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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
--------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
--------
Date of report (Date of earliest event reported) November 17, 2000
(November 8, 2000)
WESTERN RESOURCES INC.
(Exact Name of Registrant as Specified in Charter)
Kansas 1-3523 48-0290150
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
818 South Kansas Avenue, Topeka, Kansas 66612
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (785) 575-6300
Item 5. Other Events.
On November 8, 2000, Western Resources, Inc., a Kansas corporation (the
"Company"), Public Service Company of New Mexico, a New Mexico corporation
("PNM"), HVOLT Enterprises, Inc., a Delaware corporation ("Parent"), HVK, Inc.,
a Kansas corporation and a wholly owned subsidiary of Parent ("Merger Sub-1"),
and HVNM, Inc., a New Mexico corporation and a wholly owned subsidiary of Parent
("Merger Sub-2"), entered into an Agreement and Plan of Restructuring and
Merger, dated as of November 8, 2000 (the "Merger Agreement"), and related
agreements, including the Asset Allocation and Separation Agreement, dated as of
November 8, 2000 ("Allocation Agreement"), between the Company and Westar
Industries, Inc., a Kansas corporation and a wholly owned subsidiary of the
Company ("Westar"), providing for an integrated transaction (the "Transaction")
involving (a) delivery by the Company to its shareholders of its then ownership
interest in Westar, followed by (b) the merger of Merger Sub-1 into the Company
and the merger of Merger Sub-2 into Manzano Corporation, a New Mexico holding
company to be formed as a result of a pending PNM restructuring ("Manzano"),
pursuant to which each of Manzano, PNM and the Company will become wholly owned
subsidiaries of Parent and the shareholders of the Company (including Westar)
will receive a total of 55 million shares of Parent common stock, subject to
adjustment as provided in the Merger Agreement. The Merger Agreement, the
Allocation Agreement and the Form of Stockholder Agreement between Parent and
Westar, together with the forms of certain certificates of designations relating
to the Transaction are filed herewith and are incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(c) Exhibits.
99.1 Agreement and Plan of Restructuring and Merger, dated as of
November 8, 2000 among Western Resources, Inc., Public Service
Company of New Mexico, HVOLT Enterprises, Inc., HVK, Inc. and
HVNM, Inc.
99.2 Asset Allocation and Separation Agreement, dated as of November
8, 2000, between Western Resources, Inc. and Westar Industries,
Inc.
99.3 Form of Stockholder Agreement between HVOLT Enterprises, Inc. and
Westar Industries, Inc.
99.4 Form of Western Resources, Inc. Certificate of Designations for a
Series of Preference Stock designated as "7.5% Convertible
Preference Stock."
99.5 Form of HVOLT Enterprises, Inc. Certificate of Designations for a
Series of Preferred Stock designated as "7.5% Convertible
Preferred Stock."
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WESTERN RESOURCES, INC.
Date: November 17, 2000 /s/ James A. Martin
--------------------------------
By: James A. Martin
Title: Senior Vice President
and Treasurer
Exhibit Index
Exhibit Description
99.1 Agreement and Plan of Restructuring and Merger, dated as of November 8,
2000 among Western Resources, Inc., Public Service Company of New Mexico,
HVOLT Enterprises, Inc., HVK, Inc. and HVNM, Inc.
99.2 Asset Allocation and Separation Agreement, dated as of November 8, 2000,
between Western Resources, Inc. and Westar Industries, Inc.
99.3 Form of Stockholder Agreement between HVOLT Enterprises, Inc. and Westar
Industries, Inc.
99.4 Form of Western Resources, Inc. Certificate of Designations for a Series of
Preference Stock designated as "7.5% Convertible Preference Stock."
99.5 Form of HVOLT Enterprises, Inc. Certificate of Designations for a Series of
Preferred Stock designated as "7.5% Convertible Preferred Stock."
Exhibit 99.1
AGREEMENT AND PLAN OF RESTRUCTURING AND MERGER
Among
WESTERN RESOURCES, INC.
HVOLT ENTERPRISES, INC.
PUBLIC SERVICE COMPANY OF NEW MEXICO
HVK, INC.
and
HVNM, INC.
Dated as of November 8, 2000
Table of Contents
Page
Article I. The Transaction.....................................................2
1.1. The Split-Off..................................................2
1.2. The Merger.....................................................2
1.3. The Second Merger..............................................2
1.4. Effective Time.................................................2
Article II. The Surviving Corporation..........................................3
2.1. The Articles of Incorporation..................................3
2.2. The By-Laws....................................................3
2.3. Directors......................................................3
2.4. Officers.......................................................3
Article III. Effect of the Transaction on Capital Stock; Exchange of
Certificates.....................................................4
3.1. Apportionment of Company Common Stock..........................4
3.2. Effect of the Transaction on Capital Stock.....................4
3.3. Exchange of Certificates Exchanged in the Split-Off............9
3.4. Exchange of Certificates in the Merger........................10
3.5. Dissenters' Rights............................................13
3.6. Adjustments to Prevent Dilution...............................14
3.7. Restructuring of the Mergers..................................14
3.8. Manzano Guaranty; Etc.........................................15
Article IV. The Closing15
4.1. Closing.......................................................15
Article V. Representations and Warranties.....................................16
5.1. Representations and Warranties of the Company.................16
5.2. Representations and Warranties of Parent, PNM, Merger Sub-1
and Merger Sub-2............................................28
Article VI. Conduct of Business Pending the Transactions......................39
6.1. Covenants of the Company......................................39
6.2. Covenants of Parent, Manzano, PNM, Merger Sub-1 and Merger
Sub 2.......................................................42
6.3. Necessary Action..............................................45
Article VII. Additional Agreements............................................45
7.1. Access........................................................45
7.2. Acquisition Proposals.........................................46
7.3. Information Supplied..........................................47
7.4. Shareholders Meetings.........................................48
7.5. Filings; Other Actions; Notification..........................48
7.6. Affiliates....................................................50
7.7. Stock Exchange Listing and De-listing.........................50
7.8. Publicity.....................................................50
7.9. Benefits and Other Employee Matters...........................50
7.10. Board of Directors; Corporate Headquarters and Community
Involvement.................................................52
7.11. Dividends.....................................................53
7.12. Indemnification; Directors' and Officers' Insurance...........53
7.13. Expenses......................................................55
7.14. Takeover Statute..............................................55
7.15. Manzano Vote..................................................55
7.16. Agreements Relating to the Split-Off..........................55
7.17. Redemption of Preferred Shares................................55
7.18. Conveyance Taxes..............................................56
7.19. Transition Steering Team......................................56
7.20. Termination of Tax Sharing Agreements.........................56
7.21. Tax Disaffiliation Agreement..................................57
7.22. Shared Services Agreement.....................................57
7.23. Interim Reporting.............................................57
7.24. Possible Exchange.............................................57
Article VIII. Conditions.....................................................58
8.1. Conditions to Each Party's Obligation to Effect the
Transaction.................................................58
8.2. Conditions to Obligations of Parent, Merger Sub-1 and Merger
Sub-2.......................................................60
8.3. Conditions to Obligation of the Company.......................61
Article IX. Termination63
9.1. Termination by Mutual Consent.................................63
9.2. Termination by Either Parent or the Company...................63
9.3. Termination by the Company....................................63
9.4. Termination by Parent.........................................64
9.5. Effect of Termination and Abandonment.........................64
Article X. Miscellaneous and General..........................................66
10.1. Survival......................................................66
10.2. Modification or Amendment.....................................66
10.3. Waiver of Conditions..........................................66
10.4. Counterparts..................................................67
10.5. GOVERNING LAW AND VENUE.......................................67
10.6. Notices.......................................................67
10.7. Entire Agreement; NO OTHER REPRESENTATIONS....................68
10.8. No Third-Party Beneficiaries..................................69
10.9. Obligations of Parent and of the Company......................69
10.10. Severability..................................................69
10.11. Interpretation................................................69
10.12. Assignment....................................................69
EXHIBIT A - Split-Off Agreements
EXHIBIT B - Convertible Preference Certificate of Designation
EXHIBIT C - Parent Convertible Certificate of Designation
EXHIBIT D - Affiliates Letter
EXHIBIT E - Form of Stockholder Agreement
EXHIBIT F - Form of Registration Rights Agreement
Indexed of Defined Terms
Page
1935 Act.....................................................................16
Acquisition Proposal.........................................................46
Additional Cash...............................................................5
Adjustment Calculation........................................................7
Adjustment Shares.............................................................7
Affiliates Letter............................................................50
Aggregate Share Number........................................................6
Agreement.....................................................................1
Allocation and Separation Agreement...........................................1
Audit Date...................................................................20
Bankruptcy and Equity Exception..............................................18
Base Shares...................................................................6
Business Day.................................................................15
By-Laws.......................................................................3
Certificate...................................................................8
Certificate of Merger.........................................................2
Charter.......................................................................3
Chase........................................................................27
Closing......................................................................15
Closing Consideration.........................................................8
Closing Date.................................................................15
Code..........................................................................2
Company.......................................................................1
Company Common Stock..........................................................4
Company Contracts............................................................19
Company Disclosure Letter....................................................16
Company Dissenting Holder....................................................13
Company ERISA Affiliate......................................................22
Company Intellectual Property Rights.........................................26
Company Material Adverse Effect..............................................17
Company Pension Plan.........................................................22
Company Reports..............................................................19
Company Required Statutory Approvals.........................................18
Company Requisite Vote.......................................................27
Compensation and Benefit Plans...............................................21
Confidentiality Agreements...................................................68
Contracts....................................................................19
Conversion...................................................................57
Convertible Preference Shares.................................................5
Costs........................................................................53
Current Premium..............................................................54
Cut Off Date..................................................................4
D&O Insurance................................................................54
Effective Time................................................................3
Employees....................................................................21
Environmental Law............................................................24
ERISA........................................................................21
Exchange.....................................................................57
Exchange Act.................................................................17
Exchange Agent...............................................................10
Exchange Agreement............................................................1
Exchange Fund................................................................10
Exchange Ratio................................................................8
Excluded Share................................................................6
Excluded Shares...............................................................6
FERC.........................................................................18
Final Order..................................................................59
First Redemption Date........................................................58
GAAP.........................................................................17
Governmental Entity..........................................................18
Hazardous Substance..........................................................24
HSR Act......................................................................18
Indemnified Parties..........................................................53
IRS..........................................................................22
JP Morgan....................................................................38
KGCC..........................................................................2
knowledge....................................................................17
Laws.........................................................................23
Manzano.......................................................................1
Manzano Certificate...........................................................9
Manzano Common Stock..........................................................8
Manzano Dissenting Holder....................................................13
Manzano Exchange..............................................................1
Manzano Excluded Share........................................................8
Manzano Excluded Shares.......................................................8
Manzano Merger Consideration..................................................8
Manzano Transition Date.......................................................1
Merger........................................................................1
Merger Consideration..........................................................8
Merger Portion................................................................4
Merger Sub-1..................................................................1
Merger Sub-2..................................................................1
Mergers.......................................................................1
Neutral Auditor...............................................................8
NMBCA.........................................................................2
NMPRC.........................................................................3
Non-Union Employees..........................................................51
NYSE.........................................................................18
Order........................................................................59
Parent........................................................................1
Parent Common Stock...........................................................8
Parent Compensation and Benefit Plans........................................33
Parent Contracts.............................................................31
Parent Convertible Debt......................................................57
Parent Convertible Shares.....................................................8
Parent Disclosure Letter.....................................................28
Parent Employees.............................................................33
Parent ERISA Affiliate.......................................................33
Parent Material Adverse Effect...............................................29
Parent Pension Plan..........................................................33
Parent Required Statutory Approvals..........................................30
Parent Requisite Vote........................................................37
Parent Stock Plans...........................................................29
Parent Voting Debt...........................................................30
PBGC.........................................................................22
person.......................................................................11
PNM...........................................................................1
PNM Audit Date...............................................................32
PNM Common Stock.............................................................29
PNM Exchange.................................................................14
PNM Exchange Agreement.......................................................14
PNM Intellectual Property Rights.............................................37
PNM Preferred Shares.........................................................29
PNM Reports..................................................................31
Power Act....................................................................16
Preferred Shares.............................................................17
Prospectus/Proxy Statement...................................................47
Representatives..............................................................45
S-4 Registration Statement...................................................47
Salomon......................................................................27
SEC...........................................................................5
Second Merger.................................................................1
Securities Act...............................................................18
Significant Subsidiary.......................................................17
Split-Off.....................................................................1
Split-Off Agreements..........................................................1
Split-Off Consideration.......................................................6
Split-Off Exchange Ratio......................................................6
Split-Off Portion.............................................................4
Stock Award..................................................................50
Stock Plans..................................................................17
Subsidiary...................................................................16
Superior Proposal............................................................47
Surviving Corporation.........................................................2
Takeover Statute.............................................................23
Tax..........................................................................25
Tax Disaffiliation Agreement.................................................42
Taxable......................................................................25
Taxes........................................................................25
Taxing.......................................................................25
Termination Date.............................................................63
Trading Day...................................................................5
Transaction...................................................................1
TransactionTaxes.............................................................56
Transition Steering Team.....................................................56
Utility Subsidiaries.........................................................16
Voting Debt..................................................................18
Westar........................................................................1
Westar Common Stock...........................................................4
Westar Subsidiaries...........................................................1
AGREEMENT AND PLAN OF RESTRUCTURING AND MERGER
AGREEMENT AND PLAN OF RESTRUCTURING AND MERGER (hereinafter called this
"Agreement"), dated as of November 8, 2000, among Western Resources, Inc., a
Kansas corporation (the "Company"), Public Service Company of New Mexico, a New
Mexico corporation ("PNM"), HVOLT Enterprises, Inc., a Delaware corporation
("Parent"), HVK, Inc., a Kansas corporation and a wholly owned subsidiary of
Parent ("Merger Sub-1") and HVNM, Inc., a New Mexico corporation and a wholly
owned subsidiary of Parent ("Merger Sub-2").
