to any person for
such shares or funds delivered to a public official pursuant to any applicable
abandoned property, escheat or similar law.
ARTICLE III
TERMINATION AND AMENDMENT
Section 3.1 Termination. Notwithstanding the
approval and adoption of this Plan of Merger by the sharehold-
ers of SPS, the Company and Merger Sub B, this Plan of Merger
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shall terminate forthwith in the event that the Reorganization Agreement shall
be terminated as therein provided and may be terminated as otherwise provided in
the Reorganization Agreement. In the event of the termination of this Plan of
Merger as provided above, this Plan of Merger shall forthwith become void and
there shall be no liability on the part of any of the parties hereto except as
otherwise provided in the Reorganization Agreement.
Section 3.2 Amendment. This Plan of Merger shall not be amended
except in accordance with the provisions of Section 9.4 of the Reorganization
Agreement.
ARTICLE IV
MISCELLANEOUS
Section 4.1 Governing Law. This Plan of Merger
shall be governed by the laws of the State of New Mexico.
Section 4.2 Counterparts. This Plan of Merger may be executed in two
or more counterparts, each of which shall be deemed to be an original, but all
of which shall constitute one and the same agreement.
Section 4.3 Authorized Officers. The chairman of the board,
president, vice president, secretary and assistant secretary of each of the
merging corporations are each authorized by it in its name to execute and
deliver or cause to be executed and delivered any articles of merger,
agreements, certificates, appointments, or other instruments, and to do anything
else that he or they deem to be necessary or desirable in connection with the
Merger.
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IN WITNESS WHEREOF, the parties hereto have caused this Plan of
Merger to be signed by their respective officers thereunto duly authorized as of
the date first written above.
SOUTHWESTERN PUBLIC SERVICE COMPANY
By: ________________________
SPS MERGER, INC.
By: ________________________
M-P NEW CO.
By: ________________________
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Exhibit C
Form of Affiliate Agreement
Gentlemen:
The undersigned is a holder of shares of Common Stock, par value $_____
per share ("Common Stock"), of ____________________, a __________ corporation]
(the "Company") and is entitled to receive in connection with the merger (the
"Merger") of the Company with a subsidiary of M-P New Co., a Delaware
corporation ("Newco"), securities of Newco (the "Securities").
The undersigned acknowledges that the undersigned may be deemed an
"affiliate" of Newco within the meaning of Rule 145 ("Rule 145") promulgated
under the Securities Act of 1933, as amended (the "Act"), and/or as such term is
used in and for purposes of Accounting Series Releases 130 and 135, as amended,
of the Securities and Exchange Commission (the "Commission"), although nothing
contained herein shall be construed as an admission of such status.
If in fact the undersigned were an affiliate of Newco under the Act,
the undersigned's ability to sell, assign or transfer any Securities received by
the undersigned in exchange for any shares of the Company pursuant to the Merger
may be restricted unless such transaction is registered under the Act or an
exemption from such registration is available. The undersigned understands that
such exemptions are limited and the undersigned has obtained advice of counsel
as to the nature and conditions of such exemptions, including instruction with
respect to the applicability to the sale of such Securities of Rules 144 and
145(d) promulgated under the Act.
The undersigned hereby represents to and covenants to Newco that it
will not sell, assign or transfer any Securities received by the undersigned in
exchange for shares of the Common Stock pursuant to the Merger except (i)
pursuant to an effective registration statement under the Act (including,
without limitation, a registration pursuant to any registration rights granted
to that certain Agreement and Plan of Reorganization dated as of August 22, 1995
by and among the Company, Newco and [PSCo or SPS, as the case may be] (the
"Reorganization Agreement")), (ii) by a transaction in conformity with the
volume and other limitations of Rule 145 or Rule 144, to the extent applicable,
or any other applicable rules promulgated by the Commission or (iii) in a
transaction which, in the opinion of independent counsel reasonably satisfactory
to the Company, or as described in a "no-action" or interpretive letter from the
Staff of the Commission, is not required to be registered under the Act.
In the event of a sale of Securities pursuant to Rule 145, the
undersigned will supply the Company with evidence of compliance
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with such Rule, in the form of customary seller's and broker's Rule 145
representation letters or as Newco may otherwise reasonably request. The
undersigned understands that Newco may instruct its transfer agent to withhold
the transfer of any Securities disposed of by the undersigned in a manner
inconsistent with this letter.
The undersigned acknowledges and agrees that appropriate legends will
be placed on certificates representing Securities received by the undersigned in
the Merger or held by a transferee thereof, which legends will be removed (i) by
delivery of substitute certificates upon receipt of an opinion in form and
substance reasonably satisfactory to Newco to the effect that such legends are
no longer required for the purposes of the Act and the rules and regulations of
the Commission promulgated thereunder or (ii) in the event of a sale of the
Securities which has been registered under the Act.
The undersigned further represents to, and covenants with Newco and the
Company that the undersigned will not, during the 30 days prior to the effective
time of the Merger sell, transfer or otherwise dispose of, or reduce any risk
relative to, any securities of the Company, [PSCo or SPS, as the case may be] or
Newco, and the undersigned will not sell, transfer or otherwise dispose of, or
reduce any risk relative to, the Securities received by the undersigned in the
Merger or any other shares of the capital stock of Newco until after such time
as results covering at least 30 days of operations of Newco (including the
combined operations of the Company and [PSCo or SPS, as the case may be]) or
Newco have been published by Newco in the form of a quarterly earnings report,
an effective registration statement filed with the Commission, a report to the
Commission on Form 10-K, 10-Q, or 8-K, or any other public filing or
announcement which includes such results of operations.
The undersigned acknowledges that it has carefully reviewed this letter
and understands the requirements hereof and the limitations imposed upon the
distribution, sale, transfer or other disposition of Securities. Nothing
contained herein shall be deemed to limit any registration rights granted to the
undersigned pursuant to the Reorganization Agreement.
Very truly yours,
-------------------------
[Name]
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Dated:
As an inducement to the above individual to deliver this letter, Newco
agrees that for so long as and to the extent necessary to permit such individual
to sell the Securities pursuant to Rule 145 and, to the extent applicable, Rule
144 under the Act, Newco shall use all reasonable efforts to file, on a timely
basis, all reports and data required to be filed by it with the Commission
pursuant to Section 13 of the Securities and Exchange Act of 1934.
Very truly yours,
[NEWCO]
By:______________________
Name:
Title:
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EXHIBIT D
EMPLOYMENT AGREEMENT
BILL D. HELTON
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TABLE OF CONTENTS
PAGE
Employment Period......................................................... 1
Position and Duties....................................................... 1
Compensation.............................................................. 2
Termination of Employment................................................. 4
Obligations of the Company upon Termination............................... 7
Non-Exclusivity of Rights................................................. 9
Full Settlement........................................................... 9
Non-Competition Provision and Confidential Information.................... 9
Certain Additional Payments by the Company................................ 10
Attorneys' Fees........................................................... 12
Successors................................................................ 12
Miscellaneous............................................................. 13
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EMPLOYMENT AGREEMENT
THIS AGREEMENT by and between M-P New Co., a Delaware corporation (the
"Company"), and Bill D. Helton (the "Executive"), dated as of the ____ day of
__________, 199__.
WITNESSETH THAT
WHEREAS, Public Service Company of Colorado, a Colorado corporation
("PSC") and Southwestern Public Service Company, a New Mexico corporation
("SPS") have entered into an Agreement and Plan of Reorganization dated as of
August 22, 1995 (the "Reorganization Agreement"), whereby wholly owned
subsidiaries of Company will merge into PSC and SPS; and
WHEREAS, PSC and SPS wish to provide for the orderly succession of
management of the Company following the Effective Time (as defined in the
Reorganization Agreement the "Effective Time"); and
WHEREAS, PSC and SPS further wish to provide for the employment by the
Company of the Executive, and the Executive wishes to serve the Company, in the
capacities and on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, it is hereby agreed as follows:
1. Employment Period. The Company shall employ the Executive, and the
Executive shall serve the Company, on the terms and conditions set forth in this
Agreement, for an initial period (the "Initial Period") and a further period
(the "Secondary Period") (the Initial Period and the Secondary Period are
hereinafter referred to in the aggregate as the "Employment Period"). The
Initial Period shall begin at the Effective Time (as defined in the
Reorganization Agreement the "Effective Time") and end on the later of (i) June
30, 1999, or (ii) two and one-half (2 1/2) years from the Effective Time. The
Secondary Period shall begin on the first day after the end of the Initial
Period and end on May 31, 2001.
