Document/Exhibit Description Pages Size
1: 8-K Wisconsin Energy Corporation 9 34K
2: EX-2.1 Agreement and Plan of Merger 84 331K
3: EX-2.2 Wec Stock Option Agreement 18 79K
4: EX-2.3 Nsp Stock Option Agreement 18 78K
5: EX-2.4 Committees of the Board of Directors of Primergy 1 6K
6: EX-2.5 Form of Employment Agreement of James J. Howard 30 66K
7: EX-2.6 Form of Employment Agreement of Richard A. Abdoo 27 63K
8: EX-2.7 Amended and Restated Articles of Northern Power 37 124K
Wis Corp
9: EX-99.1 Wec Press Release 5 22K
EXHIBIT (2)-1
AGREEMENT AND PLAN OF MERGER
by and among
NORTHERN STATES POWER COMPANY,
WISCONSIN ENERGY CORPORATION,
NORTHERN POWER WISCONSIN CORP.
AND
WEC SUB CORP.
DATED AS OF APRIL 28, 1995
TABLE OF CONTENTS
Page
----
ARTICLE I
THE MERGERS
SECTION 1.1 The Mergers. . . . . . . . . . . . . . . . . . . 1
SECTION 1.2 Effects of the Mergers . . . . . . . . . . . . . 2
SECTION 1.3 Effective Time of the Mergers. . . . . . . . . . 2
ARTICLE II
TREATMENT OF SHARES
SECTION 2.1 Effect of the Mergers on Capital Stock . . . . . 3
SECTION 2.2 Dissenting Shares. . . . . . . . . . . . . . . . 5
SECTION 2.3 Issuance of New Certificates . . . . . . . . . . 5
ARTICLE III
THE CLOSING
SECTION 3.1 Closing. . . . . . . . . . . . . . . . . . . . . 8
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NSP
SECTION 4.1 Organization and Qualification . . . . . . . . . 8
SECTION 4.2 Subsidiaries . . . . . . . . . . . . . . . . . . 9
SECTION 4.3 Capitalization . . . . . . . . . . . . . . . . . 10
SECTION 4.4 Authority; Non-Contravention; Statutory
Approvals; Compliance. . . . . . . . . . . . . 11
SECTION 4.5 Reports and Financial Statements . . . . . . . . 13
SECTION 4.6 Absence of Certain Changes or Events . . . . . . 13
SECTION 4.7 Litigation . . . . . . . . . . . . . . . . . . . 14
SECTION 4.8 Registration Statement and Proxy
Statement. . . . . . . . . . . . . . . . . . . 14
SECTION 4.9 Tax Matters. . . . . . . . . . . . . . . . . . . 15
SECTION 4.10 Employee Matters; ERISA. . . . . . . . . . . . . 17
SECTION 4.11 Environmental Protection . . . . . . . . . . . . 19
SECTION 4.12 Regulation as a Utility. . . . . . . . . . . . . 22
SECTION 4.13 Vote Required. . . . . . . . . . . . . . . . . . 22
SECTION 4.14 Accounting Matters . . . . . . . . . . . . . . . 22
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SECTION 4.15 Applicability of Certain Minnesota Law . . . . . 23
SECTION 4.16 Opinion of Financial Advisor . . . . . . . . . . 23
SECTION 4.17 Insurance. . . . . . . . . . . . . . . . . . . . 23
SECTION 4.18 Ownership of WEC Common Stock. . . . . . . . . . 23
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WEC
SECTION 5.1 Organization and Qualification . . . . . . . . . 24
SECTION 5.2 Subsidiaries . . . . . . . . . . . . . . . . . . 24
SECTION 5.3 Capitalization . . . . . . . . . . . . . . . . . 25
SECTION 5.4 Authority; Non-Contravention; Statutory
Approvals; Compliance. . . . . . . . . . . . . 26
SECTION 5.5 Reports and Financial Statements . . . . . . . . 28
SECTION 5.6 Absence of Certain Changes or Events . . . . . . 28
SECTION 5.7 Litigation . . . . . . . . . . . . . . . . . . . 29
SECTION 5.8 Registration Statement and Proxy
Statement. . . . . . . . . . . . . . . . . . . 29
SECTION 5.9 Tax Matters. . . . . . . . . . . . . . . . . . . 29
SECTION 5.10 Employee Matters; ERISA. . . . . . . . . . . . . 31
SECTION 5.11 Environmental Protection . . . . . . . . . . . . 34
SECTION 5.12 Regulation as a Utility. . . . . . . . . . . . . 35
SECTION 5.13 Vote Required. . . . . . . . . . . . . . . . . . 35
SECTION 5.14 Accounting Matters . . . . . . . . . . . . . . . 35
SECTION 5.15 Applicability of Certain Wisconsin Law . . . . . 36
SECTION 5.16 Opinion of Financial Advisor . . . . . . . . . . 36
SECTION 5.17 Insurance. . . . . . . . . . . . . . . . . . . . 36
SECTION 5.18 Ownership of Old NSP Common Stock. . . . . . . . 36
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGERS
SECTION 6.1 Covenants of the Parties . . . . . . . . . . . . 36
ARTICLE VII
ADDITIONAL AGREEMENTS
SECTION 7.1 Access to Information. . . . . . . . . . . . . . 46
SECTION 7.2 Joint Proxy Statement and Registration
Statement. . . . . . . . . . . . . . . . . . . 46
SECTION 7.3 Regulatory Matters . . . . . . . . . . . . . . . 48
SECTION 7.4 Shareholder Approval . . . . . . . . . . . . . . 48
SECTION 7.5 Directors' and Officers' Indemnification . . . .. 49
SECTION 7.6 Disclosure Schedules . . . . . . . . . . . . . . 51
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SECTION 7.7 Public Announcements . . . . . . . . . . . . . . 51
SECTION 7.8 Rule 145 Affiliates. . . . . . . . . . . . . . . 52
SECTION 7.9 Employee Agreements and Workforce
Matters. . . . . . . . . . . . . . . . . . . . 52
SECTION 7.10 Employee Benefit Plans . . . . . . . . . . . . . 53
SECTION 7.11 Stock Option and Other Stock Plans . . . . . . . 55
SECTION 7.12 No Solicitations . . . . . . . . . . . . . . . . 56
SECTION 7.13 Company Board of Directors . . . . . . . . . . . 57
SECTION 7.14 Company Officers . . . . . . . . . . . . . . . . 57
SECTION 7.15 Employment Contracts . . . . . . . . . . . . . . 58
SECTION 7.16 Post-Merger Operations . . . . . . . . . . . . . 58
SECTION 7.17 Expenses . . . . . . . . . . . . . . . . . . . . 59
SECTION 7.18 Further Assurances . . . . . . . . . . . . . . . 59
SECTION 7.19 Utility Asset Transfer . . . . . . . . . . . . . 60
SECTION 7.20 Charter and By-law Amendments. . . . . . . . . . 60
ARTICLE VIII
CONDITIONS
SECTION 8.1 Conditions to Each Party's Obligation
to Effect the Mergers. . . . . . . . . . . . . 60
SECTION 8.2 Conditions to Obligation of WEC to
Effect the Mergers . . . . . . . . . . . . . . 62
SECTION 8.3 Conditions to Obligation of NSP to
Effect the Mergers . . . . . . . . . . . . . . 63
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1 Termination. . . . . . . . . . . . . . . . . . . 64
SECTION 9.2 Effect of Termination. . . . . . . . . . . . . . 68
SECTION 9.3 Termination Fee; Expenses. . . . . . . . . . . . 68
SECTION 9.4 Amendment. . . . . . . . . . . . . . . . . . . . 70
SECTION 9.5 Waiver . . . . . . . . . . . . . . . . . . . . . 70
ARTICLE X
GENERAL PROVISIONS
SECTION 10.1 Non-Survival; Effect of Representations
and Warranties . . . . . . . . . . . . . . . . 71
SECTION 10.2 Brokers. . . . . . . . . . . . . . . . . . . . . 71
SECTION 10.3 Notices. . . . . . . . . . . . . . . . . . . . . 71
SECTION 10.4 Miscellaneous. . . . . . . . . . . . . . . . . . 73
SECTION 10.5 Interpretation . . . . . . . . . . . . . . . . . 73
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SECTION 10.6 Counterparts; Effect . . . . . . . . . . . . . . 73
SECTION 10.7 Parties in Interest. . . . . . . . . . . . . . . 74
SECTION 10.8 Waiver of Jury Trial and Certain
Damages. . . . . . . . . . . . . . . . . . . . 74
SECTION 10.9 Enforcement. . . . . . . . . . . . . . . . . . . 74
Exhibit A Form of WEC Stock Option Agreement
Exhibit B Form of NSP Stock Option Agreement
Exhibit 7.8 Form of Affiliate Agreement
Exhibit 7.10(a) Form of NSP Severance Plan
Exhibit 7.10(b) Form of WEC Severance Plan
Exhibit 7.13 Committees of the Board of Directors of the
Company
Exhibit 7.15.1 Form of Employment Agreement of James J.
Howard
Exhibit 7.15.2 Form of Employment Agreement of Richard A.
Abdoo
Exhibit 7.20(b) Form of Amended and Restated Articles of
Incorporation of New NSP
Exhibit 7.20(c) Form of Amended and Restated Articles of
Incorporation of WEC Sub
-iv-
Index of Defined Terms
Term Page
---- ----
1935 Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
affiliate. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Affiliate Agreement. . . . . . . . . . . . . . . . . . . . . . . . 52
Affiliated Employees . . . . . . . . . . . . . . . . . . . . . . . 53
Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Business Combination . . . . . . . . . . . . . . . . . . . . . . . 65
Business Combination Proposal. . . . . . . . . . . . . . . . . . . 56
Cancelled Common Shares. . . . . . . . . . . . . . . . . . . . . . 5
Cancelled Preferred Shares . . . . . . . . . . . . . . . . . . . . 6
Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Closing Agreement. . . . . . . . . . . . . . . . . . . . . . . . . 16
Closing Date . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Committee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Common Certificates. . . . . . . . . . . . . . . . . . . . . . . . 5
Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Company Common Stock . . . . . . . . . . . . . . . . . . . . . . . 4
Company Replacement Plans. . . . . . . . . . . . . . . . . . . . . 54
Company Shares . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Company Stock Plan . . . . . . . . . . . . . . . . . . . . . . . . 54
Confidentiality Agreement. . . . . . . . . . . . . . . . . . . . . 46
control. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Direct Subsidiary. . . . . . . . . . . . . . . . . . . . . . . . . 9
Disclosure Schedules . . . . . . . . . . . . . . . . . . . . . . . 51
Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Environmental Claim. . . . . . . . . . . . . . . . . . . . . . . . 21
Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . 21
Environmental Permits. . . . . . . . . . . . . . . . . . . . . . . 20
ERISA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Exchange Act . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Exchange Agent . . . . . . . . . . . . . . . . . . . . . . . . . . 5
FERC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Final Order. . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Foundation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
GAAP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Governmental Authority . . . . . . . . . . . . . . . . . . . . . . 12
Hazardous Materials. . . . . . . . . . . . . . . . . . . . . . . . 21
HSR Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Indemnified Liabilities. . . . . . . . . . . . . . . . . . . . . . 49
Indemnified Party. . . . . . . . . . . . . . . . . . . . . . . . . 49
Initial Termination Date . . . . . . . . . . . . . . . . . . . . . 64
IRS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Joint Proxy/Registration Statement . . . . . . . . . . . . . . . . 46
joint venture. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
MBCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
-v-
Term Page
---- ----
Mergers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Mr. Abdoo. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Mr. Howard . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
New NSP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
NRC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
NSP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
NSP Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . 17
NSP Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . 3
NSP Disclosure Schedule. . . . . . . . . . . . . . . . . . . . . . 51
NSP Dissenting Shares. . . . . . . . . . . . . . . . . . . . . . . 5
NSP Effective Time . . . . . . . . . . . . . . . . . . . . . . . . 3
NSP Financial Statements . . . . . . . . . . . . . . . . . . . . . 13
NSP Incentive Plan . . . . . . . . . . . . . . . . . . . . . . . . 53
NSP Joint Venture. . . . . . . . . . . . . . . . . . . . . . . . . 9
NSP Material Adverse Effect. . . . . . . . . . . . . . . . . . . . 14
NSP Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
NSP Preferred Shares . . . . . . . . . . . . . . . . . . . . . . . 6
NSP Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . . 4
NSP Required Consents. . . . . . . . . . . . . . . . . . . . . . . 12
NSP Required Statutory Approvals . . . . . . . . . . . . . . . . . 12
NSP SEC Reports. . . . . . . . . . . . . . . . . . . . . . . . . . 13
NSP Shareholders' Approval . . . . . . . . . . . . . . . . . . . . 22
NSP Special Meeting. . . . . . . . . . . . . . . . . . . . . . . . 48
NSP Stock Awards . . . . . . . . . . . . . . . . . . . . . . . . . 55
NSP Stock Option . . . . . . . . . . . . . . . . . . . . . . . . . 55
NSP Stock Option Agreement . . . . . . . . . . . . . . . . . . . . 1
NSP Stock Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 53
NSP Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . 9
NSP Unrestricted Subsidiaries. . . . . . . . . . . . . . . . . . . 10
NSP-W. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
NYSE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Old NSP Common Stock . . . . . . . . . . . . . . . . . . . . . . . 3
Old NSP Preferred Stock. . . . . . . . . . . . . . . . . . . . . . 4
PBGC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
PCBs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Power Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Preferred Certificates . . . . . . . . . . . . . . . . . . . . . . 6
Proxy Statement. . . . . . . . . . . . . . . . . . . . . . . . . . 14
Ratio. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Registration Statement . . . . . . . . . . . . . . . . . . . . . . 14
Reincorporation Effective Time . . . . . . . . . . . . . . . . . . 3
Reincorporation Merger . . . . . . . . . . . . . . . . . . . . . . 1
Release. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Representatives. . . . . . . . . . . . . . . . . . . . . . . . . . 46
SEC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Securities Act . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Stock Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Target Party . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Task Force . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
-vi-
Term Page
---- ----
Tax Return . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Tax Ruling . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Three Year Period. . . . . . . . . . . . . . . . . . . . . . . . . 74
Violation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
WBCL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
WEC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
WEC Article Amendments . . . . . . . . . . . . . . . . . . . . . . 60
WEC Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . 31
WEC Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . 4
WEC Disclosure Schedule. . . . . . . . . . . . . . . . . . . . . . 51
WEC Financial Statements . . . . . . . . . . . . . . . . . . . . . 28
WEC Incentive Plan . . . . . . . . . . . . . . . . . . . . . . . . 53
WEC Joint Venture. . . . . . . . . . . . . . . . . . . . . . . . . 24
WEC Material Adverse Effect. . . . . . . . . . . . . . . . . . . . 28
WEC Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . . 25
WEC Required Consents. . . . . . . . . . . . . . . . . . . . . . . 27
WEC Required Statutory Approvals . . . . . . . . . . . . . . . . . 27
WEC SEC Reports. . . . . . . . . . . . . . . . . . . . . . . . . . 28
WEC Shareholders' Approval . . . . . . . . . . . . . . . . . . . . 35
WEC Special Meeting. . . . . . . . . . . . . . . . . . . . . . . . 48
WEC Stock Option Agreement . . . . . . . . . . . . . . . . . . . . 1
WEC Stock Plan . . . . . . . . . . . . . . . . . . . . . . . . . . 53
WEC Sub. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
WEC Subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . 24
WEC Unrestricted Subsidiaries. . . . . . . . . . . . . . . . . . . 25
WEPCO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
WEPCO Common Stock . . . . . . . . . . . . . . . . . . . . . . . . 25
WEPCO 6% Preferred Stock . . . . . . . . . . . . . . . . . . . . . 25
WEPCO $100 Par Value Serial Preferred Stock. . . . . . . . . . . . 25
WEPCO $25 Par Value Serial Preferred Stock . . . . . . . . . . . . 25
WEPCO Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . 25
WN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
-vii-
AGREEMENT AND PLAN OF MERGER, dated as of April 28, 1995
(this "AGREEMENT"), by and among Northern States Power Company, a
Minnesota corporation ("NSP"), Wisconsin Energy Corporation, a
Wisconsin corporation ("WEC" and, after the Effective Time (as
defined below), the "COMPANY"), Northern Power Wisconsin Corp., a
Wisconsin corporation ("NEW NSP"), and WEC Sub Corp., a Wisconsin
corporation ("WEC SUB").
WHEREAS, NSP and WEC have determined to engage in a
business combination as peer firms in a merger of equals;
WHEREAS, in furtherance thereof, the respective Boards of
Directors of NSP, WEC, New NSP and WEC Sub have approved this
Agreement and the transactions contemplated hereby on the terms and
conditions set forth in this Agreement (such transactions referred
to herein collectively as the "MERGERS");
WHEREAS, the Board of Directors of WEC has approved and
WEC has executed an agreement with NSP in the form of EXHIBIT A
(the "WEC STOCK OPTION AGREEMENT") and the Board of Directors of
NSP has approved and NSP has executed an agreement with WEC in the
form of EXHIBIT B (the "NSP STOCK OPTION AGREEMENT") whereby each
of WEC and NSP, respectively, has granted to the other an option to
purchase shares of its common stock on the terms and conditions
provided in such agreement; and
WHEREAS, for federal income tax purposes, it is intended
that the parties hereto and their respective stockholders will
recognize no gain or loss for federal income tax purposes as a
result of the consummation of the Mergers;
NOW THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained
herein, the parties hereto, intending to be legally bound hereby,
agree as follows:
ARTICLE I
THE MERGERS
Section 1.1 THE MERGERS. Upon the terms and subject to
the conditions of this Agreement:
(i) At the Reincorporation Effective Time (as defined in
SECTION 1.3), NSP shall be merged with and into New NSP (the
"REINCORPORATION MERGER") in accordance with the laws of the
States of Minnesota and Wisconsin. New
NSP shall be the surviving corporation in the Reincorporation
Merger and shall continue its corporate existence under the
laws of the State of Wisconsin. The effects and the
consequences of the Reincorporation Merger shall be as set
forth in SECTION 1.2(a). Throughout this Agreement, the term
"NSP" shall refer to NSP and/or New NSP, as the context
requires.
(ii) At the NSP Effective Time (as defined in
SECTION 1.3), WEC Sub shall be merged with and into New NSP
(the "NSP MERGER") in accordance with the laws of the State of
Wisconsin. New NSP shall be the surviving corporation in the
NSP Merger and shall continue its corporate existence under
the laws of the State of Wisconsin. The effects and the
consequences of the NSP Merger shall be as set forth in
SECTION 1.2(b).
Section 1.2 EFFECTS OF THE MERGERS. (a) At the
Reincorporation Effective Time, (i) the articles of incorporation
of New NSP, as in effect immediately prior to the Reincorporation
Effective Time, shall be the articles of incorporation of the
surviving corporation in the Reincorporation Merger until
thereafter amended as provided by law and such articles of in-
corporation, and (ii) the by-laws of New NSP, as in effect im-
mediately prior to the Reincorporation Effective Time, shall be the
by-laws of the surviving corporation in the Reincorporation Merger
until thereafter amended as provided by law, the articles of
incorporation of the surviving corporation in the Reincorporation
Merger and such by-laws. Subject to the foregoing, the additional
effects of the Reincorporation Merger shall be as provided in the
applicable provisions of the Minnesota Business Corporation Act
(the "MBCA") and the Wisconsin Business Corporation Law (the
"WBCL").
(b) At the NSP Effective Time, (i) the articles of
incorporation of New NSP, as in effect immediately prior to the NSP
Effective Time, shall be the articles of incorporation of the
surviving corporation in the NSP Merger until thereafter amended as
provided by law and such articles of incorporation, and (ii) the
by-laws of New NSP, as in effect immediately prior to the NSP
Effective Time, shall be the by-laws of the surviving corporation
in the NSP Merger until thereafter amended as provided by law, the
articles of incorporation of the surviving corporation in the NSP
Merger and such by-laws. Subject to the foregoing, the additional
effects of the NSP Merger shall be as provided in the applicable
provisions of the WBCL.
Section 1.3 EFFECTIVE TIME OF THE MERGERS. On the
Closing Date (as defined in SECTION 3.1), (a) with respect to the
Reincorporation Merger, articles of merger complying with
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the requirements of the WBCL and the MBCA shall be executed by NSP
and New NSP and shall be filed by New NSP with the Secretary of
State of each of the States of Wisconsin and Minnesota, and (b)
with respect to the NSP Merger, articles of merger complying with
the requirements of the WBCL shall be executed by New NSP and WEC
Sub and shall be filed by New NSP with the Secretary of State of
the State of Wisconsin. The Reincorporation Merger shall become
effective at the time specified in the articles of merger filed
with respect to the Reincorporation Merger (the "REINCORPORATION
EFFECTIVE TIME"). The NSP Merger shall become effective at the
time specified in the articles of merger filed with respect to the
NSP Merger (the "NSP EFFECTIVE TIME" or the "EFFECTIVE TIME"). The
effective time specified in the articles of merger to be filed with
respect to the Reincorporation Merger shall be prior to the
effective time specified in the articles of merger filed with
respect to the NSP Merger.
ARTICLE II
TREATMENT OF SHARES
Section 2.1 EFFECT OF THE MERGERS ON CAPITAL STOCK. (a)
At the Reincorporation Effective Time, by virtue of the
Reincorporation Merger and without any action on the part of any
holder of any capital stock of NSP or New NSP:
(i) CANCELLATION OF NEW NSP STOCK. Each share of Common
Stock, par value $2.50 per share, of New NSP (the "NSP COMMON
STOCK") that is owned by NSP shall be cancelled and shall
cease to exist.
(ii) TREATMENT OF NSP COMMON STOCK. Each issued and
outstanding share of Common Stock, par value $2.50 per share,
of NSP (the "OLD NSP COMMON STOCK"), other than NSP Dissenting
Shares (as defined in SECTION 2.2), shall be cancelled and
converted into the right to receive one fully paid and,
subject to Section 180.0622(2)(b) of the WBCL, as judicially
interpreted, non-assessable share of NSP Common Stock. Upon
such cancellation, all such shares of Old NSP Common Stock
shall cease to exist, and each holder of a certificate
formerly representing any such shares of Old NSP Common Stock
shall cease to have any rights with respect thereto, except
the right to receive the shares of NSP Common Stock to be
issued in consideration therefor and, following the NSP
Merger, the right to receive the shares of Company Common
Stock (as defined in SECTION 2.1(b)(ii)) to be issued in
consideration therefor
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upon the surrender of such certificate in accordance with
SECTION 2.3.