RECITALS
WHEREAS, PNM and Manzano Corporation, a New Mexico corporation ("Manzano"),
have entered into an Agreement and Plan of Share Exchange, dated as of April 17,
2000 (the "Exchange Agreement"), which provides for the mandatory share exchange
by the holders of the outstanding common stock of PNM for shares of the common
stock of Manzano at an exchange ratio of one share of Manzano common stock for
each share of PNM common stock, whereby PNM will become a wholly owned
subsidiary of Manzano (the "Manzano Exchange");
WHEREAS, upon consummation of the Exchange, Manzano will execute a
counterpart hereof as set forth below with the effect set forth herein (the date
on which PNM becomes a Subsidiary of Manzano and Manzano executes a counterpart
of this Agreement being referred to as the "Manzano Transition Date");
WHEREAS, the Company, Parent, PNM, Merger Sub-1 and Merger Sub-2 have
agreed to enter into an integrated transaction (the "Transaction") pursuant to
which, first (x) the Company shall deliver to its shareholders its then entire
ownership interest in Westar Industries, Inc., a Kansas corporation and a
subsidiary of the Company ("Westar", together with the subsidiaries of Westar at
the time of the Split-Off, the "Westar Subsidiaries") (such transaction being
referred to as the "Split-Off"), in exchange for a portion of their shares of
the Company Common Stock on the terms and conditions contained herein and in the
Asset Allocation and Separation Agreement (the "Allocation and Separation
Agreement") and the other agreements and term sheets attached thereto (together
with the Allocation and Separation Agreement, the "Split-Off Agreements")
between the Company and Westar in the forms attached hereto as Exhibit A, and
then (y) Merger Sub-1 will merge with and into the Company, whereby the Company
will become a wholly owned subsidiary of Parent (the "Merger"), and Merger Sub-2
will merge with and into Manzano, whereby Manzano and PNM will become wholly
owned subsidiaries of Parent (the "Second Merger" and, together with the Merger,
the "Mergers"), pursuant to the terms and conditions set forth in this
Agreement;
WHEREAS, the respective Boards of Directors of the Company, Parent, PNM,
Merger Sub-1 and Merger Sub-2 (i) have determined that the Transaction and other
transactions contemplated hereby are fair to, advisable and in the best
interests of the Company, Parent, PNM, Merger Sub-1 and Merger Sub-2 and their
shareholders, respectively, and (ii) have approved this Agreement and the
transactions contemplated hereby; and
WHEREAS, for federal income Tax (as defined below) purposes, it is intended
that (i) the Split-Off will be treated as a taxable exchange of the Split-Off
Portion (as defined below) of the Company Common Stock for Westar Common Stock,
and (ii) the Mergers taken together will be treated as a transaction described
in Section 351 of the Internal Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the premises, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
Article I
The Transaction
1.1. The Split-Off.
The Company has or will enter into the Allocation and Separation Agreement
and each other Split-Off Agreement to which it is a party, and, provided that
all conditions precedent to the Split-Off have been satisfied, immediately prior
to the Merger, the Company shall effect, and cause Westar to effect, the
Split-Off.
1.2. The Merger.
Upon the terms and subject to the conditions set forth in this Agreement,
at the Effective Time, Merger Sub-1 shall be merged with and into the Company
and the separate corporate existence of Merger Sub-1 shall thereupon cease. The
Company shall be the surviving corporation in the Merger (sometimes hereinafter
referred to as the "Surviving Corporation"), and the separate corporate
existence of the Company with all its rights, privileges, immunities, powers and
franchises shall continue unaffected by the Merger, except as set forth in
Article III. The Merger shall have the effects specified in the Kansas General
Corporation Code (the "KGCC").
1.3. The Second Merger.
Upon the terms and subject to the conditions set forth in this Agreement,
at the Effective Time, Merger Sub-2 shall be merged with and into Manzano and
the separate corporate existence of Merger Sub-2 shall thereupon cease. Manzano
shall be the surviving corporation in the Second Merger, and the separate
corporate existence of Manzano with all its rights, privileges, immunities,
powers and franchises shall continue unaffected by the Second Merger. The Second
Merger shall have the effects specified in the New Mexico Business Corporation
Act (the "NMBCA").
1.4. Effective Time.
On the Closing Date (as defined in Section 4.1), or if not reasonably
practicable, as soon as practicable following the Closing Date, the Company and
Parent will cause a Certificate of Merger (the "Certificate of Merger") to be
executed, acknowledged and filed with the Secretary of State of the State of
Kansas as provided in Sections 17-6003 and 17-6701 of the KGCC. The Merger shall
become effective at the time when the Certificate of Merger has been duly filed
with the Secretary of State of the State of Kansas or upon such later date as
agreed upon by the parties and specified in such Certificate of Merger (the
"Effective Time"). Not later than simultaneously with the filing of the
Certificate of Merger, Manzano and Parent will cause such certificates or other
instruments to be filed with the New Mexico Public Regulation Commission (the
"NMPRC") as are required in accordance with the NMBCA to cause the Second Merger
to become effective at the Effective Time.
Article II.
The Surviving Corporation
2.1. The Articles of Incorporation.
The restated articles of incorporation of the Company as in effect
immediately prior to the Effective Time shall be the articles of incorporation
of the Surviving Corporation (the "Charter"), until duly amended as provided
therein or by applicable law.
2.2. The By-Laws.
The by-laws of the Company as in effect immediately prior to the Effective
Time shall be the by-laws of the Surviving Corporation (the "By-Laws"), until
thereafter amended as provided therein or by applicable law.
2.3. Directors.
The directors of Merger Sub-1 at the Effective Time shall, from and after
the Effective Time, be the directors of the Surviving Corporation until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Charter and the
By-Laws. The directors of Merger Sub-1 at the Effective Time shall be appointed
by Parent in its sole discretion, provided that at least three such directors
shall be resident in the service territory of the Company or Kansas Gas and
Electric Company in the State of Kansas.
2.4. Officers.
The officers of Merger Sub-1 at the Effective Time shall, from and after
the Effective Time, be the officers of the Surviving Corporation until their
successors have been duly elected or appointed and qualified or until their
earlier death, resignation or removal in accordance with the Charter and the
By-Laws.
Article III.
Effect of the Transaction on Capital Stock; Exchange of Certificates
3.1. Apportionment of Company Common Stock.
(a) The Split-Off.
At the Effective Time and in accordance with the terms hereof and of the
Allocation and Separation Agreement, a portion (the "Split-Off Portion") of each
share of common stock, par value $5.00 per share, of the Company (the "Company
Common Stock") shall be exchanged for shares of common stock, par value $.01 per
share, of Westar (the "Westar Common Stock"). The Split-Off Portion shall be
calculated as follows: the market value of the shares of Westar Common Stock
issued to and held by the Company divided by the market value of the total
number of issued and outstanding shares of Company Common Stock, in each case
immediately prior to the effective time of the Split-Off and determined based on
the average (rounded to the nearest thousandth, or if there shall not be a
nearest thousandth, the next highest thousandth) of the volume weighted averages
(rounded to the nearest thousandth, or if there shall not be a nearest
thousandth, the next highest thousandth) of the trading price of Westar Common
Stock or Company Common Stock, as the case may be, on the New York Stock
Exchange as reported by Bloomberg Financial Markets, or if not reported thereby,
another reputable source, in the period of 20 consecutive Trading Days ending on
the close of business on the second Business Day immediately preceding the
effective time of the Split-Off; provided that if Westar Common Stock is not
listed for trading on the New York Stock Exchange, the market price for Westar
Common Stock shall be determined as the average of price quotes from three
investment banking firms, one appointed by Westar, one appointed by the Company
and the third by the two other appointees.
(b) The Merger.
At the Effective Time, the portion of each share of Company Common Stock
not included in the Split-Off Portion (the "Merger Portion") shall be converted
into the right to receive the Merger Consideration as set forth in Section
3.2(b) below.
3.2. Effect of the Transaction on Capital Stock.
(a) Permitted Intercompany Adjustments.
For the period from the date hereof through the close of business on the
day that is 15 Business Days prior to the Closing Date (the "Cut Off Date"), the
following intercompany transfers between the Company and Westar shall be
permitted and shall be adjustments to the Merger Consideration to the extent set
forth in subsection (b) below:
(i) Westar may pay Additional Cash to the Company, at Westar's option, as:
(A) consideration for the purchase of shares of Company Common Stock
at a price based on the average (rounded to the nearest thousandth, or if
there shall not be a nearest thousandth, the next higher thousandth) of the
volume weighted averages (rounded to the nearest thousandth, or if there
shall not be a nearest thousandth, the next higher thousandth) of the
trading price of Company Common Stock on the New York Stock Exchange as
reported by Bloomberg Financial Markets, or if not reported thereby,
another reputable source, in the period of 20 consecutive Trading Days
ending on the close of business on the Business Day immediately preceding
the date of purchase; or
(B) consideration for the purchase of convertible preference shares of
the Company having the terms set forth on Exhibit B hereto (as may be
amended following approval by the Company's shareholders of amendments to
the articles of incorporation of the Company with respect to the voting
rights of such shares) (the "Convertible Preference Shares") in accordance
with the terms thereof, at the price specified thereon; provided that (x)
prior to purchasing any Convertible Preference Shares, Westar will purchase
a number of shares of Company Common Stock that would be converted into
9.9% of the issued and outstanding shares of Parent Common Stock on a fully
diluted basis (based on the Company's good faith determination of the
likely number of shares of Parent Common Stock to be outstanding at the
Effective Time taking into consideration the most recent financial
statements filed with the Securities and Exchange Commission (the "SEC") by
the Company, PNM and Manzano and the Company's good faith estimate of the
Adjustment Shares to be issued pursuant to Section 3.2(b)) and (y) the
aggregate amount of cash paid by Westar to the Company pursuant to this
subsection (B) shall not exceed $375,000,000. The Convertible Preference
Shares may, but are not required to, be converted into shares of Company
Common Stock by the holder thereof on or prior to the Effective Time and,
to the extent so converted, shall be included in the calculation set forth
in Section 3.2(b)(ii)(A); or
(C) consideration for the repurchase of shares of Westar Common Stock
at a price based on the average (rounded to the nearest thousandth, or if
there shall not be a nearest thousandth, the next higher thousandth) of the
volume weighted averages (rounded to the nearest thousandth, or if there
shall not be a nearest thousandth, the next higher thousandth) of the
trading price of Westar Common Stock on the New York Stock Exchange as
reported by Bloomberg Financial Markets, or if not reported thereby,
another reputable source, in the period of 20 consecutive Trading Days
ending on the close of business on the Business Day immediately preceding
the date of purchase or the initial exercise price for rights to purchase
Westar Common Stock, whichever is higher; provided that Westar may not
redeem its Common Stock pursuant hereto unless the Westar Common Stock is
listed for trading on the New York Stock Exchange or other national
securities exchange; or
(D) an increase in the amount of the intercompany receivable owed by
the Company to Westar.
As used herein, the term "Trading Day" means a day on which the New York
Stock Exchange is open for trading. As used herein, the term "Additional
Cash" means cash other than cash paid by Westar or any Split-Off Subsidiary
to the Company pursuant to (i) any of the Company Contracts and other
arrangements specified in Section 5.1(u) of the Company Disclosure Letter
and (ii) the Company's tax sharing and allocation policy (Company
Accounting Manual Section No. 6.90) as in effect on the date hereof.
(ii) At any time between the date hereof and the Cut Off Date, Westar
may convert any amount of the intercompany receivable into any of the
securities listed in subsections (i)(A), (B) or (C) hereto; provided that
any remaining outstanding balance of the intercompany receivable shall be
so converted at the Effective Time, in each case consistent with the terms
of subsections (i)(A), (B) or (C), with Westar providing written notice to
the Company of its choice of conversion options on or prior to the Cut Off
Date.
(iii) The Company may pay cash to Westar, either as an equity
contribution or a reduction in the amount of the intercompany receivable
(but not below zero) in an amount not to exceed the limitation set forth in
Section 6.7(g) of the Company's $600 million Credit Agreement dated June
28, 2000, as in effect on the date hereof; provided that any cash payments
pursuant to (i) any of the Company contracts and other arrangements
specified in Section 5.1(u) of the Company Disclosure Letter and (ii) the
Company's tax sharing and allocation policy (Company Accounting Manual
Section No. 6.90) as in effect on the date hereof shall not be adjustments
to the Merger Consideration.
(iv) The maximum aggregate value of Company Common Stock and Company
Preference Shares purchased by Westar pursuant to this Section 3.2(a),
including without limitation as a result of the conversion of the existing
intercompany receivable, shall not exceed $641,000,000.
(b) Closing Consideration.
At the Effective Time, as a result of the Split-Off and Merger and without
any action on the part of the holder of any capital stock of the Company:
(i) The Split-Off Portion of each share of Company Common Stock issued
and outstanding immediately prior to the Effective Time (except for shares
of Company Common Stock owned by Parent, Merger Sub-1, Merger Sub-2 or any
other direct or indirect subsidiary of Parent or shares of Company Common
Stock that are owned by the Company or any direct or indirect subsidiary of
the Company but excluding any shares of Company Common Stock issued to and
owned directly or indirectly by Westar, and in each case not held on behalf
of third parties (each, an "Excluded Share" and collectively, "Excluded
Shares")), shall be exchanged for a number of shares of Westar Common Stock
equal to the Split-Off Exchange Ratio (the "Split-Off Consideration"). The
"Split-Off Exchange Ratio" shall be equal to the number of shares of Westar
Common Stock issued to and owned by the Company divided by the number of
shares of Company Common Stock issued and outstanding (other than the
Excluded Shares), in each case at the Effective Time.
(ii) (A) Subject to the provisions hereof, the aggregate number of
shares of Parent Common Stock to be issued in the Merger shall be
55,000,000 (the "Base Shares") plus the Adjustment Shares (as defined
below) (the "Aggregate Share Number").
The "Adjustment Shares" shall be determined by dividing (A) the
difference (which may be a positive or a negative number) between (x) the
sum of: (i) the amount of any proceeds (net of expenses relating to such
sale) from the sale of Westar securities received by the Company from the
date hereof through the Cut Off Date (excluding the amount of any such
proceeds received by Westar directly and transferred to the Company
pursuant to clause (iii) or (v) below); (ii) for each regular quarterly
record date for payment of dividends on shares of Company Common Stock
between the date hereof and the Closing Date, an amount equal to the
product of (A) the number of shares of Company Common Stock outstanding and
entitled to receive a dividend on such record date and (B) the difference
between $0.30 and the amount of the actual cash dividend or dividend
equivalent under the Stock Plans (as in effect on the date hereof except as
such plans may be amended in conformity with this Agreement) declared per
share of Common Stock outstanding on such record date; (iii) the value of
any shares of Company Common Stock issued to Westar pursuant to subsection
(a)(i)(A) or (a)(ii) above based on the consideration paid by Westar for
such shares; (iv) the value of any shares of Company Common Stock issued to
Westar pursuant to the conversion of Convertible Preference Shares issued
to Westar in accordance with subsection (a)(i)(B) or (a)(ii) above based on
the consideration paid by Westar for the Convertible Preference Shares
which were converted into such Company Common Stock (it being understood
that no adjustment shall be made pursuant hereto with respect to any
Convertible Preference Shares that will remain issued and outstanding at or
after the Effective Time); (v) the value of any shares of Westar Common
Stock repurchased by Westar in accordance with subsection (a)(i)(C) or
(a)(ii) above based on the purchase price paid by Westar for such shares;
(vi) the amount of cash received as consideration for shares of Company
Common Stock issued by the Company or the cash value of any compensation
paid to employees of the Company in the form of shares of Company Common
Stock, as the case may be, between the date hereof and the Cut Off Date
pursuant to the Company's Direct Stock Purchase Plan and the Stock Plans
(as defined in Section 5.1(b)); and (vii) the amount of any cash (or other
consideration pursuant to a cashless exercise) received from the exercise
of outstanding options (including pursuant to cashless exercises) to
purchase shares of Company Common Stock between the date hereof and the Cut
Off Date, and (y) the sum of (i) the amount of any cash paid by the Company
to Westar as an equity contribution pursuant to subsection (a)(iii) above
and (ii) $234 million, by (B) $27.00. On or prior to the Cut Off Date the
Company shall deliver to Parent a statement showing the adjustment
calculated in accordance with this Section 3.2(b) (the "Adjustment
Calculation"). The Adjustment Calculation shall have sufficient detail to
enable Parent to ascertain whether or not the adjustment proposed by the
Company was made in conformity with the provisions of this Agreement.