2. Position and Duties.
(a) During the Initial Period, the Executive shall serve as
Chief Executive Officer of the Company and Chairman of the Board of Directors of
the Company (the "Board"). During the Secondary Period, the Executive shall
serve as Chairman of the Board. The Executive shall serve in each such case as
an employee of the Company and with such duties and responsibilities as are
customarily assigned to such positions, and such other duties and
responsibilities not inconsistent therewith as may from time to time be assigned
to him by the Board. The Executive shall be a
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member of the Board on the first day of the Employment Period, and the Board
shall propose the Executive for re-election to the Board throughout the
Employment Period.
(b) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive shall
devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive under this Agreement, use the
Executive's reasonable best efforts to carry out such responsibilities
faithfully and efficiently. It shall not be considered a violation of the
foregoing for the Executive to serve on corporate, industry, civic or charitable
boards or committees, so long as such activities do not significantly interfere
with the performance of the Executive's responsibilities as an employee of the
Company in accordance with this Agreement.
(c) The Executive's services shall be performed primarily at
the Company's headquarters in Denver, Colorado.
3. Compensation.
(a) Base Salary. The Executive's compensation during the
Employment Period shall be determined by the Board upon the recommendation of
the Compensation Committee of the Board, subject to the next sentence and
Section 3(b). During the Employment Period, the Executive shall receive an
annual base salary ("Annual Base Salary") of not less than his annual base
salary from SPS as in effect immediately before the Effective Time. During the
Initial Period, Executive shall be compensated by the Company and its
subsidiaries at a level that is higher than the compensation from the Company
and its subsidiaries received by any other executive officer of the Company. The
Annual Base Salary shall be payable in accordance with the Company's regular
payroll practice for its senior executives, as in effect from time to time.
During the Employment Period, the Annual Base Salary shall be reviewed at least
annually. Any increase in the Annual Base Salary shall not limit or reduce any
other obligation of the Company under this Agreement.
(b) Incentive Compensation. During the Employment Period, the
Executive shall participate in short-term incentive compensation plans and
long-term incentive compensation plans (the latter to consist of plans offering
stock options, restricted stock and other long-term incentive compensation)
providing him with the opportunity to earn, on a year-by-year basis, short-term
and long- term incentive compensation (the "Incentive Compensation") at least
equal to the greater of (i) the amounts that he had the opportunity to earn
under the comparable plans of SPS as in effect immediately before the Effective
Time, or (ii) the amounts that the next highest executive officer of the Company
has the opportunity to earn under the plans of the Company and its subsidiaries
for that year.
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(c) Other Benefits.
(i) Supplemental Executive Retirement Plan. During the
Employment Period, the Executive shall participate in a supplemental executive
retirement plan ("SERP") such that the aggregate value of the retirement
benefits that he and his spouse will receive at the end of the Employment Period
under all defined benefit plans of the Company and its affiliates (whether
qualified or not) will be not less than the aggregate value of the benefits he
and his spouse would have received (and with the same forms of benefit payments)
had he continued, through the end of the Employment Period, to accrue the
supplemental retirement benefits provided by the terms of the Supplemental
Retirement Income Plan of SPS as in effect immediately before the Effective
Time. The Company shall maintain and fund one or more grantor trusts (the
"Trusts"), or such other funding mechanism as may be satisfactory to the
Executive, which shall comply with the following sentence and which shall at all
times be adequate to provide for the payment of all benefits under the SERP to
the Executive, as well as any elective deferrals by the Executive under any
non-qualified plan (with such adequacy being determined by an independent
consulting firm acceptable to the Executive, whose fees shall be paid by the
Company). The assets of the Trusts (if any) shall be subject to the claims of
the Company's creditors, and the Trusts (if any) shall in all other respects be
designed to prevent the Executive and his spouse from being taxed on the assets
or income thereof, except as and when such assets or income are paid to them.
(ii) During the Employment Period, the Company shall
provide the Executive with life insurance coverage providing a death benefit to
such beneficiary or beneficiaries as the Executive may designate of not less
than two times his Annual Base Salary.
(iii) In addition, and without limiting the generality of
the foregoing, during the Employment Period and thereafter: (A) the Executive
shall be entitled to participate in all applicable incentive, savings and
retirement plans, practices, policies and programs of the Company and its
subsidiaries to the same extent as other senior executives of the Company; and
(B) the Executive and/or the Executive's family, as the case may be, shall be
eligible for participation in, and shall receive all benefits under, all
applicable welfare benefit plans, practices, policies and programs provided by
the Company and its subsidiaries, other than severance plans, practices,
policies and programs but including, without limitation, medical, prescription,
dental, disability, sick leave, employee life insurance, group life insurance,
accidental death and travel accident insurance plans and programs, to the same
extent as other senior executives of the Company.
(d) Fringe Benefits. During the Employment Period, the
Executive shall be entitled to receive fringe benefits on the same terms and
conditions as the greater of (i) the fringe benefits received by, or available
to, him from SPS immediately before the
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Effective Time, including but not limited to, relocation assistance under SPS's
Relocation Assistance Policy, or (ii) the fringe benefits provided by the
Company or its subsidiaries which are available to the next highest executive
officer of the Company for the year.
4. Termination of Employment.
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the Employment Period.
The Company shall be entitled to terminate the Executive's employment because of
the Executive's Disability during the Employment Period. "Disability" means that
(i) the Executive has been unable, for a period of 180 consecutive business
days, to perform the Executive's duties under this Agreement, as a result of
physical or mental illness or injury, and (i) a physician selected by the
Company or its insurers, and acceptable to the Executive or the Executive's
legal representative, has determined that the Executive's incapacity is total
and permanent. A termination of the Executive's employment by the Company for
Disability shall be communicated to the Executive by written notice, and shall
be effective on the 30th day after receipt of such notice by the Executive (the
"Disability Effective Date"), unless the Executive returns to full-time
performance of the Executive's duties before the Disability Effective Date.
(b) By the Company.
(i) The Company may terminate the Executive's employment
during the Employment Period for Cause or without Cause. "Cause" means:
A. the willful and continued failure of the Executive
substantially to perform the Executive's duties under this Agreement (other than
as a result of physical or mental illness or injury), after the Board of the
Company delivers to the Executive a written demand for substantial performance
that specifically identifies the manner in which the Board believes that the
Executive has not substantially performed the Executive's duties; or
B. illegal conduct or gross misconduct by the Executive,
in either case that is willful and results in material and demonstrable damage
to the business or reputation of the Company.
No act or failure to act on the part of the Executive
shall be considered "willful" unless it is done, or omitted to be done, by the
Executive in bad faith or without reasonable belief that the Executive's action
or omission was in the best interests of the Company. Any act or failure to act
that is based upon authority given pursuant to a resolution duly adopted by the
Board, or the advice of counsel for the Company, shall be conclusively presumed
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to be done, or omitted to be done, by the Executive in good faith
and in the best interests of the Company.
(ii) A termination of the Executive's employment for
Cause shall be effected in accordance with the following procedures. The Company
shall give the Executive written notice ("Notice of Termination for Cause") of
its intention to terminate the Executive's employment for Cause, setting forth
in reasonable detail the specific conduct of the Executive that it considers to
constitute Cause and the specific provision(s) of this Agreement on which it
relies, and stating the date, time and place of the Special Board Meeting for
Cause. The "Special Board Meeting for Cause" means a meeting of the Board called
and held specifically for the purpose of considering the Executive's termination
for Cause, that takes place not less than ten and not more than twenty business
days after the Executive receives the Notice of Termination for Cause. The
Executive shall be given an opportunity, together with counsel, to be heard at
the Special Board Meeting for Cause. The Executive's termination for Cause shall
be effective when and if a resolution is duly adopted at the Special Board
Meeting for Cause by affirmative vote of at least the greater of (A) two-thirds
(2/3) of the entire membership of the Board (excluding the Executive who shall
not vote on this matter) or (B) ten (10) members of the Board, stating that in
the good faith opinion of the Board, the Executive is guilty of the conduct
described in the Notice of Termination for Cause, and that conduct constitutes
Cause under this Agreement.