(iii) TREATMENT OF NSP PREFERRED STOCK. Each issued and
outstanding share of Cumulative Preferred Stock, par value
$100.00 per share, of NSP (the "OLD NSP PREFERRED STOCK"),
other than NSP Dissenting Shares, shall be cancelled and
converted into the right to receive one fully paid and, sub-
ject to Section 180.0622(2)(b) of the WBCL, as judicially
interpreted, non-assessable share of Cumulative Preferred
Stock, par value $100.00 per share, of New NSP ("NSP PREFERRED
STOCK") with identical rights (including dividend rates) and
designations to the cancelled share of Old NSP Preferred
Stock. Upon such cancellation, all such shares of Old NSP
Preferred Stock shall cease to exist, and each holder of a
certificate representing any such shares of Old NSP Preferred
Stock shall cease to have any rights with respect thereto, ex-
cept the right to receive the shares of NSP Preferred Stock to
be issued in consideration therefor upon the surrender of such
certificate in accordance with SECTION 2.3.
(b) At the NSP Effective Time, by virtue of the NSP
Merger and without any action on the part of any holder of any
capital stock of New NSP or WEC Sub:
(i) CANCELLATION OF CERTAIN NSP STOCK. Each share of
NSP Common Stock and each share of NSP Preferred Stock that is
owned by New NSP as treasury stock, by subsidiaries of New NSP
or by WEC or any of its subsidiaries shall be cancelled and
cease to exist.
(ii) TREATMENT OF NSP COMMON STOCK. Each issued and
outstanding share of NSP Common Stock (other than shares
cancelled pursuant to SECTION 2.1(b)(i) and NSP Dissenting
Shares) shall be cancelled and converted into the right to
receive 1.626 (the "RATIO") fully paid and, subject to Section
180.0622(2)(b) of the WBCL, as judicially interpreted, non-
assessable shares of Common Stock, par value $.01 per share,
of WEC (the "WEC COMMON STOCK" and, with respect to any period
after the Effective Time, the "COMPANY COMMON STOCK"). Upon
such cancellation, all such Shares of NSP Common Stock shall
cease to exist, and each holder of a certificate formerly
representing any such shares shall cease to have any rights
with respect thereto, except the right to receive the shares
of Company Common Stock to be issued in consideration therefor
upon the surrender of such certificate in accordance with
Section 2.3.
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(iii) NO CHANGE IN NSP PREFERRED STOCK. Each issued and
outstanding share of NSP Preferred Stock (other than shares
cancelled pursuant to SECTION 2.1(b)(i)) shall be unchanged as
a result of the NSP Merger and shall remain outstanding
thereafter.
(iv) TREATMENT OF WEC SUB STOCK. Each issued and
outstanding share of Common Stock, par value $.01 per share,
of WEC Sub shall be cancelled and converted into one fully
paid and, subject to Section 180.0622(2)(b) of the WBCL, as
judicially interpreted, non-assessable share of NSP Common
Stock.
Section 2.2 DISSENTING SHARES. Shares of Old NSP Common
Stock and Old NSP Preferred Stock held by any holder entitled to
relief as a dissenting shareholder under Section 471 of the MBCA
(the "NSP DISSENTING SHARES") shall not become the right to receive
NSP Common Stock or NSP Preferred Stock, as the case may be, in the
Reincorporation Merger or, in the case of Old NSP Common Stock,
into the right to receive Company Common Stock in the NSP Merger,
but shall be cancelled and converted into such consideration as may
be due with respect to such shares pursuant to the applicable
provisions of the MBCA, unless and until the right of such holder
to receive fair cash value for such NSP Dissenting Shares
terminates in accordance with Section 473 of the MBCA. If such
right is terminated otherwise than by the purchase of such shares
by NSP, then such shares shall cease to be NSP Dissenting Shares
and shall represent the right to receive Company Common Stock, as
provided in SECTION 2.1(b), or NSP Preferred Stock, as provided in
SECTION 2.1(a).
Section 2.3 ISSUANCE OF NEW CERTIFICATES.
(a) DEPOSIT WITH EXCHANGE AGENT. As soon as practicable
after the Effective Time, the Company shall deposit with such bank
or trust company mutually agreeable to WEC and NSP (the "EXCHANGE
AGENT"), certificates representing shares of Company Common Stock
and NSP Preferred Stock required to effect the issuances referred
to in SECTION 2.1, together with cash payable in respect of
fractional shares pursuant to SECTION 2.3(d).
(b) ISSUANCE PROCEDURES. As soon as practicable after
the Effective Time, the Exchange Agent shall mail (x) to each
holder of record of a certificate or certificates (the "COMMON
CERTIFICATES") which immediately prior to the Reincorporation
Effective Time represented outstanding shares of Old NSP Common
Stock (the "CANCELLED COMMON Shares") that were cancelled and
became instead the right to receive shares of
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Company Common Stock (the "COMPANY SHARES") pursuant to SECTION 2.1
and (y) to each holder of record of a certificate or certificates
(the "PREFERRED CERTIFICATES" and together with the Common Certifi-
cates, the "CERTIFICATES") which immediately prior to the
Reincorporation Effective Time represented outstanding shares of
Old NSP Preferred Stock (the "CANCELLED PREFERRED SHARES") that
were cancelled and became instead the right to receive NSP
Preferred Stock (the "NSP PREFERRED SHARES") pursuant to SECTION
2.1(a)(iii), (i) a letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon actual delivery of the
Certificates to the Exchange Agent) and (ii) instructions for use
in effecting the surrender of the Certificates in exchange for
certificates representing Company Shares (or NSP Preferred Shares,
as the case may be). Upon surrender of a Certificate to the
Exchange Agent for cancellation (or to such other agent or agents
as may be appointed by agreement of NSP and WEC), together with a
duly executed letter of transmittal and such other documents as the
Exchange Agent shall require, the holder of such Certificate shall
be entitled to receive a certificate representing that number of
whole Company Shares (or NSP Preferred Shares, as the case may be)
which such holder has the right to receive pursuant to the
provisions of this ARTICLE II. In the event of a transfer of
ownership of Cancelled Common Shares (or Cancelled Preferred
Shares) which is not registered in the transfer records of NSP, a
certificate representing the proper number of Company Shares (or
NSP Preferred Shares, as the case may be) may be issued to a
transferee if the Certificate representing such Cancelled Common
Shares (or Cancelled Preferred Shares, as the case may be) is
presented to the Exchange Agent, accompanied by all documents
required to evidence and effect such transfer and by evidence
satisfactory to the Exchange Agent that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated
by this SECTION 2.3, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive
upon such surrender the certificate representing Company Shares (or
NSP Preferred Shares, as the case may be) and cash in lieu of any
fractional shares of Company Common Stock as contemplated by this
SECTION 2.3.
(c) DISTRIBUTIONS WITH RESPECT TO UNSURRENDERED SHARES.
No dividends or other distributions declared or made after the
Effective Time with respect to Company Shares or NSP Preferred
Shares with a record date after the Effective Time shall be paid to
the holder of any unsurrendered Certificate with respect to the
Company Shares or NSP Preferred Shares represented thereby and no
cash payment in lieu of fractional shares shall be paid to any such
holder pursuant to SECTION
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2.3(d) until the holder of record of such Certificate shall
surrender such Certificate. Subject to the effect of unclaimed
property, escheat and other applicable laws, following surrender of
any such Certificate, there shall be paid to the record holder of
the certificates representing whole Company Shares or NSP Preferred
Shares issued in consideration therefor, without interest, (i) at
the time of such surrender, the amount of any cash payable in lieu
of a fractional share of Company Common Stock to which such holder
is entitled pursuant to SECTION 2.3(d) and the amount of dividends
or other distributions with a record date after the Effective Time
theretofore paid with respect to such whole Company Shares or NSP
Preferred Shares and (ii) at the appropriate payment date, the
amount of dividends or other distributions with a record date after
the Effective Time but prior to surrender and a payment date sub-
sequent to surrender payable with respect to such whole Company
Shares or NSP Preferred Shares, as the case may be.
(d) NO FRACTIONAL SECURITIES. Notwithstanding any other
provision of this Agreement, no certificates or scrip representing
fractional shares of Company Common Stock shall be issued upon the
surrender for exchange of Certificates and such fractional shares
shall not entitle the owner thereof to vote or to any other rights
of a holder of Company Common Stock. A holder of NSP Common Stock
who would otherwise have been entitled to a fractional share of
Company Common Stock shall be entitled to receive a cash payment in
lieu of such fractional share in an amount equal to the product of
such fraction multiplied by the average of the last reported sales
price, regular way, per share of Old NSP Common Stock on the New
York Stock Exchange ("NYSE") Composite Tape for the ten business
days prior to and including the last business day on which Old NSP
Common Stock was traded on the NYSE, without any interest thereon.
(e) CLOSING OF TRANSFER BOOKS. From and after the NSP
Effective Time the stock transfer books of NSP shall be closed and
no transfer of any capital stock of NSP shall thereafter be made.
If, after the Effective Time, Certificates are presented to the
Company, they shall be cancelled and exchanged for certificates
representing the appropriate number of Company Shares or NSP
Preferred Shares, as the case may be, as provided in this SECTION
2.3.
(f) TERMINATION OF EXCHANGE AGENT. Any certificates
representing Company Shares or NSP Preferred Shares deposited with
the Exchange Agent pursuant to SECTION 2.3(a) and not exchanged
within one year after the Effective Time pursuant to this
SECTION 2.3 shall be returned by the Exchange Agent to the Company,
which shall thereafter act as Exchange Agent. All
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funds held by the Exchange Agent for payment to the holders of
unsurrendered Certificates and unclaimed at the end of one year
from the Effective Time shall be returned to the Company, after
which time any holder of unsurrendered Certificates shall look as
a general creditor only to the Company for payment of such funds to
which such holder may be due, subject to applicable law. The
Company shall not be liable to any person for such shares or funds
delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
ARTICLE III
THE CLOSING
Section 3.1 CLOSING. The closing of the Mergers (the
"CLOSING") shall take place at the offices of Wachtell, Lipton,
Rosen & Katz, 51 West 52nd Street, New York, New York at 10:00
A.M., local time, on the second business day immediately following
the date on which the last of the conditions set forth in ARTICLE
VIII hereof is fulfilled or waived, or at such other time and date
and place as NSP and WEC shall mutually agree (the "CLOSING DATE").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF NSP
NSP represents and warrants to WEC as follows:
Section 4.1 ORGANIZATION AND QUALIFICATION. Except as
set forth in Section 4.1 of the NSP Disclosure Schedule (as defined
in SECTION 7.6(ii)), each of NSP and each of the NSP Subsidiaries
(as defined below) is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has all requisite corporate power
and authority, and has been duly authorized by all necessary
approvals and orders to own, lease and operate its assets and
properties to the extent owned, leased and operated and to carry on
its business as it is now being conducted and is duly qualified and
in good standing to do business in each jurisdiction in which the
nature of its business or the ownership or leasing of its assets
and properties makes such qualification necessary. As used in this
Agreement, (a) the term "SUBSIDIARY" of a person shall mean any
corporation or other entity (including partnerships and other
business associations) of which at least a majority of the
outstanding capital stock or other voting securities having voting
power under ordinary circumstances to elect directors or
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similar members of the governing body of such corporation or entity
shall at the time be held, directly or indirectly, by such person,
(b) the term "NSP SUBSIDIARY" shall mean those of the subsidiaries
of NSP identified as NSP Subsidiaries in Section 4.2 of the NSP
Disclosure Schedule and (c) the term "DIRECT SUBSIDIARY" shall be
deemed to mean NSP Subsidiaries or WEC Subsidiaries (as defined in
Section 5.1), as the case may be.
Section 4.2 SUBSIDIARIES. Section 4.2 of the NSP
Disclosure Schedule sets forth a description as of the date hereof,
of all subsidiaries and joint ventures of NSP, including (a) the
name of each such entity and NSP's interest therein, and (b) as to
each NSP Subsidiary and NSP Joint Venture (as defined below), a
brief description of the principal line or lines of business
conducted by each such entity. Except as set forth in Section 4.2
of the NSP Disclosure Schedule, none of the NSP Subsidiaries is a
"public utility company", a "holding company", a "subsidiary
company" or an "affiliate" of any public utility company within the
meaning of Section 2(a)(5), 2(a)(7), 2(a)(8) or 2(a)(11) of the
Public Utility Holding Company Act of 1935, as amended (the "1935
ACT"), respectively. Except as set forth in Section 4.2 of the NSP
Disclosure Schedule, all of the issued and outstanding shares of
capital stock of each NSP Subsidiary are validly issued, fully
paid, nonassessable (subject to Section 180.0622(2)(b) of the WBCL,
as judicially interpreted, in the case of New NSP and NSP-W (as
defined in Section 4.12)) and free of preemptive rights, and are
owned, directly or indirectly, by NSP free and clear of any liens,
claims, encumbrances, security interests, equities, charges and
options of any nature whatsoever and there are no outstanding
subscriptions, options, calls, contracts, voting trusts, proxies or
other commitments, understandings, restrictions, arrangements,
rights or warrants, including any right of conversion or exchange
under any outstanding security, instrument or other agreement,
obligating any such NSP Subsidiary to issue, deliver or sell, or
cause to be issued, delivered or sold, additional shares of its
capital stock or obligating it to grant, extend or enter into any
such agreement or commitment. As used in this Agreement, (a) the
term "JOINT VENTURE" of a person shall mean any corporation or
other entity (including partnerships and other business asso-
ciations) that is not a subsidiary of such person, in which such
person or one or more of its subsidiaries owns an equity interest,
other than equity interests held for passive investment purposes
which are less than 5% of any class of the outstanding voting
securities or equity of any such entity and (b) the term "NSP JOINT
VENTURE" shall mean those of the joint ventures of NSP or any NSP
Subsidiary identified as a NSP Joint Venture in Section 4.2 of the
NSP Disclosure Schedule. With respect to the subsidiaries
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and joint ventures of NSP that are not NSP Subsidiaries (the "NSP
UNRESTRICTED SUBSIDIARIES"): (i) except as set forth in Section
4.2 of the NSP Disclosure Schedule, neither NSP nor any NSP Sub-
sidiary is liable for any obligations or liabilities of any NSP
Unrestricted Subsidiary; (ii) neither NSP nor any NSP Subsidiary is
obligated to make any loans or capital contributions to, or to
undertake any guarantees or other obligations with respect to, NSP
Unrestricted Subsidiaries, except for loans, capital contributions,
guarantees and other obligations not in excess of $75,000,000 in
the aggregate to all such NSP Unrestricted Subsidiaries; and (iii)
the aggregate book value as of December 31, 1994, of NSP's invest-
ment in the NSP Unrestricted Subsidiaries was not in excess of
$300,000,000.
Section 4.3 CAPITALIZATION. The authorized capital
stock of NSP consists of 160,000,000 shares of Old NSP Common
Stock, and 7,000,000 shares of Old NSP Preferred Stock. As of the
close of business on April 20, 1995, there were issued and
outstanding 67,275,241 shares of Old NSP Common Stock and 2,400,000
shares of Old NSP Preferred Stock, consisting of: 275,000 shares
of $3.60 series; 150,000 shares of $4.08 series; 175,000 shares of
$4.10 series; 200,000 shares of $4.11 series; 100,000 shares of
$4.16 series; 150,000 shares of $4.56 series; 200,000 shares of
$6.80 series; 200,000 shares of $7.00 series; 300,000 shares of
Adjustable Rate Series A; and 650,000 shares of Adjustable Rate
Series B. All of the issued and outstanding shares of the capital
stock of NSP are, and any shares of Old NSP Common Stock issued
pursuant to the NSP Stock Option Agreement will be, validly issued,
fully paid, nonassessable and free of preemptive rights. Except as
set forth in Section 4.3 of the NSP Disclosure Schedule, as of the
date hereof, there are no outstanding subscriptions, options,
calls, contracts, voting trusts, proxies or other commitments,
understandings, restrictions, arrangements, rights or warrants, in-
cluding any right of conversion or exchange under any outstanding
security, instrument or other agreement, obligating NSP or any of
the NSP Subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of the capital stock
of NSP, or obligating NSP to grant, extend or enter into any such
agreement or commitment, other than under the NSP Stock Option
Agreement. There are no outstanding stock appreciation rights of
NSP which were not granted in tandem with a related stock option
and no outstanding limited stock appreciation rights or other
rights to redeem for cash options or warrants of NSP.
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Section 4.4 AUTHORITY; NON-CONTRAVENTION; STATUTORY
APPROVALS; COMPLIANCE.
(a) AUTHORITY. NSP has all requisite power and au-
thority to enter into this Agreement and the NSP Stock Option
Agreement, and, subject to the applicable NSP Shareholders'
Approval (as defined in SECTION 4.13) and the applicable NSP
Required Statutory Approvals (as defined in SECTION 4.4(c)), to
consummate the transactions contemplated hereby or thereby. The
execution and delivery of this Agreement and the NSP Stock Option
Agreement and the consummation by NSP of the transactions
contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of NSP, subject to obtaining
the applicable NSP Shareholders' Approval. Each of this Agreement
and the NSP Stock Option Agreement has been duly and validly
executed and delivered by NSP and, assuming the due authorization,
execution and delivery hereof and thereof by the other signatories
hereto and thereto, constitutes the valid and binding obligation of
NSP enforceable against it in accordance with its terms.
(b) NON-CONTRAVENTION. Except as set forth in Section
4.4(b) of the NSP Disclosure Schedule, the execution and delivery
of this Agreement and the NSP Stock Option Agreement by NSP do not,
and the consummation of the transactions contemplated hereby or
thereby will not, in any material respect, violate, conflict with,
or result in a material breach of any provision of, or constitute
a material default (with or without notice or lapse of time or
both) under, or result in the termination or modification of, or
accelerate the performance required by, or result in a right of
termination, cancellation, or acceleration of any obligation or the
loss of a material benefit under, or result in the creation of any
material lien, security interest, charge or encumbrance upon any of
the properties or assets of NSP or any of the NSP Subsidiaries or
NSP Joint Ventures (any such violation, conflict, breach, default,
right of termination, modification, cancellation or acceleration,
loss or creation, a "VIOLATION" with respect to NSP, such term when
used in ARTICLE V having a correlative meaning with respect to WEC)
pursuant to any provisions of (i) the articles of incorporation,
by-laws or similar governing documents of NSP or any of the NSP
Subsidiaries or the NSP Joint Ventures, (ii) subject to obtaining
the NSP Required Statutory Approvals and the receipt of the NSP
Shareholders' Approval, any statute, law, ordinance, rule,
regulation, judgment, decree, order, injunction, writ, permit or
license of any Governmental Authority (as defined in SECTION
4.4(c)) applicable to NSP or any of the NSP Subsidiaries or the NSP
Joint Ventures or any of their respective properties or assets or
(iii) subject to obtaining the third-party consents set forth in
Section 4.4(b) of the NSP
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Disclosure Schedule (the "NSP REQUIRED CONSENTS") any material
note, bond, mortgage, indenture, deed of trust, license, franchise,
permit, concession, contract, lease or other instrument, obligation
or agreement of any kind to which NSP or any of the NSP
Subsidiaries or the NSP Joint Ventures is a party or by which it or
any of its properties or assets may be bound or affected.
(c) STATUTORY APPROVALS. No declaration, filing or
registration with, or notice to or authorization, consent or
approval of, any court, federal, state, local or foreign gov-
ernmental or regulatory body (including a stock exchange or other
self-regulatory body) or authority (each, a "GOVERNMENTAL
AUTHORITY") is necessary for the execution and delivery of this
Agreement or the NSP Stock Option Agreement by NSP or the con-
summation by NSP of the transactions contemplated hereby or
thereby, except as described in Section 4.4(c) of the NSP Dis-
closure Schedule (the "NSP REQUIRED STATUTORY APPROVALS", it being
understood that references in this Agreement to "obtaining" such
NSP Required Statutory Approvals shall mean making such
declarations, filings or registrations; giving such notices;
obtaining such authorizations, consents or approvals; and having
such waiting periods expire as are necessary to avoid a violation
of law).
(d) COMPLIANCE. Except as set forth in Section 4.4(d),
Section 4.10 or Section 4.11 of the NSP Disclosure Schedule, or as
disclosed in the NSP SEC Reports (as defined in SECTION 4.5) filed
prior to the date hereof, neither NSP nor any of the NSP
Subsidiaries nor, to the knowledge of NSP, any NSP Joint Venture is
in material violation of, is under investigation with respect to
any material violation of, or has been given notice or been charged
with any material violation of, any law, statute, order, rule,
regulation, ordinance or judgment (including, without limitation,
any applicable environmental law, ordinance or regulation) of any
Governmental Authority. Except as set forth in Section 4.4(d) of
the NSP Disclosure Schedule or in Section 4.11 of the NSP
Disclosure Schedule, NSP and the NSP Subsidiaries and NSP Joint
Ventures have all permits, licenses, franchises and other
governmental authorizations, consents and approvals necessary to
conduct their businesses as presently conducted in all material re-
spects. Except as set forth in Section 4.4(d) of the NSP Dis-
closure Schedule, NSP and each of the NSP Subsidiaries is not in
material breach or violation of or in material default in the
performance or observance of any term or provision of, and no event
has occurred which, with lapse of time or action by a third party,
could result in a material default under, (i) its
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articles of incorporation or by-laws or (ii) any material contract,
commitment, agreement, indenture, mortgage, loan agreement, note,
lease, bond, license, approval or other instrument to which it is
a party or by which it is bound or to which any of its property is
subject.
Section 4.5 REPORTS AND FINANCIAL STATEMENTS. The
filings required to be made by NSP and the NSP Subsidiaries since
January 1, 1990 under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT"), the 1935 Act, the Federal Power Act (the
"POWER ACT"), the Atomic Energy Act and applicable state laws and
regulations have been filed with the Securities and Exchange
Commission (the "SEC"), the Federal Energy Regulatory Commission
(the "FERC"), the Nuclear Regulatory Commission ("NRC") or the
appropriate state public utilities commission, as the case may be,
including all forms, statements, reports, agreements (oral or
written) and all documents, exhibits, amendments and supplements
appertaining thereto, and complied, as of their respective dates,
in all material respects with all applicable requirements of the
appropriate statute and the rules and regulations thereunder. NSP
has made available to WEC a true and complete copy of each report,
schedule, registration statement and definitive proxy statement
filed by NSP with the SEC since January 1, 1992 (as such documents
have since the time of their filing been amended, the "NSP SEC
REPORTS"). As of their respective dates, the NSP SEC Reports did
not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited consolidated
financial statements and unaudited interim financial statements of
NSP included in the NSP SEC Reports (collectively, the "NSP
FINANCIAL STATEMENTS") have been prepared in accordance with
generally accepted accounting principles applied on a consistent
basis ("GAAP") (except as may be indicated therein or in the notes
thereto and except with respect to unaudited statements as
permitted by Form 10-Q of the SEC) and fairly present the financial
position of NSP as of the dates thereof and the results of its
operations and cash flows for the periods then ended, subject, in
the case of the unaudited interim financial statements, to normal,
recurring audit adjustments. True, accurate and complete copies of
the Restated Articles of Incorporation and by-laws of NSP, as in
effect on the date hereof, are included (or incorporated by
reference) in the NSP SEC Reports.