(B) Parent may dispute the Adjustment Calculation provided by the
Company by providing notice in writing to the Company within five Business
Days of receipt of the Adjustment Calculation. If Parent and the Company
are unable to reach resolution of any differences with respect to the
Adjustment Calculation within ten Business Days of receipt of Parent's
written notice of dispute to the Company, Parent and the Company shall
submit the amounts remaining in dispute to one of the five largest
nationally recognized independent auditing firms selected by the Company
but not to include the auditing firm who prepared the most recent audited
financial statements for Parent or the Company (the "Neutral Auditor"). The
Neutral Auditor shall --------------- be instructed to determine and report
to the parties, within 20 Business Days after such submission, upon such
remaining disputed amounts, and such report shall be final, binding and
conclusive on the parties hereto with respect to the amounts disputed. The
fees and disbursements of the Neutral Auditor shall be shared equally by
Parent and the Company.
(iii) The Merger Portion of each share of the Company Common Stock
issued and outstanding immediately prior to the Effective Time (other than
the Excluded Shares) shall be converted into, and become exchangeable for a
number of shares of common stock, par value $0.001 per share of Parent (the
"Parent Common Stock") equal to the Exchange Ratio (the "Merger
Consideration" and together with the Split-Off Consideration, the "Closing
Consideration"). The "Exchange Ratio" shall be equal to the Aggregate Share
Number divided by the number of outstanding shares of Company Common Stock
at the Effective Time (other than the Excluded Shares).
(iv) Each Excluded Share shall, by virtue of the Split-Off and Merger
and without any action on the part of the holder thereof, cease to be
outstanding, shall be cancelled and retired without payment of any
consideration therefor and shall cease to exist.
(v) At the Effective Time, all shares of Company Common Stock shall no
longer be outstanding and shall be cancelled and retired and shall cease to
exist, and each certificate (a "Certificate") formerly representing any
such shares of Company Common Stock (other than Excluded Shares) shall
thereafter represent only the right to receive the Closing Consideration
and the right, if any, to receive pursuant to Section 3.4(e) cash in lieu
of fractional shares into which such shares of Company Common Stock have
been converted pursuant to this Section 3.2(b) and any distribution or
dividend pursuant to Section 3.4(c).
(vi) Each issued and outstanding Convertible Preference Share shall be
converted into one share of convertible preferred stock of Parent having
the terms set forth on Exhibit C hereto (the "Parent Convertible Shares").
(c) Second Merger Consideration.
(i) Each share of common stock, par value $0.001 per share of Manzano
(the "Manzano Common Stock") issued and outstanding prior to the Effective
Time (excluding shares owned by Parent, PNM, Manzano or any of their direct
or indirect subsidiaries or by the Company or any Split-Off Subsidiary or
any other direct or indirect subsidiaries, in each case not held on behalf
of third parties, each a "Manzano Excluded Share" and collectively (the
"Manzano Excluded Shares")) shall be converted into, and exchangeable for,
one share of Parent Common Stock (the "Manzano Merger Consideration").
(ii) At the Effective Time, all shares of Manzano Common Stock shall
no longer be outstanding and shall be cancelled and retired and shall cease
to exist, and each certificate (a "Manzano Certificate") formerly
representing any such shares of Manzano Common Stock (other than Manzano
Excluded Shares) shall thereafter represent only the right to receive
shares of Parent Common Stock pursuant to subsection (i) above and the
right, if any, to receive pursuant to Section 3.4(e) cash in lieu of
fractional shares into which such shares of Manzano Common Stock have been
converted pursuant to this Section 3.2(c) and any distribution or dividend
pursuant to Section 3.4(c).
(iii) Each Manzano Excluded Share shall, by virtue of the Second
Merger and without any action on the part of the holder thereof, cease to
be outstanding, shall be cancelled and retired without payment of any
consideration therefor and shall cease to exist.
(d) Merger Sub-1.
At the Effective Time, each share of Common Stock, no par value, of
Merger Sub-1 issued and outstanding immediately prior to the Effective Time
shall be converted into one share of common stock of the Surviving
Corporation and shall constitute the only shares of capital stock of the
Surviving Corporation.
(e) Merger Sub-2.
At the Effective Time, each share of Common Stock, no par value, of
Merger Sub-2 issued and outstanding immediately prior to the Effective Time
shall be converted into one share of Manzano Common Stock and shall
constitute the only shares of capital stock of Manzano.
3.3. Exchange of Certificates Exchanged in the Split-Off.
(a) At the Effective Time, the Company shall deposit with the Exchange
Agent (as defined in Section 3.4 below) a stock certificate or certificates,
endorsed in blank by the Company, representing the shares of Westar Common Stock
owned by the Company.
(b) Following surrender of any Certificate formerly representing shares of
Company Common Stock in accordance with Section 3.4(b), there shall be issued to
the holder thereof, the Split-Off Consideration to which such holder is entitled
pursuant to the Split-Off.
(c) Holders of record at the Effective Time of unsurrendered Certificates
exchanged in the Split-Off shall be entitled to vote after the Effective Time at
any meeting of Westar shareholders the number of whole shares of Westar Common
Stock represented by such Certificates, regardless of whether such holders have
exchanged their Certificates.
3.4. Exchange of Certificates in the Merger.
(a) Exchange Agent.
At the Effective Time, Parent shall deposit, or shall cause to be
deposited, with an exchange agent (the "Exchange Agent"), selected by Parent
with the Company's prior approval, which shall not be unreasonably withheld, for
the benefit of the holders of shares of Company Common Stock, certificates
representing the shares of Parent Common Stock to be issued in the Merger
pursuant to Section 3.2 in exchange for outstanding shares of the Company Common
Stock (such shares of Parent Common Stock and shares of Westar Common Stock
deposited pursuant to Section 3.3, together with any dividends or distributions
with respect thereto with a record date after the Effective Time and any cash
payable in lieu of any fractional shares of Parent Common Stock or Westar Common
Stock, being hereinafter referred to as the "Exchange Fund"). At the Effective
Time, Parent shall also deposit with the Exchange Agent, to be held as part of
the Exchange Fund, certificates representing shares of Parent Common Stock to be
issued in the Second Merger in exchange for outstanding shares of Manzano Common
Stock, together with any dividends or distributions with respect thereto with a
record date after the Effective Time.
(b) Exchange Procedures.
As soon as reasonably practicable after the Effective Time, but in no event
later than three Business Days after the Effective Time, the Surviving
Corporation and Manzano shall cause the Exchange Agent to mail to each holder of
record of shares of Company Common Stock and Manzano Common Stock at the
Effective Time (other than holders of Excluded Shares) (i) a letter of
transmittal specifying that delivery of the Certificates or the Manzano
Certificates, as the case may be, shall be effected, and risk of loss and title
to the Certificates or the Manzano Certificates, as the case may be, shall pass,
only upon delivery of the Certificates or the Manzano Certificates, as the case
may be, (or affidavits of loss in lieu thereof) to the Exchange Agent, such
letter of transmittal to be in such form and have such other provisions as
Parent and the Company may reasonably agree, and (ii) instructions for use in
effecting the surrender of the Certificates or the Manzano Certificates, as the
case may be, in exchange for (A) Closing Consideration, in the case of the
Split-Off and Merger, or Manzano Merger Consideration, in the case of the Second
Merger and (B) any unpaid dividends and other distributions and cash in lieu of
fractional shares to be paid pursuant to this Agreement (such instructions shall
include instructions for the payment of the Closing Consideration, in the case
of the Split-Off and Merger, or, Manzano Merger Consideration, in the case of
the Second Merger, cash in lieu of fractional shares, and dividends or other
distributions to a Person other than the Person in whose name the surrendered
Certificate, or Manzano Certificate, as the case may be, is registered on the
transfer books of the Company or Manzano, as the case may be, subject to the
receipt of appropriate documentation for such transfer). Upon surrender of a
Certificate, or Manzano Certificate, as the case may be, (or evidence of loss in
lieu thereof) for cancellation to the Exchange Agent together with such letter
of transmittal, duly executed in accordance with the provisions of this Section
3.4(b), the holder of such Certificate, or Manzano Certificate, as the case may
be, shall be entitled to receive in exchange therefor (x) Merger Consideration,
in the case of the Merger, or, Manzano Merger Consideration, in the case of the
Second Merger, in each case that such holder is entitled to receive pursuant to
this Article III, and (y) a check in the amount (after giving effect to any
required tax withholdings) of (A) any cash in lieu of fractional shares plus (B)
any unpaid non-stock dividends and any other dividends or other distributions
that such holder has the right to receive pursuant to the provisions of this
Article III, and the Certificate, or Manzano Certificate, as the case may be, so
surrendered shall forthwith be cancelled. No interest will be paid or accrued on
any amount payable upon due surrender of the Certificates, or Manzano
Certificates, as the case may be. In the event of a transfer of ownership of
shares of Company Common Stock or Manzano Common Stock that is not registered in
the transfer records of the Company or Manzano, respectively, payment may be
issued to such a transferee if the Certificate, or Manzano Certificate, as the
case may be, formerly representing such shares of Company Common Stock or
Manzano Common Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and the person
requesting such issuance pays any transfer or other taxes required by reason of
such payment to a person other than the registered holder of such Certificate,
or Manzano Certificate, as the case may be, or establishes to the satisfaction
of Parent and the Company that such tax has been paid or is not applicable.
For the purposes of this Agreement, the term "person" shall mean any
individual, corporation (including not-for-profit corporations), general or
limited partnership, limited liability company, joint venture, estate, trust,
association, organization, Governmental Entity or other entity of any kind or
nature.
(c) Distributions with Respect to Unexchanged Shares; Voting.
(i) All shares of Parent Common Stock to be issued pursuant to the Mergers
shall be deemed issued and outstanding as of the Effective Time and whenever a
dividend or other distribution is declared by Parent in respect of the Parent
Common Stock, the record date for which is at or after the Effective Time, that
declaration shall include dividends or other distributions in respect of all
shares of Parent Common Stock issuable pursuant to this Agreement. No dividends
or other distributions in respect of the Parent Common Stock shall be paid to
any holder of any unsurrendered Certificate, or Manzano Certificate, as the case
may be, until such Certificate, or Manzano Certificate, as the case may be, is
surrendered for exchange in accordance with this Article IV. Following surrender
of any Certificate, or Manzano Certificate, as the case may be, there shall be
issued and/or paid to the holder of the certificates representing whole shares
of Parent Common Stock issued in exchange therefor, without interest, (A) at the
time of such surrender, the dividends and other distributions with a record date
after the Effective Time theretofore payable with respect to such whole shares
of Parent Common Stock and not paid with respect to such shares and (B) at the
appropriate payment date, the dividends and other distributions payable with
respect to such whole shares of Parent Common Stock with a record date after the
Effective Time but with a payment date subsequent to surrender.
(ii) Holders of record at the Effective Time of unsurrendered Certificates
shall be entitled to vote after the Effective Time at any meeting of Parent
shareholders the number of whole shares of Parent Common Stock represented by
such Certificates, regardless of whether such holders have exchanged their
Certificates. Holders of record at the Effective Time of unsurrendered Manzano
Certificates shall be entitled to vote after the Effective Time at any meeting
of Parent shareholders the number of whole shares of Parent Common Stock
represented by such Manzano Certificates, regardless of whether such holders
have exchanged their Manzano Certificates.
(d) Transfers, Etc.
After the Effective Time, there shall be no transfers on the stock transfer
books of the Company or Manzano of shares of Company Common Stock or Manzano
Common Stock that were outstanding immediately prior to the Effective Time.
(e) Fractional Shares.
Notwithstanding any other provision of this Agreement to the contrary and
solely for convenience and not as a separately bargained for consideration, no
fractional shares of Parent Common Stock will be issued and any holder of shares
of Company Common Stock entitled to receive a fractional share of Parent Common
Stock but for this Section 3.4(e) shall be entitled to receive a cash payment in
lieu thereof, as follows. The Exchange Agent will be directed to determine the
number of whole shares and fractional shares of Parent Common Stock issuable to
each holder of record of certificates formerly representing shares of Company
Common Stock as of the Effective Time. Upon the determination by the Exchange
Agent of such number of fractional shares, as soon as practicable after the
Effective Time, the Exchange Agent, acting on behalf of the holders thereof,
shall sell such fractional shares for cash on the open market in each case at
the then prevailing market prices and shall distribute to each holder entitled
thereto, in lieu of any fractional share, without interest, that holder's
ratable share of the proceeds of that sale, after making appropriate deductions
of the amount required, if any, to be withheld for United States income Tax
purposes.
(f) Termination of Exchange Fund.
Any portion of the Exchange Fund relating to the Merger Consideration in
the case of the Merger or the Manzano Merger Consideration, in the case of the
Second Merger that remains unclaimed by the shareholders of the Company or the
shareholders of Manzano for one year after the Effective Time shall be returned
to Parent. At the same time, any portion of the Exchange Fund comprised of
Split-Off Consideration shall be returned to Westar. Any shareholders of the
Company or of Manzano who have not theretofore complied with this Article III
shall thereafter look only to (i) Parent for payment of the Merger Consideration
in the case of the Merger, or Manzano Merger Consideration, in the case of the
Second Merger, and any cash, dividends and other distributions in respect
thereof payable and/or issuable pursuant to Section 3.2 and Section 3.4(c) upon
due surrender of their Certificates, or Manzano Certificates, as the case may
be, (or affidavits of loss in lieu thereof), and (ii) Westar for payment of the
Split-Off Consideration, in each case, without any interest thereon.
Notwithstanding the foregoing, none of Parent, the Surviving Corporation,
Manzano, Westar, the Exchange Agent or any other person shall be liable to any
former holder of shares of Company Common Stock or Manzano Common Stock for any
amount properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(g) Lost, Stolen or Destroyed Certificates.
In the event that any Certificate, or Manzano Certificate, as the case may
be, shall have been lost, stolen or destroyed, upon the making of an affidavit
of that fact by the person claiming such Certificate, or Manzano Certificate, as
the case may be, to be lost, stolen or destroyed and, if required by Parent, the
posting by such person of a bond in customary amount as indemnity against any
claim that may be made against it with respect to such Certificate, or Manzano
Certificates, as the case may be, the Exchange Agent will issue in exchange for
such lost, stolen or destroyed Certificate, or Manzano Certificate, as the case
may be, the Closing Consideration in the case of the Merger and the Split-Off,
or the Manzano Merger Consideration, in the case of the Second Merger, and, if
applicable, any cash payable and any unpaid dividends or other distributions
deliverable in respect thereof pursuant to Section 3.4(c) upon due surrender of
the shares of the Company Common Stock or Manzano Common Stock represented by
such Certificate, or Manzano Certificate, as the case may be, pursuant to this
Agreement.
(h) Affiliates.
Notwithstanding anything herein to the contrary, Certificates surrendered
by any "affiliate" (as determined pursuant to Section 7.6) of the Company shall
not be exchanged until Parent shall have received a written agreement from such
person as provided for in Section 7.6 hereof.