(iii) A termination of the Executive's employment without
Cause shall be effective in accordance with the following procedures. The
Company shall give the Executive written notice ("Notice of Termination without
Cause") of its intention to terminate the Executive's employment without Cause,
stating the date, time and place of the Special Board Meeting without Cause. The
"Special Board Meeting without Cause" means a meeting of the Board called and
held specifically for the purpose of considering the Executive's termination
without Cause, that takes place not less than ten and not more than twenty
business days after the Executive receives the Notice of Termination without
Cause. The Executive shall be given an opportunity, together with counsel, to be
heard at the Special Board Meeting without Cause. The Executive's termination
without Cause shall be effective when and if a resolution is duly adopted at the
Special Board Meeting without Cause by affirmative vote of at least the greater
of (A) two-thirds (2/3) of the entire membership of the Board (excluding the
Executive who shall not vote on this matter) or (B) ten (10) members of the
Board, stating that the Executive is terminated without Cause.
(c) Good Reason.
(i) The Executive may terminate employment for Good
Reason or without Good Reason. "Good Reason" means:
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A. the assignment to the Executive of any duties
inconsistent in any respect with paragraph (a) of Section 2 of his Agreement, or
any other action by the Company that results in a diminution in the Executive's
position, authority, duties or responsibilities, other than an isolated,
insubstantial and inadvertent action that is not taken in bad faith and is
remedied by the Company promptly after receipt of notice thereof from the
Executive;
B. any failure by the Company to comply with any
provision of Section 3 of this Agreement, other than an isolated, insubstantial
and inadvertent failure that is not taken in bad faith and is remedied by the
Company promptly after receipt of notice thereof from the Executive;
C. the assignment or reassignment by the Company of the
Executive without the Executive's consent to another place of employment more
than 50 miles from the Company's headquarters indicated in Section 2(d);
D. any purported termination of the Executive's
employment by the Company for a reason or in a manner not expressly permitted by
this Agreement;
E. any failure by the Company to comply with paragraph
(c) of Section 11 of this Agreement; or
F. any other substantial breach of this Agreement by the
Company that either is not taken in good faith or is not remedied by the Company
promptly after receipt of notice thereof from the Executive.
The Company and the Executive, upon mutual written agreement, may waive any of
the foregoing provisions which would otherwise constitute Good Reason.
(ii) A termination of employment by the Executive for
Good Reason shall be effectuated by giving the Company written notice ("Notice
of Termination for Good Reason") of the termination, setting forth in reasonable
detail the specific conduct of the Company that constitutes Good Reason and the
specific provision(s) of this Agreement on which the Executive relies. A
termination of employment by the Executive for Good Reason shall be effective on
the fifth business day following the date when the Notice of Termination for
Good Reason is given, unless the notice sets forth a later date (which date
shall in no event be later than 30 days after the notice is given). For purposes
of this Section 4(c), any good faith determination of "Good Reason" made by the
Executive shall be conclusive.
(iii) A termination of the Executive's employment by the
Executive without Good Reason shall be effected by giving the Company written
notice of the termination.
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(d) No Waiver. The failure to set forth any fact or
circumstance in a Notice of Termination for Cause, a Notice of Termination
without Cause or a Notice of Termination for Good Reason shall not constitute a
waiver of the right to assert, and shall not preclude the party giving notice
from asserting, such fact or circumstance in an attempt to enforce any right
under or provision of this Agreement.
(e) Date of Termination. The "Date of Termination" means the
date of the Executive's death, the Disability Effective Date, the date on which
the termination of the Executive's employment by the Company for Cause or
without Cause or by the Executive for Good Reason is effective, or the date on
which the Executive gives the Company notice of a termination of employment
without Good Reason, as the case may be.
5. Obligations of the Company upon Termination.
(a) By the Company other than for cause or disability; by the
Executive for Good Reason. If, during the Employment Period, the Company
terminates the Executive's employment, other than for Cause or Disability, or
the Executive terminates employment for Good Reason, the Company shall continue
to provide the Executive with the compensation and benefits set forth in
paragraphs (a), (b) and (c) of Section 3 as if he had remained employed by the
Company pursuant to this Agreement through the end of the Employment Period and
then retired (at which time he will be treated as eligible for all retiree
welfare benefits and other benefits provided to retired senior executives, as
set forth in Section 3(c)(ii) and (iii)); PROVIDED, that the Incentive
Compensation for such period shall be based upon the target Incentive
Compensation for the year in which the Date of Termination occurs; PROVIDED,
further, that in lieu of stock options, restricted stock and other stock-based
awards, the Executive shall be paid cash equal to the fair market value as of
the Date of Termination (without regard to any restrictions and based upon a
valuation model generally utilized for purposes of valuing comparable stock
based compensation awards) of the stock options, restricted stock and other
stock-based awards that would otherwise have been granted with such cash being
paid within 90 days after the Date of Termination; PROVIDED, further, that to
the extent any benefits described in paragraph (c) of Section 3 cannot be
provided pursuant to the plan or program maintained by the Company for its
executives, the Company shall provide such benefits outside such plan or program
at no additional cost (including without limitation tax cost) to the Executive
and his family; and PROVIDED, finally, that during any period when the Executive
is eligible to receive benefits of the type described in clause (B) of paragraph
(c)(iii) of Section 3 under another employer-provided plan, the benefits
provided by the Company under paragraph (a) of Section 5 may be made secondary
to those provided under another plan. In addition to the foregoing, any
restricted stock outstanding on the Date of Termination shall be fully vested as
of the Date of Termination and all options outstanding on the Date of
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Termination shall be fully vested and exercisable and shall remain in effect and
exercisable through the end of their respective terms, without regard to the
termination of the Executive's employment. The payments and benefits provided
pursuant to this paragraph (a) of Section 5 are intended as liquidated damages
for a termination of the Executive's employment by the Company other than for
Cause or Disability or for the actions of the Company leading to a termination
of the Executive's employment by the Executive for Good Reason, and shall be the
sole and exclusive remedy therefor.
(b) Death or Disability. If the Executive's employment is
terminated by reason of the Executive's death or Disability during the
Employment Period, the Company shall pay to the Executive or, in the case of the
Executive's death, to the Executive's designated beneficiaries (or, if there is
no such beneficiary, to the Executive's estate or legal representative) in a
lump sum in cash within 30 days after the Date of Termination, the sum of the
following amounts (the "Accrued Obligations"): (1) any portion of the
Executive's Annual Base Salary through the Date of Termination that has not yet
been paid; (2) an amount representing the target Incentive Compensation for the
year that includes the Date of Termination, computed by assuming that the amount
of all such target Incentive Compensation would be equal to the amount of such
target Incentive Compensation that the Executive would have been eligible to
earn for such period, and multiplying that amount by a fraction, the numerator
of which is the number of days in such period through the Date of Termination,
and the denominator of which is the total number of days in the relevant period
(3) any compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) that has not yet been paid; and (4) any
accrued but unpaid Incentive Compensation and vacation pay; and the Company
shall have no further obligations under this Agreement, except as specified in
Section 6 below. If the Executive's employment is terminated by reason of
Disability, he shall be entitled to receive the maximum disability payments
which can be provided under the disability plans described in Section 3(c)(ii),
reduced, however, by actual disability benefits received under such plans.
(c) By the Company for Cause; by the Executive other than for
Good Reason. If the Executive's employment is terminated by the Company for
Cause during the Employment Period, the Company shall pay the Executive the
Annual Base Salary through the Date of Termination and the amount of any
compensation previously deferred by the Executive (together with any accrued
interest or earnings thereon), in each case to the extent not yet paid, and the
Company shall have no further obligations under this Agreement, except as
specified in Section 6 below. If the Executive voluntarily terminates employment
during the Employment Period, other than for Good Reason, the Company shall pay
the Accrued Obligations to the Executive in a lump sum in cash within 30 days of
the Date of Termination, and the Company shall have no further obligations under
this Agreement, except as specified in Section 6 below.
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6. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies for which the Executive may qualify, nor, subject to paragraph (f) of
Section 12, shall anything in this Agreement limit or otherwise affect such
rights as the Executive may have under any contract or agreement with the
Company or any of its affiliated companies. Vested benefits and other amounts
that the Executive is otherwise entitled to receive under the SERP or any other
plan, policy, practice or program of, or any contract or agreement with, the
Company or any of its affiliated companies on or after the Date of Termination
shall be payable in accordance with the terms of each such plan, policy,
practice, program, contract or agreement, as the case may be, except as
explicitly modified by this Agreement.