Section 4.6 ABSENCE OF CERTAIN CHANGES OR EVENTS.
Except as disclosed in the NSP SEC Reports filed prior to the
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date hereof or as set forth in Section 4.6 of the NSP Disclosure
Schedule, from December 31, 1994, NSP and each of the NSP
Subsidiaries have conducted their business only in the ordinary
course of business consistent with past practice and there has not
been, and no fact or condition exists which would have or, insofar
as reasonably can be foreseen, could have, a material adverse
effect on the business, assets, financial condition, results of
operations or prospects of NSP and its subsidiaries taken as a
whole (a "NSP MATERIAL ADVERSE EFFECT").
Section 4.7 LITIGATION. Except as disclosed in the NSP
SEC Reports filed prior to the date hereof or as set forth in
Section 4.7, Section 4.9 or Section 4.11 of the NSP Disclosure
Schedule, (i) there are no material claims, suits, actions or
proceedings, pending or, to the knowledge of NSP, threatened, nor
are there, to the knowledge of NSP, any material investigations or
reviews pending or threatened against, relating to or affecting NSP
or any of the NSP Subsidiaries, (ii) there have not been any
significant developments since December 31, 1994 with respect to
such disclosed claims, suits, actions, proceedings, investigations
or reviews and (iii) there are no material judgments, decrees,
injunctions, rules or orders of any court, governmental department,
commission, agency, instrumentality or authority or any arbitrator
applicable to NSP or any of the NSP Subsidiaries.
Section 4.8 REGISTRATION STATEMENT AND PROXY STATEMENT.
None of the information supplied or to be supplied by or on behalf
of NSP for inclusion or incorporation by reference in (i) the
registration statement on Form S-4 to be filed with the SEC by the
Company in connection with the issuance of shares of Company Common
Stock in the Mergers (the "REGISTRATION STATEMENT") will, at the
time the Registration Statement is filed with the SEC and at the
time it becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading and (ii) the joint proxy
statement, in definitive form, relating to the meetings of NSP and
WEC shareholders to be held in connection with the Mergers (the
"PROXY STATEMENT") will not, at the dates mailed to shareholders
and at the times of the meetings of shareholders to be held in
connection with the Mergers, contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made,
not misleading. The Registration Statement and the Proxy Statement
will comply as to form in all material respects with the provisions
of the Securities Act and the Exchange Act and the rules and
regulations thereunder.
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Section 4.9 TAX MATTERS. "TAXES", as used in this
Agreement, means any federal, state, county, local or foreign
taxes, charges, fees, levies, or other assessments, including all
net income, gross income, sales and use, AD VALOREM, transfer,
gains, profits, excise, franchise, real and personal property,
gross receipt, capital stock, production, business and occupation,
disability, employment, payroll, license, estimated, stamp, custom
duties, severance or withholding taxes or charges imposed by any
governmental entity, and includes any interest and penalties (civil
or criminal) on or additions to any such taxes. "TAX RETURN", as
used in this Agreement, means a report, return or other information
required to be supplied to a governmental entity with respect to
Taxes including, where permitted or required, combined or
consolidated returns for any group of entities that includes NSP or
any of its subsidiaries, or WEC or any of its subsidiaries, as the
case may be.
Except as set forth in Section 4.9 of the NSP Disclosure
Schedule:
(a) FILING OF TIMELY TAX RETURNS. NSP and each of the
NSP Subsidiaries have filed (or there has been filed on its
behalf) all material Tax Returns required to be filed by each
of them under applicable law. All such Tax Returns were and
are in all material respects true, complete and correct and
filed on a timely basis.
(b) PAYMENT OF TAXES. NSP and each of the NSP Sub-
sidiaries have, within the time and in the manner prescribed
by law, paid all Taxes that are currently due and payable
except for those contested in good faith and for which
adequate reserves have been taken.
(c) TAX RESERVES. NSP and the NSP Subsidiaries have
established on their books and records reserves adequate to
pay all Taxes and reserves for deferred income taxes in
accordance with GAAP.
(d) TAX LIENS. There are no Tax liens upon the assets
of NSP or any of the NSP Subsidiaries except liens for Taxes
not yet due.
(e) WITHHOLDING TAXES. NSP and each of the NSP
Subsidiaries have complied in all material respects with the
provisions of the Internal Revenue Code of 1986, as amended
(the "CODE") relating to the withholding of Taxes, as well as
similar provisions under any other laws, and have, within the
time and in the manner prescribed by law, withheld from
employee wages and paid over to the proper governmental
authorities all amounts required.
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(f) EXTENSIONS OF TIME FOR FILING TAX RETURNS. Neither
NSP nor any of the NSP Subsidiaries has requested any
extension of time within which to file any Tax Return, which
Tax Return has not since been filed.
(g) WAIVERS OF STATUTE OF LIMITATIONS. Neither NSP nor
any of the NSP Subsidiaries has executed any outstanding
waivers or comparable consents regarding the application of
the statute of limitations with respect to any Taxes or Tax
Returns.
(h) EXPIRATION OF STATUTE OF LIMITATIONS. The statute
of limitations for the assessment of all Taxes has expired for
all applicable Tax Returns of NSP and each of the NSP
Subsidiaries or those Tax Returns have been examined by the
appropriate taxing authorities for all periods through the
date hereof, and no deficiency for any Taxes has been
proposed, asserted or assessed against NSP or any of the NSP
Subsidiaries that has not been resolved and paid in full.
(i) AUDIT, ADMINISTRATIVE AND COURT PROCEEDINGS. No
audits or other administrative proceedings or court pro-
ceedings are presently pending with regard to any Taxes or Tax
Returns of NSP or any of the NSP Subsidiaries.
(j) POWERS OF ATTORNEY. No power of attorney currently
in force has been granted by NSP or any of the NSP
Subsidiaries concerning any Tax matter.
(k) TAX RULINGS. Neither NSP nor any of the NSP
Subsidiaries has received a Tax Ruling (as defined below) or
entered into a Closing Agreement (as defined below) with any
taxing authority that would have a continuing adverse effect
after the Closing Date. "TAX RULING", as used in this
Agreement, shall mean a written ruling of a taxing authority
relating to Taxes. "CLOSING AGREEMENT", as used in this
Agreement, shall mean a written and legally binding agreement
with a taxing authority relating to Taxes.
(l) AVAILABILITY OF TAX RETURNS. NSP has made available
to WEC complete and accurate copies of (i) all Tax Returns,
and any amendments thereto, filed by NSP or any of the NSP
Subsidiaries, (ii) all audit reports received from any taxing
authority relating to any Tax Return filed by NSP or any of
the NSP Subsidiaries and (iii) any Closing Agreements entered
into by NSP or any of the NSP Subsidiaries with any taxing
authority.
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(m) TAX SHARING AGREEMENTS. Neither NSP nor any NSP
Subsidiary is a party to any agreement relating to allocating
or sharing of Taxes.
(n) CODE SECTION 280G. Neither NSP nor any of the NSP
Subsidiaries is a party to any agreement, contract, or
arrangement that could result, on account of the transactions
contemplated hereunder, separately or in the aggregate, in the
payment of any "excess parachute payments" within the meaning
of Section 280G of the Code.
(o) LIABILITY FOR OTHERS. None of NSP or any of the NSP
Subsidiaries has any liability for Taxes of any person other
than NSP and the NSP Subsidiaries (i) under Treasury
Regulations Section 1.1502-6 (or any similar provision of
state, local or foreign law) as a transferee or successor,
(ii) by contract, or (iii) otherwise.
Section 4.10 EMPLOYEE MATTERS; ERISA. Except as set
forth in Section 4.10 of the NSP Disclosure Schedule:
(a) BENEFIT PLANS. Section 4.10(a) of the NSP Dis-
closure Schedule contains a true and complete list of each employee
benefit plan covering employees, former employees or directors of
NSP and each of the NSP Subsidiaries or their beneficiaries, or
providing benefits to such persons in respect of services provided
to any such entity, including, but not limited to, any employee
benefit plans within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") and
any severance or change in control agreement (collectively, the
"NSP BENEFIT PLANS"). For the purposes of this SECTION 4.10 only,
the term "NSP" shall be deemed to include the predecessors of such
company.
(b) CONTRIBUTIONS. All material contributions and other
payments required to be made by NSP or any of the NSP Subsidiaries
to any NSP Benefit Plan (or to any person pursuant to the terms
thereof) have been made or the amount of such payment or
contribution obligation has been reflected in the NSP Financial
Statements.
(c) QUALIFICATION; COMPLIANCE. Each of the NSP Benefit
Plans intended to be "qualified" within the meaning of Section
401(a) of the Code has been determined by the IRS to be so
qualified, and, to the best knowledge of NSP, no circumstances
exist that are reasonably expected by NSP to result in the
revocation of any such determination. NSP is in compliance in all
material respects with, and each of the NSP Benefit Plans is and
has been operated in all material respects in compliance with, all
applicable laws, rules and regulations
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governing such plan, including, without limitation, ERISA and the
Code. Each NSP Benefit Plan intended to provide for the deferral
of income, the reduction of salary or other compensation, or to
afford other income tax benefits, complies with the requirements of
the applicable provisions of the Code or other laws, rules and
regulations required to provide such income tax benefits.
(d) LIABILITIES. With respect to the NSP Benefit Plans,
individually and in the aggregate, no event has occurred, and, to
the best knowledge of NSP, there does not now exist any condition
or set of circumstances, that could subject NSP or any of the NSP
Subsidiaries to any material liability arising under the Code,
ERISA or any other applicable law (including, without limitation,
any liability to any such plan or the Pension Benefit Guaranty
Corporation (the "PBGC")), or under any indemnity agreement to
which NSP is a party, excluding liability for benefit claims and
funding obligations payable in the ordinary course.
(e) WELFARE PLANS. None of the NSP Benefit Plans that
are "welfare plans", within the meaning of Section 3(1) of ERISA,
provides for any retiree benefits, other than continuation coverage
required to be provided under Section 4980B of the Code or Part 6
of Title I of ERISA.
(f) DOCUMENTS MADE AVAILABLE. NSP has made available to
WEC a true and correct copy of each collective bargaining agreement
to which NSP or any of the NSP Subsidiaries is a party or under
which NSP or any of the NSP Subsidiaries has obligations and, with
respect to each NSP Benefit Plan, where applicable, (i) such plan
and summary plan description, (ii) the most recent annual report
filed with the IRS, (iii) each related trust agreement, insurance
contract, service provider or investment management agreement
(including all amendments to each such document), (iv) the most
recent determination of the IRS with respect to the qualified
status of such NSP Benefit Plan, and (v) the most recent actuarial
report or valuation.
(g) PAYMENTS RESULTING FROM MERGERS. (i) The con-
summation or announcement of any transaction contemplated by this
Agreement will not (either alone or upon the occurrence of any
additional or further acts or events) result in any (A) payment
(whether of severance pay or otherwise) becoming due from NSP or
any of the NSP Subsidiaries to any officer, employee, former
employee or director thereof or to the trustee under any "rabbi
trust" or similar arrangement, or (B) benefit under any NSP Benefit
Plan being established or becoming accelerated, vested or payable
and (ii) neither NSP nor any of
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the NSP Subsidiaries is a party to (A) any management, employment,
deferred compensation, severance (including any payment, right or
benefit resulting from a change in control), bonus or other
contract for personal services with any officer, director or
employee, (B) any consulting contract with any person who prior to
entering into such contract was a director or officer of NSP, or
(C) any plan, agreement, arrangement or understanding similar to
any of the foregoing.
(h) LABOR AGREEMENTS. As of the date hereof, neither
NSP nor any of the NSP Subsidiaries is a party to any collective
bargaining agreement or other labor agreement with any union or
labor organization. To the best knowledge of NSP, as of the date
hereof, there is no current union representation question involving
employees of NSP or any of the NSP Subsidiaries, nor does NSP know
of any activity or proceeding of any labor organization (or
representative thereof) or employee group to organize any such
employees. Except as disclosed in the NSP SEC Reports filed prior
to the date hereof or in Section 4.10(h) of the NSP Disclosure
Schedule, (i) there is no unfair labor practice, employment
discrimination or other material complaint against NSP or any of
the NSP Subsidiaries pending, or to the best knowledge of NSP,
threatened, (ii) there is no strike or lockout or material dispute,
slowdown or work stoppage pending, or to the best knowledge of NSP,
threatened, against or involving NSP, and (iii) there is no
proceeding, claim, suit, action or governmental investigation
pending or, to the best knowledge of NSP, threatened, in respect of
which any director, officer, employee or agent of NSP or any of the
NSP Subsidiaries is or may be entitled to claim indemnification
from NSP or such NSP Subsidiary pursuant to their respective
articles of incorporation or by-laws or as provided in the
indemnification agreements listed in Section 4.10(h) of the NSP
Disclosure Schedule.
Section 4.11 ENVIRONMENTAL PROTECTION. Except as set
forth in Section 4.11 of the NSP Disclosure Schedule or in the NSP
SEC Reports filed prior to the date hereof:
(a) COMPLIANCE. NSP and each of the NSP Subsidiaries is
in material compliance with all applicable Environmental Laws (as
defined in SECTION 4.11(g)(ii)); and neither NSP nor any of the NSP
Subsidiaries has received any communication (written or oral), from
any person or Governmental Authority that alleges that NSP or any
of the NSP Subsidiaries is not in such compliance with applicable
Environmental Laws.
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(b) ENVIRONMENTAL PERMITS. NSP and each of the NSP
Subsidiaries has obtained or has applied for all material en-
vironmental, health and safety permits and governmental autho-
rizations (collectively, the "ENVIRONMENTAL PERMITS") necessary for
the construction of their facilities or the conduct of their
operations, and all such Environmental Permits are in good standing
or, where applicable, a renewal application has been timely filed
and is pending agency approval, and NSP and the NSP Subsidiaries
are in material compliance with all terms and conditions of the
Environmental Permits.
(c) ENVIRONMENTAL CLAIMS. To the best knowledge of NSP,
there is no material Environmental Claim (as defined in SECTION
4.11(g)(i)) pending (i) against NSP or any of the NSP Subsidiaries
or NSP Joint Ventures, (ii) against any person or entity whose
liability for any Environmental Claim NSP or any of the NSP
Subsidiaries has or may have retained or assumed either
contractually or by operation of law, or (iii) against any real or
personal property or operations which NSP or any of the NSP
Subsidiaries owns, leases or manages, in whole or in part.
(d) RELEASES. NSP has no knowledge of any material
Releases (as defined in SECTION 4.11(g)(iv)) of any Hazardous
Material (as defined in SECTION 4.11(g)(iii)) that would be
reasonably likely to form the basis of any material Environmental
Claim against NSP or any of the NSP Subsidiaries, or against any
person or entity whose liability for any material Environmental
Claim NSP or any of the NSP Subsidiaries has or may have retained
or assumed either contractually or by operation of law.
(e) PREDECESSORS. NSP has no knowledge, with respect to
any predecessor of NSP or any of the NSP Subsidiaries, of any
material Environmental Claim pending or threatened, or of any
Release of Hazardous Materials that would be reasonably likely to
form the basis of any material Environmental Claim.
(f) DISCLOSURE. To NSP's best knowledge, NSP has
disclosed to WEC all material facts which NSP reasonably believes
form the basis of a material Environmental Claim arising from (i)
the cost of NSP pollution control equipment currently required or
known to be required in the future; (ii) current NSP remediation
costs or NSP remediation costs known to be required in the future;
or (iii) any other environmental matter affecting NSP.
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(g) As used in this Agreement:
(i) "ENVIRONMENTAL CLAIM" means any and all admin-
istrative, regulatory or judicial actions, suits, demands,
demand letters, directives, claims, liens, investigations,
proceedings or notices of noncompliance or violation (written
or oral) by any person or entity (including any Governmental
Authority) alleging potential liability (including, without
limitation, potential responsibility for or liability for en-
forcement, investigatory costs, cleanup costs, governmental
response costs, removal costs, remedial costs, natural-
resources damages, property damages, personal injuries or
penalties) arising out of, based on or resulting from (A) the
presence, or Release or threatened Release into the
environment, of any Hazardous Materials at any location,
whether or not owned, operated, leased or managed by NSP or
any of the NSP Subsidiaries or NSP Joint Ventures (for
purposes of this SECTION 4.11), or by WEC or any of the WEC
Subsidiaries or WEC Joint Ventures (for purposes of SECTION
5.11); or (B) circumstances forming the basis of any
violation, or alleged violation, of any Environmental Law; or
(C) any and all claims by any third party seeking damages,
contribution, indemnification, cost recovery, compensation or
injunctive relief resulting from the presence or Release of
any Hazardous Materials.
(ii) "ENVIRONMENTAL LAWS" means all federal, state,
local laws, rules and regulations relating to pollution, the
environment (including, without limitation, ambient air,
surface water, groundwater, land surface or subsurface strata)
or protection of human health as it relates to the environment
including, without limitation, laws and regulations relating
to Releases or threatened Releases of Hazardous Materials, or
otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials.
(iii) "HAZARDOUS MATERIALS" means (a) any petroleum or
petroleum products, radioactive materials, asbestos in any
form that is or could become friable, urea formaldehyde foam
insulation, and transformers or other equipment that contain
dielectric fluid containing polychlorinated biphenyls
("PCBs"); and (b) any chemicals, materials or substances which
are now defined as or included in the definition of "hazardous
substances", "hazardous wastes", "hazardous materials",
"extremely hazardous wastes", "restricted hazardous wastes",
"toxic substances", "toxic
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pollutants", or words of similar import, under any Envi-
ronmental Law; and (c) any other chemical, material, substance
or waste, exposure to which is now prohibited, limited or
regulated under any Environmental Law in a jurisdiction in
which NSP or any of the NSP Subsidiaries or NSP Joint Ventures
operates (for purposes of this SECTION 4.11) or in which WEC
or any of the WEC Subsidiaries or WEC Joint Ventures operates
(for purposes of SECTION 5.11).
(iv) "RELEASE" means any release, spill, emission,
leaking, injection, deposit, disposal, discharge, dispersal,
leaching or migration into the atmosphere, soil, surface
water, groundwater or property.
Section 4.12 REGULATION AS A UTILITY. NSP is regulated
as a public utility in the States of Minnesota, North Dakota and
South Dakota and in no other state. Northern States Power Company,
a Wisconsin corporation ("NSP-W"), is regulated as a public utility
in the States of Wisconsin and Michigan and in no other state.
Except as set forth in Section 4.12 of the NSP Disclosure Schedule,
neither NSP nor any "subsidiary company" or "affiliate" of NSP is
subject to regulation as a public utility or public service company
(or similar designation) by any other state in the United States or
any foreign country. NSP is an exempt holding company under
Section 3(a)(2) of the 1935 Act.
Section 4.13 VOTE REQUIRED. The approval of the Mergers
by a majority of the votes entitled to be cast by all holders of
Old NSP Common Stock and Old NSP Preferred Stock voting together as
a single class (the "NSP SHAREHOLDERS' APPROVAL") is the only vote
of the holders of any class or series of the capital stock of NSP
or any of its subsidiaries required to approve this Agreement, the
Mergers and the other transactions contemplated hereby, PROVIDED
that the approval of shareholders of NSP may be required for the
repurchase of shares of Old NSP Common Stock pursuant to Section
7(a) of the NSP Stock Option Agreement under circumstances where
Subdivision 3 of Section 302A.553 of the MBCA would be applicable.
Section 4.14 ACCOUNTING MATTERS. Neither NSP nor, to
NSP's best knowledge, any of its affiliates has taken or agreed to
take any action that would prevent the Company from accounting for
the transactions to be effected pursuant to this Agreement as a
pooling of interests in accordance with GAAP and applicable SEC
regulations. As used in this Agreement (except as specifically
otherwise defined), the term "AFFILIATE", except where otherwise
defined herein, shall mean, as to any person, any other person
which directly or indirectly controls,
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or is under common control with, or is controlled by, such person.
As used in this definition, "CONTROL" (including, with its
correlative meanings, "controlled by" and "under common control
with") shall mean possession, directly or indirectly, of power to
direct or cause the direction of management or policies (whether
through ownership of securities or partnership or other ownership
interests, by contract or otherwise).
Section 4.15 APPLICABILITY OF CERTAIN MINNESOTA LAW.
Assuming the representation and warranty of WEC made in SECTION
5.18 is correct, none of the control share acquisition provisions
of Section 302A.671 of the MBCA, the business combination
provisions of Sections 302A.673 and 675 of the MBCA or any similar
provisions of the MBCA (or, to the best knowledge of NSP, any other
similar state statute) or the Restated Articles of Incorporation or
by-laws of NSP, are applicable to the transactions contemplated by
this Agreement, including the granting or exercise of the NSP Stock
Option Agreement.
Section 4.16 OPINION OF FINANCIAL ADVISOR. NSP has
received the opinion of Goldman, Sachs & Co., dated April 28, 1995,
to the effect that, as of the date thereof, the Ratio is fair from
a financial point of view to the holders of Old NSP Common Stock.
Section 4.17 INSURANCE. Except as set forth in Section
4.17 of the NSP Disclosure Schedule, NSP and each of the NSP
Subsidiaries is, and has been continuously since January 1, 1990,
insured with financially responsible insurers in such amounts and
against such risks and losses as are customary in all material
respects for companies conducting the business as conducted by NSP
and the NSP Subsidiaries during such time period. Except as set
forth in Section 4.17 of the NSP Disclosure Schedule, neither NSP
nor any of the NSP Subsidiaries has received any notice of
cancellation or termination with respect to any material insurance
policy of NSP or any of the NSP Subsidiaries. The insurance
policies of NSP and each of the NSP Subsidiaries are valid and
enforceable policies in all material respects.