3.5. Dissenters' Rights.
(a) In the event that appraisal rights are available under Section 17-6712
of the KGCC to holders of shares of the Company Common Stock at the Effective
Time, any issued and outstanding shares of the Company Common Stock held by a
person who objects to the Transaction and complies with all applicable
provisions of the KGCC concerning the right of such person to dissent from the
Transaction and demands appraisal of shares ("Company Dissenting Holder") shall
from and after the Effective Time represent only the right to receive such
consideration as may be determined to be due to such Company Dissenting Holder
with respect to such shares pursuant to the KGCC and shall not be converted as
described in Section 3.2(b); provided, however, that shares outstanding
immediately prior to the Effective Time and held by a Company Dissenting Holder
who shall withdraw the demand for appraisal or lose the right of appraisal of
such shares pursuant to the KGCC shall be deemed to be converted, as of the
Effective Time, into the right to receive the Closing Consideration.
(b) Any issued and outstanding shares of Manzano Common Stock held by a
person who objects to the Second Merger and complies with all applicable
provisions of the NMBCA concerning the right of such person to dissent from the
Second Merger and demands appraisal of such shares ("Manzano Dissenting Holder")
shall from and after the Effective Time represent only the right to receive such
consideration as may be determined to be due to such Manzano Dissenting Holder
with respect to such shares pursuant to the NMBCA and shall not be converted as
described in Section 3.2(c); provided, however, that shares outstanding
immediately prior to the Effective Time and held by a Manzano Dissenting Holder
who shall withdraw the demand for appraisal, or lose the right of appraisal of
such shares pursuant to the NMBCA shall be deemed to be converted, as of the
Effective Time, into the right to receive the Manzano Merger Consideration.
3.6. Adjustments to Prevent Dilution.
In the event that the Company changes the number of shares of Company
Common Stock or securities convertible or exchangeable into or exercisable for
shares of Company Common Stock (other than the issuance of Convertible
Preference Shares), Manzano changes the number of shares of Manzano Common Stock
or securities convertible or exchangeable for shares of Manzano Common Stock, or
Parent changes the number of shares of Parent Common Stock or securities
convertible or exchangeable into or exercisable for shares of Parent Common
Stock, in each case issued and outstanding prior to the Effective Time as a
result of a reclassification, stock split (including a reverse stock split),
stock dividend or distribution, recapitalization, merger, subdivision, issuer
tender or exchange offer, or other similar transaction, the Closing
Consideration, the Exchange Ratio and the Split-Off Exchange Ratio shall be
equitably adjusted to reflect such change in the case of the Merger and the
Split-Off, and the number of shares of Parent Common Stock into which each share
of Manzano Common Stock shall be converted shall be equitably adjusted to
reflect such change, in the case of the Second Merger.
3.7. Restructuring of the Mergers.
If for any reason, the Manzano Transition Date can not occur, or the
regulatory approvals required to permit it to occur are likely to materially
delay the Effective Time, then the parties agree to restructure certain of the
transactions contemplated hereby and to exclude Manzano from participation in
the transactions contemplated hereby. In such event, PNM and Parent, in lieu of
the Manzano Exchange and the Second Merger, as provided for herein, shall enter
into an agreement and plan of share exchange (the "PNM Exchange Agreement")
(which agreement shall be substantially the same as the Exchange Agreement with
such changes therein as are appropriate to reflect Parent's status as a Delaware
corporation, except that Article VI of the Exchange Agreement shall be modified
to require all holders to surrender their certificates for cancellation or
cancellation and transfer) pursuant to which (i) the Exchange Agreement would be
terminated and the Manzano Exchange abandoned, (ii) at the Effective Time, each
share of PNM Common Stock would be automatically converted into shares of Parent
Common Stock based on the Manzano Exchange Ratio (the "PNM Exchange") and Parent
would thereby acquire and become the owner and holder of each issued and
outstanding share of PNM Common Stock. In the event the Manzano Transition Date
does not occur prior to the Effective Time, PNM shall retain all of its rights,
obligations, interests and liabilities under this Agreement. The Parties
recognize that there may be other circumstances in which it may be preferable to
effectuate a business combination between Parent, PNM and the Company by means
of an alternative structure to the Transaction. Accordingly, if, prior to
satisfaction of the conditions contained in Article VIII hereto, either party
proposes the adoption of an alternative structure that will not delay the
Effective Time and that otherwise substantially preserves for Parent, PNM, the
Company and the holders of the Company Common Stock the economic and Tax
benefits of the Transactions, then the parties shall make good faith to effect a
business combination among themselves by means of a mutually agreed upon
structure other than the Transactions that so preserves such benefits; provided
that if the Company Requisite Vote or the Parent Requisite Vote has already been
obtained, such alternative business combination does not require any additional
approval of the shareholders of the Company under the KGCC or other applicable
law or the shareholders of PNM under the NMBCA or other applicable law. In the
event that the parties adopt a restructured transaction, the Agreement shall be
revised to reflect such transaction as determined necessary by the parties
hereto and prior to closing any such restructured transaction, all material
third party and Governmental Authority declarations, filings, registrations,
notices, authorizations, consents or approvals necessary for the effectuation of
such alternative business combination shall have been obtained and all other
conditions to the parties' obligations to consummate the Transaction and other
transactions contemplated hereby, as applied to such alternative business
combination, shall have been satisfied or waived.
3.8. Manzano Guaranty; Etc.
Effective from the Manzano Transition Date, (i) Manzano unconditionally
guarantees the obligations of Parent under this Agreement but only through the
Effective Time, it being the intent of the parties that such obligations shall
be obligations solely of Parent from and after the Effective Time and (ii)
Manzano assumes and agrees to perform all obligations of PNM hereunder and shall
succeed to all rights, interests and liabilities of PNM hereunder and be
substituted for PNM for all purposes of this Agreement as if originally named
herein, in each case without necessity for further act by any party hereto.
Manzano agrees promptly to execute a counterpart of this Agreement upon PNM
becoming its Subsidiary. PNM agrees to give written notice to all other parties
hereto of the occurrence of the Manzano Transition Date.
Article IV.
The Closing
4.1. Closing.
The closing of the Transaction (the "Closing") shall take place (i) at the
offices of LeBoeuf, Lamb, Greene & MacRae, L.L.P., 125 West 55th Street, New
York, New York at 10:00 A.M. on the twentieth Business Day after the last to be
satisfied or waived of the conditions set forth in Article VIII (other than
those conditions that by their nature are to be satisfied at the Closing, but
subject to the satisfaction or waiver of those conditions) shall be satisfied or
waived (by the party entitled to the benefit of such condition) in accordance
with this Agreement or (ii) at such other place and time and/or on such other
date as the Company and Parent may agree in writing (the "Closing Date");
provided that in the event a dispute resolution process pursuant to Section
3.2(b)(ii)(B) is pending, the Closing Date shall automatically be extended to
two business days following the date of delivery of the report of the Neutral
Auditor. For purposes of this Agreement, the term "Business Day" means a day on
which banks are not required or authorized by law to close in New York City.
Article V.
Representations and Warranties
5.1. Representations and Warranties of the Company.
Except as set forth in the disclosure letter delivered to Parent by the
Company on or prior to entering into this Agreement (the "Company Disclosure
Letter") or the Company Reports, the Company hereby represents and warrants to
Parent, PNM, Merger Sub-1 and Merger Sub-2 that:
(a) Organization, Good Standing and Qualification.
Each of the Company and its Utility Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of organization and has all requisite corporate or
similar power and authority to own and operate its properties and assets and to
carry on its business as presently conducted in all material respects and is
qualified to do business and is in good standing as a foreign corporation in
each jurisdiction where the ownership or operation of its properties or conduct
of its business requires such qualification, except where the failure to be so
qualified as a foreign corporation or be in good standing would not be
reasonably likely to have, either individually or in the aggregate, a Company
Material Adverse Effect. Wolf Creek Nuclear Operating Corporation is a
corporation in good standing under the laws of the state of Kansas. The Company
has made available to Parent complete and correct copies of the Company's and
each of its Utility Subsidiaries' articles of incorporation and by-laws (or
comparable governing instruments), as amended to date. The Company's and its
Utility Subsidiaries' articles of incorporation and by-laws (or comparable
governing instruments) so delivered are in full force and effect. Section 5.1(a)
of the Company Disclosure Letter sets forth a list, as of the date hereof, of
all of the Subsidiaries of the Company, the jurisdictions under which such
Subsidiaries were incorporated, the percent of the equity interest therein owned
by the Company and each Subsidiary of the Company, as applicable, whether such
Subsidiary has active business operations, and specifies each Subsidiary that as
of the date hereof, (i) (A) owns or operates any portion of the Company's
electric utility business as reflected in the unconsolidated balance sheet
included in Section 5.1(e)(ii) of the Company Disclosure Letter and (B) is to
remain a Subsidiary of the Company after giving effect to the Split-Off or (ii)
otherwise holds the Company's investments in affordable housing tax credits as
shown in the consolidated financial statements of the Company and its
Subsidiaries included in the Company Reports (the Subsidiaries so specified in
the list being herein collectively called the "Utility Subsidiaries"). Section
5.1(a) of the Company Disclosure Letter specifies the status of each Utility
Subsidiary under Section 2(a)(5), 2(a)(7), 2(a)(11), 32(a)(1) or 33(a)(3) of the
Public Utility Holding Company Act of 1935, as amended (the "1935 Act") and
Section 201(e) of the Federal Power Act (the "Power Act"). No Subsidiary which
is a Utility Subsidiary will be a Westar Subsidiary.
As used in this Agreement, the term "Subsidiary" means, with respect to the
Company, PNM, Parent, Merger Sub-1 or Merger Sub-2, as the case may be, any
entity, other than a Westar Subsidiary, whether incorporated or unincorporated,
of which at least a majority of the securities or ownership interests having by
their terms ordinary voting power to elect a majority of the board of directors
or other persons performing similar functions is directly or indirectly owned or
controlled by such party or by one or more of its respective Subsidiaries or by
such party and any one or more of its respective Subsidiaries.
As used in this Agreement, the term "Significant Subsidiary" means a
"significant subsidiary" (other than, with respect to the Company, a Westar
Subsidiary) within the meaning of Rule 1.02(w) of Regulation S-X promulgated
pursuant to the Securities Exchange Act of 1934, as amended ("Exchange Act").
As used in this Agreement, the term "Company Material Adverse Effect" means
a material adverse effect on the financial condition, business, assets or
results of operations of the Company and its Subsidiaries taken as a whole;
provided, however, that any such effect resulting from or arising out of (i) any
change in law, rule, regulation or generally accepted accounting principles
("GAAP") or interpretations thereof, (ii) economic or business conditions in the
United States generally, (iii) conditions generally affecting the electric
utility industry or (iv) the execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby or by the Split-Off
Agreements shall not be considered when determining if a Company Material
Adverse Effect has occurred. As used in this Agreement, the term " " or any
similar formulation of knowledge shall mean the actual knowledge of, with
respect to the Company, those persons set forth in Section 5.1(a) of the Company
Disclosure Letter and, with respect to Parent and PNM, those persons set forth
in Section 5.2 of the Parent Disclosure Letter. Notwithstanding the foregoing,
the parties hereto acknowledge and agree that in no event shall any matter that
is or would be a Westar Group Liability (as such term is defined in the
Allocation and Separation Agreement) constitute or give rise to, in whole or in
part, a Company Material Adverse Effect; provided that, such matter does not
also constitute or result in a Western Group Liability (as such term is defined
in the Allocation and Separation Agreement).
(b) Capital Structure.
The authorized capital stock of the Company consists of (x) 150,000,000
shares of Company Common Stock, of which 69,980,902 shares were outstanding as
of the close of business on November 6, 2000, (y) 6,600,000 shares of preferred
stock, (the "Preferred Shares") of which 138,576 shares of 4 1/2% series were
outstanding, 60,000 shares of 4 1/4% series were outstanding, and 50,000 shares
of 5% series were outstanding, in each case, as of November 6, 2000, and (z)
4,000,000 shares of preference stock, none of which are outstanding as of
November 6, 2000. All of the issued and outstanding shares of capital stock of
the Company have been duly authorized and are validly issued, fully paid and
nonassessable. Each of the outstanding shares of capital stock or other
securities of each of the Company's Subsidiaries is duly authorized, validly
issued, fully paid and nonassessable and owned by the Company or a direct or
indirect wholly owned Subsidiary of the Company, free and clear of any lien,
pledge, security interest, claim or other encumbrance. Other than pursuant to
the Company Long Term Incentive and Share Award Plan, the Executive Stock for
Compensation Program, the Employee's Stock Purchase Plan and the 401(k) Plan
(collectively, the "Stock Plans") and pursuant to the Company Direct Stock
Purchase Plan, there are no preemptive or other outstanding rights, options,
warrants, conversion rights, stock appreciation rights, redemption rights,
repurchase rights, agreements, arrangements or commitments to issue or to sell
any shares of capital stock or other securities of the Company or any of its
Subsidiaries or any securities or obligations convertible or exchangeable into
or exercisable for, or giving any Person a right to subscribe for or acquire,
any securities of the Company or any of its Subsidiaries, and no securities or
obligations evidencing such rights are authorized, issued or outstanding. The
Company does not have outstanding any bonds, debentures, notes or other
obligations the holders of which have the right to vote (or convertible into or
exercisable for securities having the right to vote) with the shareholders of
the Company on any matter ("Voting Debt").
(c) Corporate Authority.
(i) The Company has all requisite corporate power and authority and
has taken all corporate action necessary in order to execute, deliver and
perform its obligations under this Agreement and to consummate, on the
terms and subject to the conditions of this Agreement, the transactions
contemplated hereby, subject only to receipt of the Company Requisite Vote
and the Company Required Statutory Approvals. This Agreement is a valid and
legally binding agreement of the Company enforceable against such party in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general
applicability relating to or affecting creditors' rights and to general
equity principles (the "Bankruptcy and Equity Exception").
(ii) As of the date hereof the Board of Directors of the Company has
approved and adopted this Agreement and the Merger, the Split-Off and other
transactions contemplated hereby and, subject to its fiduciary duties, has
resolved to recommend that the shareholders of the Company approve this
Agreement and the transactions contemplated hereby.
(d) Governmental Filings; No Violations.
(i) Other than any reports, filings, registrations, approvals and/or
notices (A) required to be made pursuant to Section 1.4 (B) under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), the Securities Act of 1933, as amended (the "Securities Act"), and the
Exchange Act, (C) with, to or of the Federal Energy Regulatory Commission (the
"FERC"), (D) with, to or of the Kansas Corporation Commission; (E) with, to or
of the SEC under the 1935 Act; (F) to or with the Nuclear Regulatory Commission,
(G) to or with the Federal Communications Commission, (H) to comply with state
securities or "blue-sky" laws; and (I) to comply with the rules and regulations
of the New York Stock Exchange, Inc. (the "NYSE") (items B through I, the
"Company Required Statutory Approvals"), no notices, reports, registrations or
other filings are required to be made by the Company with, nor are any consents,
registrations, approvals, permits or authorizations required to be obtained by
the Company from, any governmental or regulatory authority, agency, commission,
body or other governmental entity (each a "Governmental Entity"), in connection
with the execution and delivery of this Agreement and the consummation by the
Company of the transactions contemplated hereby, except for those that the
failure to make or obtain are not, individually or in the aggregate, reasonably
likely to have a Company Material Adverse Effect or prevent, materially delay or
materially impair the ability of the Company to consummate the transactions
contemplated by this Agreement.