7. Full Settlement. The Company's obligation to make the payments
provided for in, and otherwise to perform its obligations under, this Agreement
shall not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action that the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement and, except as
specifically provided in paragraph (a) of Section 5 with respect to benefits
described in clause (B) of paragraph (c)(iii) of Section 3, such amounts shall
not be reduced, regardless of whether the Executive obtains other employment.
8. Non-Competition Provision and Confidential Information.
(a) Without prior written consent of the Company, for the
greater of (i) the twenty-four (24) month period following the Date of
Termination, or (ii) the remaining term of this Agreement, the Executive shall
not, as a shareholder, officer, director, partner, consultant, or otherwise,
engage directly or indirectly in any business or enterprise which is "in
competition" with the Company or its successors or assigns; provided, however,
that the Executive's ownership of less than five percent of the issued and
outstanding voting securities of a publicly-traded company shall not be deemed
to constitute such competition. A business or enterprise is deemed to be "in
competition" if it is engaged in the business of generation, purchase,
transmission, distribution, or sale of electricity, or in the purchase,
transmission, distribution, sale or transportation of natural gas within the
States of Colorado, New Mexico, Texas, Wyoming, Kansas or Oklahoma.
(b) The Executive shall hold in a fiduciary capacity for the
benefit of the Company all secret or confidential information, knowledge or data
relating to the Company or any of its affiliated companies and their respective
businesses that the Executive obtains during the Executive's employment by the
Company or any of its affiliated companies and that is not public knowledge
(other
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than as a result of the Executive's violation of this Section 8) ("Confidential
Information"). The Executive shall not communicate, divulge or disseminate
Confidential Information at any time during or after the Executive's employment
with the Company, except with the prior written consent of the Company or as
otherwise required by law or legal process. In no event shall any asserted
violation of the provisions of this Section 8 constitute a basis for deferring
or withholding any amounts otherwise payable to the Executive under this
Agreement.
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of the Executive (whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this Section 9) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code") or any interest or penalties are incurred by the Executive with respect
to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
the Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of paragraph (c) of this Section
9, all determinations required to be made under this Section 9, including
whether and when a Gross-Up Payment is required and the amount of such Gross-up
Payment and the assumptions to be utilized in arriving at such determination,
shall be made by a nationally recognized certified public accounting firm
designated by the Executive (the "Accounting Firm"), which shall provide
detailed supporting calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by the Company. All fees and
expenses of the Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the
Company to the Executive within five days of the receipt of the Accounting
Firm's determination. Any determination by the Accounting Firm shall be binding
upon the Company and the Executive. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the initial determination
by the Accounting Firm hereunder, it is possible that Gross-Up Payments which
will not have been made by the Company should have been made ("Underpayment")
consistent with the calculations
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required to be made hereunder. In the event that the Company exhausts its
remedies pursuant to paragraph (c) of this Section 9 and the Executive
thereafter is required to make a payment of any Excise Tax, the Accounting Firm
shall determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten business days after the Executive
is informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(i) give the Company any information reasonably requested
by the Company relating to such claim,
(ii) take such action in connection with contesting such
claim as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in order
effectively to contest such claim, and
(iv) permit the Company to participate in any proceedings
relating to such claim;
PROVIDED, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this paragraph (c) of Section 9, the Company shall
control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forego any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may, at its sole option, either direct the Executive to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial
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jurisdiction and in one or more appellate courts, as the Company shall
determine; PROVIDED, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and PROVIDED, further, that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to paragraph (c) of this Section 9, the
Executive becomes entitled to receive any refund with respect to such claim, the
Executive shall (subject to the Company's complying with the requirements of
paragraph (c) of this Section 9) promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon after taxes
applicable thereto). If after the receipt by the Executive of an amount advanced
by the Company pursuant to paragraph (c) of this Section 9, a determination is
made that the Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
10. Attorneys' Fees. The Company agrees to pay, as incurred, to the
fullest extent permitted by law, all legal fees and expenses that the Executive
may reasonably incur as a result of any contest (regardless of the outcome) by
the Company, the Executive or others of the validity or enforceability of or
liability under, or otherwise involving, any provision of this Agreement,
together with interest on any delayed payment at the applicable federal rate
provided for in Section 7872(f)(2)(A) of the Code.
11. Successors.
(a) This Agreement is personal to the Executive and, without
the prior written consent of the Company, shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
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(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would have been required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean both
the Company as defined above and any such successor that assumes and agrees to
perform this Agreement, by operation of law or otherwise.
12. Miscellaneous.
(a) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Colorado, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified except by a written agreement executed by the parties
hereto or their respective successors and legal representatives.
(b) All notices and other communications under this Agreement
shall be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
Mr. Bill D. Helton
7801 Tarrytown Avenue
Amarillo, TX 79121
If to the Company:
M-P New Co.
1225 17th Street
Denver, CO 80202
Attention: General Counsel
or to such other address as either party furnishes to the other in writing in
accordance with this paragraph (b) of Section 12. Notices and communications
shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement. If any provision of this Agreement shall be held
invalid or unenforceable in part, the remaining portion of such provision,
together with all other provisions of this Agreement, shall remain valid and
enforceable and continue in full force and effect to the fullest extent
consistent with law.
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(d) Notwithstanding any other provision of this Agreement, the
Company may withhold from amounts payable under this Agreement all federal,
state, local and foreign taxes that are required to be withheld by applicable
laws or regulations.
(e) The Executive's or the Company's failure to insist upon
strict compliance with any provision of, or to assert any right under, this
Agreement (including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to paragraph (c) of Section 4 of
this Agreement) shall not be deemed to be a waiver of such provision or right or
of any other provision of or right under this Agreement.
(f) The Executive and the Company acknowledge that this
Agreement supersedes and terminates any other severance and employment
agreements between the Executive and the Company, SPS or the Company's
affiliates.
(g) The rights and benefits of the Executive under this
Agreement may not be anticipated, assigned, alienated or subject to attachment,
garnishment, levy, execution or other legal or equitable process except as
required by law. Any attempt by the Executive to anticipate, alienate assign,
sell, transfer, pledge, encumber or charge the same shall be void. Payments
hereunder shall not be considered assets of the Executive in the event of
insolvency or bankruptcy.
(h) This Agreement may be executed in several counterparts,
each of which shall be deemed an original, and said counterparts shall
constitute but one and the same instrument.
IN WITNESS WHEREOF, the Executive has hereunto set the Executive's
hand and, pursuant to the authorization of its Board of Directors, the Company
has caused this Agreement to be executed in its name on its behalf, all as of
the day and year first above written.
-------------------------------
Bill D. Helton
COMPANY
By:______________________________
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EXHIBIT E
EMPLOYMENT AGREEMENT
WAYNE H. BRUNETTI
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TABLE OF CONTENTS
PAGE
Employment Period......................................................... 1
Position and Duties....................................................... 1
Compensation.............................................................. 2
Termination of Employment................................................. 4
Obligations of the Company upon Termination............................... 7
Non-Exclusivity of Rights................................................. 9
Full Settlement........................................................... 9
Non-Competition Provision and Confidential Information.................... 9
Certain Additional Payments by the Company................................ 10
Attorneys' Fees........................................................... 12
Successors................................................................ 13
Miscellaneous............................................................. 13
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EMPLOYMENT AGREEMENT
THIS AGREEMENT by and between M-P New Co., a Delaware corporation (the
"Company"), and Wayne H. Brunetti (the "Executive"), dated as of the ____ day of
__________, 199__.
WITNESSETH THAT
WHEREAS, Public Service Company of Colorado, a Colorado corporation
("PSC") and Southwestern Public Service Company, a New Mexico corporation
("SPS") have entered into an Agreement and Plan of Reorganization dated as of
August 22, 1995 (the "Reorganization Agreement"), whereby wholly owned
subsidiaries of Company will merge into PSC and SPS; and
WHEREAS, PSC and SPS wish to provide for the orderly succession of
management of the Company following the Effective Time (as defined in the
Reorganization Agreement); and
WHEREAS, PSC and SPS further wish to provide for the employment by the
Company of the Executive, and the Executive wishes to serve the Company, in the
capacities and on the terms and conditions set forth in this Agreement;
NOW, THEREFORE, it is hereby agreed as follows:
1. Employment Period. The Company shall employ the Executive, and the
Executive shall serve the Company, on the terms and conditions set forth in this
Agreement, for an initial period (the "Initial Period") and a further period
(the "Secondary Period") (the Initial Period and the Secondary Period are
hereinafter referred to in the aggregate as the "Employment Period"). The
Initial Period shall begin at the Effective Time (as defined in the
Reorganization Agreement the "Effective Time") and end on the later of (i) June
30, 1999, or (ii) two and one-half (2 1/2) years from the Effective Time. The
Secondary Period shall begin on the first day after the end of the Initial
Period and end on May 31, 2001.