Section 4.18 OWNERSHIP OF WEC COMMON STOCK. Except
pursuant to the terms of the WEC Stock Option Agreement, NSP does
not "beneficially own" (as such term is defined for purposes of
Section 13(d) of the Exchange Act) any shares of WEC Common Stock.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WEC
WEC represents and warrants to NSP as follows:
Section 5.1 ORGANIZATION AND QUALIFICATION. Except as
set forth in Section 5.1 of the WEC Disclosure Schedule (as defined
in SECTION 7.6(i)), each of WEC and each of the WEC Subsidiaries
(as defined below) is a corporation duly organized, validly
existing and in active status under the laws of its jurisdiction of
incorporation or organization, has all requisite corporate power
and authority, and has been duly authorized by all necessary
approvals and orders to own, lease and operate its assets and
properties to the extent owned, leased and operated and to carry on
its business as it is now being conducted and is duly qualified and
in good standing to do business in each jurisdiction in which the
nature of its business or the ownership or leasing of its assets
and properties makes such qualification necessary. As used in this
Agreement, the term: (a) "WEC SUBSIDIARY" shall mean those of the
subsidiaries of WEC identified as WEC Subsidiaries in Section 5.2
of the WEC Disclosure Schedule; and (b) "WEC JOINT VENTURE" shall
mean those of the joint ventures of WEC or any WEC Subsidiary
identified as a WEC Joint Venture in Section 5.2 of the WEC
Disclosure Schedule.
Section 5.2 SUBSIDIARIES. Section 5.2 of the WEC
Disclosure Schedule sets forth a description as of the date hereof
of all subsidiaries and joint ventures of WEC, including (a) the
name of each such entity and WEC's interest therein, and (b) as to
each WEC Subsidiary and WEC Joint Venture, a brief description of
the principal line or lines of business conducted by each such
entity. Except as set forth in Section 5.2 of the WEC Disclosure
Schedule, none of the WEC Subsidiaries is a "public utility
company", a "holding company", a "subsidiary company" or an
"affiliate" of any public utility company within the meaning of
Section 2(a)(5), 2(a)(7), 2(a)(8) or 2(a)(11) of the 1935 Act,
respectively. Except as set forth in Section 5.2 of the WEC
Disclosure Schedule, all of the issued and outstanding shares of
capital stock of each WEC Subsidiary are validly issued, fully
paid, nonassessable (subject to Section 180.0622(2)(b) of the WBCL,
as judicially interpreted) and free of preemptive rights, and are
owned directly or indirectly by WEC free and clear of any liens,
claims, encumbrances, security interests, equities, charges and
options of any nature whatsoever and there are no outstanding sub-
scriptions, options, calls, contracts, voting trusts, proxies or
other commitments, understandings, restrictions, arrangements,
rights or warrants, including any right of conversion or
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exchange under any outstanding security, instrument or other
agreement, obligating any such WEC Subsidiary to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares
of its capital stock or obligating it to grant, extend or enter
into any such agreement or commitment. With respect to the
subsidiaries and joint ventures of WEC that are not WEC
Subsidiaries (the "WEC UNRESTRICTED SUBSIDIARIES"): (i) except as
set forth in Section 5.2 of the WEC Disclosure Schedule, neither
WEC nor any WEC Subsidiary is liable for any obligations or
liabilities of any WEC Unrestricted Subsidiary; (ii) neither WEC
nor any WEC Subsidiary is obligated to make any loans or capital
contributions to, or to undertake any guarantees or other
obligations with respect to, WEC Unrestricted Subsidiaries, except
for loans, capital contributions, guarantees and other obligations
not in excess of $35 million in the aggregate to all such WEC
Unrestricted Subsidiaries; and (iii) the aggregate book value as of
December 31, 1994, of WEC's investment in the WEC Unrestricted
Subsidiaries was not in excess of $120 million.
Section 5.3 CAPITALIZATION. The authorized capital
stock of WEC consists of 325,000,000 shares of WEC Common Stock,
and 15,000,000 shares of Preferred Stock, par value $.01 per share
(the "WEC PREFERRED STOCK"). As of the close of business on April
20, 1995, there were issued and outstanding 109,415,713 shares of
WEC Common Stock and no shares of WEC Preferred Stock. All of the
issued and outstanding shares of the capital stock of WEC are, and
any WEC Common Stock issued pursuant to the WEC Stock Option
Agreement will be, validly issued, fully paid, nonassessable
(subject to Section 180.0622(2)(b) of the WBCL, as judicially
interpreted) and free of preemptive rights. The authorized capital
stock of Wisconsin Electric Power Company, a Wisconsin corporation
("WEPCO"), consists of 65,000,000 shares of Common Stock, par value
$10.00 per share (the "WEPCO COMMON STOCK"), 45,000 shares of 6%
Preferred Stock, par value $100.00 per share (the "WEPCO 6% PRE-
FERRED STOCK"); 2,286,500 shares of Serial Preferred Stock, par
value $100.00 per share (the "WEPCO $100 PAR VALUE SERIAL PREFERRED
STOCK") and 5,000,000 shares of Serial Preferred Stock, par value
$25.00 per share (the "WEPCO $25 PAR VALUE SERIAL PREFERRED STOCK"
and, together with the WEPCO 6% Preferred Stock and the WEPCO $100
Par Value Serial Preferred Stock, the "WEPCO PREFERRED STOCK"). As
of the close of business on April 20, 1995, there were issued and
outstanding 33,289,327 shares of WEPCO Common Stock, 44,508 shares
of the WEPCO 6% Preferred Stock, 260,000 shares of the WEPCO $100
Par Value Serial Preferred Stock, 3.60% Series, and no shares of
the WEPCO $25 Par Value Serial Preferred Stock. Except as set
forth in Section 5.3 of the WEC Disclosure Schedule, as of the date
hereof,
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there are no outstanding subscriptions, options, calls, contracts,
voting trusts, proxies or other commitments, understandings,
restrictions, arrangements, rights or warrants, including any right
of conversion or exchange under any outstanding security,
instrument or other agreement, obligating WEC or any of the WEC
Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of the capital stock of WEC,
or obligating WEC to grant, extend or enter into any such agreement
or commitment, other than under the WEC Stock Option Agreement.
There are no outstanding stock appreciation rights of WEC which
were not granted in tandem with a related stock option and no
outstanding limited stock appreciation rights or other rights to
redeem for cash options or warrants of WEC.
Section 5.4 AUTHORITY; NON-CONTRAVENTION; STATUTORY
APPROVALS; COMPLIANCE.
(a) AUTHORITY. WEC has all requisite power and au-
thority to enter into this Agreement and the WEC Stock Option
Agreement, and, subject to the applicable WEC Shareholders'
Approval (as defined in SECTION 5.13) and the applicable WEC
Required Statutory Approvals (as defined in SECTION 5.4(c)), to
consummate the transactions contemplated hereby or thereby. The
execution and delivery of this Agreement and the WEC Stock Option
Agreement and the consummation by WEC of the transactions
contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of WEC, subject to obtaining
the applicable WEC Shareholders' Approval. Each of this Agreement
and the WEC Stock Option Agreement has been duly and validly
executed and delivered by WEC and, assuming the due authorization,
execution and delivery hereof and thereof by the other signatories
hereto and thereto, constitutes the valid and binding obligation of
WEC enforceable against it in accordance with its terms.
(b) NON-CONTRAVENTION. Except as set forth in Section
5.4(b) of the WEC Disclosure Schedule, the execution and delivery
of this Agreement and the WEC Stock Option Agreement by WEC do not,
and the consummation of the transactions contemplated hereby or
thereby will not, result in a material Violation pursuant to any
provisions of (i) the articles of incorporation, by-laws or similar
governing documents of WEC or any of the WEC Subsidiaries or the
WEC Joint Ventures, (ii) subject to obtaining the WEC Required
Statutory Approvals and the receipt of the WEC Shareholders'
Approval, any statute, law, ordinance, rule, regulation, judgment,
decree, order, injunction, writ, permit or license of any
Governmental Authority applicable to WEC or any of the WEC
Subsidiaries or the WEC Joint Ventures or any of their respective
properties or assets
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or (iii) subject to obtaining the third-party consents set forth in
Section 5.4(b) of the WEC Disclosure Schedule (the "WEC REQUIRED
CONSENTS") any material note, bond, mortgage, indenture, deed of
trust, license, franchise, permit, concession, contract, lease or
other instrument, obligation or agreement of any kind to which WEC
or any of the WEC Subsidiaries or the WEC Joint Ventures is a party
or by which it or any of its properties or assets may be bound or
affected.
(c) STATUTORY APPROVALS. No declaration, filing or
registration with, or notice to or authorization, consent or
approval of, any Governmental Authority is necessary for the
execution and delivery of this Agreement or the WEC Stock Option
Agreement by WEC or the consummation by WEC of the transactions
contemplated hereby or thereby, except as described in Section
5.4(c) of the WEC Disclosure Schedule (the "WEC REQUIRED STATUTORY
APPROVALS", it being understood that references in this Agreement
to "obtaining" such WEC Required Statutory Approvals shall mean
making such declarations, filings or registrations; giving such
notices; obtaining such authorizations, consents or approvals; and
having such waiting periods expire as are necessary to avoid a
violation of law).
(d) COMPLIANCE. Except as set forth in Section 5.4(d),
Section 5.10 or Section 5.11 of the WEC Disclosure Schedule, or as
disclosed in the WEC SEC Reports (as defined in SECTION 5.5) filed
prior to the date hereof, neither WEC nor any of the WEC
Subsidiaries nor, to the knowledge of WEC, any WEC Joint Venture,
is in material violation of, is under investigation with respect to
any material violation of, or has been given notice or been charged
with any material violation of, any law, statute, order, rule,
regulation, ordinance or judgment (including, without limitation,
any applicable environmental law, ordinance or regulation) of any
Governmental Authority. Except as set forth in Section 5.4(d) of
the WEC Disclosure Schedule or in Section 5.11 of the WEC
Disclosure Schedule, WEC and the WEC Subsidiaries and WEC Joint
Ventures have all permits, licenses, franchises and other
governmental authorizations, consents and approvals necessary to
conduct their businesses as presently conducted in all material re-
spects. Except as set forth in Section 5.4(d) of the WEC Dis-
closure Schedule, WEC and each of the WEC Subsidiaries is not in
material breach or violation of or in material default in the
performance or observance of any term or provision of, and no event
has occurred which, with lapse of time or action by a third party,
could result in a material default under, (i) its articles of
incorporation or by-laws or (ii) any material contract, commitment,
agreement, indenture, mortgage, loan agreement, note, lease, bond,
license, approval or other instrument
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to which it is a party or by which it is bound or to which any of
its property is subject.
Section 5.5 REPORTS AND FINANCIAL STATEMENTS. The
filings required to be made by WEC and the WEC Subsidiaries since
January 1, 1990 under the Securities Act, the Exchange Act, the
1935 Act, the Power Act, the Atomic Energy Act and applicable state
laws and regulations have been filed with the SEC, the FERC, the
NRC or the appropriate state public utilities commission, as the
case may be, including all forms, statements, reports, agreements
(oral or written) and all documents, exhibits, amendments and
supplements appertaining thereto, and complied, as of their
respective dates, in all material respects with all applicable
requirements of the appropriate statute and the rules and
regulations thereunder. WEC has made available to NSP a true and
complete copy of each report, schedule, registration statement and
definitive proxy statement filed by WEC with the SEC since January
1, 1992 (as such documents have since the time of their filing been
amended, the "WEC SEC REPORTS"). As of their respective dates, the
WEC SEC Reports did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The
audited consolidated financial statements and unaudited interim
financial statements of WEC included in the WEC SEC Reports
(collectively, the "WEC FINANCIAL STATEMENTS") have been prepared
in accordance with GAAP (except as may be indicated therein or in
the notes thereto and except with respect to unaudited statements
as permitted by Form 10-Q of the SEC) and fairly present the
financial position of WEC as of the dates thereof and the results
of its operations and cash flows for the periods then ended,
subject, in the case of the unaudited interim financial statements,
to normal, recurring audit adjustments. True, accurate and
complete copies of the Restated Articles of Incorporation and by-
laws of WEC, as in effect on the date hereof, are included (or
incorporated by reference) in the WEC SEC Reports.
Section 5.6 ABSENCE OF CERTAIN CHANGES OR EVENTS.
Except as disclosed in the WEC SEC Reports filed prior to the date
hereof or as set forth in Section 5.6 of the WEC Disclosure
Schedule, from December 31, 1994, WEC and each of the WEC
Subsidiaries have conducted their business only in the ordinary
course of business consistent with past practice and there has not
been, and no fact or condition exists which would have or, insofar
as reasonably can be foreseen, could have, a material adverse
effect on the business, assets, financial condition, results of
operations or prospects of WEC and its subsidiaries taken as a
whole (an "WEC MATERIAL ADVERSE EFFECT").
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Section 5.7 LITIGATION. Except as disclosed in the WEC
SEC Reports filed prior to the date hereof or as set forth in
Section 5.7, Section 5.9 or Section 5.11 of the WEC Disclosure
Schedule, (i) there are no material claims, suits, actions or
proceedings, pending or, to the knowledge of WEC, threatened, nor
are there, to the knowledge of WEC, any material investigations or
reviews pending or threatened against, relating to or affecting WEC
or any of the WEC Subsidiaries, (ii) there have not been any
significant developments since December 31, 1994 with respect to
such disclosed claims, suits, actions, proceedings, investigations
or reviews and (iii) there are no material judgments, decrees,
injunctions, rules or orders of any court, governmental department,
commission, agency, instrumentality or authority or any arbitrator
applicable to WEC or any of the WEC Subsidiaries.
Section 5.7 REGISTRATION STATEMENT AND PROXY STATEMENT.
None of the information supplied or to be supplied by or on behalf
of WEC for inclusion or incorporation by reference in (i) the
Registration Statement will, at the time the Registration Statement
is filed with the SEC and at the time it becomes effective under
the Securities Act, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and (ii)
the Proxy Statement will not, at the dates mailed to shareholders
and at the times of the meetings of shareholders to be held in
connection with the Mergers, contain any untrue statement of a
material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made,
not misleading. The Registration Statement and the Proxy Statement
will comply as to form in all material respects with the provisions
of the Securities Act and the Exchange Act and the rules and
regulations thereunder.
Section 5.9 TAX MATTERS. Except as set forth in Section
5.9 of the WEC Disclosure Schedule:
(a) FILING OF TIMELY TAX RETURNS. WEC and each of the
WEC Subsidiaries have filed (or there has been filed on its
behalf) all material Tax Returns required to be filed by each
of them under applicable law. All such Tax Returns were and
are in all material respects true, complete and correct and
filed on a timely basis.
(b) PAYMENT OF TAXES. WEC and each of the WEC Sub-
sidiaries have, within the time and in the manner prescribed
by law, paid all Taxes that are currently due and
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payable except for those contested in good faith and for which
adequate reserves have been taken.
(c) TAX RESERVES. WEC and the WEC Subsidiaries have
established on their books and records reserves adequate to
pay all Taxes and reserves for deferred income taxes in
accordance with GAAP.
(d) TAX LIENS. There are no Tax liens upon the assets
of WEC or any of the WEC Subsidiaries except liens for Taxes
not yet due.
(e) WITHHOLDING TAXES. WEC and each of the WEC
Subsidiaries have complied in all material respects with the
provisions of the Code relating to the withholding of Taxes,
as well as similar provisions under any other laws, and have,
within the time and in the manner prescribed by law, withheld
from employee wages and paid over to the proper governmental
authorities all amounts required.
(f) EXTENSIONS OF TIME FOR FILING TAX RETURNS. Neither
WEC nor any of the WEC Subsidiaries has requested any
extension of time within which to file any Tax Return, which
Tax Return has not since been filed.
(g) WAIVERS OF STATUTE OF LIMITATIONS. Neither WEC nor
any of the WEC Subsidiaries has executed any outstanding
waivers or comparable consents regarding the application of
the statute of limitations with respect to any Taxes or Tax
Returns.
(h) EXPIRATION OF STATUTE OF LIMITATIONS. The statute
of limitations for the assessment of all Taxes has expired for
all applicable Tax Returns of WEC and each of the WEC
Subsidiaries or those Tax Returns have been examined by the
appropriate taxing authorities for all periods through the
date hereof, and no deficiency for any Taxes has been
proposed, asserted or assessed against WEC or any of the WEC
Subsidiaries that has not been resolved and paid in full.
(i) AUDIT, ADMINISTRATIVE AND COURT PROCEEDINGS. No
audits or other administrative proceedings or court pro-
ceedings are presently pending with regard to any Taxes or Tax
Returns of WEC or any of the WEC Subsidiaries.
(j) POWERS OF ATTORNEY. No power of attorney currently
in force has been granted by WEC or any of the WEC
Subsidiaries concerning any Tax matter.
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(k) TAX RULINGS. Neither WEC nor any of the WEC
Subsidiaries has received a Tax Ruling or entered into a
Closing Agreement with any taxing authority that would have a
continuing adverse effect after the Closing Date.
(l) AVAILABILITY OF TAX RETURNS. WEC has made available
to NSP complete and accurate copies of (i) all Tax Returns,
and any amendments thereto, filed by WEC or any of the WEC
Subsidiaries, (ii) all audit reports received from any taxing
authority relating to any Tax Return filed by WEC or any of
the WEC Subsidiaries and (iii) any Closing Agreements entered
into by WEC or any of the WEC Subsidiaries with any taxing
authority.
(m) TAX SHARING AGREEMENTS. Neither WEC nor any WEC
Subsidiary is a party to any agreement relating to allocating
or sharing of Taxes.
(n) CODE SECTION 280G. Neither WEC nor any of the WEC
Subsidiaries is a party to any agreement, contract, or
arrangement that could result, on account of the transactions
contemplated hereunder, separately or in the aggregate, in the
payment of any "excess parachute payments" within the meaning
of Section 280G of the Code.
(o) LIABILITY FOR OTHERS. None of WEC or any of the WEC
Subsidiaries has any liability for Taxes of any person other
than WEC and the WEC Subsidiaries (i) under Treasury
Regulations Section 1.1502-6 (or any similar provision of
state, local or foreign law) as a transferee or successor,
(ii) by contract, or (iii) otherwise.
Section 5.10 EMPLOYEE MATTERS; ERISA. Except as set
forth in Section 5.10 of the WEC Disclosure Schedule:
(a) BENEFIT PLANS. Section 5.10(a) of the WEC Dis-
closure Schedule contains a true and complete list of each
employee benefit plan covering employees, former employees or
directors of WEC and each of the WEC Subsidiaries or their
beneficiaries, or providing benefits to such persons in
respect of services provided to any such entity, including,
but not limited to, any employee benefit plans within the
meaning of Section 3(3) of ERISA and any severance or change
in control agreement (collectively, the "WEC BENEFIT PLANS").
For the purposes of this SECTION 5.10 only, the term "WEC"
shall be deemed to include the predecessors of such company.
(b) CONTRIBUTIONS. All material contributions and other
payments required to be made by WEC or any of the
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WEC Subsidiaries to any WEC Benefit Plan (or to any person
pursuant to the terms thereof) have been made or the amount of
such payment or contribution obligation has been reflected in
the WEC Financial Statements.
(c) QUALIFICATION; COMPLIANCE. Each of the WEC Benefit
Plans intended to be "qualified" within the meaning of
Section 401(a) of the Code has been determined by the IRS to
be so qualified, and, to the best knowledge of WEC, no
circumstances exist that are reasonably expected by WEC to
result in the revocation of any such determination. WEC is in
compliance in all material respects with, and each of the WEC
Benefit Plans is and has been operated in all material
respects in compliance with, all applicable laws, rules and
regulations governing such plan, including, without
limitation, ERISA and the Code. Each WEC Benefit Plan
intended to provide for the deferral of income, the reduction
of salary or other compensation, or to afford other income tax
benefits, complies with the requirements of the applicable
provisions of the Code or other laws, rules and regulations
required to provide such income tax benefits.
(d) LIABILITIES. With respect to the WEC Benefit Plans,
individually and in the aggregate, no event has occurred, and,
to the best knowledge of WEC, there does not now exist any
condition or set of circumstances, that could subject WEC or
any of the WEC Subsidiaries to any material liability arising
under the Code, ERISA or any other applicable law (including,
without limitation, any liability to any such plan or the
PBGC), or under any indemnity agreement to which WEC is a
party, excluding liability for benefit claims and funding
obligations payable in the ordinary course.
(e) WELFARE PLANS. None of the WEC Benefit Plans that
are "welfare plans", within the meaning of Section 3(1) of
ERISA, provides for any retiree benefits, other than
continuation coverage required to be provided under
Section 4980B of the Code or Part 6 of Title I of ERISA.
(f) DOCUMENTS MADE AVAILABLE. WEC has made available to
NSP a true and correct copy of each collective bargaining
agreement to which WEC or any of the WEC Subsidiaries is a
party or under which WEC or any of the WEC Subsidiaries has
obligations and, with respect to each WEC Benefit Plan, where
applicable, (i) such plan and summary plan description, (ii)
the most recent annual report filed with the IRS, (iii) each
related trust agreement, insurance contract, service provider
or investment management
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agreement (including all amendments to each such document),
(iv) the most recent determination of the IRS with respect to
the qualified status of such WEC Benefit Plan, and (v) the
most recent actuarial report or valuation.
(g) PAYMENTS RESULTING FROM MERGERS. (i) The con-
summation or announcement of any transaction contemplated by
this Agreement will not (either alone or upon the occurrence
of any additional or further acts or events) result in any (A)
payment (whether of severance pay or otherwise) becoming due
from WEC or any of the WEC Subsidiaries to any officer,
employee, former employee or director thereof or to the
trustee under any "rabbi trust" or similar arrangement, or (B)
benefit under any WEC Benefit Plan being established or
becoming accelerated, vested or payable and (ii) neither WEC
nor any of the WEC Subsidiaries is a party to (A) any
management, employment, deferred compensation, severance
(including any payment, right or benefit resulting from a
change in control), bonus or other contract for personal
services with any officer, director or employee, (B) any
consulting contract with any person who prior to entering into
such contract was a director or officer of WEC, or (C) any
plan, agreement, arrangement or understanding similar to any
of the foregoing.
(h) LABOR AGREEMENTS. As of the date hereof, neither
WEC nor any of the WEC Subsidiaries is a party to any
collective bargaining agreement or other labor agreement with
any union or labor organization. To the best knowledge of
WEC, as of the date hereof, there is no current union
representation question involving employees of WEC or any of
the WEC Subsidiaries, nor does WEC know of any activity or
proceeding of any labor organization (or representative
thereof) or employee group to organize any such employees.
Except as disclosed in the WEC SEC Reports filed prior to the
date hereof or in Section 5.10(h) of the WEC Disclosure Sched-
ule, (i) there is no unfair labor practice, employment
discrimination or other material complaint against WEC or any
of the WEC Subsidiaries pending, or to the best knowledge of
WEC, threatened, (ii) there is no strike, or lockout or
material dispute, slowdown or work stoppage pending, or to the
best knowledge of WEC, threatened, against or involving WEC,
and (iii) there is no proceeding, claim, suit, action or
governmental investigation pending or, to the best knowledge
of WEC, threatened, in respect of which any director, officer,
employee or agent of WEC or any of the WEC Subsidiaries is or
may be entitled to claim indemnification from WEC or such WEC
Subsidiary pursuant to their respective articles
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of incorporation or by-laws or as provided in the indemnifi-
cation agreements listed in Section 5.10(h) of the WEC
Disclosure Schedule.