(ii) The execution, delivery and performance of this Agreement and the
consummation by the Company of the transactions contemplated hereby will not
constitute or result in (A) a breach or violation of, or a default under, either
the articles of incorporation of the Company or by-laws of the Company or the
comparable governing instruments of any Company Utility Subsidiary, (B) a breach
or violation of, or a default under, the acceleration of any obligations, the
loss of any right or benefit, or the creation of a lien, pledge, security
interest or other encumbrance on the assets of the Company or any Company
Utility Subsidiary (with or without notice, lapse of time or both) pursuant to,
any agreement, lease, contract, note, mortgage, indenture, arrangement or other
obligation not otherwise terminable by the other party thereto on 90 days' or
less notice ("Contracts") binding upon the Company or any Company Utility
Subsidiary (the "Company Contracts") or any Law (as defined in Section 5.1(i))
or governmental or non-governmental permit or license to which the Company or
any Company Utility Subsidiary is subject or (C) any change in the rights or
obligations of any party under any of the Company Contracts, except, in the case
of clause (B) or (C) above, for any breach, violation, default, acceleration,
creation or change that would not, individually or in the aggregate, be
reasonably likely to have a Company Material Adverse Effect or prevent, or
materially impair the ability of the Company to consummate the transactions
contemplated by this Agreement.
(e) Company Reports; Financial Statements.
(i) The filings required to be made (A) by the Company and its Subsidiaries
since January 1, 1999 under the Securities Act; the Exchange Act; the 1935 Act;
the Federal Power Act; and applicable state public utility laws and regulations
have been filed with the SEC, FERC, or the appropriate state public utilities
commission, as the case may be, and (B) by Wolf Creek Nuclear Operating
Corporation since January 1, 1999 under the Atomic Energy Act of 1954, as
amended, to the knowledge of the Company, have been filed with the NRC,
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 statutes and the rules and
regulations thereunder, except for such filings the failure of which to have
been made or so to comply would not result in a Company Material Adverse Effect.
The Company has made available to Parent each registration statement, report,
proxy statement or information statement filed by it with the SEC (collectively,
including any amendments of any such reports, the "Company Reports") pursuant to
the Securities Act or the Exchange Act since January 1, 1999, and prior to the
date hereof, including (i) the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999 and (ii) the Company's Quarterly Reports on
Form 10-Q for the quarterly periods ended March 31, 2000 and June 30, 2000, each
in the form (including exhibits, annexes and any amendments thereto) promulgated
by the SEC under the Securities Act or the Exchange Act. None of the Company
Reports (in the case of Company Reports filed pursuant to the Securities Act),
as of their effective dates, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
to make the statements made therein, in light of the circumstances under which
they were made, not misleading and none of the Company Reports (in the case of
Company Reports filed pursuant to the Exchange Act) as of the respective dates
filed with the SEC or first mailed to shareholders, as applicable, contained any
statement which, at the time and in the light of the circumstances under which
it was made, was false or misleading with respect to any material fact, or
omitted to state any material fact necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The consolidated financial statements of the Company and its
Subsidiaries included in such Company Reports comply as to form in all material
respects with the applicable rules and regulations of the SEC with respect
thereto. Each of the consolidated balance sheets included in or incorporated by
reference into the Company Reports (including the related notes and schedules)
presents fairly, in all material respects, the financial position of the Company
and its Subsidiaries as of its date and each of the consolidated statements of
income and consolidated statements of cash flow included in or incorporated by
reference into the Company Reports (including any related notes and schedules)
fairly presents in all material respects the results of operations, retained
earnings and changes in financial position, as the case may be, of the Company
and its Subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to the absence of notes and normal year-end audit
adjustments), in each case in accordance with GAAP consistently applied during
the periods involved, except as may be noted therein.
(ii) Section 5.1(e)(ii) of the Company Disclosure Letter contains the
unaudited pro forma consolidated balance sheet of the Company and its Utility
Subsidiaries as of September 30, 2000, which presents information as if the
Split-Off had occurred (on the terms and subject to the conditions set forth in
the Split-Off Agreements) as of the Audit Date. Such balance sheet is based on,
and should be read in conjunction with, the historical consolidated financial
statements included in the Company Reports. Such balance sheet fairly presents
in all material respects the consolidated financial position of the Company and
its Subsidiaries as of its date, as if the Split-Off had occurred (on the terms
and subject to the conditions set forth in the Split-Off Agreements) on such
date, subject to notes and normal year-end audit adjustments that will not be
material in amount or effect. The accounts reflected in the unaudited pro forma
balance sheet referred to in this subsection have been prepared in accordance
with GAAP on a basis consistent with the historical audited consolidated balance
sheets of the Company and its Subsidiaries (including the Split-Off
Subsidiaries) and were prepared in accordance with the requirements of SEC
Regulation S-X as it relates to pro forma balance sheets.
(f) Absence of Certain Changes.
Since December 31, 1999 (the "Audit Date"), except as expressly
contemplated by this Agreement and the Split-Off Agreements, the Company and its
Subsidiaries taken as a whole have conducted their business only in, and have
not engaged in any material transaction other than according to, the ordinary
and usual course of such business and there has not been (i) any change in the
financial condition, properties, assets, business or results of operations of
the Company and its Subsidiaries that has had or would be reasonably likely to
have a Company Material Adverse Effect; (ii) any declaration, setting aside or
payment of any dividend or other distribution in respect of the capital stock of
the Company or any repurchase, redemption or other acquisition by the Company or
any Subsidiary of any securities of the Company other than regular quarterly
dividends on shares of the Company Common Stock in the ordinary course
(including any periodic increase thereon consistent with past practice); or
(iii) any change by the Company in accounting principles, practices or methods
which is not required or permitted by GAAP. Since the Audit Date and through the
date hereof, except as provided for herein, there has not been any material
increase in the compensation payable or that could become payable by the Company
or any of its Subsidiaries to officers or key employees or any material
amendment of any of the Compensation and Benefit Plans other than increases or
amendments in the ordinary course of business consistent with past practice.
(g) Litigation.
(i) There are no civil, criminal or administrative actions, suits,
claims, hearings, investigations, reviews or proceedings pending or, to the
knowledge of the Company, threatened against the Company or any of its
Utility Subsidiaries, except for those that would not be reasonably likely
to have, either individually or in the aggregate, a Company Material
Adverse Effect.
(ii) To the knowledge of the Company, there are no civil, criminal or
administrative actions, suits, claims, hearings, investigations, reviews or
proceedings pending or threatened against Wolf Creek Nuclear Operating
Corporation, except for those that would not be reasonably likely to have,
either individually or in the aggregate, a Company Material Adverse Effect.
(h) Employee Benefits.
(i) A copy of (i) each bonus, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership,
stock bonus, stock purchase, change in control, retention, restricted
stock, stock option, employment, termination, severance, compensation,
medical, health or other plan, agreement, policy, practice or arrangement
that covers employees or former employees of the Company and its
Subsidiaries ("Employees"), or directors or former directors of the Company
(the "Compensation and Benefit Plans"); and (ii) any trust agreement or
insurance contract forming a part of such Compensation and Benefit Plans
has been made available to Parent prior to the date hereof. Section 5.1(h)
of the Company Disclosure Letter lists all Compensation and Benefit Plans
other than those that, in the aggregate, are not material to the Company
and its Subsidiaries and any Compensation and Benefit Plans containing
"change of control" or similar provisions therein are specifically
identified in Section 5.1(h) of the Company Disclosure Letter.
(ii) All Compensation and Benefit Plans, to the extent subject to the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") are
in substantial compliance with the applicable provisions of ERISA. Each
Compensation and Benefit Plan that is an "employee pension benefit plan"
within the meaning of Section 3(2) of ERISA (a "Company Pension Plan") and
that is intended to be qualified under Section 401(a) of the Code has
received a favorable determination letter from the Internal Revenue Service
(the "IRS"), and nothing has occurred, whether by action or failure to act,
that would cause the loss of such qualification or that would result in
costs to the Company or any of its Subsidiaries under the Internal Revenue
Service's Employee Plans Compliance Resolution System that would be
reasonably likely to have a Company Material Adverse Effect. As of the date
hereof, there is no material pending or to the knowledge of the Company
threatened litigation relating to the Compensation and Benefit Plans.
Neither the Company nor any of its Subsidiaries nor, to the knowledge of
the Company, any other person has engaged in a transaction with respect to
any Compensation and Benefit Plan that, assuming the taxable period of such
transaction expired as of the date hereof, would subject the Company or any
of its Subsidiaries to a material tax or penalty imposed by either Section
4975 of the Code or Section 502(i) of ERISA.
(iii) No liability under Subtitle C or D of Title IV of ERISA has been
or is expected to be incurred by the Company or any of its Subsidiaries
with respect to any ongoing, frozen or terminated "single-employer plan",
within the meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by any of them, or the single-employer plan of any entity which
is considered one employer with the Company under Section 4001 of ERISA or
Section 414 of the Code (a "Company ERISA Affiliate"). The Company and its
Subsidiaries have not incurred and do not expect to incur and would not
expect to incur any withdrawal liability with respect to a multiemployer
plan under Subtitle E of Title IV of ERISA (regardless of whether based on
contributions of a Company ERISA Affiliate) if, as of the date hereof, the
Company or a Company ERISA Affiliate were to engage in a "complete
withdrawal" (as defined in Section 4203 of ERISA) or a "partial withdrawal"
(as defined in Section 4205 of ERISA) from such multiemployer plan. No
notice of a "reportable event", within the meaning of Section 4043 of ERISA
for which the 30-day reporting requirement has not been waived or extended,
other than the extension provided by PBGC Reg. Section 4043.66, has been
required to be filed for any Company Pension Plan or by any Company ERISA
Affiliate within the 12-month period ending on the date hereof.
(iv) All contributions required to be made under the terms of any
Compensation and Benefit Plan as of the date hereof have been timely made
or have been reflected on the most recent consolidated balance sheet filed
or incorporated by reference in the Company Reports and all premium
payments to the Pension Benefit Guaranty Corporation ("PBGC") have been
made when due for such plans. Neither any Company Pension Plan nor any
single-employer plan of a Company ERISA Affiliate has an "accumulated
funding deficiency" (whether or not waived) within the meaning of Section
412 of the Code or Section 302 of ERISA and no Company ERISA Affiliate has
an outstanding funding waiver. Neither the Company nor any of its
Subsidiaries has provided, or is required to provide, security to any
Company Pension Plan or to any single-employer plan of a Company ERISA
Affiliate pursuant to Section 401(a)(29) of the Code.
(v) Neither the Company nor its Subsidiaries have any obligations for,
or liabilities with respect to, retiree health and life benefits under any
Compensation and Benefit Plan, except for benefits required to be provided
under Section 4980B of the Code.
(vi) Notwithstanding anything to the contrary contained in this
Section 5.1(h), the representations and warranties contained in this
Section 5.1(h) shall be deemed to be true and correct unless such failures
to be true and correct are reasonably likely to have a Company Material
Adverse Effect.
(i) Compliance with Laws.
As of the date hereof, the business of the Company and its Subsidiaries,
taken as a whole, is not being conducted in violation of any federal, state,
local or foreign law, statute, ordinance, rule, regulation, judgment, order,
injunction, decree, arbitration award, agency requirement, license or permit of
any Governmental Entity (collectively, "Laws"), except for violations that would
not be reasonably likely to have, either individually or in the aggregate, a
Company Material Adverse Effect or prevent or materially impair the ability of
the Company to consummate the transactions contemplated by this Agreement. As of
the date hereof, no investigation or review by any Governmental Entity with
respect to the Company or any of its Subsidiaries is pending or, to the
knowledge of the Company, threatened, nor has any Governmental Entity indicated
an intention to conduct the same, except for those the outcome of which would
not be reasonably likely to have, either individually or in the aggregate, a
Company Material Adverse Effect or prevent or materially impair the ability of
the Company to consummate the transactions contemplated by this Agreement. The
Company and each of its Utility Subsidiaries each has all permits, licenses,
franchises, variances, exemptions, orders and other governmental authorizations,
consents and approvals from Governmental Entities necessary to conduct its
business as presently conducted, except for those the absence of which would not
be reasonably likely to have, either individually or in the aggregate, a Company
Material Adverse Effect or prevent or materially impair the ability of the
Company to consummate the transactions contemplated by this Agreements.
(j) Takeover Statutes.
Assuming the accuracy of the representation contained in Section 5.2(q), no
business combination, control share, fair price, moratorium or similar
anti-takeover provision (a "Takeover Statute") of the KGCC or any applicable
anti-takeover provision in the certificate of incorporation of the Company or
the bylaws of the Company is applicable to the Transaction or any other
transaction contemplated hereby.
(k) Environmental Matters.
Except for such matters that would not, either individually or in the
aggregate, be reasonably likely to cause a Company Material Adverse Effect: (i)
the Company's operations are in compliance with all applicable Environmental
Laws; (ii) the Company possesses and maintains in effect all environmental and
natural resources permits, licenses, authorizations and approvals required under
applicable Environmental Laws with respect to the business of the Company as
presently conducted; (iii) the Company has not received any written
environmental claim, notice or request for information during the past three
years concerning any violation or alleged violation of any applicable
Environmental Law or concerning any liability under any applicable Environmental
Law; and (iv) there are no material writs, injunctions, decrees, orders or
judgments outstanding, or any actions, suits or proceedings pending relating to
compliance by the Company with any environmental permits, licenses,
authorizations and approvals required under applicable Environmental Laws or
liability of the Company under any applicable Environmental Law.
The representations and warranties in this Section 5.1(k) constitute the
sole representations and warranties of the Company with respect to any
Environmental Law or Hazardous Substance.
As used herein, the term "Environmental Law" means any federal, state or
local laws (including common law), regulations, codes, rules, ordinances,
permits, authorizations, decrees, orders, injunctions or judgments and any
binding administrative or judicial interpretations thereof relating to: (a)
pollution; (b) the protection of the environment (including air, water, soil,
subsurface strata, biota and natural resources) or human health and safety from
exposure to Hazardous Substances; and (c) the regulation of the generation, use,
storage, handling, transportation, treatment, release, remediation or disposal
of Hazardous Substances.
As used herein, the term "Hazardous Substance" means (a) any substances,
mixtures, chemicals, products, materials or wastes that, pursuant to
Environmental Law, are defined by or regulated as or having the characteristics
of "hazardous," "toxic," "pollutant," "contaminant," "flammable," "corrosive,"
"reactive," "explosive" or "radioactive"; or (b) any petroleum, petroleum
products or by-products, friable asbestos or any material or equipment
containing regulated concentrations of polychlorinated biphenyls.
As used in this Section 5.1(k), the "Company" shall mean the
Company and each of its Subsidiaries.
(l) Taxes.