2. Position and Duties.
(a) During the Initial Period, the Executive shall serve as
President and Chief Operating Officer of the Company, and as Vice-Chairman of
the Board of the Company (the "Board"). During the Secondary Period, the
Executive shall serve as President of the Company, Chief Executive Officer of
the Company and Vice-Chairman of the Board. The Executive shall serve in each
case as an employee of the Company and with such duties and responsibilities as
are customarily assigned to such positions, and such other duties and
responsibilities not inconsistent therewith as may from time to time be assigned
to him by the Board. The Executive shall
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be a member of the Board on the first day of the Employment Period, and the
Board shall propose the Executive for re-election to the Board throughout the
Employment Period.
(b) During the Initial Period as is customary, the Executive
shall report to the Chief Executive Officer and during the Secondary Period, as
is customary the Executive shall report to the Board.
(c) During the Employment Period, and excluding any periods of
vacation and sick leave to which the Executive is entitled, the Executive shall
devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive under this Agreement, use the
Executive's reasonable best efforts to carry out such responsibilities
faithfully and efficiently. It shall not be considered a violation of the
foregoing for the Executive to serve on corporate, industry, civic or charitable
boards or committees, so long as such activities do not significantly interfere
with the performance of the Executive's responsibilities as an employee of the
Company in accordance with this Agreement.
(d) The Executive's services shall be performed
primarily at the Company's headquarters in Denver, Colorado.
3. Compensation.
(a) Base Salary. The Executive's compensation during the
Employment Period shall be determined by the Board upon the recommendation of
the Compensation Committee of the Board, subject to the next sentence and
Section 3(b). During the Employment Period, the Executive shall receive an
annual base salary ("Annual Base Salary") of not less than his annual base
salary from PSC as in effect immediately before the Effective Time. During the
Initial Period, Executive shall be compensated by the Company and its
subsidiaries at a level that is higher than the compensation from the Company
and its subsidiaries received by any other executive officer of the Company
except the Chief Executive Officer and Chairman of the Board. The Annual Base
Salary shall be payable in accordance with the Company's regular payroll
practice for its senior executives, as in effect from time to time. During the
Employment Period, the Annual Base Salary shall be reviewed at least annually.
Any increase in the Annual Base Salary shall not limit or reduce any other
obligation of the Company under this Agreement.
(b) Incentive Compensation. During the Employment Period, the
Executive shall participate in short-term incentive compensation plans and
long-term incentive compensation plans (the latter to consist of plans offering
stock options, restricted stock and other long-term incentive compensation)
providing him with the opportunity to earn, on a year-by-year basis, short-term
and long-term incentive compensation (the "Incentive Compensation") at least
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equal to the greater of (i) the amounts that he had the opportunity to earn
under the comparable plans of PSC as in effect immediately before the Effective
Time, or (ii) the amounts that the next highest executive officer of the Company
has the opportunity to earn under plans of the Company and its subsidiaries for
that year.
(c) Other Benefits.
(i) Supplemental Executive Retirement Plan. During the
Employment Period, the Executive shall participate in a supplemental executive
retirement plan ("SERP") such that the aggregate value of the retirement
benefits that he and his spouse will receive at the end of the Employment Period
under all defined benefit plans of the Company and its affiliates (whether
qualified or not) will be not less than the aggregate value of the benefits he
and his spouse would have received (and with the same forms of benefit payments)
had he continued, through the end of the Employment Period, to accrue the
supplemental retirement benefits provided by the terms of his employment
agreement with PSC as in effect immediately before the Effective Time. The
Company shall maintain and fund one or more grantor trusts (the "Trusts"), or
such other funding mechanism as may be satisfactory to the Executive, which
shall comply with the following sentence and which shall at all times be
adequate to provide for the payment of all benefits under the SERP to the
Executive, as well as any elective deferrals by the Executive under any
non-qualified plan (with such adequacy being determined by an independent
consulting firm acceptable to the Executive, whose fees shall be paid by the
Company). The assets of the Trusts (if any) shall be subject to the claims of
the Company's creditors, and the Trusts (if any) shall in all other respects be
designed to prevent the Executive and his spouse from being taxed on the assets
or income thereof, except as and when such assets or income are paid to them.
(ii) During the Employment Period, the Company shall
provide the Executive with life insurance coverage providing a death benefit to
such beneficiary or beneficiaries as the Executive may designate of not less
than two times his Annual Base Salary.
(iii) In addition, and without limiting the generality of
the foregoing, during the Employment Period and thereafter: (A) the Executive
shall be entitled to participate in all applicable incentive, savings and
retirement plans, practices, policies and programs of the Company and its
subsidiaries to the same extent as other senior executives of the Company; and
(B) the Executive and/or the Executive's family, as the case may be, shall be
eligible for participation in, and shall receive all benefits under, all
applicable welfare benefit plans, practices, policies and programs provided by
the Company and its subsidiaries, other than severance plans, practices,
policies and programs but including, without limitation, medical, prescription,
dental, disability, sick leave, employee life insurance, group life insurance,
accidental death and travel accident insurance plans and
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programs, to the same extent as other senior executives of the Company.
(d) Fringe Benefits. During the Employment Period, the
Executive shall be entitled to receive fringe benefits on the same terms and
conditions as the greater of (i) the fringe benefits received by, or available
to, him from PSC immediately before the Effective Time, or (ii) the fringe
benefits provided by the Company or its subsidiaries which are available to the
next highest executive officer of the Company for the year.
4. Termination of Employment.
(a) Death or Disability. The Executive's employment shall
terminate automatically upon the Executive's death during the Employment Period.
The Company shall be entitled to terminate the Executive's employment because of
the Executive's Disability during the Employment Period. "Disability" means that
(i) the Executive has been unable, for a period of 180 consecutive business
days, to perform the Executive's duties under this Agreement, as a result of
physical or mental illness or injury, and (i) a physician selected by the
Company or its insurers, and acceptable to the Executive or the Executive's
legal representative, has determined that the Executive's incapacity is total
and permanent. A termination of the Executive's employment by the Company for
Disability shall be communicated to the Executive by written notice, and shall
be effective on the 30th day after receipt of such notice by the Executive (the
"Disability Effective Date"), unless the Executive returns to full-time
performance of the Executive's duties before the Disability Effective Date.
(b) By the Company.
(i) The Company may terminate the Executive's
employment during the Employment Period for Cause or without Cause.
"Cause" means:
A. the willful and continued failure of the
Executive substantially to perform the Executive's duties under this Agreement
(other than as a result of physical or mental illness or injury), after the
Board of the Company delivers to the Executive a written demand for substantial
performance that specifically identifies the manner in which the Board believes
that the Executive has not substantially performed the Executive's duties; or
B. illegal conduct or gross misconduct by the
Executive, in either case that is willful and results in material and
demonstrable damage to the business or reputation of the Company.
No act or failure to act on the part of the Executive shall be
considered "willful" unless it is done, or omitted to be done, by the Executive
in bad faith or without reasonable belief that the
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Executive's action or omission was in the best interests of the Company. Any act
or failure to act that is based upon authority given pursuant to a resolution
duly adopted by the Board, or the advice of counsel for the Company, shall be
conclusively presumed to be done, or omitted to be done, by the Executive in
good faith and in the best interests of the Company.