Section 5.11 ENVIRONMENTAL PROTECTION. Except as set
forth in Section 5.11 of the WEC Disclosure Schedule or in the WEC
SEC Reports filed prior to the date hereof:
(a) COMPLIANCE. WEC and each of the WEC Subsidiaries is
in material compliance with all applicable Environmental Laws;
and neither WEC nor any of the WEC Subsidiaries has received
any communication (written or oral), from any person or
Governmental Authority that alleges that WEC or any of the WEC
Subsidiaries is not in such compliance with applicable
Environmental Laws.
(b) ENVIRONMENTAL PERMITS. WEC and each of the WEC
Subsidiaries has obtained or has applied for all the En-
vironmental Permits necessary for the construction of their
facilities or the conduct of their operations, and all such
Environmental Permits are in good standing or, where
applicable, a renewal application has been timely filed and is
pending agency approval, and WEC and the WEC Subsidiaries are
in material compliance with all terms and conditions of the
Environmental Permits.
(c) ENVIRONMENTAL CLAIMS. To the best knowledge of WEC,
there is no material Environmental Claim pending (i) against
WEC or any of the WEC Subsidiaries or WEC Joint Ventures, (ii)
against any person or entity whose liability for any
Environmental Claim WEC or any of the WEC Subsidiaries has or
may have retained or assumed either contractually or by
operation of law, or (iii) against any real or personal
property or operations which WEC or any of the WEC
Subsidiaries owns, leases or manages, in whole or in part.
(d) RELEASES. WEC has no knowledge of any material
Releases of any Hazardous Material that would be reasonably
likely to form the basis of any material Environmental Claim
against WEC or any of the WEC Subsidiaries, or against any
person or entity whose liability for any material En-
vironmental Claim WEC or any of the WEC Subsidiaries has or
may have retained or assumed either contractually or by
operation of law.
(e) PREDECESSORS. WEC has no knowledge, with respect to
any predecessor of WEC or any of the WEC Subsidiaries, of any
material Environmental Claim pending or threatened, or of any
Release of Hazardous Materials that
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would be reasonably likely to form the basis of any material
Environmental Claim.
(f) DISCLOSURE. To WEC's best knowledge, WEC has
disclosed to NSP all material facts which WEC reasonably
believes form the basis of a material Environmental Claim
arising from (i) the cost of WEC pollution control equipment
currently required or known to be required in the future; (ii)
current WEC remediation costs or WEC remediation costs known
to be required in the future; or (iii) any other environmental
matter affecting WEC.
Section 5.12 REGULATION AS A UTILITY. WEC is regulated
as a public utility holding company under Section 196.795 of the
Wisconsin Statutes. WEPCO is regulated as a public utility in the
States of Wisconsin and Michigan and in no other state. Wisconsin
Natural Gas Company, a Wisconsin corporation ("WN"), is regulated
as a public utility in the State of Wisconsin and in no other
state. Neither WEC nor any "subsidiary company" or "affiliate" of
WEC is subject to regulation as a public utility or public service
company (or similar designation) by any other state in the United
States or any foreign country. WEC is an exempt holding company
under Section 3(a)(1) of the 1935 Act.
Section 5.13 VOTE REQUIRED. The approval of the
issuance of Company Common Stock in connection with the NSP Merger
by a majority of the votes entitled to be cast by the holders of
the shares of WEC Common Stock represented at the meeting and
entitled to vote thereon (in which the total vote cast represents
over 50% of all shares entitled to vote thereon) and approval of
the WEC Article Amendments (as defined in SECTION 7.20) by the
votes required in the WEC Restated Articles of Incorporation
(collectively, the "WEC SHAREHOLDERS' APPROVAL") are the only votes
of the holders of any class or series of the capital stock of WEC
or any of its subsidiaries required to approve this Agreement, the
Mergers and the other transactions contemplated hereby, PROVIDED
that the approval of shareholders of WEC may be required for the
repurchase of shares of WEC Common Stock pursuant to Section 7(a)
of the WEC Stock Option Agreement under circumstances where Section
180.1134(1) of the WBCL or Article III.D.(1) of WEC's Restated
Articles of Incorporation would be applicable.
Section 5.14 ACCOUNTING MATTERS. Neither WEC nor, to
WEC's best knowledge, any of its affiliates has taken or agreed to
take any action that would prevent the Company from accounting for
the transactions to be effected pursuant to this Agreement as a
pooling of interests in accordance with GAAP and applicable SEC
regulations.
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Section 5.15 APPLICABILITY OF CERTAIN WISCONSIN LAW.
Assuming that the representation and warranty of NSP made in
SECTION 4.18 is correct, none of the control share acquisition
provisions of Section 180.1150 of the WBCL, the business com-
bination provisions of Sections 180.1140 to 180.1144 of the WBCL,
the "fair price" provisions of Sections 180.1130 to 180.1134 of the
WBCL or any similar provisions of the WBCL (or, to the best
knowledge of WEC, any other similar state statute) or the Restated
Articles of Incorporation or by-laws of WEC, are applicable to the
transactions contemplated by this Agreement, including the granting
or exercise of the WEC Stock Option Agreement (except as set forth
in Section 5.15 of the WEC Disclosure Schedule).
Section 5.16 OPINION OF FINANCIAL ADVISOR. WEC has
received the opinion of Barr Devlin Associates, dated April 28,
1995, to the effect that, as of the date thereof, the Ratio is fair
from a financial point of view to the holders of WEC Common Stock.
Section 5.17 INSURANCE. Except as set forth in Section
5.17 of the WEC Disclosure Schedule, WEC and each of the WEC
Subsidiaries is, and has been continuously since January 1, 1990,
insured with financially responsible insurers in such amounts and
against such risks and losses as are customary in all material
respects for companies conducting the business as conducted by WEC
and the WEC Subsidiaries during such time period. Except as set
forth in Section 5.17 of the WEC Disclosure Schedule, neither WEC
nor any of the WEC Subsidiaries has received any notice of
cancellation or termination with respect to any material insurance
policy of WEC or any of the WEC Subsidiaries. The insurance
policies of WEC and each of the WEC Subsidiaries are valid and
enforceable policies in all material respects.
Section 5.18 OWNERSHIP OF OLD NSP COMMON STOCK. Except
pursuant to the terms of the NSP Stock Option Agreement, WEC does
not "beneficially own" (as such term is defined for purposes of
Section 13(d) of the Exchange Act) any shares of Old NSP Common
Stock or Old NSP Preferred Stock.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGERS
Section 6.1 COVENANTS OF THE PARTIES. After the date
hereof and prior to the Effective Time or earlier termination of
this Agreement, NSP and WEC each agree as follows, each as to
itself and to each of the NSP Subsidiaries and the
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WEC Subsidiaries, as the case may be, except as expressly con-
templated or permitted in this Agreement, the NSP Stock Option
Agreement or the WEC Stock Option Agreement, or to the extent the
other parties hereto shall otherwise consent in writing:
(a) ORDINARY COURSE OF BUSINESS. Each party hereto
shall, and shall cause its Direct Subsidiaries to, carry on
their respective businesses in the usual, regular and ordinary
course in substantially the same manner as heretofore
conducted and use all commercially reasonable efforts to
preserve intact their present business organizations and
goodwill, preserve the goodwill and relationships with
customers, suppliers and others having business dealings with
them and, subject to prudent management of workforce needs and
ongoing programs currently in force, keep available the
services of their present officers and employees. Except as
set forth in Section 6.1(a) of the NSP Disclosure Schedule or
the WEC Disclosure Schedule, respectively, no party shall, nor
shall any party permit any of its Direct Subsidiaries to,
enter into a new line of business, or make any change in the
line of business it engages in as of the date hereof involving
any material investment of assets or resources or any material
exposure to liability or loss, in the case of NSP, to NSP and
its subsidiaries taken as a whole, and in the case of WEC, to
WEC and its subsidiaries taken as a whole.
(b) DIVIDENDS. No party shall, nor shall any party
permit any of its Direct Subsidiaries to, (i) declare or pay
any dividends on or make other distributions in respect of any
of their capital stock other than to such party or its wholly-
owned subsidiaries and other than dividends required to be
paid on any WEPCO Preferred Stock or Old NSP Preferred Stock
in accordance with the respective terms thereof, regular
quarterly dividends on WEC Common Stock with usual record and
payment dates not, during any fiscal year, in excess of 106%
of the dividends for the prior fiscal year and regular
quarterly dividends on Old NSP Common Stock with usual record
and payment dates not, during any fiscal year, in excess of
106% of the dividends for the prior fiscal year; (ii) split,
combine or reclassify any of their capital stock or issue or
authorize or propose the issuance of any other securities in
respect of, in lieu of, or in substitution for, shares of
their capital stock; or (iii) redeem, repurchase or otherwise
acquire any shares of their capital stock, other than (A)
redemptions, purchases or acquisitions required by the
respective terms of any series of WEPCO Preferred Stock or Old
NSP Preferred Stock, (B) in connection with refunding of WEPCO
Preferred Stock or Old NSP Preferred
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Stock with preferred stock or debt at a lower cost of funds
(calculating such cost on an after-tax basis), (C) in
connection with intercompany purchases of capital stock or (D)
for the purpose of funding employee stock ownership plans in
accordance with past practice. The last record date of each
of WEC and NSP on or prior to the Effective Time which relates
to a regular quarterly dividend on WEC Common Stock or Old NSP
Common Stock, as the case may be, shall be the same date and
shall be prior to the Effective Time. Notwithstanding the
foregoing, (i) NSP may redeem all or any portion of the Old
NSP Preferred Stock if the Board of Directors of NSP
determines such course of action will facilitate the
transactions contemplated hereby and (ii) WEPCO may redeem all
or any portion of the WEPCO Preferred Stock, if the WEPCO
Board of Directors determines such course of action will
facilitate the transactions contemplated hereby.
(c) ISSUANCE OF SECURITIES. No party shall, nor shall
any party permit any of its Direct Subsidiaries to, issue,
agree to issue, deliver, sell, award, pledge, dispose of or
otherwise encumber or authorize or propose the issuance,
delivery, sale, award, pledge, disposal or other encumbrance
of, any shares of their capital stock of any class or any
securities convertible into or exchangeable for, or any
rights, warrants or options to acquire, any such shares or
convertible or exchangeable securities, other than pursuant to
the NSP Stock Option Agreement and the WEC Stock Option
Agreement, as the case may be, other than intercompany
issuances of capital stock, and other than issuances (i) in
the case of WEC and the WEC Subsidiaries (x) in connection
with refunding WEPCO Preferred Stock with preferred stock or
debt at a lower cost of funds (calculating such cost on an
after-tax basis); and (y) up to 1,600,000 shares of WEC Common
Stock to be issued for general corporate purposes, including
issuances in connection with acquisitions and financing and
issuances pursuant to employee benefit plans, stock option and
other incentive compensation plans, directors plans and stock
purchase and dividend reinvestment plans; and (ii), in the
case of NSP and the NSP Subsidiaries (x) in connection with
refunding of Old NSP Preferred Stock with preferred stock or
debt at a lower cost of funds (calculating such cost on an
after-tax basis); and (y) up to 2,900,000 shares of NSP Common
Stock to be issued for general corporate purposes, including
issuances in connection with acquisitions and financing and
issuances pursuant to employee benefit plans, stock option and
other incentive compensation plans, directors plans and stock
purchase and dividend reinvestment plans. The parties
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shall promptly furnish to each other such information as may
be reasonably requested including financial information and
take such action as may be reasonably necessary and otherwise
fully cooperate with each other in the preparation of any
registration statement under the Securities Act and other
documents necessary in connection with issuance of securities
as contemplated by this SECTION 6.1(c), subject to obtaining
customary indemnities.
(d) CHARTER DOCUMENTS. Except as set forth in Section
6.1(d) of the NSP Disclosure Schedule or the WEC Disclosure
Schedule, no party shall amend or propose to amend its
respective articles of incorporation, by-laws or regulations,
or similar organic documents, except as contemplated herein.
(e) NO ACQUISITIONS. Except as set forth in Section
6.1(e) of the NSP Disclosure Schedule or the WEC Disclosure
Schedule, other than acquisitions by a party and its Direct
Subsidiaries not in excess of $50 million over the amount
budgeted by such party for acquisition expenditures, as set
forth in such Section 6.1(e) of the NSP Disclosure Schedule or
the WEC Disclosure Schedule, singularly or in the aggregate,
no party shall, nor shall any party permit any of its Direct
Subsidiaries to, acquire, or publicly propose to acquire, or
agree to acquire, by merger or consolidation with, or by
purchase or otherwise, a substantial equity interest in or a
substantial portion of the assets of, any business or any
corporation, partnership, association or other business
organization or division thereof, nor shall any party acquire
or agree to acquire a material amount of assets other than in
the ordinary course of business consistent with past practice.
(f) CAPITAL EXPENDITURES AND EMISSION ALLOWANCES.
Except as set forth in Section 6.1(f) of the NSP Disclosure
Schedule or the WEC Disclosure Schedule or as required by law,
no party shall, nor shall any party permit any of its Direct
Subsidiaries to, (i) make capital expenditures in excess of
$100 million over the amount budgeted by such party for
capital expenditures as set forth in such Section 6.1(f) of
the NSP Disclosure Schedule or the WEC Disclosure Schedule or
(ii) enter into written commitments for the purchase of sulfur
dioxide emission allowances as provided for by the Clean Air
Act Amendments of 1990, in excess of $20 million, singularly
or in the aggregate.
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(g) NO DISPOSITIONS. Except as set forth in Section
6.1(g) of the NSP Disclosure Schedule or the WEC Disclosure
Schedule, other than dispositions by a party and its Direct
Subsidiaries of less than $50 million, singularly or in the
aggregate, no party shall, nor shall any party permit any of
its Direct Subsidiaries to, sell, lease, license, encumber or
otherwise dispose of, any of its assets, other than
encumbrances or dispositions in the ordinary course of its
business consistent with past practice.
(h) INDEBTEDNESS. Except as contemplated by this
Agreement, no party shall, nor shall any party permit any of
its Direct Subsidiaries to, incur or guarantee any in-
debtedness (including any debt borrowed or guaranteed or
otherwise assumed including, without limitation, the issuance
of debt securities or warrants or rights to acquire debt) or
enter into any "keep well" or other agreement to maintain any
financial statement condition of another person or enter into
any arrangement having the economic effect of any of the
foregoing other than (i) short-term indebtedness in the
ordinary course of business consistent with past practice
(such as the issuance of commercial paper or the use of
existing credit facilities); (ii) long-term indebtedness not
aggregating more than $650 million; (iii) arrangements between
such party and its Direct Subsidiaries or among its Direct
Subsidiaries; (iv) as set forth in Section 6.1(h) of the NSP
Disclosure Schedule or the WEC Disclosure Schedule; (v) in
connection with the refunding of existing indebtedness at a
lower cost of funds; or (vi) in connection with the refunding
of WEPCO Preferred Stock or Old NSP Preferred Stock as per-
mitted in SECTION 6.1(b).
(i) COMPENSATION, BENEFITS. Except as set forth in
Section 6.1(i) of the NSP Disclosure Schedule or the WEC
Disclosure Schedule, as may be required by applicable law or
as contemplated by this Agreement, no party shall, nor shall
any party permit any of its Direct Subsidiaries to, (i) enter
into, adopt or amend or increase the amount or accelerate the
payment or vesting of any benefit or amount payable under, any
employee benefit plan or other contract, agreement, com-
mitment, arrangement, plan or policy maintained by, con-
tributed to or entered into by such party or any of its Direct
Subsidiaries, or increase, or enter into any contract,
agreement, commitment or arrangement to increase in any
manner, the compensation or fringe benefits, or otherwise to
extend, expand or enhance the engagement, employment or any
related rights, of any director, officer or other employee of
such party or any of
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its Direct Subsidiaries, except for normal increases in the
ordinary course of business consistent with past practice
that, in the aggregate, do not result in a material increase
in benefits or compensation expense to such party or any of
its Direct Subsidiaries or (ii) enter into or amend any
employment, severance or special pay arrangement with respect
to the termination of employment or other similar contract,
agreement or arrangement with any director or officer or other
employee other than in the ordinary course of business
consistent with past practice.
(j) 1935 ACT. Except as set forth in Section 6.1(j) of
the NSP Disclosure Schedule or WEC Disclosure Schedule, no
party shall, nor shall any party permit any of its Direct
Subsidiaries to, except as required or contemplated by this
Agreement, engage in any activities which would cause a change
in its status, or that of its subsidiaries, under the 1935
Act, or that would impair the ability of NSP to claim an
exemption as of right under Rule 2 of the 1935 Act or that
would impair the ability of WEC to claim an exemption pursuant
to its order under Section 3(a)(1) of the 1935 Act prior to
the Effective Time, other than (i) the application to the SEC
under the 1935 Act contemplated by this Agreement for approval
to the extent required of the transactions contemplated hereby
and (ii) the registration of the Company pursuant to the 1935
Act.
(k) TRANSMISSION, GENERATION. Except as required
pursuant to tariffs on file with the FERC as of the date
hereof, in the ordinary course of business consistent with
past practice, or as set forth in Section 6.1(k) of the NSP
Disclosure Schedule or the WEC Disclosure Schedule, no party
shall, nor shall any party permit any of its Direct
Subsidiaries to, (i) commence construction of any additional
generating, transmission or delivery capacity, or (ii)
obligate itself to purchase or otherwise acquire, or to sell
or otherwise dispose of, or to share, any additional
generating, transmission or delivery capacity except as set
forth in the budgets of NSP and WEC.
(l) ACCOUNTING. Except as set forth in Section 6.1(l)
of the NSP Disclosure Schedule or WEC Disclosure Schedule, no
party shall, nor shall any party permit any of its Direct
Subsidiaries to, make any changes in their accounting methods,
except as required by law, rule, regulation or GAAP.
(m) POOLING. No party shall, nor shall any party permit
any of its subsidiaries to, take any action which
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would, or would be reasonably likely to, prevent the Company
from accounting for the transactions to be effected pursuant
to this Agreement as a pooling of interests in accordance with
GAAP and applicable SEC regulations, and each party hereto
shall use all reasonable efforts to achieve such result
(including taking such actions as may be necessary to cure any
facts or circumstances that could prevent such transactions
from qualifying for pooling-of-interests accounting
treatment).
(n) TAX-FREE STATUS. No party shall, nor shall any
party permit any of its subsidiaries to, take any actions
which would, or would be reasonably likely to, adversely
affect the status of the Mergers as tax-free transactions
(except as to dissenters' rights and fractional shares) under
Section 368(a) of the Code, and each party hereto shall use
all reasonable efforts to achieve such result.
(o) AFFILIATE TRANSACTIONS. Except as set forth in
Section 6.1(o) of each of the NSP Disclosure Schedule or the
WEC Disclosure Schedule, no party shall, nor shall any party
permit any of its Direct Subsidiaries to, enter into any
material agreement or arrangement with any of their respective
affiliates (other than wholly-owned subsidiaries) on terms
materially less favorable to such party than could be
reasonably expected to have been obtained with an unaffiliated
third party on an arm's-length basis.
(p) COOPERATION, NOTIFICATION. Each party shall, and
shall cause its Direct Subsidiaries to, (i) confer on a
regular and frequent basis with one or more representatives of
the other party to discuss, subject to applicable law,
material operational matters and the general status of its
ongoing operations; (ii) promptly notify the other party of
any significant changes in its business, properties, assets,
condition (financial or other), results of operations or
prospects; (iii) advise the other party of any change or event
which has had or, insofar as reasonably can be foreseen, is
reasonably likely to result in, in the case of NSP, a NSP
Material Adverse Effect or, in the case of WEC, a WEC Material
Adverse Effect; and (iv) promptly provide the other party with
copies of all filings made by such party or any of its Direct
Subsidiaries with any state or federal court, administrative
agency, commission or other Governmental Authority in
connection with this Agreement and the transactions
contemplated hereby.
(q) RATE MATTERS. Each of NSP and WEC shall, and shall
cause its Direct Subsidiaries to, discuss with the
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other any changes in its or its Direct Subsidiaries' rates or
charges (other than pass-through fuel and gas rates or
charges), standards of service or accounting from those in
effect on the date hereof and consult with the other prior to
making any filing (or any amendment thereto), or effecting any
agreement, commitment, arrangement or consent with
governmental regulators, whether written or oral, formal or
informal, with respect thereto, and no party will make any
filing to change its rates on file with the FERC that would
have a material adverse effect on the benefits associated with
the business combination provided for herein.
(r) THIRD-PARTY CONSENTS. NSP shall, and shall cause
its Direct Subsidiaries to, use all commercially reasonable
efforts to obtain all NSP Required Consents. NSP shall
promptly notify WEC of any failure or prospective failure to
obtain any such consents and, if requested by WEC, shall
provide copies of all NSP Required Consents obtained by NSP to
WEC. WEC shall, and shall cause its Direct Subsidiaries to,
use all commercially reasonable efforts to obtain all WEC
Required Consents. WEC shall promptly notify NSP of any
failure or prospective failure to obtain any such consents
and, if requested by NSP, shall provide copies of all WEC
Required Consents obtained by WEC to NSP.
(s) NO BREACH, ETC. No party shall, nor shall any party
permit any of its Direct Subsidiaries to, willfully take any
action that would or is reasonably likely to result in a
material breach of any provision of this Agreement, the NSP
Stock Option Agreement or the WEC Stock Option Agreement, as
the case may be, or in any of its representations and
warranties set forth in this Agreement, the NSP Stock Option
Agreement, or the WEC Stock Option Agreement, as the case may
be, being untrue on and as of the Closing Date.
(t) TAX-EXEMPT STATUS. No party shall, nor shall any
party permit any Direct Subsidiary to, take any action that
would likely jeopardize the qualification of NSP's or WEPCO's
outstanding revenue bonds which qualify on the date hereof
under Section 142(a) of the Code as "exempt facility bonds" or
as tax-exempt industrial development bonds under Section
103(b)(4) of the Internal Revenue Code of 1954, as amended,
prior to the Tax Reform Act of 1986.