Except as would not have a Company Material Adverse Effect, the Company and
each of its Utility Subsidiaries (i) have duly and timely filed (taking into
account any extension of time within which to file) all Tax Returns (as defined
below) required to be filed by any of them as of the date hereof and all such
filed Tax Returns are complete and accurate in all respects; (ii) (A) have
timely paid all Taxes that are shown as due on such filed Tax Returns, except
with respect to matters contested in good faith and for which adequate reserves
have been established and (B) no penalties or charges are due with respect to
the late filing of any Tax Return required to be filed by or with respect to any
of them on or before the Effective Time; (iii) with respect to any filed Tax
Returns, have not waived any statute of limitations with respect to Taxes or
agreed to any extension of time with respect to a Tax assessment or deficiency;
(iv) as of the date hereof, does not have any deficiency, or any such audits,
examinations, investigations or other proceedings in respect of Taxes or Tax
matters pending or proposed or threatened in writing; and (v) has not been or is
not a party to any Tax sharing agreement or similar arrangement. Except as would
not have a Company Material Adverse Effect when aggregated with the preceding
sentence, the Split-Off will not result in any Member of the Mustang Group (as
defined in the Allocation and Separation Agreement) or their Affiliates
recognizing income or gain pursuant to Treasury Regulation Section 1.1502-13.
"Tax" (and the correlative meaning, "Taxes", "Taxing" and "Taxable") shall
mean (i) any net income, gross income, gross receipts, alternative or add-on
minimum, sales, use, ad valorem, franchise, profits, license, withholding,
payroll, employment, excise, transfer, recording, severance, stamp, occupation,
premium, property, environmental, custom duty, or other tax, governmental fee or
other like assessment or charge of any kind whatsoever, together with any
interest and any penalty, addition to Tax or additional amount imposed by a
Taxing Authority; (ii) any liability of the Company, Westar or any Affiliate of
the Company or Westar (or, in each case, any predecessor or successor in
interest thereto by merger or otherwise), as the case may be, for the payment of
any amounts of the type described in clause (i) for any Taxable period resulting
from the application of Treasury Regulation Section 1.1502-6 or, in the case of
any similar provision applicable under state, local or foreign law; and (iii)
any liability of the Company, Westar or any Affiliate of the Company or Westar
(or, in each case, any predecessor or successor in interest thereto by merger or
otherwise) for the payment of any amounts described in clause (i) as a result of
any express or implied obligation to indemnify any other party.
(m) Labor and Employment Matters.
(i) Labor Relations. Except as would not have a Company Material
Adverse Effect, (A) neither the Company nor any of its Subsidiaries is a
party to any collective bargaining agreement or other labor agreement with
any labor union, labor organization, employee association or similar
organization, nor does the Company or any of its Subsidiaries have
knowledge of any such union, labor organization, employee association or
similar organization that represents or claims to represent any of the
Company's or any of its Subsidiaries' employees or intends to organize any
of the Company's or any its Subsidiaries' employees; (B) there is no labor
strike, dispute, slowdown, stoppage, lockout or other labor dispute
actually pending, nor to the knowledge of the Company or any of its
Subsidiaries, threatened against or affecting the Company or any of its
Subsidiaries; (C) to the knowledge of the Company, neither the Company nor
any of its Subsidiaries is engaged in any unfair labor practices as defined
in the National Labor Relations Act or other applicable law, ordinance or
regulation; nor is there an unfair labor practice charge or complaint
against the Company or any of its Subsidiaries pending or, to the knowledge
of the Company, threatened before the National Labor Relations Board or any
similar state agency; and (D) there is no grievance pending, nor, to the
knowledge of the Company, is there any grievance threatened arising out of
any collective bargaining agreement or other grievance procedure.
(ii) Employment. Except as would not have a Company Material Adverse
Effect, (A) neither the Company nor any of its Subsidiaries is in material
violation of any applicable laws respecting employment and employment
practices, terms and conditions of employment, wages, hours of work and
occupational safety and health; (B) to the knowledge of the Company, there
are no charges with respect to or relating to the Company or any of its
Subsidiaries pending before the Equal Employment Opportunity Commission or
any other agency responsible for the prevention of unlawful employment
practices; (C) to the knowledge of the Company, neither the Company nor any
of its Subsidiaries received notice of the intent of any federal, state or
local agency responsible for the enforcement of labor or employment laws to
conduct an investigation with respect to or relating to the Company or any
of its Subsidiaries and no such investigation is in progress; and (D) to
the knowledge of the Company, there are no complaints, lawsuits or other
proceedings pending or threatened in any forum by or on behalf of any
present or former employee of the Company or any of its Subsidiaries, any
applicant for employment or classes of the foregoing alleging breach of any
express or implied contract for employment, any law or regulation governing
employment or the termination thereof or other discriminatory, wrongful or
tortuous conduct in connection with the employment relationship.
(iii) WARN Act. The Company is presently in compliance with its
notification obligations with respect to the Company's employees pursuant
to the Worker Adjustment and Retraining Notification (WARN) Act and will
conduct any plant closing or mass layoff prior to the date of Closing in
accordance with WARN.
(n) Intellectual Property.
(i) After giving effect to the Split-Off, the Company or its Utility
Subsidiaries will own, or will be licensed or otherwise possess sufficient
legally enforceable rights to use, all patents, trademarks, trade names,
service marks, copyrights, technology, know-how, computer software programs
or applications, databases and tangible or intangible proprietary
information or materials that are currently used in its and its
Subsidiaries' businesses (collectively, "Company Intellectual Property
Rights"), except for any such failures to own, be licensed or possess that,
individually or in the aggregate, are not reasonably likely to have a
Company Material Adverse Effect.
(ii) Except as disclosed in the Company Reports filed prior to the
date hereof, and except for such matters that, individually or in the
aggregate, are not reasonably likely to have a Company Material Adverse
Effect, (i) to the knowledge of the Company, the use of the Company
Intellectual Property Rights by the Company or its Utility Subsidiaries
does not conflict with, infringe upon, violate or interfere with or
constitute an appropriation of any right, title, interest or goodwill,
including, without limitation, any intellectual property right, patent,
trademark, trade name, service mark, copyright of any other Person and (ii)
there have been no claims made and neither the Company nor any of its
Utility Subsidiaries has received written notice of any claim or otherwise
knows that any Company Intellectual Property Right is invalid, or conflicts
with the asserted right of any other Person.
(o) Vote Required.
Provided that the Preferred Shares have been redeemed pursuant to Section
7.17, the approval of the majority of the shares of Company Common Stock
outstanding on the record date for such vote (the "Company Requisite Vote") is
the only vote of any class or series of the capital stock of the Company
required to approve this Agreement and the transactions contemplated hereby.
(p) Regulation as a Utility.
The Company is a holding company exempt under Section 3(a)(1) pursuant to
Rule 2 from all provisions of the 1935 Act except Section 9(a)(2) thereof. The
Company and Kansas Gas and Electric Company are regulated as public utility
companies in the state of Kansas and by the FERC. Except as set forth above and
in Section 5.1(p) of the Company Disclosure Letter or as contemplated by the
Split-Off Agreements, neither the Company nor any "subsidiary company" or
"affiliate" of the Company is subject to regulation as a public utility or
public service company (or similar designation) by the Federal government of the
United States, any state in the United States or any political subdivision
thereof, or any foreign country. As used in this Section 5.1(p), the terms
"subsidiary company" and "affiliate" shall have the respective meanings ascribed
to them in Section 2(a)(8) and Section 2(a)(11), respectively, of the 1935 Act.
(q) Ownership of Parent, PNM, Merger Sub-1 or Merger Sub-2 Common Stock.
None of the Company or any of the Company Subsidiaries or the Westar
Subsidiaries beneficially owns any Parent Common Stock or common stock of PNM,
Merger Sub-1 or Merger Sub-2.
(r) Brokers and Finders.
Except for Chase Securities, Inc. ("Chase") and Salomon Smith Barney Inc.
("Salomon"), neither the Company nor any of its officers, directors or employees
has employed any broker or finder or incurred any liability for any brokerage
fees, commissions or finders' fees in connection with the Transaction or the
other transactions contemplated hereby.
(s) Opinion of Financial Advisor.
The Company has received the opinions of Chase and Salomon dated as of the
date hereof, each to the effect that, as of such date, the Closing Consideration
is fair from a financial point of view to holders of Company Common Stock.
(t) Nuclear Power Plant Operations.
To the knowledge of the Company, the operations of the Wolf Creek
Generating Station are being conducted in compliance with applicable health,
safety, regulatory and other legal requirements, except where the failure to be
in compliance in the aggregate does not, and insofar as can reasonably be
foreseen, would not have a Company Material Adverse Effect.
(u) Affiliate Contracts.
Section 5.1(u) of the Company Disclosure Letter lists all Company Contracts
and other arrangements, including those relating to goods, rights or services
provided or licensed between the Company or any Utility Subsidiary and any
Westar Subsidiary other than Company Contracts or other arrangements which are
Split-Off Agreements.
(v) No Other Representations or Warranties.
Except for the representations and warranties contained in this Section
5.1, neither the Company nor any other Person makes any other express or implied
representation or warranty on behalf of the Company or any of its Subsidiaries.
5.2. Representations and Warranties of Parent, PNM, Merger Sub-1 and Merger
Sub-2.
Except as set forth in the disclosure letter delivered to the Company by
Parent on or prior to entering into this Agreement (the "Parent Disclosure
Letter") or the PNM Reports, Parent, PNM, Merger Sub-1 and Merger Sub-2 each
represents and warrants to the Company that:
(a) Capitalization of Merger Sub-1 and Merger Sub-2.
The authorized capital stock of Merger Sub-1 consists of 40,000,000 shares
of common stock, no par value, of which one was issued and outstanding on the
date hereof and 10 million shares of preferred stock, no par value. The
authorized capital stock of Merger Sub-2 consists of 1,000 shares of common
stock, no par value, of which one was issued and outstanding on the date hereof.
All of the issued and outstanding capital stock of Merger Sub-1 and Merger Sub-2
is, and at the Effective Time will be, owned by Parent, and there are (i) no
other shares of capital stock or voting securities of Merger Sub-1 and Merger
Sub-2 authorized, (ii) no securities of Merger Sub-1 and Merger Sub-2
convertible into or exchangeable for shares of capital stock or voting
securities of Merger Sub-1 and Merger Sub-2 and (iii) no options or other rights
to acquire from Merger Sub-1 and Merger Sub-2, and no obligations of Merger
Sub-1 and Merger Sub-2 to issue, any capital stock, voting securities or
securities convertible into or exchangeable for capital stock or voting
securities of Merger Sub-1 and Merger Sub-2. Merger Sub-1 and Merger Sub-2 have
not conducted any business prior to the date hereof and has no, and prior to the
Effective Time will have no, assets, liabilities or obligations of any nature
other than those incident to its formation and pursuant to or in connection with
the this Agreement and the transactions contemplated hereby.
(b) Organization, Good Standing and Qualification.
Each of Parent and its Significant Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of organization and has all requisite corporate or
similar power and authority to own and operate its material properties and
assets and to carry on its business as presently conducted in all material
respects and is qualified to do business and is in good standing as a foreign
corporation in each jurisdiction where the ownership or operation of its
properties or conduct of its business requires such qualification, except where
the failure to be so qualified as a foreign corporation or be in good standing
would not be reasonably likely to have, either individually or in the aggregate,
a Parent Material Adverse Effect. Parent has made available to the Company a
complete and correct copy of Parent's, Manzano's and PNM's and its Significant
Subsidiaries' certificates of incorporation and by-laws (or comparable governing
instruments), as amended to date and the certificate of incorporation and
by-laws of Parent are set forth in Section 5.2(b) of the Parent Disclosure
Schedule. Parent's, Manzano's and PNM's and its Significant Subsidiaries'
certificates of incorporation and by-laws (or comparable governing instruments)
so delivered are in full force and effect.
As used in this Agreement, the term "Parent Material Adverse Effect" means
a material adverse effect on the financial condition, business, assets or
results of operations of Manzano and PNM and their Subsidiaries taken as a
whole; provided, however, that any such effect resulting from or arising out of
(i) any change in law, rule, regulation or GAAP or interpretations thereof, (ii)
economic or business conditions in the United States generally, (iii) conditions
generally affecting the electric or gas utility industries or (iv) the execution
and delivery of this Agreement, or the contemplated consummation of the
transactions contemplated hereby, shall not be considered when determining if a
Parent Material Adverse Effect has occurred.
(c) Capital Structure.
The authorized capital stock of PNM consists of (x) 80,000,000 shares of
common stock, par value $5.00 per share ("PNM Common Stock"), of which
39,082,599 shares were issued and outstanding on November 6, 2000, and (y)
10,000,000 shares of preferred stock (the "PNM Preferred Shares"), of which
128,000 shares were issued and outstanding on November 6, 2000. All of the
issued and outstanding shares of PNM Common Stock and PNM Preferred Shares have
been duly authorized and are validly issued, fully paid and nonassessable. The
authorized capital stock of Parent consists of 200,000,000 shares of Parent
Common Stock, one of which was issued and outstanding on the date hereof and
10,000,000 shares of preferred stock, none of which were outstanding on the date
hereof. The authorized capital stock of Manzano consists of 120,000,000 shares
of Manzano Common Stock, 100 of which were issued and outstanding on the date
hereof. Each of the outstanding shares of capital stock or other securities of
each of PNM's Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable and owned by PNM or a direct or indirect wholly-owned Subsidiary
of PNM, free and clear of any lien, pledge, security interest, claim or other
encumbrance. Other than pursuant to the First Restated and Amended Director
Retainer Plan, the Third Restated and Amended Performance Stock Plan, the
Manzano Omnibus Performance Equity Plan and the PNM Direct Plan (the "Parent
Stock Plans"), there are no preemptive or other outstanding rights, options,
warrants, conversion rights, stock appreciation rights, redemption rights,
repurchase rights, agreements, arrangements or commitments to issue or to sell
any shares of capital stock or other securities of Parent, PNM or Manzano or any
of their Subsidiaries or any securities or obligations convertible or
exchangeable into or exercisable for, or giving any Person a right to subscribe
for or acquire, any securities of Parent, Manzano, PNM or any of its
Subsidiaries, and no securities or obligations evidencing such rights are
authorized, issued or outstanding. Parent, PNM and Manzano do not have
outstanding any bonds, debentures, notes or other obligations the holders of
which have the right to vote (or convertible into or exercisable for securities
having the right to vote) with the shareholders of Parent on any matter ("Parent
Voting Debt").
(d) Corporate Authority and Approval.
(i) Each of Parent, Manzano, PNM, Merger Sub-1 and Merger Sub-2 has
all requisite corporate power and authority and has taken all corporate
action necessary in order to execute, deliver and perform its obligations
under this Agreement, and to consummate, subject only to the receipt of the
Parent Requisite Vote and the Parent Required Statutory Approvals, the
transactions contemplated hereby. This Agreement has been duly executed and
delivered by Parent, Manzano, PNM, Merger Sub-1 and Merger Sub-2 and,
assuming due authorization, execution and delivery by the Company, is a
valid and legally binding agreement of Parent, Manzano, PNM, Merger Sub-1
and Merger Sub-2, enforceable against each of Parent, PNM, Merger Sub-1 and
Merger Sub-2 in accordance with its terms, subject to the Bankruptcy and
Equity Exception.
(ii) As of the date hereof, the Board of Directors of Parent, Manzano,
PNM, Merger Sub-1 and Merger Sub-2 have approved and adopted this Agreement
and the Mergers and other transactions set forth herein, and subject to
their respective fiduciary duties, the Boards of Directors of PNM and
Manzano have resolved to recommend that the shareholders of PNM and Manzano
approve this Agreement and the transactions contemplated hereby.