(ii) A termination of the Executive's employment
for Cause shall be effected in accordance with the following procedures. The
Company shall give the Executive written notice ("Notice of Termination for
Cause") of its intention to terminate the Executive's employment for Cause,
setting forth in reasonable detail the specific conduct of the Executive that it
considers to constitute Cause and the specific provision(s) of this Agreement on
which it relies, and stating the date, time and place of the Special Board
Meeting for Cause. The "Special Board Meeting for Cause" means a meeting of the
Board called and held specifically for the purpose of considering the
Executive's termination for Cause, that takes place not less than ten and not
more than twenty business days after the Executive receives the Notice of
Termination for Cause. The Executive shall be given an opportunity, together
with counsel, to be heard at the Special Board Meeting for Cause. The
Executive's termination for Cause shall be effective when and if a resolution is
duly adopted at the Special Board Meeting for Cause by affirmative vote of at
least the greater of (A) two-thirds (2/3) of the entire membership of the Board
(excluding the Executive who shall not vote on this matter) or (B) ten (10)
members of the Board, stating that in the good faith opinion of the Board, the
Executive is guilty of the conduct described in the Notice of Termination for
Cause, and that conduct constitutes Cause under this Agreement.
(iii) A termination of the Executive's
employment without Cause shall be effective in accordance with the following
procedures. The Company shall give the Executive written notice ("Notice of
Termination without Cause") of its intention to terminate the Executive's
employment without Cause, stating the date, time and place of the Special Board
Meeting without Cause. The "Special Board Meeting without Cause" means a meeting
of the Board called and held specifically for the purpose of considering the
Executive's termination without Cause, that takes place not less than ten and
not more than twenty business days after the Executive receives the Notice of
Termination without Cause. The Executive shall be given an opportunity, together
with counsel, to be heard at the Special Board Meeting without Cause. The
Executive's termination without Cause shall be effective when and if a
resolution is duly adopted at the Special Board Meeting without Cause by
affirmative vote of the greater of (A) at least two-thirds (2/3) of the entire
membership of the Board (excluding the Executive who shall not vote on this
matter) or (B) ten members of the Board stating that the Executive is terminated
without Cause.
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(c) Good Reason.
(i) The Executive may terminate employment for Good
Reason or without Good Reason. "Good Reason" means:
A. the assignment to the Executive of any duties
inconsistent in any respect with paragraph (a) of Section 2 of his Agreement, or
any other action by the Company that results in a diminution in the Executive's
position, authority, duties or responsibilities, other than an isolated,
insubstantial and inadvertent action that is not taken in bad faith and is
remedied by the Company promptly after receipt of notice thereof from the
Executive;
B. any failure by the Company to comply with any
provision of Section 3 of this Agreement, other than an isolated, insubstantial
and inadvertent failure that is not taken in bad faith and is remedied by the
Company promptly after receipt of notice thereof from the Executive;
C. the assignment or reassignment by the Company of the
Executive without the Executive's consent to another place of employment more
than 50 miles from the Company's headquarters indicated in Section 2(d);
D. any purported termination of the Executive's
employment by the Company for a reason or in a manner not expressly permitted by
this Agreement;
E. any failure by the Company to comply with paragraph
(c) of Section 11 of this Agreement; or
F. any other substantial breach of this Agreement by the
Company that either is not taken in good faith or is not remedied by the Company
promptly after receipt of notice thereof from the Executive.
The Company and the Executive, upon mutual written agreement, may waive any of
the foregoing provisions which would otherwise constitute Good Reason.
(ii) A termination of employment by the Executive for
Good Reason shall be effectuated by giving the Company written notice ("Notice
of Termination for Good Reason") of the termination, setting forth in reasonable
detail the specific conduct of the Company that constitutes Good Reason and the
specific provision(s) of this Agreement on which the Executive relies. A
termination of employment by the Executive for Good Reason shall be effective on
the fifth business day following the date when the Notice of Termination for
Good Reason is given, unless the notice sets forth a later date (which date
shall in no event be later than 30 days after the notice is given). For purposes
of this Section 4(c), any good faith determination of "Good Reason" made by the
Executive shall be conclusive.
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(iii) A termination of the Executive's employment
by the Executive without Good Reason shall be effected by giving the Company
written notice of the termination.
(d) No Waiver. The failure to set forth any fact or
circumstance in a Notice of Termination for Cause, a Notice of Termination
without Cause or a Notice of Termination for Good Reason shall not constitute a
waiver of the right to assert, and shall not preclude the party giving notice
from asserting, such fact or circumstance in an attempt to enforce any right
under or provision of this Agreement.
(e) Date of Termination. The "Date of Termination" means the
date of the Executive's death, the Disability Effective Date, the date on which
the termination of the Executive's employment by the Company for Cause or
without Cause or by the Executive for Good Reason is effective, or the date on
which the Executive gives the Company notice of a termination of employment
without Good Reason, as the case may be.
5. Obligations of the Company upon Termination.
(a) By the Company other than for cause or disability; by the
Executive for Good Reason. If, during the Employment Period, the Company
terminates the Executive's employment, other than for Cause or Disability, or
the Executive terminates employment for Good Reason, the Company shall continue
to provide the Executive with the compensation and benefits set forth in
paragraphs (a), (b) and (c) of Section 3 as if he had remained employed by the
Company pursuant to this Agreement through the end of the Employment Period and
then retired (at which time he will be treated as eligible for all retiree
welfare benefits and other benefits provided to retired senior executives, as
set forth in Section 3(c)(ii) and (iii)); PROVIDED, that the Incentive
Compensation for such period shall be based upon the target Incentive
Compensation for the year in which the Date of Termination occurs; PROVIDED,
further, that in lieu of stock options, restricted stock and other stock-based
awards, the Executive shall be paid cash equal to the fair market value as of
the Date of Termination (without regard to any restrictions and based upon a
valuation model generally utilized for purposes of valuing comparable stock
based compensation awards) of the stock options, restricted stock and other
stock-based awards that would otherwise have been granted with such cash being
paid within 90 days after the Date of Termination; PROVIDED, further, that to
the extent any benefits described in paragraph (c) of Section 3 cannot be
provided pursuant to the plan or program maintained by the Company for its
executives, the Company shall provide such benefits outside such plan or program
at no additional cost (including without limitation tax cost) to the Executive
and his family; and PROVIDED, finally, that during any period when the Executive
is eligible to receive benefits of the type described in clause (B) of paragraph
(c)(iii) of Section 3 under another employer-provided plan, the benefits
provided by the Company under paragraph (a) of
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Section 5 may be made secondary to those provided under another plan. In
addition to the foregoing, any restricted stock outstanding on the Date of
Termination shall be fully vested as of the Date of Termination and all options
outstanding on the Date of Termination shall be fully vested and exercisable and
shall remain in effect and exercisable through the end of their respective
terms, without regard to the termination of the Executive's employment. The
payments and benefits provided pursuant to this paragraph (a) of Section 5 are
intended as liquidated damages for a termination of the Executive's employment
by the Company other than for Cause or Disability or for the actions of the
Company leading to a termination of the Executive's employment by the Executive
for Good Reason, and shall be the sole and exclusive remedy therefor.
(b) Death or Disability. If the Executive's employment is
terminated by reason of the Executive's death or Disability during the
Employment Period, the Company shall pay to the Executive or, in the case of the
Executive's death, to the Executive's designated beneficiaries (or, if there is
no such beneficiary, to the Executive's estate or legal representative) in a
lump sum in cash within 30 days after the Date of Termination, the sum of the
following amounts (the "Accrued Obligations"): (1) any portion of the
Executive's Annual Base Salary through the Date of Termination that has not yet
been paid; (2) an amount representing the target Incentive Compensation for the
year that includes the Date of Termination, computed by assuming that the amount
of all such target Incentive Compensation would be equal to the amount of such
target Incentive Compensation that the Executive would have been eligible to
earn for such period, and multiplying that amount by a fraction, the numerator
of which is the number of days in such period through the Date of Termination,
and the denominator of which is the total number of days in the relevant period
(3) any compensation previously deferred by the Executive (together with any
accrued interest or earnings thereon) that has not yet been paid; and (4) any
accrued but unpaid Incentive Compensation and vacation pay; and the Company
shall have no further obligations under this Agreement, except as specified in
Section 6 below. If the Executive's employment is terminated by reason of
Disability, he shall be entitled to receive the maximum disability payments
which can be provided under the disability plans described in Section 3(c)(ii),
reduced, however, by actual disability benefits received under such plans.
(c) By the Company for Cause; by the Executive other than for
Good Reason. If the Executive's employment is terminated by the Company for
Cause during the Employment Period, the Company shall pay the Executive the
Annual Base Salary through the Date of Termination and the amount of any
compensation previously deferred by the Executive (together with any accrued
interest or earnings thereon), in each case to the extent not yet paid, and the
Company shall have no further obligations under this Agreement, except as
specified in Section 6 below. If the Executive voluntarily terminates employment
during the Employment Period, other than for
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Good Reason, the Company shall pay the Accrued Obligations to the Executive in a
lump sum in cash within 30 days of the Date of Termination, and the Company
shall have no further obligations under this Agreement, except as specified in
Section 6 below.