(u) TRANSITION MANAGEMENT. As soon as practicable after
the date hereof, the parties shall create a special transition
management task force (the "TASK FORCE") which
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shall be headed by James J. Howard ("MR. HOWARD") and Richard
A. Abdoo ("MR. ABDOO"). The Task Force shall examine various
alternatives regarding the manner in which to best organize
and manage the business of the Company after the Effective
Time, subject to applicable law. Messrs. Howard and Abdoo
will have joint decision-making authority regarding the Task
Force, and Mr. Abdoo will manage and be responsible for the
day-to-day activities and operations of the Task Force.
(v) COMPANY ACTIONS. WEC and NSP shall cause the
Company to take only those actions, from the date hereof until
the Effective Time, that are required or contemplated by this
Agreement to be so taken by the Company, including, without
limitation, the declaration, filing or registration with, or
notice to or authorization, consent or approval of, any
Governmental Authority, as set forth in Section 4.4(b) of the
NSP Disclosure Schedule, Section 4.4(c) of the NSP Disclosure
Schedule, Section 5.4(b) of the WEC Disclosure Schedule and
Section 5.4(c) of the WEC Disclosure Schedule.
(w) TAX MATTERS. Except as set forth in Section 6.1(w)
of the NSP Disclosure Schedule or the WEC Disclosure Schedule,
no party shall make or rescind any material express or deemed
election relating to taxes, settle or compromise any material
claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to taxes, or
change any of its methods of reporting income or deductions
for federal income tax purposes from those employed in the
preparation of its federal income tax return for the taxable
year ending December 31, 1993, except as may be required by
applicable law.
(x) DISCHARGE OF LIABILITIES. No party shall pay,
discharge or satisfy any material claims, liabilities or
obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction, in the ordinary course of business consistent
with past practice (which includes the payment of final and
unappealable judgments) or in accordance with their terms, of
liabilities reflected or reserved against in, or contemplated
by, the most recent consolidated financial statements (or the
notes thereto) of such party included in such party's reports
filed with the SEC, or incurred in the ordinary course of
business consistent with past practice.
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(y) CONTRACTS. No party shall, except in the ordinary
course of business consistent with past practice, modify,
amend, terminate, renew or fail to use reasonable business
efforts to renew any material contract or agreement to which
such party or any Direct Subsidiary of such party is a party
or waive, release or assign any material rights or claims.
(z) INSURANCE. Each party shall, and shall cause its
Direct Subsidiaries to, maintain with financially responsible
insurance companies insurance in such amounts and against such
risks and losses as are customary for companies engaged in the
electric and gas utility industry and employing methods of
generating electric power and fuel sources similar to those
methods employed and fuels used by such party or its Direct
Subsidiaries.
(aa) PERMITS. Each party shall, and shall cause its
Direct Subsidiaries to, use reasonable efforts to maintain in
effect all existing governmental permits pursuant to which
such party or its Direct Subsidiaries operate.
(bb) LIMITATION ON INVESTMENTS IN UNRESTRICTED SUB-
SIDIARIES. From and after the date hereof, NSP will not make,
and will not permit any NSP Subsidiary to make, any additional
investments in, or loans or capital contributions to, or to
undertake any guarantees or other obligations with respect to,
any NSP Unrestricted Subsidiary in excess of $350 million
(which number shall be made up of, and shall not be in
duplication of, the amounts budgeted for capital expenditures
and acquisitions as set forth in Sections 6.1(e) and (f) of
the NSP Disclosure Schedule and amounts spent pursuant to the
$50 million basket referenced in SECTION 6.1(e)) in the
aggregate to all NSP Unrestricted Subsidiaries; and WEC will
not make, and will not permit any WEC Subsidiary to make, any
additional investments in, or loans or capital contributions
to, or to undertake any guarantees or other obligations with
respect to, any WEC Unrestricted Subsidiary in excess of $100
million (which number shall be made up of, and shall not be in
duplication of, the amounts budgeted for capital expenditures
and acquisitions as set forth in Sections 6.1(e) and (f) of
the WEC Disclosure Schedule and amounts spent pursuant to the
$50 million basket referenced in SECTION 6.1(e)) in the ag-
gregate to all WEC Unrestricted Subsidiaries.
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ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 ACCESS TO INFORMATION. Upon reasonable
notice, each party shall, and shall cause its Direct Subsidiaries
to, afford to the officers, directors, employees, accountants,
counsel, investment bankers, financial advisors and other rep-
resentatives of the other (collectively, "REPRESENTATIVES")
reasonable access, during normal business hours throughout the
period prior to the Effective Time, to all of its properties,
books, contracts, commitments and records (including, but not
limited to, Tax Returns) and, during such period, each party shall,
and shall cause its Direct Subsidiaries to, furnish promptly to the
other (i) access to each report, schedule and other document filed
or received by it or any of its Direct Subsidiaries pursuant to the
requirements of federal or state securities laws or filed with or
sent to the SEC, the FERC, the NRC, the Department of Justice, the
Federal Trade Commission, the Minnesota Public Utilities
Commission, the Public Service Commission of Wisconsin or any other
federal or state regulatory agency or commission, and (ii) access
to all information concerning themselves, their subsidiaries,
directors, officers and shareholders and such other matters as may
be reasonably requested by the other party in connection with any
filings, applications or approvals required or contemplated by this
Agreement or for any other reason related to the transactions
contemplated by this Agreement. Each party shall provide access to
those premises, documents, reports and information described above
of subsidiaries of such party that are not Direct Subsidiaries to
the extent such party has or is able to obtain such access. Each
party shall, and shall cause its subsidiaries and Representatives
to, hold in strict confidence all documents and information
concerning the other furnished to it in connection with the
transactions contemplated by this Agreement in accordance with the
Confidentiality Agreement, dated January 17, 1995, between NSP and
WEC, as it may be amended from time to time (the "CONFIDENTIALITY
AGREEMENT").
Section 7.2 JOINT PROXY STATEMENT AND REGISTRATION
STATEMENT.
(a) PREPARATION AND FILING. The parties will prepare
and file with the SEC as soon as reasonably practicable after the
date hereof the Registration Statement and the Proxy Statement
(together, the "JOINT PROXY/REGISTRATION STATEMENT"). The parties
hereto shall each use reasonable efforts to cause the Registration
Statement to be declared effective under the Securities Act as
promptly as practicable after such filing.
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Each party hereto shall also take such action as may be reasonably
required to cause the shares of Company Common Stock issuable in
connection with the Mergers to be registered or to obtain an
exemption from registration under applicable state "blue sky" or
securities laws; PROVIDED, HOWEVER, that no party shall be required
to register or qualify as a foreign corporation or to take other
action which would subject it to service of process in any
jurisdiction where it will not be, following the Mergers, so
subject. Each of the parties hereto shall furnish all information
concerning itself which is required or customary for inclusion in
the Joint Proxy/Registration Statement. The parties shall use
reasonable efforts to cause the shares of Company Common Stock
issuable in the Mergers to be approved for listing on the NYSE upon
official notice of issuance. The information provided by any party
hereto for use in the Joint Proxy/Registration Statement shall be
true and correct in all material respects without omission of any
material fact which is required to make such information not false
or misleading. No representation, covenant or agreement is made by
any party hereto with respect to information supplied by any other
party for inclusion in the Joint Proxy Statement/Registration
Statement.
(b) LETTER OF NSP'S ACCOUNTANTS. NSP shall use best
efforts to cause to be delivered to WEC letters of Deloitte &
Touche LLP and Price Waterhouse LLP, dated a date within two
business days before the date of the Joint Proxy/Registration
Statement, and addressed to WEC, in form and substance reasonably
satisfactory to WEC and customary in scope and substance for "cold
comfort" letters delivered by independent public accountants in
connection with registration statements on Form S-4.
(c) LETTER OF WEC'S ACCOUNTANTS. WEC shall use best
efforts to cause to be delivered to NSP a letter of Price Wa-
terhouse LLP, dated a date within two business days before the date
of the Joint Proxy/Registration Statement, and addressed to NSP, in
form and substance reasonably satisfactory to NSP and customary in
scope and substance for "cold comfort" letters delivered by
independent public accountants in connection with registration
statements on Form S-4.
(d) FAIRNESS OPINIONS. It shall be a condition to the
mailing of the Joint Proxy/Registration Statement to the
shareholders of NSP and WEC that (i) NSP shall have received an
opinion from Goldman, Sachs & Co., dated the date of the Joint
Proxy/Registration Statement, to the effect that, as of the date
thereof, the Ratio is fair to the holders of Old NSP Common Stock
and (ii) WEC shall have received an opinion from Barr Devlin
Associates, dated the date of the Joint Proxy Statement,
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to the effect that, as of the date thereof, the Ratio is fair from
a financial point of view to the holders of WEC Common Stock.
Section 7.3 REGULATORY MATTERS.
(a) HSR FILINGS. Each party hereto shall file or cause
to be filed with the Federal Trade Commission and the Department of
Justice any notifications required to be filed by their respective
"ultimate parent" companies under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR ACT"), and the rules
and regulations promulgated thereunder with respect to the
transactions contemplated hereby. Such parties will use all
commercially reasonable efforts to make such filings promptly and
to respond promptly to any requests for additional information made
by either of such agencies.
(b) OTHER REGULATORY APPROVALS. Each party hereto shall
cooperate and use its best efforts to promptly prepare and file all
necessary documentation, to effect all necessary applications,
notices, petitions, filings and other documents, and to use all
commercially reasonable efforts to obtain all necessary permits,
consents, approvals and authorizations of all Governmental
Authorities necessary or advisable to consummate the transactions
contemplated by this Agreement, including, without limitation, the
NSP Required Statutory Approvals and the WEC Required Statutory
Approvals.
Section 7.4 SHAREHOLDER APPROVAL.
(a) APPROVAL OF WEC SHAREHOLDERS. Subject to the
provisions of SECTION 7.4(c) and SECTION 7.4(d), WEC shall, as soon
as reasonably practicable after the date hereof (i) take all steps
necessary to duly call, give notice of, convene and hold a special
meeting of its shareholders (the "WEC SPECIAL MEETING") for the
purpose of securing the WEC Shareholders' Approval, (ii) distribute
to its shareholders the joint Proxy Statement in accordance with
applicable federal and state law and with its Restated Articles of
Incorporation and by-laws, (iii) subject to the fiduciary duties of
its Board of Directors, recommend to its shareholders the approval
of the NSP Merger, this Agreement and the transactions contemplated
hereby (including the WEC Article Amendments) and (iv) cooperate
and consult with NSP with respect to each of the foregoing matters.
(b) APPROVAL OF NSP SHAREHOLDERS. Subject to the
provisions of SECTION 7.4(c) and SECTION 7.4(d), NSP shall, as soon
as reasonably practicable after the date hereof (i) take all steps
necessary to duly call, give notice of, convene and
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hold a special meeting of its shareholders (the "NSP SPECIAL
MEETING") for the purpose of securing the NSP Shareholders'
Approval, (ii) distribute to its shareholders the joint Proxy
Statement in accordance with applicable federal and state law and
with its Restated Articles of Incorporation and by-laws, (iii)
subject to the fiduciary duties of its Board of Directors,
recommend to its shareholders the approval of the NSP Merger, this
Agreement and the transactions contemplated hereby and (iv)
cooperate and consult with WEC with respect to each of the
foregoing matters.
(c) MEETING DATE. The WEC Special Meeting for the
purpose of securing the WEC Shareholders' Approval and the NSP
Special Meeting for the purpose of securing the NSP Shareholders'
Approval shall be held on such dates as NSP and WEC shall mutually
determine.
(d) FAIRNESS OPINIONS NOT WITHDRAWN. It shall be a
condition to the obligation of NSP to hold the NSP Special Meeting
that the opinion of Goldman, Sachs & Co., referred to in SECTION
7.2(d), shall not have been withdrawn, and it shall be a condition
to the obligation of WEC to hold the WEC Special Meeting that the
opinion of Barr Devlin Associates, referred to in SECTION 7.2(d),
shall not have been withdrawn.
Section 7.5 DIRECTORS' AND OFFICERS' INDEMNIFICATION.
(a) INDEMNIFICATION. To the extent, if any, not
provided by an existing right of indemnification or other agreement
or policy, from and after the Effective Time, the Company shall, to
the fullest extent permitted by applicable law, indemnify, defend
and hold harmless each person who is now, or has been at any time
prior to the date hereof, or who becomes prior to the Effective
Time, an officer, director or employee of any of the parties hereto
or any subsidiary (each an "INDEMNIFIED PARTY" and collectively,
the "INDEMNIFIED PARTIES") against (i) all losses, expenses
(including reasonable attorney's fees and expenses), claims,
damages or liabilities or, subject to the proviso of the next
succeeding sentence, amounts paid in settlement, arising out of
actions or omissions occurring at or prior to the Effective Time
(and whether asserted or claimed prior to, at or after the
Effective Time) that are, in whole or in part, based on or arising
out of the fact that such person is or was a director, officer or
employee of such party (the "INDEMNIFIED LIABILITIES"), and (ii)
all Indemnified Liabilities to the extent they are based on or
arise out of or pertain to the transactions contemplated by this
Agreement. In the event of any such loss, expense, claim,
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damage or liability (whether or not arising before the Effective
Time), (i) the Company shall pay the reasonable fees and expenses
of counsel selected by the Indemnified Parties, which counsel shall
be reasonably satisfactory to the Company, promptly after
statements therefor are received and otherwise advance to such
Indemnified Party upon request reimbursement of documented expenses
reasonably incurred, in either case to the extent not prohibited by
the WBCL and upon receipt of any affirmation and undertaking
required by Section 180.0853 of the WBCL, (ii) the Company will
cooperate in the defense of any such matter and (iii) any
determination required to be made with respect to whether an
Indemnified Party's conduct complies with the standards set forth
under Wisconsin law and the Restated Articles of Incorporation
(including the WEC Article Amendments) or By-laws of the Company
(as the same shall be amended pursuant to SECTION 7.20) shall be
made by independent counsel mutually acceptable to the Company and
the Indemnified Party; PROVIDED, HOWEVER, that the Company shall
not be liable for any settlement effected without its written
consent (which consent shall not be unreasonably withheld). The
Indemnified Parties as a group may retain only one law firm with
respect to each related matter except to the extent there is, in
the opinion of counsel to an Indemnified Party, under applicable
standards of professional conduct, a conflict on any significant
issue between positions of such Indemnified Party and any other
Indemnified Party or Indemnified Parties.
(b) INSURANCE. For a period of six years after the
Effective Time, the Company shall cause to be maintained in effect
policies of directors' and officers' liability insurance maintained
by NSP and WEC for the benefit of those persons who are currently
covered by such policies on terms no less favorable than the terms
of such current insurance coverage; PROVIDED, HOWEVER, that the
Company shall not be required to expend in any year an amount in
excess of 200% of the annual aggregate premiums currently paid by
NSP and WEC for such insurance; and PROVIDED, FURTHER, that if the
annual premiums of such insurance coverage exceed such amount, the
Company shall be obligated to obtain a policy with the best
coverage available, in the reasonable judgment of the Board of
Directors of the Company, for a cost not exceeding such amount.
(c) SUCCESSORS. In the event the Company or any of its
successors or assigns (i) consolidates with or merges into any
other person and shall not be the continuing or surviving
corporation or entity of such consolidation or merger or (ii)
transfers all or substantially all of its properties and assets to
any person, then and in either such case, proper provisions shall
be made so that the successors and assigns of the Company shall
assume the obligations set forth in this SECTION 7.5.
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(d) SURVIVAL OF INDEMNIFICATION. To the fullest extent
permitted by law, from and after the Effective Time, all rights to
indemnification as of the date hereof in favor of the employees,
agents, directors and officers of NSP, WEC and their respective
subsidiaries with respect to their activities as such prior to the
Effective Time, as provided in their respective articles of
incorporation and by-laws in effect on the date thereof, or
otherwise in effect on the date hereof, shall survive the Mergers
and shall continue in full force and effect for a period of not
less than six years from the Effective Time.
(e) BENEFIT. The provisions of this SECTION 7.5 are
intended to be for the benefit of, and shall be enforceable by,
each Indemnified Party, his or her heirs and his or her repre-
sentatives.
Section 7.6 DISCLOSURE SCHEDULES. On the date hereof,
(i) WEC has delivered to NSP a schedule (the "WEC DISCLOSURE
SCHEDULE"), accompanied by a certificate signed by the chief
financial officer of WEC stating the WEC Disclosure Schedule is
being delivered pursuant to this SECTION 7.6(i) and (ii) NSP has
delivered to WEC a schedule (the "NSP DISCLOSURE SCHEDULE"),
accompanied by a certificate signed by the chief financial officer
of NSP stating the NSP Disclosure Schedule is being delivered
pursuant to this SECTION 7.6(ii). The NSP Disclosure Schedule and
the WEC Disclosure Schedule are collectively referred to herein as
the "DISCLOSURE SCHEDULES". The Disclosure Schedules constitute an
integral part of this Agreement and modify the respective
representations, warranties, covenants or agreements of the parties
hereto contained herein to the extent that such representations,
warranties, covenants or agreements expressly refer to the
Disclosure Schedules. Anything to the contrary contained herein or
in the Disclosure Schedules notwithstanding, any and all
statements, representations, warranties or disclosures set forth in
the Disclosure Schedules shall be deemed to have been made on and
as of the date hereof.
Section 7.7 PUBLIC ANNOUNCEMENTS. Subject to each
party's disclosure obligations imposed by law, NSP and WEC will
cooperate with each other in the development and distribution of
all news releases and other public information disclosures with
respect to this Agreement or any of the transactions contemplated
hereby and shall not issue any public announcement or statement
with respect hereto or thereto without the consent of the other
party (which consent shall not be unreasonably withheld).
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Section 7.8 RULE 145 AFFILIATES. Within 30 days after
the date of this Agreement, NSP shall identify in a letter to WEC,
and WEC shall identify in a letter to NSP, all persons who are, and
to such person's best knowledge who will be at the Closing Date,
"affiliates" of NSP and WEC, respectively, as such term is used in
Rule 145 under the Securities Act (or otherwise under applicable
SEC accounting releases with respect to pooling-of-interests
accounting treatment). Each of NSP and WEC shall use all
reasonable efforts to cause their respective affiliates (including
any person who may be deemed to have become an affiliate after the
date of the letter referred to in the prior sentence) to deliver to
the Company on or prior to the Closing Date a written agreement
substantially in the form attached as EXHIBIT 7.8 (each, an
"AFFILIATE AGREEMENT").
Section 7.9 EMPLOYEE AGREEMENTS AND WORKFORCE MATTERS.
(a) CERTAIN EMPLOYEE AGREEMENTS. Subject to SECTION
7.10, SECTION 7.14 and SECTION 7.15, the Company and its sub-
sidiaries shall honor, without modification, all contracts,
agreements, collective bargaining agreements and commitments of the
parties prior to the date hereof which apply to any current or
former employee or current or former director of the parties
hereto; PROVIDED, HOWEVER, that this undertaking is not intended to
prevent the Company from enforcing such contracts, agreements,
collective bargaining agreements and commitments in accordance with
their terms, including, without limitation, any reserved right to
amend, modify, suspend, revoke or terminate any such contract,
agreement, collective bargaining agreement or commitment.
(b) WORKFORCE MATTERS. Subject to applicable collective
bargaining agreements, for a period of three years following the
Effective Time, any reductions in workforce in respect of employees
of the Company shall be made on a fair and equitable basis, in
light of the circumstances and the objectives to be achieved,
giving consideration to previous work history, job experience, and
qualifications, without regard to whether employment was with NSP
or its subsidiaries or WEC or its subsidiaries, and any employees
whose employment is terminated or jobs are eliminated by the
Company or any of its subsidiaries during such period shall be
entitled to participate on a fair and equitable basis in the job
opportunity and employment placement programs offered by the
Company or any of its subsidiaries. Any workforce reductions
carried out following the Effective Time by the Company and its
subsidiaries shall be done in accordance with all applicable
collective bargaining agreements, and all laws and regulations
governing
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the employment relationship and termination thereof including,
without limitation, the Worker Adjustment and Retraining Notifi-
cation Act and regulations promulgated thereunder, and any
comparable state or local law.
Section 7.10 EMPLOYEE BENEFIT PLANS.
(a) MAINTENANCE OF NSP AND WEC BENEFIT PLANS. Subject
to SECTION 7.10(b), SECTION 7.10(c) and SECTION 6.1(i), each of the
NSP Benefit Plans and WEC Benefit Plans in effect at the date
hereof shall be maintained in effect with respect to the employees
or former employees of NSP and any of its Direct Subsidiaries, on
the one hand, and of WEC and any of its Direct Subsidiaries, on the
other hand, respectively, who are covered by any such benefit plan
immediately prior to the Closing Date (the "AFFILIATED EMPLOYEES")
until the Company otherwise determines after the Effective Time;
PROVIDED, HOWEVER, that nothing herein contained shall limit any
reserved right contained in any such NSP Benefit Plan or WEC
Benefit Plan to amend, modify, suspend, revoke or terminate any
such plan; PROVIDED, FURTHER, HOWEVER, that the Company or its sub-
sidiaries shall provide to the Affiliated Employees for a period of
not less than one year following the Effective Time benefits, other
than with respect to plans referred to in SECTION 7.10(b) and
SECTION 7.11, which are no less favorable in the aggregate than
those provided under the NSP Benefit Plans or the WEC Benefit
Plans, as the case may be. Without limitation of the foregoing,
each participant of any such NSP Benefit Plan or WEC Benefit Plan
shall receive credit for purposes of eligibility to participate,
vesting, benefit accrual and eligibility to receive benefits under
any benefit plan of the Company or any of its subsidiaries or af-
filiates for service credited for the corresponding purpose under
such benefit plan; PROVIDED, HOWEVER, that such crediting of
service shall not operate to duplicate any benefit to any such par-
ticipant or the funding for any such benefit. Any person hired by
the Company or any of its subsidiaries after the Closing Date who
was not employed by any party hereto or its subsidiaries
immediately prior to the Closing Date shall be eligible to
participate in such benefit plans maintained, or contributed to, by
the subsidiary, division or operation by which such person is em-
ployed, PROVIDED that such person meets the eligibility re-
quirements of the applicable plan.
(b) ADOPTION OF COMPANY REPLACEMENT PLANS. With respect
to the WEC Short-Term Performance Plan (the "WEC INCENTIVE PLAN"),
the NSP Executive Incentive Compensation Plan (the "NSP INCENTIVE
PLAN"), the NSP Long-Term Incentive Award Stock Plan (the "NSP
STOCK PLAN") and the WEC 1993 Omnibus Stock Incentive Plan (the
"WEC STOCK PLAN"), the Company and
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its subsidiaries shall adopt replacement plans as set forth in this
SECTION 7.10(b) (collectively, the "COMPANY REPLACEMENT PLANS").