(iii) Prior to the Effective Time, Parent will have taken all
necessary action to permit it to issue the number of shares of Parent
Common Stock required to be issued pursuant to Article III and upon
conversion of any Parent Convertible Shares held by Westar. The Parent
Common Stock, when issued, will be validly issued, fully paid and
nonassessable, and no shareholder of Parent will have any preemptive right
of subscription or purchase in respect thereof. The Parent Common Stock,
when issued, will be registered under the Securities Act and Exchange Act
and registered or exempt from registration under any applicable state
securities or "blue sky" laws.
(e) Governmental Filings; No Violations.
(i) Other than any reports, filings, registrations, approvals and/or
notices (A) required to be made pursuant to Section 1.4, (B) required to be
made under the HSR Act, the Securities Act and the Exchange Act, (C) with,
to or of the SEC under the 1935 Act, (D) with, to or of the FERC, (E) with
or to the Nuclear Regulatory Commission, (F) with or to the Federal
Communications Commission, (G) with or to the NMPRC, (H) to comply with
state securities or "blue sky" laws, and (I) required to be made with the
NYSE, (items B through I, the "Parent Required Statutory Approvals"), no
notices, reports, registrations or other filings are required to be made by
Parent, Manzano, PNM, Merger Sub-1 or Merger Sub-2 with, nor are any
consents, registrations, approvals, permits or authorizations required to
be obtained by Parent, Manzano, PNM, Merger Sub-1 or Merger Sub-2 from, any
Governmental Entity, in connection with the execution and delivery of this
Agreement by Parent, Manzano, PNM, Merger Sub-1 and Merger Sub-2 and the
consummation by Parent, Manzano, PNM, Merger Sub-1 or Merger Sub-2 of the
Mergers and the other transactions contemplated hereby, except for those
that the failure to make or obtain would not be reasonably likely to have,
either individually or in the aggregate, a Parent Material Adverse Effect
or prevent, materially delay or materially impair the ability of Parent,
Manzano, PNM, Merger Sub-1 or Merger Sub-2 to consummate the transactions
contemplated hereby.
(ii) The execution, delivery and performance of this Agreement by
Parent, Manzano, PNM, Merger Sub-1 or Merger Sub-2 do not, and the
consummation by Parent, Manzano, PNM, Merger Sub-1 or Merger Sub-2 of the
Merger and the other transactions contemplated hereby will not, constitute
or result in (A) breach or violation of, or a default under, either the
certificate of incorporation or by-laws of Parent, Manzano, PNM, Merger
Sub-1 or Merger Sub-2 or the comparable governing instruments of any of
PNM's Significant Subsidiaries, (B) a breach or violation of, or a default
under, the acceleration of any obligations, the loss of any right or
benefit or the creation of a lien, pledge, security interest or other
encumbrance on the assets of PNM or any of its Significant Subsidiaries
(with or without notice, lapse of time or both) pursuant to any Contracts
binding upon PNM or any of its Significant Subsidiaries (the "Parent
Contracts") or any Law or governmental or non-governmental permit or
license to which PNM or any of its Significant Subsidiaries is subject or
(C) any change in the rights or obligations of any party under any of the
Parent Contracts, except, in the case of clause (B) or (C) above, for any
breach, violation, default, acceleration, creation or change that would not
be reasonably likely to have, either individually or in the aggregate, a
Parent Material Adverse Effect or prevent, materially delay or materially
impair the ability of Parent, Manzano, PNM, Merger Sub-1 or Merger Sub-2 to
consummate the transactions contemplated hereby.
(f) PNM Reports; Financial Statements.
The filings required to be made by PNM and its Subsidiaries since January
1, 1999 under the Securities Act; the Exchange Act; the 1935 Act; the Federal
Power Act; the Atomic Energy Act of 1954, as amended, and applicable state
public utility laws and regulations have been filed with the SEC, 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 statutes and the rules and
regulations thereunder, except for such filings the failure of which to have
been made or so to comply would not result in a Parent Material Adverse Effect.
PNM has made available to the Company each registration statement, report, proxy
statement or information statement filed by it with the SEC (collectively,
including any amendments of any such reports, the "PNM Reports") pursuant to the
Securities Act or the Exchange Act since December 31, 1999, and prior to the
date hereof, including (i) PNM Annual Report on Form 10-K for the fiscal year
ended December 31, 1999 and (ii) PNM Quarterly Reports on Form 10-Q for the
quarterly periods ended March 31, 2000 and June 30, 2000, each in the form
(including exhibits, annexes and any amendments thereto) promulgated by the SEC
under the Securities Act or the Exchange Act. None of the PNM Reports (in the
case of PNM Reports filed pursuant to the Securities Act), as of their effective
dates, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
made therein, in light of the circumstances under which they were made, not
misleading and none of the PNM Reports (in the case of PNM Reports filed
pursuant to the Exchange Act) as of the respective dates first mailed to
shareholders contained any statement which, at the time and in the light of the
circumstances under which it was made, was false or misleading with respect to
any material fact, or omitted to state any material fact necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The consolidated financial statements of the PNM and its
Subsidiaries included in such PNM Reports comply as to form in all material
respects with the applicable rules and regulations of the SEC with respect
thereto. Each of the consolidated balance sheets included in or incorporated by
reference into the PNM Reports (including the related notes and schedules)
presents fairly, in all material respects, the financial position of the PNM and
its Subsidiaries as of its date and each of the consolidated statements of
income and consolidated statements of cash flow included in or incorporated by
reference into the PNM Reports (including any related notes and schedules)
fairly presents in all material respects the results of operations, retained
earnings and changes in financial position, as the case may be, of the PNM and
its Subsidiaries for the periods set forth therein (subject, in the case of
unaudited statements, to the absence of notes and normal year-end audit
adjustments), in each case in accordance with GAAP consistently applied during
the periods involved, except as may be noted therein.
(g) Absence of Certain Changes.
Since the December 31, 1999 (the "PNM Audit Date"), PNM and its
Subsidiaries, taken as a whole, have conducted their business only in, and have
not engaged in any material transaction other than according to, the ordinary
and usual course of such business and there has not been (i) any change in the
financial condition, properties, assets, business or results of operations of
PNM and its Subsidiaries that has had or would be reasonably likely to have a
Parent Material Adverse Effect; (ii) any declaration, setting aside or payment
of any dividend or other distribution in respect of the capital stock of PNM or
any repurchase, redemption or other acquisition by PNM or any Subsidiary of any
securities of PNM other than quarterly dividends in the ordinary course
(including any increase thereon consistent with past practice); or (iii) any
change by PNM in accounting principles, practices or methods which is not
required or permitted by GAAP. Since the PNM Audit Date and through the date
hereof, except as provided for herein or as disclosed in the PNM Reports, there
has not been any material increase in the compensation payable or that could
become payable by PNM or any of its Subsidiaries to officers or key employees or
any material amendment of any of the PNM Compensation and Benefit Plans other
than increases or amendments in the ordinary course of business consistent with
past practice.
(h) Litigation.
There are no civil, criminal or administrative actions, suits, claims,
hearings, investigations, reviews or proceedings pending or, to the knowledge of
Parent and PNM, threatened against Parent, PNM, or any of its Significant
Subsidiaries, except for those that would not be reasonably likely to have,
either individually or in the aggregate, a Parent Material Adverse Effect.
(i) Employee Benefits.
(i) A copy of (i) each bonus, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership,
stock bonus, stock purchase, change in control, retention, restricted
stock, stock option, employment, termination, severance, compensation,
medical, health or other plan, agreement, policy, practice or
arrangement that covers employees or former employees of PNM and
Parent and their Subsidiaries ("Parent Employees"), or directors or
former directors of PNM or Parent (the "Parent Compensation and
Benefit Plans"); and (ii) any trust agreement or insurance contract
forming a part of such PNM Compensation and Benefit Plans has been
made available to the Company prior to the date hereof. Section 5.2(i)
of the Parent Disclosure Letter lists all Parent Compensation and
Benefit Plans other than those that, in the aggregate, are not
material to PNM or Parent and their Subsidiaries and any Parent
Compensation and Benefit Plans containing "change of control" or
similar provisions therein are specifically identified in Section
5.2(i) of the Parent Disclosure Letter.
(ii) All Parent Compensation and Benefit Plans, to the extent
subject to ERISA are in substantial compliance with the applicable
provisions of ERISA. Each Parent Compensation and Benefit Plan that is
an "employee pension benefit plan" within the meaning of Section 3(2)
of ERISA (a "Parent Pension Plan") and that is intended to be
qualified under Section 401(a) of the Code has received favorable
determination letter from the IRS, and nothing has occurred, whether
by action or failure to act, that would cause the loss of such
qualification or that would result in costs to PNM, Parent or any of
their Subsidiaries under the Internal Revenue Service's Employee Plans
Compliance Resolution System that would reasonably be likely to have a
Parent Material Adverse Effect. As of the date hereof, there is no
material pending or to the knowledge of Parent or PNM threatened
litigation relating to the PNM Compensation and Benefit Plans. Neither
Parent nor any of its Subsidiaries nor, to the knowledge of Parent,
any other person has engaged in a transaction with respect to any
Parent Compensation and Benefit Plan that, assuming the taxable period
of such transaction expired as of the date hereof, would subject
Parent or any of its Subsidiaries to a material tax or penalty imposed
by either Section 4975 of the Code or Section 502(i) of ERISA.
(iii) No liability under Subtitle C or D of Title IV of ERISA has
been or is expected to be incurred by Parent, PNM or any of their
Subsidiaries with respect to any ongoing, frozen or terminated
"single-employer plan", within the meaning of Section 4001(a)(15) of
ERISA, currently or formerly maintained by any of them, or the
single-employer plan of any entity which is considered one employer
with Parent, PNM or any of their Subsidiaries under Section 4001 of
ERISA or Section 414 of the Code (a "Parent ERISA Affiliate"). Parent,
PNM and their Subsidiaries have not incurred and do not expect to
incur and would not expect to incur any withdrawal liability with
respect to a multiemployer plan under Subtitle E of Title IV of ERISA
(regardless of whether based on contributions of a Parent ERISA
Affiliate) if, as of the date hereof, Parent, PNM or a Parent ERISA
Affiliate were to engage in a "complete withdrawal" (as defined in
Section 4203 of ERISA) or a "partial withdrawal" (as defined in
Section 4205 of ERISA) form such multiemployer plan. No notice of a
"reportable event", within the meaning of Section 4043 of ERISA for
which the 30-day reporting requirement has not been waived or
extended, other than the extension provided by PBGC Reg. Section
4043.66, has been required to be filed for any Parent Pension Plan or
by any ERISA Affiliate within the 12-month period ending on the date
hereof.
(iv) All contributions required to be made under the terms of any
Parent Compensation and Benefit Plan as of the date hereof have been
timely made or have been reflected on the most recent consolidated
balance sheet filed or incorporated by reference in the PNM Reports
and all premium payments to the PBGC have been made when due for such
plans. Neither any Parent Pension Plan nor any single-employer plan of
a Parent ERISA Affiliate has an "accumulated funding deficiency"
(whether or not waived) within the meaning of Section 412 of the Code
or Section 302 of ERISA and no Parent ERISA Affiliate has an
outstanding funding waiver. None of Parent, PNM or any of their
Subsidiaries has provided, or is required to provide, security to any
Pension Plan or to any single-employer plan of a Parent ERISA
Affiliate pursuant to Section 401(a)(29) of the Code.
(v) None of Parent, PNM or any of their Subsidiaries have any
obligations for, or liabilities with respect to, retiree health and
life benefits under any PNM Compensation and Benefit Plan, except for
benefits required to be provided under Section 4980B of the Code.
(vi) Notwithstanding anything to the contrary contained in this
Section 5.2(i), the representations and warranties contained in this
Section 5.2(i) shall be deemed to be true and correct unless such
failures to be true and correct are reasonably likely to have a Parent
Material Adverse Effect.
(j) Compliance with Laws.
As of the date hereof, the business of PNM and its Subsidiaries, taken as a
whole, is not being conducted in violation of any Laws, except for violations
that would not be reasonably likely to have, either individually or in the
aggregate, a Parent Material Adverse Effect or prevent or materially impair the
ability of Parent, Manzano, PNM, Merger Sub-1 or Merger Sub-2 to consummate the
transactions contemplated hereby. As of the date hereof, no investigation or
review by any Governmental Entity with respect to Parent or any of its
Subsidiaries is pending or to the knowledge of Parent threatened, nor has any
Governmental Entity indicated an intention to conduct the same, except for those
the outcome of which would not be reasonably likely to have, either individually
or in the aggregate, a Parent Material Adverse Effect or prevent or materially
impair the ability of Parent, Manzano, PNM, Merger Sub-1 or Merger Sub-2 to
consummate the transactions contemplated hereby. PNM and its Significant
Subsidiaries each has all permits, licenses, franchises, variances, exemptions,
orders and other governmental authorizations, consents and approvals from
Governmental Entities necessary to conduct its business as presently conducted,
except for those the absence of which would not be reasonably likely to have,
either individually or in the aggregate, a Parent Material Adverse Effect or
prevent or materially impair the ability of Parent, Manzano, PNM, Merger Sub-1
or Merger Sub-2 to consummate the transactions contemplated hereby.
(k) Takeover Statutes.
Assuming the accuracy of the representation contained in Section 5.1(q), no
Takeover Statute of the NMBCA or any applicable anti-takeover provision in the
certificate of incorporation of PNM, Manzano or Parent or by-laws of PNM,
Manzano or Parent is applicable to the Transaction or any of the other
transactions contemplated hereby.
(l) Environmental Matters.
Except for such matters that would not be reasonably likely to cause a
Parent Material Adverse Effect: (i) PNM's operations are in compliance with all
applicable Environmental Laws; (ii) PNM possesses and maintains in effect all
environmental and natural resources permits, licenses, authorizations and
approvals required under applicable Environmental Laws with respect to the
business of PNM as presently conducted; (iii) PNM has not received any written
environmental claim, notice or request for information during the past three
years concerning any violation or alleged violation of any applicable
Environmental Law or concerning any obligation or liability under any applicable
Environmental Law; and (iv) there are no material writs, injunctions, decrees,
orders or judgments outstanding, or any actions, suits or proceedings pending
relating to compliance by PNM with any environmental permits, licenses,
authorizations or approvals required under applicable Environmental Laws or
liability of PNM under any applicable Environmental Law.
The representations and warranties in this Section 5.1(l) constitute the
sole representations and warranties of Parent or PNM with respect to any
Environmental Law or Hazardous Substance.
As used in this Section 5.2(l), "PNM" shall mean PNM and each of its
Subsidiaries.
(m) Taxes.