6. Non-Exclusivity of Rights. Nothing in this Agreement shall prevent
or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies for which the Executive may qualify, nor, subject to paragraph (f) of
Section 12, shall anything in this Agreement limit or otherwise affect such
rights as the Executive may have under any contract or agreement with the
Company or any of its affiliated companies. Vested benefits and other amounts
that the Executive is otherwise entitled to receive under the SERP or any other
plan, policy, practice or program of, or any contract or agreement with, the
Company or any of its affiliated companies on or after the Date of Termination
shall be payable in accordance with the terms of each such plan, policy,
practice, program, contract or agreement, as the case may be, except as
explicitly modified by this Agreement.
7. Full Settlement. The Company's obligation to make the payments
provided for in, and otherwise to perform its obligations under, this Agreement
shall not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action that the Company may have against the Executive or
others. In no event shall the Executive be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to the
Executive under any of the provisions of this Agreement and, except as
specifically provided in paragraph (a) of Section 5 with respect to benefits
described in clause (B) of paragraph (c)(iii) of Section 3, such amounts shall
not be reduced, regardless of whether the Executive obtains other employment.
8. Non-Competition Provision and Confidential Information.
(a) Without prior written consent of the Company, for the
greater of (i) the twenty-four (24) month period following the Date of
Termination, or (ii) the remaining term of this Agreement, the Executive shall
not, as a shareholder, officer, director, partner, consultant, or otherwise,
engage directly or indirectly in any business or enterprise which is "in
competition" with the Company or its successors or assigns; provided, however,
that the Executive's ownership of less than five percent of the issued and
outstanding voting securities of a publicly-traded company shall not be deemed
to constitute such competition. A business or enterprise is deemed to be "in
competition" if it is engaged in the business of generation, purchase,
transmission, distribution, or sale of electricity, or in the purchase,
transmission, distribution, sale or transportation of natural gas within the
States of Colorado, New Mexico, Texas, Wyoming, Kansas or Oklahoma.
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(b) The Executive shall hold in a fiduciary capacity for the
benefit of the Company all secret or confidential information, knowledge or data
relating to the Company or any of its affiliated companies and their respective
businesses that the Executive obtains during the Executive's employment by the
Company or any of its affiliated companies and that is not public knowledge
(other than as a result of the Executive's violation of this Section 8)
("Confidential Information"). The Executive shall not communicate, divulge or
disseminate Confidential Information at any time during or after the Executive's
employment with the Company, except with the prior written consent of the
Company or as otherwise required by law or legal process. In no event shall any
asserted violation of the provisions of this Section 8 constitute a basis for
deferring or withholding any amounts otherwise payable to the Executive under
this Agreement.
9. Certain Additional Payments by the Company.
(a) Anything in this Agreement to the contrary
notwithstanding, in the event it shall be determined that any payment or
distribution by the Company to or for the benefit of the Executive (whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments
required under this Section 9) (a "Payment") would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code") or any interest or penalties are incurred by the Executive with respect
to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
the Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
(b) Subject to the provisions of paragraph (c) of this Section
9, all determinations required to be made under this Section 9, including
whether and when a Gross-Up Payment is required and the amount of such Gross-up
Payment and the assumptions to be utilized in arriving at such determination,
shall be made by a nationally recognized certified public accounting firm
designated by the Executive (the "Accounting Firm"), which shall provide
detailed supporting calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by the Company. All fees and
expenses of the Accounting Firm shall be borne solely by the Company. Any
Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the
Company to the Executive within five days of the receipt of the Accounting
Firm's determination. Any determination by the
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Accounting Firm shall be binding upon the Company and the Executive. As a result
of the uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been
made ("Underpayment") consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies pursuant to
paragraph (c) of this Section 9 and the Executive thereafter is required to make
a payment of any Excise Tax, the Accounting Firm shall determine the amount of
the Underpayment that has occurred and any such Underpayment shall be promptly
paid by the Company to or for the benefit of the Executive.
(c) The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten business days after the Executive
is informed in writing of such claim and shall apprise the Company of the nature
of such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:
(i) give the Company any information reasonably
requested by the Company relating to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in
order effectively to contest such claim, and
(iv) permit the Company to participate in any
proceedings relating to such claim;
PROVIDED, however, that the Company shall bear and pay directly all
costs and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax or income tax (including
interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on the
foregoing provisions of this paragraph (c) of Section 9, the Company shall
control all proceedings taken in connection with such contest and, at its sole
option, may pursue or forego any and all
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administrative appeals, proceedings, hearings and conferences with the taxing
authority in respect of such claim and may, at its sole option, either direct
the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to
a determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; PROVIDED, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and hold
the Executive harmless, on an after-tax basis, from any Excise Tax or income tax
(including interest or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with respect to such advance;
and PROVIDED, further, that any extension of the statute of limitations relating
to payment of taxes for the taxable year of the Executive with respect to which
such contested amount is claimed to be due is limited solely to such contested
amount. Furthermore, the Company's control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
(d) If, after the receipt by the Executive of an amount
advanced by the Company pursuant to paragraph (c) of this Section 9, the
Executive becomes entitled to receive any refund with respect to such claim, the
Executive shall (subject to the Company's complying with the requirements of
paragraph (c) of this Section 9) promptly pay to the Company the amount of such
refund (together with any interest paid or credited thereon after taxes
applicable thereto). If after the receipt by the Executive of an amount advanced
by the Company pursuant to paragraph (c) of this Section 9, a determination is
made that the Executive shall not be entitled to any refund with respect to such
claim and the Company does not notify the Executive in writing of its intent to
contest such denial of refund prior to the expiration of 30 days after such
determination, then such advance shall be forgiven and shall not be required to
be repaid and the amount of such advance shall offset, to the extent thereof,
the amount of Gross-Up Payment required to be paid.
10. Attorneys' Fees. The Company agrees to pay, as incurred, to the
fullest extent permitted by law, all legal fees and expenses that the Executive
may reasonably incur as a result of any contest (regardless of the outcome) by
the Company, the Executive or others of the validity or enforceability of or
liability under, or otherwise involving, any provision of this Agreement,
together with interest on any delayed payment at the applicable federal rate
provided for in Section 7872(f)(2)(A) of the Code.
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11. Successors.
(a) This Agreement is personal to the Executive and, without
the prior written consent of the Company, shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.
(c) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company expressly to
assume and agree to perform this Agreement in the same manner and to the same
extent that the Company would have been required to perform it if no such
succession had taken place. As used in this Agreement, "Company" shall mean both
the Company as defined above and any such successor that assumes and agrees to
perform this Agreement, by operation of law or otherwise.
12. Miscellaneous.
(a) This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Colorado, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified except by a written agreement executed by the parties
hereto or their respective successors and legal representatives.
(b) All notices and other communications under this Agreement
shall be in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive:
Wayne H. Brunetti
295 High Street
Denver, CO 80209
If to the Company:
M-P New Co.
1225 17th Street
Denver, CO 80202
Attention: General Counsel
or to such other address as either party furnishes to the other in writing in
accordance with this paragraph (b) of Section 12. Notices and communications
shall be effective when actually received by the addressee.
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(c) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement. If any provision of this Agreement shall be held
invalid or unenforceable in part, the remaining portion of such provision,
together with all other provisions of this Agreement, shall remain valid and
enforceable and continue in full force and effect to the fullest extent
consistent with law.
(d) Notwithstanding any other provision of this Agreement, the
Company may withhold from amounts payable under this Agreement all federal,
state, local and foreign taxes that are required to be withheld by applicable
laws or regulations.
(e) The Executive's or the Company's failure to insist upon
strict compliance with any provision of, or to assert any right under, this
Agreement (including, without limitation, the right of the Executive to
terminate employment for Good Reason pursuant to paragraph (c) of Section 4 of
this Agreement) shall not be deemed to be a waiver of such provision or right or
of any other provision of or right under this Agreement.
(f) The Executive and the Company acknowledge that this
Agreement supersedes and terminates any other severance and employment
agreements between the Executive and the Company, PSC or the Company's
affiliates.