Each Company Replacement Plan shall amend and supersede the
corresponding NSP or WEC plan and such corresponding plan shall, as
of the Effective Time, be merged with and into the appropriate
Company Replacement Plan. The WEC Incentive Plan and the NSP
Incentive Plan shall be replaced by a new annual bonus plan under
which cash bonuses, based on percentages of base salaries, are
awarded based upon the achievement of performance goals determined
in advance by the Compensation Committee of the Board of Directors
of the Company (the "COMMITTEE"). With respect to those
participants in the new plan who are, or who the Committee
determines are likely to be, "covered individuals" within the
meaning of Section 162(m) of the Code, the performance goals shall
be objective standards that are approved by shareholders in
accordance with the requirements for exclusion from the limits of
Section 162(m) of the Code as performance-based compensation. The
NSP Stock Plan and the WEC Stock Plan shall be replaced by a stock
compensation plan (the "COMPANY STOCK PLAN") providing for the
grant of stock options, stock appreciation rights, restricted stock
and such other awards based upon the Company Common Stock as the
Board of Directors may determine, subject to shareholder approval
of the Company Stock Plan. The Company shall reserve 12 million
shares for issuance under the Company Stock Plan.
(c) NSP AND WEC ACTION. With respect to each of the
Company Replacement Plans, each of NSP and WEC shall take all
corporate action necessary or appropriate to obtain the approval of
the respective shareholders with respect to such plan prior to the
Effective Time. Before the Effective Time, WEC shall take all
steps necessary to amend (i) the WEC Supplemental Executive Re-
tirement Plan, (ii) the WEC Executive Non-Qualified Trust, (iii)
each of the Supplemental Retirement Benefit Agreements set forth in
Section 5.10(g) of the WEC Disclosure Schedule, (iv) the WEC
Executive Deferred Compensation Plan, (v) the WEC Directors'
Deferred Compensation Plan, and (vi) the WEPCO Directors' Deferred
Compensation Plan, so that none of the transactions contemplated by
this Agreement shall constitute a Change of Control for purposes of
said arrangements, PROVIDED that with respect to items (iii)
through (vi), WEC shall use its best efforts to obtain the consent
of the other parties thereto. Prior to or as soon as practicable
after the date hereof, each of NSP and WEC shall adopt severance
plans substantially in the forms attached hereto as Exhibits
7.10(a) and 7.10(b), respectively.
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Section 7.11 STOCK OPTION AND OTHER STOCK PLANS.
(a) AMENDMENT OF NSP STOCK PLAN AND AGREEMENTS. Ef-
fective as of the Effective Time, NSP shall amend the NSP Stock
Plan and each underlying award agreement to provide that (i) each
outstanding option to purchase shares of Old NSP Common Stock
(each, a "NSP STOCK OPTION"), along with any tandem stock
appreciation right, shall constitute an option to acquire shares of
Company Common Stock, on the same terms and conditions as were
applicable under such NSP Stock Option, based on the same number of
shares of the Company Common Stock as the holder of such NSP Stock
Option would have been entitled to receive pursuant to the NSP
Merger in accordance with ARTICLE II had such holder exercised such
option in full immediately prior to the Effective Time; PROVIDED,
that the number of shares, the option price, and the terms and
conditions of exercise of such option, shall be determined in a
manner that preserves both (A) the aggregate gain (or loss) on the
NSP Stock Option immediately prior to the Effective Time and (B)
the ratio of the exercise price per share subject to the NSP Stock
Option to the fair market value (determined immediately prior to
the Effective Time) per share subject to such option; and PROVIDED,
FURTHER, that in the case of any option to which Section 421 of the
Code applies by reason of its qualification under any of
Sections 422-424 of the Code, the option price, the number of
shares purchasable pursuant to such option and the terms and
conditions of exercise of such option shall be determined in order
to comply with Section 424(a) of the Code; and (ii) each other
outstanding award under the NSP Stock Plan ("NSP STOCK AWARDS")
shall constitute an award based upon the same number of shares of
Company Common Stock as the holder of such NSP Stock Award would
have been entitled to receive pursuant to the NSP Merger in
accordance with ARTICLE II had such holder been the absolute owner,
immediately before the Effective Time, of the shares of NSP Common
Stock on which such NSP Stock Award is based, and otherwise on the
same terms and conditions as governed such NSP Stock Award
immediately before the Effective Time. At the Effective Time, the
Company shall assume each stock award agreement relating to the NSP
Stock Plan, each as amended as previously provided. As soon as
practicable after the Effective Time, the Company shall deliver to
the holders of NSP Stock Options and NSP Stock Awards appropriate
notices setting forth such holders' rights pursuant to the Company
Stock Plan and each underlying stock award agreement, each as
assumed by the Company.
(b) AMENDMENT OF WEC STOCK PLAN AND AGREEMENTS.
Effective as of the Effective Time, WEC shall amend the WEC Stock
Plan and use its best efforts to amend each underlying stock award
agreement to provide that none of the transactions
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contemplated by this Agreement shall constitute a Change in Control
for purposes of the WEC Stock Plan.
(c) COMPANY ACTION. With respect to each of the NSP
Stock Plan, the WEC Stock Plan, the NSP Employee Stock Ownership
Plan and any other plans under which the delivery of Old NSP Common
Stock, WEC Common Stock or Company Common Stock is required upon
payment of benefits, grant of awards or exercise of options (the
"STOCK PLANS"), the Company shall take all corporate action
necessary or appropriate to (i) obtain shareholder approval with
respect to such Stock Plan to the extent such approval is required
for purposes of the Code or other applicable law, or to enable such
Stock Plan to comply with Rule 16b-3 promulgated under the Exchange
Act, (ii) reserve for issuance under such plan or otherwise provide
a sufficient number of shares of Company Common Stock for delivery
upon payment of benefits, grant of awards or exercise of options
under such Stock Plan and (iii) as soon as practicable after the
Effective Time, file registration statements on Form S-3 or Form S-
8, as the case may be (or any successor or other appropriate
forms), with respect to the shares of Company Common Stock subject
to such Stock Plan to the extent such registration statement is
required under applicable law, and the Company shall use its best
efforts to maintain the effectiveness of such registration
statements (and maintain the current status of the prospectuses
contained therein) for so long as such benefits and grants remain
payable and such options remain outstanding. With respect to those
individuals who subsequent to the Mergers will be subject to the
reporting requirements under Section 16(a) of the Exchange Act, the
Company shall administer the Stock Plans, where applicable, in a
manner that complies with Rule 16b-3 promulgated under the Exchange
Act.
Section 7.12 NO SOLICITATIONS. No party hereto shall,
and each such party shall cause its Direct Subsidiaries not to,
shall not permit any of its Representatives or subsidiaries that
are not Direct Subsidiaries to, and shall use its best efforts to
cause such persons not to, directly or indirectly: initiate,
solicit or encourage, or take any action to facilitate the making
of any offer or proposal which constitutes or is reasonably likely
to lead to, any Business Combination Proposal (as defined below),
or, in the event of an unsolicited Business Combination Proposal,
except to the extent required by their fiduciary duties under
applicable law if so advised in a written opinion of outside
counsel, engage in negotiations or provide any information or data
to any person relating to any Business Combination Proposal. Each
party hereto shall notify the other party orally and in writing of
any such inquiries, offers or proposals (including, without
limitation, the terms and conditions of any such proposal and
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the identity of the person making it), within 24 hours of the
receipt thereof, shall keep the other party informed of the status
and details of any such inquiry, offer or proposal, and shall give
the other party five days' advance notice of any agreement to be
entered into with or any information to be supplied to any person
making such inquiry, offer or proposal. Each party hereto shall
immediately cease and cause to be terminated all existing
discussions and negotiations, if any, with any parties conducted
heretofore with respect to any Business Combination Proposal. As
used in this SECTION 7.12, "BUSINESS COMBINATION PROPOSAL" shall
mean any tender or exchange offer, proposal for a merger,
consolidation or other business combination involving any party to
this Agreement or any of its material subsidiaries, or any proposal
or offer (in each case, whether or not in writing and whether or
not delivered to the stockholders of a party generally) to acquire
in any manner, directly or indirectly, a substantial equity
interest in or a substantial portion of the assets of any party to
this Agreement or any of its material subsidiaries, other than
pursuant to the transactions contemplated by this Agreement or
referred to in SECTION 7.19(c) of this Agreement. Nothing
contained herein shall prohibit a party from taking and disclosing
to its stockholders a position contemplated by Rule 14e-2(a) under
the Exchange Act with respect to a Business Combination Proposal by
means of a tender offer.
Section 7.13 COMPANY BOARD OF DIRECTORS. NSP's and
WEC's respective Boards of Directors will take such action as may
be necessary to cause the number of directors comprising the full
Board of Directors of the Company at the Effective Time to be 12
persons, six of whom shall be designated by NSP prior to the
Effective Time and six of whom shall be designated by WEC prior to
the Effective Time. The initial designation of such directors
among the three classes of the Board of Directors of the Company
shall be agreed to by NSP and WEC, the designees of each party to
be divided equally among such classes; PROVIDED, HOWEVER, that if,
prior to the Effective Time, any of such designees shall decline or
be unable to serve, the party which designated such person shall
designate another person to serve in such person's stead. NSP's
and WEC's respective Boards of Directors will also take such action
as may be necessary to cause the committees of the Board of
Directors of the Company at the Effective Time to consist of that
number of NSP and WEC designees with such chairs as are set forth
on EXHIBIT 7.13.
Section 7.14 COMPANY OFFICERS. At the Effective Time,
pursuant to the terms hereof and of the employment contracts
referred to in SECTION 7.15: (a) Mr. Howard shall hold
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the positions of Chairman of the Board and Chief Executive Officer
of the Company and shall be entitled to serve in such capacities
until the end of the Initial Period (as defined in Mr. Howard's
employment contract entered into pursuant to SECTION 7.15), at
which time he shall be entitled to continue to hold the position of
Chairman of the Board of the Company until the end of the Secondary
Period (as defined in Mr. Howard's employment contract entered into
pursuant to SECTION 7.15); and (b) Mr. Abdoo shall hold the
positions of Vice Chairman of the Board, President and Chief
Operating Officer of the Company and shall be entitled to serve in
such capacities until the end of the Initial Period, at which time
he shall be entitled to hold the additional position of Chief
Executive Officer of the Company and to serve in all such
capacities until his successor is elected or appointed and shall
have qualified in accordance with the WBCL and the Restated
Articles of Incorporation (including the WEC Article Amendments)
and By-laws of the Company (as the same shall be amended pursuant
to SECTION 7.20). If either of such persons is unable or unwilling
to hold such offices for the periods set forth above, his successor
shall be selected by the Board of Directors of the Company in
accordance with its By-laws.
Section 7.15 EMPLOYMENT CONTRACTS. The Company shall,
as of or prior to the Effective Time, enter into employment
contracts with Mr. Howard and Mr. Abdoo in the forms set forth in
EXHIBIT 7.15.1 and EXHIBIT 7.15.2, respectively.
Section 7.16 POST-MERGER OPERATIONS. Following the
Effective Time, the Company shall conduct its operations in
accordance with the following:
(a) PRINCIPAL CORPORATE OFFICES. The Company and NSP
shall maintain their principal corporate offices in Minnesota
in the city of Minneapolis and WEPCO shall maintain its
principal corporate offices in Wisconsin in the city of
Milwaukee.
(b) MAINTENANCE OF SEPARATE EXISTENCE OF NEW NSP AND
WEPCO. WEPCO, on the one hand, and New NSP, on the other
hand, shall continue their separate corporate existences,
operating under the names of "WISCONSIN ENERGY COMPANY" and
"NORTHERN STATES POWER COMPANY", respectively. The respective
corporate officers of WEPCO, on the one hand, and NSP, on the
other hand, shall be entitled to maintain their current titles
and responsibilities as officers of WEPCO and New NSP,
respectively, unless and until otherwise determined by the
Board of Directors of WEPCO and New NSP.
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(c) CHARITIES. After the Effective Time, the Company
shall provide charitable contributions and community support
within the service areas of the parties and each of their
respective subsidiaries at levels substantially comparable to
the levels of charitable contributions and community support
provided by the parties and their respective subsidiaries
within their service areas within the two-year period
immediately prior to the Effective Time. The assets of The
Wisconsin Energy Corporation Foundation, Inc. (the
"FOUNDATION") shall be used for charitable purposes in
accordance with the articles and by-laws of the Foundation in
the service areas of WEPCO (including the prior service area
of NSP-W) unless changed by the Board of Directors of the
Company.
Section 7.17 EXPENSES. Subject to SECTION 9.3, all
costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party
incurring such expenses, except that those expenses incurred in
connection with printing the Joint Proxy/Registration Statement, as
well as the filing fee relating thereto, shall be shared equally by
NSP and WEC.
Section 7.18 FURTHER ASSURANCES. Each party will, and
will cause its Direct Subsidiaries to, execute such further
documents and instruments and take such further actions as may
reasonably be requested by any other party in order to consummate
the Mergers in accordance with the terms hereof. The parties
expressly acknowledge and agree that, although it is their current
intention to effect a business combination among themselves in the
form contemplated by this Agreement, it may be preferable to
effectuate such a business combination by means of an alternative
structure in light of the conditions set forth in SECTION 8.1(e),
SECTION 8.2(e), SECTION 8.2(f), SECTION 8.3(e), and SECTION 8.3(f).
Accordingly, if the only conditions to the parties' obligations to
consummate the Mergers which are not satisfied or waived are
receipt of any one or more of the NSP Required Consents, NSP
Required Statutory Approvals, WEC Required Consents, WEC Required
Statutory Approvals or the ruling referred to in Sections 8.2(e)
and 8.3(e), and the adoption of an alternative structure (that
otherwise substantially preserves for NSP and WEC the economic
benefits of the Merger) would result in such conditions being
satisfied or waived, then the parties shall use their respective
best efforts to effect a business combination among themselves by
means of a mutually agreed upon structure other than the Mergers
that so preserves such benefits; PROVIDED that, prior to closing
any such restructured transaction, all material third
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party and Governmental Authority declarations, filings, regis-
trations, notices, authorizations, consents or approvals necessary
for the effectuation of such alternative business combination shall
have been obtained and all other conditions to the parties'
obligations to consummate the Mergers, as applied to such
alternative business combination, shall have been satisfied or
waived.
Section 7.19 UTILITY ASSET TRANSFER. In addition to the
transactions described in ARTICLE I and ARTICLE II, con-
temporaneously with the Reincorporation Effective Time, NSP-W shall
sell and transfer to New NSP certain utility assets located in the
State of Wisconsin such that, upon such transfer, New NSP shall be
a Wisconsin utility for purposes of considering its assets as
assets of a public utility affiliate in the determination made un-
der Section 196.795(5)(p) of the Wisconsin Statutes.
Section 7.20 CHARTER AND BY-LAW AMENDMENTS. Prior to
the Closing: (a) WEC and NSP shall agree upon amendments to be
effected to the Restated Articles of Incorporation of WEC,
including to change the name of WEC to a name agreed upon by NSP
and WEC (which shall not be the name of, or a name substantially
similar to, either NSP or WEC) (the "WEC ARTICLE AMENDMENTS"), and
the by-laws of WEC, and WEC shall take all actions necessary so
that the WEC Article Amendments and such amendments to the WEC by-
laws become effective no later than the Effective Time; (b) NSP
shall cause the articles of incorporation of New NSP to be amended
and restated in substantially the form attached hereto as Exhibit
7.20(b); (c) WEC shall cause the articles of incorporation of WEC
Sub to be amended and restated in the form attached hereto as
Exhibit 7.20(c) and shall cause WEC Sub to issue to WEC additional
fully paid shares of WEC Sub's common stock so that, at the
Effective Time, the number of outstanding shares of common stock of
WEC Sub is equal to the number of outstanding shares of NSP Common
Stock at such time.
ARTICLE VIII
CONDITIONS
Section 8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO
EFFECT THE MERGERS. The respective obligations of each party to
effect the Mergers shall be subject to the satisfaction on or prior
to the Closing Date of the following conditions, except, to the
extent permitted by applicable law, that such conditions may be
waived in writing pursuant to SECTION 9.5 by the joint action of
the parties hereto:
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(a) SHAREHOLDER APPROVALS. The WEC Shareholders'
Approval and the NSP Shareholders' Approval shall have been
obtained.
(b) NO INJUNCTION. No temporary restraining order or
preliminary or permanent injunction or other order by any
federal or state court preventing consummation of the Mergers
shall have been issued and be continuing in effect, and the
Mergers and the other transactions contemplated hereby shall
not have been prohibited under any applicable federal or state
law or regulation.
(c) REGISTRATION STATEMENT. The Registration Statement
shall have become effective in accordance with the provisions
of the Securities Act, and no stop order suspending such
effectiveness shall have been issued and remain in effect.
(d) LISTING OF SHARES. The shares of Company Common
Stock issuable in the Mergers pursuant to ARTICLE II shall
have been approved for listing on the NYSE upon official
notice of issuance.
(e) STATUTORY APPROVALS. The NSP Required Statutory
Approvals and the WEC Required Statutory Approvals shall have
been obtained at or prior to the Effective Time, such
approvals shall have become Final Orders (as defined below)
and such Final Orders do not impose terms or conditions which,
in the aggregate, would have, or insofar as reasonably can be
foreseen, could have, a material adverse effect on the
business, assets, financial condition or results of operations
of the Company and its prospective subsidiaries taken as a
whole or on the Company's prospective utility subsidiaries
located in the State of Minnesota taken as a whole, or on its
prospective utility subsidiaries located in the State of
Wisconsin taken as a whole or which would be materially
inconsistent with the agreements of the parties contained
herein. A "FINAL ORDER" means action by the relevant
regulatory authority which has not been reversed, stayed,
enjoined, set aside, annulled or suspended, with respect to
which any waiting period prescribed by law before the
transactions contemplated hereby may be consummated has
expired, and as to which all conditions to the consummation of
such transactions prescribed by law, regulation or order have
been satisfied.
(f) DISSENTERS' RIGHTS. The number of NSP Dissenting
Shares shall not constitute more than 5% of the number of
issued and outstanding shares of Old NSP Common Stock
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and Old NSP Preferred Stock, taken together as a single class,
for this purpose.
(g) POOLING. Each of NSP and WEC shall have received a
letter of its independent public accountants, dated the
Closing Date, in form and substance reasonably satisfactory,
in each case, to NSP and WEC, stating that the transactions
effected pursuant to this Agreement will qualify as a pooling
of interests transaction under GAAP and applicable SEC regu-
lations.
Section 8.2 CONDITIONS TO OBLIGATION OF WEC TO EFFECT
THE MERGERS. The obligation of WEC to effect the NSP Merger shall
be further subject to the satisfaction, on or prior to the Closing
Date, of the following conditions, except as may be waived by WEC
in writing pursuant to SECTION 9.5:
(a) PERFORMANCE OF OBLIGATIONS OF NSP. NSP (and/or its
appropriate subsidiaries) will have performed its agreements
and covenants contained in SECTIONS 6.1(b) and 6.1(c) and
SECTION 7.19 and will have performed in all material respects
its other agreements and covenants contained in or
contemplated by this Agreement and the NSP Stock Option
Agreement required to be performed by it at or prior to the
Effective Time.
(b) REPRESENTATIONS AND WARRANTIES. The representations
and warranties of NSP set forth in this Agreement and the NSP
Stock Option Agreement shall be true and correct (i) on and as
of the date hereof and (ii) on and as of the Closing Date with
the same effect as though such representations and warranties
had been made on and as of the Closing Date (except for
representations and warranties that expressly speak only as of
a specific date or time other than the date hereof or the
Closing Date which need only be true and correct as of such
date or time) except in each of cases (i) and (ii) for such
failures of representations or warranties to be true and
correct (without regard to any materiality qualifications con-
tained therein) which, individually or in the aggregate, would
not be reasonably likely to result in a NSP Material Adverse
Effect.
(c) CLOSING CERTIFICATES. WEC shall have received a
certificate signed by the chief financial officer of NSP,
dated the Closing Date, to the effect that, to the best of
such officer's knowledge, the conditions set forth in SECTION
8.2(a) and SECTION 8.2(b) have been satisfied.
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(d) NSP MATERIAL ADVERSE EFFECT. No NSP Material
Adverse Effect shall have occurred and there shall exist no
fact or circumstance which is reasonably likely to have a NSP
Material Adverse Effect.
(e) TAX RULING AND OPINION. WEC shall have received (i)
a private letter ruling from the Internal Revenue Service
("IRS") providing certain assurances regarding the federal
income tax consequences of the Mergers satisfactory in form
and substance to Skadden, Arps, Slate, Meagher & Flom and
Quarles & Brady and (ii) an opinion of Skadden, Arps, Slate,
Meagher & Flom or Quarles & Brady based upon such ruling and
satisfactory in form and substance to WEC, dated as of the
Closing Date, to the effect that the Reincorporation Merger
and the subsequent NSP Merger will each be treated as a tax-
free reorganization under Section 368(a) of the Code.
(f) NSP REQUIRED CONSENTS. The NSP Required Consents
the failure of which to obtain would have a NSP Material
Adverse Effect shall have been obtained.
(g) AFFILIATE AGREEMENTS. The Company shall have
received Affiliate Agreements, duly executed by each "af-
filiate" of NSP, substantially in the form of EXHIBIT 7.8, as
provided in SECTION 7.8.
Section 8.3 CONDITIONS TO OBLIGATION OF NSP TO EFFECT
THE MERGERS. The obligation of NSP to effect the NSP Merger shall
be further subject to the satisfaction, on or prior to the Closing
Date, of the following conditions, except as may be waived by NSP
in writing pursuant to SECTION 9.5:
(a) PERFORMANCE OF OBLIGATIONS OF WEC. WEC (and/or its
appropriate subsidiaries) will have performed its agreements
and covenants contained in SECTIONS 6.1(b) and 6.1(c) and will
have performed in all material respects its other agreements
and covenants contained in or contemplated by this Agreement
and the WEC Stock Option Agreement required to be performed at
or prior to the Effective Time.
(b) REPRESENTATIONS AND WARRANTIES. The representations
and warranties of WEC set forth in this Agreement and the WEC
Stock Option Agreement shall be true and correct (i) on and as
of the date hereof and (ii) on and as of the Closing Date with
the same effect as though such representations and warranties
had been made on and as of the Closing Date (except for
representations and warranties that expressly speak only as of
a specific date or
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time other than the date hereof or the Closing Date which need
only be true and correct as of such date or time) except in
each of cases (i) and (ii) for such failures of
representations or warranties to be true and correct (without
regard to any materiality qualifications contained therein)
which, individually or in the aggregate, would not be
reasonably likely to result in a WEC Material Adverse Effect.