(g) The rights and benefits of the Executive under this
Agreement may not be anticipated, assigned, alienated or subject to attachment,
garnishment, levy, execution or other legal or equitable process except as
required by law. Any attempt by the Executive to anticipate, alienate assign,
sell, transfer, pledge, encumber or charge the same shall be void. Payments
hereunder shall not be considered assets of the Executive in the event of
insolvency or bankruptcy.
(h) This Agreement may be executed in several counterparts,
each of which shall be deemed an original, and said counterparts shall
constitute but one and the same instrument.
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization of its Board of Directors, the Company has
caused this Agreement to be executed in its name on its behalf, all as of the
day and year first above written.
-------------------------------
Wayne H. Brunetti
COMPANY
By:______________________________
15
Joint News Release
Public Service Co. Southwestern Public
of Colorado Service Company
1225 17th Street, Suite 2000 P.O. Box 1261
Denver, Colorado 80202 Amarillo, Texas 79170
(303) 294-8900 (806) 378-2116
PSCo and SPS to Combine in Merger of Equals
Utilities Join to Compete in Evolving Energy Industry
(DENVER, COLO., AND AMARILLO, TEXAS) -- Southwestern
Public Service Company (NYSE:SPS), based in Amarillo, Texas,
and Denver-based Public Service Co. of Colorado (NYSE:PSR)
announced Wednesday that they have entered into a definitive
merger agreement to combine two low-cost utilities and form a
new energy-services holding company that will cover one of the
largest geographic areas in the country.
This "merger of equals" -- which is subject to
approval by shareholders of both companies and various regula-
tory authorities -- was unanimously approved by both companies'
boards of directors in separate meetings Tuesday.
Bill D. Helton, SPS chairman and chief executive
officer, and Del Hock, PSCo chairman and chief executive offi-
cer, said the new company will build on the strengths of each
partner.
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"We are extremely pleased with the natural synergies
and resulting savings of combining our two companies, and we
will be very well-positioned to succeed in our changing elec-
tric utility industry," Hock said.
Helton said the two companies are a natural fit and
complement each other in many areas. "As both companies con-
sidered whether a merger was the right move, both wanted to
ensure joining with a company with low rates. We found that in
each other. The combination will result in one of the premier
low-cost energy providers of the future."
Based on fiscal 1994 results, the new holding company
will have combined annual revenues of approximately $3 billion
and total assets of approximately $6 billion. The companies
expect to save approximately $770 million in the first 10 years
after the merger is completed.
Upon completion of the merger, holders of PSCo common
stock will receive one share of the new holding company stock
for each share of PSCo stock. Holders of SPS common stock will
receive 0.95 shares of the new holding company's stock for
each share of SPS stock. As of August 4, 1995, PSCo had 63.1 million
common shares outstanding and SPS had 40.9 million common shares
outstanding.
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Based on the number of common shares outstanding,
PSCo shareholders will own 61.9 percent of the common equity of
the new holding company, while SPS shareholders will own 38.1
percent. The current combined market capitalization of PSCo
and SPS will result in a $3.2 billion market capitalization of
the new holding company.
It is anticipated that the holding company will adopt
the SPS dividend payment level, adjusted for the exchange
ratio. Based on the exchange ratio, the pro forma dividend for
the new company will be $2.32 per share on an annual basis,
following completion of the merger. The dividend declarations will
be determined by the board of directors of the new holding company.
Debt holders and preferred stockholders will continue
with their present holdings under existing terms.
According to Hock and Helton, the anticipated $770
million savings during a 10-year period will allow the operat-
ing companies to provide "very competitive" electricity rates
in both service areas for many years to come. They said spe-
cific rate plans would be filed with appropriate state public
utilities commissions and the Federal Energy Regulatory Commis-
sion in the near future.
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According to Helton, PSCo adds a faster-growing
service-area economy, natural gas utility operations, and inno-
vative approaches to information technology and energy ser-
vices. SPS brings strong generation and engineering, diversity
of power plants and fuels, and success with wholesale markets
and non-regulated generation projects.
Hock noted that customers also would benefit from the
adoption of the "best practices" of each company, the sharing
of generating capacity and increased leverage in purchasing.
"We will have lower fuel costs for generation; we can defer
additional generating capacity; and we can reduce total inven-
tories," Hock said.
The new company will be a registered public utility
holding company, which will be the parent for both Public Ser-
vice Co. of Colorado and Southwestern Public Service Company.
The corporate offices of the holding company will be in Denver,
with significant operating functions based in Amarillo. SPS
and PSCo will maintain their company headquarters in Amarillo
and Denver, respectively. The board of the new holding company
will consist of eight current directors from PSCo and six cur-
rent directors from SPS.
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Upon the expected completion of the merger in early
1997, PSCo Chairman and Chief Executive Officer Del Hock, who
currently is 60 years old, will retire. SPS Chairman and Chief
Executive Officer Bill D. Helton, 56, will become the company's
chairman and chief executive officer. PSCo President and Chief
Operating Officer Wayne H. Brunetti, 52, will become vice
chairman, president and chief operationg officer of the new
company.
On June 30, 1999 (or two-and-a-half years after the
merger is completed, whichever comes later), Brunetti will
assume the responsibilities of CEO and Helton will remain
chairman. On May 31, 2001, Helton will retire and Brunetti
will add the responsibilities of chairman of the board.
The merger is subject to approval by the shareholders
of both companies. The merger is also subject to approval or
regulatory review by the Federal Energy Regulatory Commission,
the Securities and Exchange Commission, the Federal Trade Com-
mission, the Department of Justice, the Nuclear Regulatory Com-
mission and state regulators in Texas, Colorado, New Mexico,
Wyoming, Oklahoma and Kansas.
Brunetti said the merger agreement has the key ele-
ment to succeed. "I have long believed that if you can satisfy
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customers, you will be successful. This merger is unquestion-
ably a step that enhances our ability to give our customers
what they want and what they want most of all -- low price,"
Brunetti said. "Price is the entry point into today's energy
market."
Brunetti said a transition team -- made up of repre-
sentatives of both companies -- would be responsible for making
recommendations to cut costs and take advantage of the natural
synergies. He said he expected employee reductions would be
approximately 8 percent of the consolidated work force of both
companies. That figure equals 550 to 600 positions out of the
combined work forces of approximately 7,000 employees.
"We pledge to keep employees, customers, share-
holders and regulators informed throughout the transition period,"
Brunetti said.
After the merger, a new transmission line will be
built that connects SPS with PSCo through a high-voltage,
direct-current interconnection.
Helton said the interconnection will enhance competi-
tion in the region's wholesale power markets and will make the
generation and fuel savings possible.
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Upon completion of the merger, the new company will
serve almost 1.5 million electric customers in Colorado, Texas,
New Mexico, Wyoming, Oklahoma, and Kansas. The company also
will provide natural gas service to 933,000 customers in Colo-
rado and Wyoming.
SPS, based in Amarillo, is a regional electric util-
ity that primarily provides service to a population of about
one million people in a 52,000-square-mile area comprising
eastern and southeastern New Mexico, the South Plains and Pan-
handle of Texas, the Oklahoma Panhandle and southwestern Kan-
sas. The company also made wholesale power sales to other
electric systems in 15 states last year.
SPS's generating capability is 52 percent coal-fueled
and 48 percent in other fuels, primarily natural gas. The com-
pany has 12 power plants throughout its system.
SPS subsidiary Utility Engineering Corporation pro-
vides engineering, design and construction management services
to a variety of industries. Another subsidiary, Quixx Corpora-
tion, is involved in a number of non-utility power generation
projects, both nationally and internationally.
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Public Service Co. of Colorado is an electric, natu-
ral gas and thermal energy utility, which serves a
32,000-square-mile area and a population of approximately 2.8
million people in Colorado and in the Cheyenne, Wyo. area.
Headquartered in Denver, the company operates eight
steam-electric plants, nine hydroelectric facilities, a down-
town Denver thermal energy service and an extensive natural gas
system.
PSCo's fuel for generation is approximately 99 per-
cent coal and one percent natural gas. Hydroelectric power
also plays a role in this mix during the warmer months of the
year.
PSCo's subsidiary, e prime, was started January 1995
to provide value-added, energy-related products and services to
energy-using customers and to selected segments of the utility
industry in the United States. Another subsidiary, Natural
Fuels Corp., is building an infrastructure for natural gas
vehicles, and it sells compressed natural gas as a transporta-
tion fuel.