(c) CLOSING CERTIFICATES. NSP shall have received a
certificate signed by the chief financial officer of WEC,
dated the Closing Date, to the effect that, to the best of
such officer's knowledge, the conditions set forth in SECTION
8.3(a) and SECTION 8.3(b) have been satisfied.
(d) WEC MATERIAL ADVERSE EFFECT. No WEC Material
Adverse Effect shall have occurred and there shall exist no
fact or circumstance which is reasonably likely to have a WEC
Material Adverse Effect.
(e) TAX RULING AND OPINION. NSP shall have received (i)
a private letter ruling from the IRS providing certain
assurances regarding the federal income tax consequences of
the Mergers satisfactory in form and substance to Wachtell,
Lipton, Rosen & Katz and (ii) an opinion of Wachtell, Lipton,
Rosen & Katz based upon such ruling and satisfactory in form
and substance to NSP, dated as of the Closing Date, to the
effect that the Reincorporation Merger and the subsequent NSP
Merger will each be treated as a tax-free reorganization under
Section 368(a) of the Code.
(f) WEC REQUIRED CONSENTS. The WEC Required Consents
the failure of which to obtain would have a WEC Material
Adverse Effect shall have been obtained.
(g) AFFILIATE AGREEMENTS. The Company shall have
received Affiliate Agreements, duly executed by each "af-
filiate" of WEC substantially in the form of EXHIBIT 7.8, as
provided in SECTION 7.8.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 TERMINATION. This Agreement may be
terminated at any time prior to the Closing Date, whether before or
after approval by the shareholders of the respective parties hereto
contemplated by this Agreement:
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(a) by mutual written consent of the Boards of Directors
of NSP and WEC;
(b) by any party hereto, by written notice to the other
parties, if the Effective Time shall not have occurred on or
before April 30, 1997 (the "INITIAL TERMINATION DATE");
PROVIDED, HOWEVER, that the right to terminate the Agreement
under this SECTION 9.1(b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement
has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before this date; and PROVIDED,
FURTHER, that if on the Initial Termination Date the
conditions to the Closing set forth in SECTIONS 8.1(e), 8.2(f)
and/or 8.3(f) shall not have been fulfilled but all other
conditions to the Closing shall be fulfilled or shall be
capable of being fulfilled, then the Initial Termination Date
shall be extended to October 31, 1997;
(c) by any party hereto, by written notice to the other
parties, if the WEC Shareholders' Approval shall not have been
obtained at a duly held WEC Special Meeting, including any
adjournments thereof, or the NSP Shareholders' Approval shall
not have been obtained at a duly held NSP Special Meeting,
including any adjournments thereof;
(d) by any party hereto, if any state or federal law,
order, rule or regulation is adopted or issued, which has the
effect, as supported by the written opinion of outside counsel
for such party, of prohibiting the NSP Merger, or by any party
hereto if any court of competent jurisdiction in the United
States or any State shall have issued an order, judgment or
decree permanently restraining, enjoining or otherwise
prohibiting the NSP Merger, and such order, judgment or decree
shall have become final and nonappealable;
(e) by WEC, upon two days' prior notice to NSP, if, as
a result of a tender offer by a party other than NSP or any of
its affiliates or any written offer or proposal with respect
to a merger, sale of a material portion of its assets or other
business combination (each, a "BUSINESS COMBINATION") by a
party other than NSP or any of its affiliates, the Board of
Directors of WEC determines in good faith that their fiduciary
obligations under applicable law require that such tender
offer or other written offer or proposal be accepted;
PROVIDED, HOWEVER, that (i) the Board of Directors of WEC
shall have been advised in a written opinion of outside
counsel that notwithstanding a
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binding commitment to consummate an agreement of the nature of
this Agreement entered into in the proper exercise of their
applicable fiduciary duties, and notwithstanding all
concessions which may be offered by NSP in negotiations
entered into pursuant to CLAUSE (ii) below, such fiduciary
duties would also require the directors to reconsider such
commitment as a result of such tender offer or other written
offer or proposal; and (ii) prior to any such termination, WEC
shall, and shall cause its respective financial and legal
advisors to, negotiate with NSP to make such adjustments in
the terms and conditions of this Agreement as would enable WEC
to proceed with the transactions contemplated herein on such
adjusted terms;
(f) by NSP, upon two days' prior notice to WEC, if, as
a result of a tender offer by a party other than WEC or any of
its affiliates or any written offer or proposal with respect
to a Business Combination by a party other than WEC or any of
its affiliates, the Board of Directors of NSP determines in
good faith that their fiduciary obligations under applicable
law require that such tender offer or other written offer or
proposal be accepted; PROVIDED, HOWEVER, that (i) the Board of
Directors of NSP shall have been advised in a written opinion
of outside counsel that notwithstanding a binding commitment
to consummate an agreement of the nature of this Agreement en-
tered into in the proper exercise of their applicable fi-
duciary duties, and notwithstanding all concessions which may
be offered by WEC in negotiations entered into pursuant to
clause (ii) below, such fiduciary duties would also require
the directors to reconsider such commitment as a result of
such tender offer or other written offer or proposal; and (ii)
prior to any such termination, NSP shall, and shall cause its
respective financial and legal advisors to, negotiate with WEC
to make such adjustments in the terms and conditions of this
Agreement as would enable NSP to proceed with the transactions
contemplated herein on such adjusted terms;
(g) by NSP, by written notice to WEC, if (i) there exist
breaches of the representations and warranties of WEC made
herein as of the date hereof which breaches, individually or
in the aggregate, would or would be reasonably likely to
result in an WEC Material Adverse Effect, and such breaches
shall not have been remedied within 20 days after receipt by
WEC of notice in writing
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from NSP, specifying the nature of such breaches and requesting
that they be remedied, (ii) WEC (and/or its appropriate
subsidiaries) shall not have performed and complied with its
agreements and covenants contained in SECTIONS 6.1(b) and 6.1(c) or
shall have failed to perform and comply with, in all material
respects, its other agreements and covenants hereunder or under the
WEC Stock Option Agreement and such failure to perform or comply
shall not have been remedied within 20 days after receipt by WEC of
notice in writing from NSP, specifying the nature of such failure
and requesting that it be remedied; or (iii) the Board of Directors
of WEC or any committee thereof (A) shall withdraw or modify in any
manner adverse to NSP its approval or recommendation of this
Agreement or the NSP Merger, (B) shall fail to reaffirm such ap-
proval or recommendation upon NSP's request, (C) shall approve or
recommend any acquisition of WEC or a material portion of its
assets or any tender offer for shares of capital stock of WEC, in
each case, by a party other than NSP or any of its affiliates or
(D) shall resolve to take any of the actions specified in CLAUSE
(A), (B) or (C); or
(h) by WEC, by written notice to NSP, if (i) there exist
material breaches of the representations and warranties of NSP
made herein as of the date hereof which breaches, individually
or in the aggregate, would or would be reasonably likely to
result in a NSP Material Adverse Effect, and such breaches
shall not have been remedied within 20 days after receipt by
NSP of notice in writing from WEC, specifying the nature of
such breaches and requesting that they be remedied, (ii) NSP
(and/or its appropriate subsidiaries) shall not have performed
and complied with its agreements and covenants contained in
SECTIONS 6.1(b) and 6.1(c) or shall have failed to perform and
comply with, in all material respects, its other agreements
and covenants hereunder or under the NSP Stock Option
Agreement, and such failure to perform or comply shall not
have been remedied within 20 days after receipt by NSP of
notice in writing from WEC, specifying the nature of such
failure and requesting that it be remedied; or (iii) the Board
of Directors of NSP or any committee thereof (A) shall
withdraw or modify in any manner adverse to WEC its approval
or recommendation of this Agreement or the NSP Merger, (B)
shall fail to reaffirm such approval or recommendation upon
WEC's request, (C) shall approve or recommend any acquisition
of NSP or a material portion of its assets or any tender offer
for the shares of capital stock of NSP, in each case by a
party other than WEC or any of its affiliates or (D) shall
resolve to take any of the actions specified in CLAUSE (A),
(B) or (C).
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Section 9.2 EFFECT OF TERMINATION. Subject to SECTION
10.1(b), in the event of termination of this Agreement by either
NSP or WEC pursuant to SECTION 9.1 there shall be no liability on
the part of either NSP or WEC or their respective officers or
directors hereunder, except that SECTION 7.17 and SECTION 9.3, the
agreement contained in the last sentence of SECTION 7.1, SECTION
10.2 and SECTION 10.8 shall survive the termination.
Section 9.3 TERMINATION FEE; EXPENSES.
(a) TERMINATION FEE UPON BREACH OR WITHDRAWAL OF
APPROVAL. If this Agreement is terminated at such time that this
Agreement is terminable pursuant to one (but not both) of (x)
SECTION 9.1(g)(i) or (ii) or (y) SECTION 9.1(h)(i) or (ii), then:
(i) the breaching party shall promptly (but not later than five
business days after receipt of notice from the non-breaching party)
pay to the non-breaching party in cash an amount equal to all
documented out-of-pocket expenses and fees incurred by the non-
breaching party (including, without limitation, fees and expenses
payable to all legal, accounting, financial, public relations and
other professional advisors arising out of, in connection with or
related to the Mergers or the transactions contemplated by this
Agreement) not in excess of $10 million; PROVIDED, HOWEVER, that,
if this Agreement is terminated by a party as a result of a willful
breach by the other party, the non-breaching party may pursue any
remedies available to it at law or in equity and shall, in addition
to its out-of-pocket expenses (which shall be paid as specified
above and shall not be limited to $10 million), be entitled to
retain such additional amounts as such non-breaching party may be
entitled to receive at law or in equity; and (ii) if (x) at the
time of the breaching party's willful breach of this Agreement,
there shall have been a third party tender offer for shares of, or
a third party offer or proposal with respect to a Business
Combination involving, such party or any of its affiliates which at
the time of such termination shall not have been rejected by such
party and its board of directors and withdrawn by the third party,
and (y) within two and one-half years of any termination by the
non-breaching party, the breaching party or an affiliate thereof
becomes a subsidiary of such offeror or a subsidiary of an
affiliate of such offeror or accepts a written offer to consummate
or consummates a Business Combination with such offeror or an
affiliate thereof, then such breaching party (jointly and severally
with its affiliates), upon the signing of a definitive agreement
relating to such a Business Combination, or, if no such agreement
is signed then at the closing (and as a condition to the closing)
of such breaching party becoming such a subsidiary or of such
Business
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Combination, will pay to the non-breaching party an additional fee
equal to $75 million in cash.
(b) ADDITIONAL TERMINATION FEE. If (i) this Agreement
(x) is terminated by any party pursuant to SECTION 9.1(e) or
SECTION 9.1(f), (y) is terminated following a failure of the
shareholders of any one of the parties to grant the necessary
approvals described in SECTION 4.13 and SECTION 5.13 or (z) is
terminated as a result of such party's material breach of SECTION
7.4, and (ii) at the time of such termination or prior to the
meeting of such party's shareholders there shall have been a third-
party tender offer for shares of, or a third-party offer or
proposal with respect to a Business Combination involving, such
party or any of its affiliates which at the time of such
termination or of the meeting of such party's shareholders shall
not have been (A) rejected by such party and its board of directors
and (B) withdrawn by the third-party, and (iii) within two and one-
half years of any such termination described in clause (i) above,
the party or its affiliate which is the subject of the tender offer
or offer or proposal with respect to a Business Combination (the
"TARGET PARTY") becomes a subsidiary of such offeror or a
subsidiary of an affiliate of such offeror or accepts a written
offer to consummate or consummates a Business Combination with such
offeror or affiliate thereof, then such Target Party (jointly and
severally with its affiliates), upon the signing of a definitive
agreement relating to such a Business Combination, or, if no such
agreement is signed, then at the closing (and as a condition to the
closing) of such Target Party becoming such a subsidiary or of such
Business Combination, will pay to the other party a termination fee
equal to $75 million in cash plus the out-of-pocket fees and
expenses incurred by the non-breaching party (including, without
limitation, fees and expenses payable to all legal, accounting,
financial, public relations and other professional advisors arising
out of, in connection with or related to the Mergers or the
transactions contemplated by this Agreement).
(c) EXPENSES. The parties agree that the agreements
contained in this SECTION 9.3 are an integral part of the
transactions contemplated by the Agreement and constitute liq-
uidated damages and not a penalty. If one party fails to promptly
pay to the other any fee due hereunder, the defaulting party shall
pay the costs and expenses (including legal fees and expenses) in
connection with any action, including the filing of any lawsuit or
other legal action, taken to collect payment, together with
interest on the amount of any unpaid fee at the publicly announced
prime rate of Citibank, N.A. from the date such fee was required to
be paid.
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(d) LIMITATION OF TERMINATION FEES. Notwithstanding
anything herein to the contrary, the aggregate amount payable to
NSP and its affiliates pursuant to SECTION 9.3(a), SECTION 9.3(b)
and the terms of the WEC Stock Option Agreement shall not exceed
$125 million and the aggregate amount payable to WEC and its
affiliates pursuant to SECTION 9.3(a), SECTION 9.3(b) and the terms
of the NSP Stock Option Agreement shall not exceed $125 million
(including reimbursement for fees and expenses payable pursuant to
this SECTION 9.3). For purposes of this SECTION 9.3(d), the amount
payable pursuant to the terms of the WEC Stock Option Agreement or
the NSP Stock Option Agreement, as the case may be, shall be the
amount paid pursuant to Section 7(a)(i) and 7(a)(ii) thereof.
Section 9.4 AMENDMENT. This Agreement may be amended by
the Boards of Directors of the parties hereto, at any time before
or after approval hereof by the shareholders of NSP and WEC and
prior to the Effective Time, but after such approvals, no such
amendment shall (i) alter or change the amount or kind of shares,
rights or any of the proceedings of the treatment of shares under
ARTICLE II, (ii) alter or change any of the terms and conditions of
this Agreement if any of the alterations or changes, alone or in
the aggregate, would materially adversely affect the rights of
holders of Old NSP Common Stock or WEC Common Stock, or (iii) alter
or change any term of the Restated Articles of Incorporation of WEC
(including the WEC Article Amendments) as approved by the
shareholders of WEC, except for alterations or changes that could
otherwise be adopted by the Board of Directors of the Company,
without the further approval of such shareholders, as applicable.
This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
Section 9.5 WAIVER. At any time prior to the Effective
Time, the parties hereto may (a) extend the time for the
performance of any of the obligations or other acts of the other
parties hereto, (b) waive any inaccuracies in the representations
and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements
or conditions contained herein, to the extent permitted by
applicable law. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid if set forth in an
instrument in writing signed on behalf of such party.
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ARTICLE X
GENERAL PROVISIONS
Section 10.1 NON-SURVIVAL; EFFECT OF REPRESENTATIONS AND
WARRANTIES. (a) All representations, warranties and agreements in
this Agreement shall not survive the Mergers, except as otherwise
provided in this Agreement and except for the agreements contained
in this SECTION 10.1 and in ARTICLE II, SECTION 7.5, SECTION 7.9,
SECTION 7.10, SECTION 7.11, SECTION 7.14, SECTION 7.15, SECTION
7.16, SECTION 7.17 and SECTION 10.7.
(b) No party may assert a claim for breach of any
representation or warranty contained in this Agreement (whether by
direct claim or counterclaim) except in connection with the
cancellation of this Agreement pursuant to SECTION 9.1(g)(i) or
SECTION 9.1(h)(i) (or pursuant to any other subsection of SECTION
9.1, if the terminating party would have been entitled to terminate
this Agreement pursuant to SECTION 9.1(g)(i) or SECTION 9.1(h)(i)).
Section 10.2 BROKERS. NSP represents and warrants that,
except for Goldman, Sachs & Co. whose fees have been disclosed to
WEC prior to the date hereof, no broker, finder or investment
banker is entitled to any brokerage, finder's or other fee or
commission in connection with the Mergers or the transactions
contemplated by this Agreement based upon arrangements made by or
on behalf of NSP. WEC represents and warrants that, except for
Barr Devlin Associates, whose fees have been disclosed to NSP prior
to the date hereof, no broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in
connection with the Mergers or the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of WEC.
Section 10.3 NOTICES. All notices and other commu-
nications hereunder shall be in writing and shall be deemed given
if (i) delivered personally, (ii) sent by reputable overnight
courier service, (iii) telecopied (which is confirmed), or (iv)
five days after being mailed by registered or certified mail
(return receipt requested) to the parties at the following
addresses (or at such other address for a party as shall be
specified by like notice):
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(a) If to NSP, to:
Northern States Power Company
414 Nicollet Mall
Minneapolis, Minnesota 55401
Attention: Gary Johnson, Esq.
Telephone: (612) 330-7623
Telecopy: (612) 330-6222
with a copy to:
Gardner, Carton & Douglas
Quaker Tower, 31st Floor
321 North Clark Street
Chicago, Illinois 60610-4795
Attention: Peter Clarke, Esq.
Telephone: (312) 245-8685
Telecopy: (312) 644-3381
and a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, NY 10019
Attention: Barry A. Bryer, Esq.
Seth A. Kaplan, Esq.
Telephone: (212) 403-1000
Telecopy: (212) 403-2000
(b) If to WEC, to:
Wisconsin Energy Corporation
231 West Michigan Street
Milwaukee, WI 53201
Attention: Walter T. Woelfle, Esq.
Telephone: (414) 221-2765
Telecopy: (414) 221-2412
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with a copy to:
Quarles & Brady
411 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
Attention: Patrick M. Ryan, Esq.
Telephone: (414) 277-5181
Telecopy: (414) 277-5174
and a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attention: Sheldon S. Adler, Esq.
Telephone: (212) 735-3000
Telecopy: (212) 735-2000
Section 10.4 MISCELLANEOUS. This Agreement (including
the documents and instruments referred to herein) (i) constitutes
the entire agreement and supersedes all other prior agreements and
understandings, both written and oral, among the parties, or any of
them, with respect to the subject matter hereof other than the
Confidentiality Agreement; (ii) shall not be assigned by operation
of law or otherwise; and (iii) shall be governed by and construed
in accordance with the laws of the State of New York applicable to
contracts executed in and to be fully performed in such State,
without giving effect to its conflicts of law, rules or principles
and except to the extent the provisions of this Agreement
(including the documents or instruments referred to herein) are
expressly governed by or derive their authority from the MBCA or
the WBCL.
Section 10.5 INTERPRETATION. When a reference is made
in this Agreement to Sections or Exhibits, such reference shall be
to a Section or Exhibit of this Agreement, respectively, unless
otherwise indicated. The table of contents and headings contained
in this Agreement are for reference purposes only and shall not
affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words
"without limitation".
Section 10.6 COUNTERPARTS; EFFECT. This Agreement may
be executed in one or more counterparts, each of which shall be
deemed to be an original, but all of which shall constitute one and
the same agreement.
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Section 10.7 PARTIES IN INTEREST. This Agreement shall
be binding upon and inure solely to the benefit of each party
hereto, and, except for rights of Indemnified Parties as set forth
in SECTION 7.5, nothing in this Agreement, express or implied, is
intended to confer upon any other person any rights or remedies of
any nature whatsoever under or by reason of this Agreement.
Notwithstanding the foregoing and any other provision of this
Agreement, and in addition to any other required action of the
Board of Directors of the Company (a) a majority of the WEC
Directors (or their successors) serving on the Board of Directors
of the Company who are designated by WEC pursuant to SECTION 7.13
shall be entitled during the three year period commencing at the
Effective Time (the "THREE YEAR PERIOD") to enforce the provisions
of SECTION 7.9, SECTION 7.10, SECTION 7.11 and SECTION 7.14 on
behalf of the WEC officers, directors and employees, as the case
may be, and (b) a majority of the NSP directors (or their
successors) serving on the Board of Directors of the Company who
are designated by NSP pursuant to SECTION 7.13 shall be entitled
during the Three Year Period to enforce the provisions of, SECTIONS
7.9, SECTION 7.10, SECTION 7.11, and SECTION 7.14 on behalf of the
NSP officers, directors and employees, as the case may be. Such
directors' rights and remedies under the preceding sentence are
cumulative and are in addition to any other rights and remedies
they may have at law or in equity, but in no event shall this
SECTION 10.7 be deemed to impose any additional duties on any such
directors. The Company shall pay, at the time they are incurred,
all costs, fees and expenses of such directors incurred in
connection with the assertion of any rights on behalf of the
persons set forth above pursuant to this SECTION 10.7.
Section 10.8 WAIVER OF JURY TRIAL AND CERTAIN DAMAGES.
Each party to this Agreement waives, to the fullest extent
permitted by applicable law, (i) any right it may have to a trial
by jury in respect of any action, suit or proceeding arising out of
or relating to this Agreement and (ii) without limitation to
SECTION 9.3, any right it may have to receive damages from any
other party based on any theory of liability for any special,
indirect, consequential (including lost profits) or punitive
damages.
Section 10.9 ENFORCEMENT. The parties agree that
irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly
agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any
court of the United States located in the State of New York or in
New York state court, this being in
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addition to any other remedy to which they are entitled at law or
in equity. In addition, each of the parties hereto (a) consents to
submit itself to the personal jurisdiction of any federal court
located in the State of New York or any New York state court in the
event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement, (b) agrees that it
will not attempt to deny such personal jurisdiction by motion or
other request for leave from any such court and (c) agrees that it
will not bring any action relating to this Agreement or any of the
transactions contemplated by this Agreement in any court other than
a federal or state court sitting in the State of New York.
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IN WITNESS WHEREOF, NSP, WEC, New NSP and WEC Sub have
caused this Agreement to be signed by their respective officers
thereunto duly authorized as of the date first written above.
NORTHERN STATES POWER COMPANY
By: /s/ JAMES J. HOWARD
-------------------------------
Name: James J. Howard
Title: Chairman and Chief
Executive Officer
Attest: /s/ GARY R. JOHNSON
---------------------
Secretary
WISCONSIN ENERGY CORPORATION
By: /s/ RICHARD A. ABDOO
--------------------------
Name: Richard A. Abdoo
Title: Chairman, President
and Chief Executive
Officer
Attest: /s/ JOHN H. GOETSCH
--------------------
Secretary
NORTHERN POWER WISCONSIN CORP.
By: /s/ EDWARD J. McINTYRE
---------------------------
Name: Edward J. McIntyre
Title: President
Attest: /s/ GARY R. JOHNSON
--------------------
Secretary
WEC SUB CORP.
By: /s/ RICHARD A. ABDOO
---------------------------
Name: Richard A. Abdoo
Title: Chairman, President
and Chief Executive
Officer
Attest: /s/ ANN MARIE BRADY
-------------------
Secretary
-76-
Dates Referenced Herein and Documents Incorporated by Reference
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