Except as would not have a Parent Material Adverse Effect, PNM and each of
its Significant Subsidiaries (i) have duly and timely filed (taking into account
any extension of time within which to file) all Tax Returns required to be filed
by any of them as of the date hereof and all such filed Tax Returns are complete
and accurate in all respects; (ii) (A) have timely paid all Taxes that are shown
as due on such filed Tax Returns, except with respect to matters contested in
good faith and (B) no penalties or charges are due with respect to the late
filing of any Tax Return required to be filed by or with respect to any of them
on or before the Effective Time; (iii) with respect to any filed Tax Returns,
have not waived any statute of limitations with respect to Taxes or agreed to
any extension of time with respect to a Tax assessment or deficiency; (iv) as of
the date hereof, does not have any deficiency, or any such audits, examinations,
investigations or other proceedings in respect of Taxes or Tax matters pending
or proposed or threatened in writing; and (v) has not been or is not a party to
any Tax sharing agreement or similar arrangement. Except as would not have a
Parent Material Adverse Effect when aggregated with the preceding sentence,
neither PNM nor any PNM Subsidiary (x) has engaged in any intercompany
transaction within the meaning of Treasury Regulation Section 1.1502-13 for
which any income or gain remains unrecognized and (y) has constituted a
"distributing corporation" in a distribution of stock qualifying for tax-free
treatment under Section 355 of the Code (1) in the past 24-month period, or (2)
in a distribution which could otherwise constitute part of a "plan" or "series
of related transactions" within the meaning of Section 355(e) of the Code, in
each case, excluding any transactions described in Section 355(e)(3) of the
Code.
(n) Labor and Employment Matters.
(i) Labor Relations. Except as would not have a Parent Material
Adverse Effect, (A) neither PNM nor any of its Subsidiaries is a party to
any collective bargaining agreement or other labor agreement with any labor
union, labor organization, employee association or similar organization,
nor does PNM or any of its Subsidiaries have knowledge of any such union,
labor organization, employee association or similar organization that
represents or claims to represent any of PNM's or any of its Subsidiaries'
employees or intends to organize any of PNM's or any its Subsidiaries'
employees; (B) there is no labor strike, dispute, slowdown, stoppage,
lockout or other labor dispute actually pending, nor to the knowledge of
PNM, threatened against or affecting PNM or any of its Subsidiaries; (C) to
the knowledge of Parent and PNM, neither PNM nor any of its Subsidiaries is
engaged in any unfair labor practices as defined in the National Labor
Relations Act or other applicable law, ordinance or regulation; nor is
there an unfair labor practice charge or complaint against PNM or any of
its Subsidiaries pending or, to the knowledge of PNM, threatened before the
National Labor Relations Board or any similar state agency; and (D) there
is no grievance pending, nor to the knowledge of PNM, is there any
grievance threatened arising out of any collective bargaining agreement or
other grievance procedure.
(ii) Employment. Except as would not have Parent Material Adverse
Effect, (A) neither PNM nor any of its Subsidiaries is in material
violation of any applicable laws respecting employment and employment
practices, terms and conditions of employment, wages, hours of work and
occupational safety and health, nor have they ever been; (B) to the
knowledge of the Parent and PNM, there are no charges with respect to or
relating to PNM or any of its Subsidiaries pending before the Equal
Employment Opportunity Commission or any other agency responsible for the
prevention of unlawful employment practices; (C) to the knowledge of the
Parent and PNM, neither PNM nor any of its Subsidiaries received notice of
the intent of any federal, state or local agency responsible for the
enforcement of labor or employment laws to conduct an investigation with
respect to or relating to PNM or any of its Subsidiaries and no such
investigation is in progress; and (D) to the knowledge of the Parent and
PNM, there are no complaints, lawsuits or other proceedings pending or
threatened in any forum by or on behalf of any present or former employee
of PNM or any of its Subsidiaries, any applicant for employment or classes
of the foregoing alleging breach of any express or implied contract for
employment, any law or regulation governing employment or the termination
thereof or other discriminatory, wrongful or tortuous conduct in connection
with the employment relationship.
(iii) WARN Act. PNM is presently in compliance with its notification
obligations with respect to PNM's employees pursuant to the Worker
Adjustment and Retraining Notification (WARN) Act and will conduct any
plant closing or mass layoff prior to the date of Closing in accordance
with WARN.
(o) Intellectual Property.
(i) PNM and its Significant Subsidiaries own, or are licensed or
otherwise possess sufficient legally enforceable rights to use, all
patents, trademarks, trade names, service marks, copyrights, technology,
know-how, computer software programs or applications, databases and
tangible or intangible proprietary information or materials that are
currently used in its and its Subsidiaries' businesses (collectively, "PNM
Intellectual Property Rights"), except for any such failures to own, be
licensed or possess that, individually or in the aggregate, are not
reasonably likely to have a Parent Material Adverse Effect.
(ii) Except as disclosed in the PNM Reports filed prior to the date
hereof, and except for such matters that, individually or in the aggregate,
are not reasonably likely to have a Parent Material Adverse Effect, (i) to
the knowledge of Parent, the use of the PNM Intellectual Property Rights by
PNM or its Significant Subsidiaries does not conflict with, infringe upon,
violate or interfere with or constitute an appropriation of any right,
title, interest or goodwill, including, without limitation, any
intellectual property right, patent, trademark, trade name, service mark,
copyright of any other Person and (ii) there have been no claims made and
neither the PNM nor any of its Significant Subsidiaries has received
written notice of any claim or otherwise knows that any PNM Intellectual
Property Right is invalid, or conflicts with the asserted right of any
other Person.
(p) Vote Required.
The approval of the Second Merger by two-thirds of the holders of Manzano
Common Stock or PNM Common Stock, as the case may be, (the "Parent Requisite
Vote") is the only vote of the holders of any class or series of the capital
stock of Parent, Manzano or PNM required to approve this Agreement and the
transactions contemplated hereby.
(q) Ownership of Company Common Stock.
None of Parent, Manzano, PNM, Merger Sub-1 Merger Sub-2 or any of their
respective Subsidiaries beneficially owns any Company Common Stock.
(r) Regulation as to Utility.
None of Merger Sub-1, Merger Sub-2 or Parent is a "public utility company,"
or a "holding company" under the 1935 Act. None of Merger Sub-1, Merger Sub-2 or
Parent is subject to regulation as a public utility company in any state or by
the FERC. PNM is a public utility company subject to regulation as such in the
State of New Mexico and by the FERC. At the Manzano Transition Date, Manzano
will be a "holding company" exempt under Section 3(a)(1) pursuant to Rule 2 from
all provisions of the 1935 Act except Section 9(a)(2) thereof. Otherwise, except
as set forth in Section 5.2(r) of the Parent Disclosure Letter, none of Parent,
PNM, Merger Sub-1, Merger Sub-2, Manzano and their respective "subsidiary
companies" and "affiliates" is subject to regulation as a public utility or
public service company (or similar designation) by the Federal government of the
United States, any state in the United States or any political subdivision
thereof, or any foreign country. As used in this Section 5.2(r) the terms
"subsidiary companies" and "affiliates" have meanings correlative to the terms
"subsidiary company" and "affiliate" as used in Section 5.1(p) of the Agreement.
(s) Brokers and Finders.
Except for J.P. Morgan Securities Inc. ("JP Morgan"), neither Parent nor
any of its officers, directors or employees has employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finders' fees in
connection with the Transaction or the other transactions contemplated by this
Agreement.
(t) Opinion of Financial Advisor.
PNM has received the opinion of JP Morgan dated as of the date hereof to
the effect that, as of such date, the PNM ownership percentage is fair from a
financial point of view to the holders of PNM Common Stock.
(u) Nuclear Plant Operation.
To the knowledge of PNM, the operations of the Palo Verde Nuclear
Generating Station are being conducted in compliance with applicable health,
safety, regulatory and other legal requirements, except where the failure to be
in compliance in the aggregate does not, and insofar as can reasonably be
foreseen, would not have a Parent Material Adverse Effect.
(v) Shareholder Matters.
(i) To the knowledge of PNM and Manzano, (x) no shareholders of PNM
(excluding Manzano as sole shareholder of PNM following the effective time
of the Manzano Exchange) or Manzano has entered into any agreement, written
or unwritten, express or implied, to act in concert with others to control
the management and policies of Parent or the Surviving Corporation
immediately following the Effective Time and (y) no shareholder of PNM or
Manzano will own more than 5% of the outstanding voting securities of
Parent immediately following the Effective Time.
(ii) No shareholder of PNM (excluding Manzano as sole shareholder of
PNM following the effective time of the Manzano Exchange) or Manzano has
entered into any agreement or arrangement to vote in favor of any
particular individual or individuals for election to the board of directors
of the Surviving Corporation following the Effective Time.
(w) No Other Representations or Warranties.
Except for the representations and warranties contained in this
Section 5.2, neither Parent nor any other Person makes any other express or
implied representation or warranty on behalf of Parent or any of its
Subsidiaries.
Article VI.
Conduct of Business Pending the Transactions
6.1. Covenants of the Company.
The Company covenants and agrees as to itself and its Subsidiaries that,
from the date hereof and prior to the Effective Time, except as expressly
contemplated or permitted by this Agreement or the Split-Off Agreements, as set
forth on Section 6.1 of the Company Disclosure Letter, as required by Law or to
the extent Parent shall otherwise consent in writing, which decision regarding
consent shall be made as soon as reasonably practicable, and provided that,
except as specifically stated therein, the provisions of this Section 6.1 shall
not apply to the Westar Subsidiaries and the Company shall not be obligated to
cause the Westar Subsidiaries to comply with the obligations of this Section
6.1:
(i) the business of the Company and its Subsidiaries shall be
conducted only in the ordinary and usual course and, to the extent
consistent therewith, it and its Subsidiaries shall use their respective
reasonable best efforts to (a) subject to prudent management of workforce
needs and ongoing programs currently in force, preserve its business
organization intact and maintain its existing relations and goodwill with
customers, suppliers, distributors, creditors, lessors, employees and
business associates, (b) maintain and keep material properties and assets
in good repair and condition, subject to ordinary wear and tear and (c)
maintain in effect all material governmental permits pursuant to which the
Company or any of its Significant Subsidiaries currently operates;
(ii) the Company shall not (w) amend its articles of incorporation or
by-laws or the comparable governing instruments of any of its Subsidiaries
except for such amendments that would not prevent or materially impair the
consummation of the transactions contemplated by this Agreement; (x) split,
combine or reclassify its outstanding shares of capital stock; (y) declare,
set aside or pay any dividend payable in cash, stock or property in respect
of any capital stock (other than (A) dividends from its direct or indirect
wholly owned Subsidiaries to it or a wholly-owned Subsidiary, (B) regular
quarterly dividends on shares of Common Stock with usual record and payment
dates in amounts not to exceed $1.20 annually per share of Common Stock or
(C) dividends required to be paid on Preferred Shares or preferred
securities of subsidiary trusts outstanding on the date hereof until
redeemed pursuant to Section 7.17 or on Convertible Preference Shares
issued to Westar, in each case in accordance with their respective terms)
or (z) repurchase, redeem or otherwise acquire any shares of its capital
stock or any securities convertible into or exchangeable or exercisable for
any shares of its capital stock or permit any of its Subsidiaries to
purchase or otherwise acquire, any shares of its capital stock or any
securities convertible into or exchangeable or exercisable for any shares
of its capital stock (other than for the purpose of funding or providing
benefits under the Stock Plans and the Direct Stock Purchase Plan);
(iii) neither the Company nor any of its Subsidiaries shall issue,
sell, pledge, dispose of or encumber any shares of, or securities
convertible into or exchangeable or exercisable for, or options, warrants,
calls, commitments or rights of any kind to acquire, any shares of its
capital stock of any class or any Voting Debt or any other property or
assets (other than (A) shares of the Company Common Stock issuable pursuant
to options or restricted share units (whether or not vested) outstanding on
the date hereof under the Stock Plans, issuances of additional options or
restricted share units or rights to acquire shares of the Company Common
Stock granted pursuant to the terms of the Stock Plans as in effect on the
date hereof in the ordinary and usual course of the operation of such Stock
Plans and issuances of shares of the Company Common Stock pursuant to
options or restricted share units granted after the date hereof pursuant to
the Stock Plans; or (B) issuances of shares of the Company Common Stock,
including restricted shares, in the ordinary and usual course of the Stock
Plans and the Direct Stock Purchase Plan, each as in effect on the date
hereof);
(iv) neither the Company nor any of its Subsidiaries shall, other than
in the ordinary and usual course of business and other than transactions
not in excess of $50,000,000 in the aggregate in any calendar year,
transfer, lease, license, guarantee, sell, mortgage, pledge, dispose of or
encumber any other property or assets (including capital stock of any of
its Subsidiaries);
(v) neither the Company nor any of its Subsidiaries shall, by any
means, make any acquisition of, or investment (other than capital
expenditures) in, assets or stock (whether by way of merger, consolidation,
tender offer, share exchange or other activity) in any transaction or any
series of transactions (whether or not related) for an aggregate purchase
price or prices, including the assumption of any debt, in excess of
$50,000,000 in the aggregate in any calendar year;
(vi) neither the Company nor any of its Subsidiaries shall, other than
in the ordinary and usual course of business, (i) modify, amend, or
terminate any Contract that is material to the Company and its Subsidiaries
taken as a whole, (ii) waive, release, relinquish or assign any such
Contract (or any of the material rights of the Company or any of its
Subsidiaries thereunder), right or claim, or (iii) cancel or forgive any
material indebtedness owed to the Company or any of its Subsidiaries;
(vii) neither the Company nor any of its Subsidiaries will (i) adopt a
plan of complete or partial liquidation, dissolution, merger,
consolidation, recapitalization or other similar reorganization of the
Company or any Significant Subsidiary of the Company, or (ii) accelerate or
delay collection of notes or accounts receivable in advance of or beyond
their regular due dates, other than in the usual and ordinary course of
business;
(viii) neither the Company nor any of its Subsidiaries shall
terminate, establish, adopt, enter into, make any new grants or awards
under, amend or otherwise modify any Compensation and Benefit Plans (other
than issuances of additional shares of Company Common Stock or options or
rights to acquire shares of Common Stock granted pursuant to the terms of
the Stock Plans as in effect on the date hereof in the ordinary and usual
course of the operation of such Stock Plans), or increase the salary, wage,
bonus or other compensation of any employees except for (A) grants or
awards or increases under existing Compensation and Benefit Plans occurring
in the ordinary and usual course of business (which shall include normal
periodic performance reviews and related compensation and benefit
increases), (B) annual reestablishment of Compensation and Benefit Plans
and the provision of individual compensation or benefit plans and
agreements for newly hired or appointed officers and employees of the
Company and its Subsidiaries comparable in form and amount to such
individual compensation or benefit plans or agreements currently maintained
by the Company and its Subsidiaries, provided such individual plans and
agreements (other than award agreements issued under existing plans) shall
not include change of control provisions which would be triggered solely by
the execution and delivery of this Agreement, the consummation of the
transactions contemplated hereby and voluntary action by an individual
employee or (C) actions necessary to satisfy existing contractual
obligations under Compensation and Benefit Plans or agreements existing as
of the date hereof or applicable law;
(ix) the Company shall, and shall cause its Subsidiaries to, maintain
with financially responsible insurance companies (or through self
insurance) insurance in such amounts and against such risks and losses as
are consistent with the insurance maintained by the Company and its
Subsidiaries in the ordinary course of business consistent with past
practice;
(x) except in the ordinary and usual course of business or as may be
required by applicable Law, neither the Company nor any of its Subsidiaries
shall change any accounting principle, practice or method in a manner that
is inconsistent with past practice, except to the extent required by GAAP
as advised by the Company's regular independent accountants;
(xi) neither the Company nor any of its Subsidiaries shall engage in
or allow any transfer of assets or liabilities or other transactions
between the Company and its Subsidiaries, on the one hand, and the Westar
Subsidiaries, on the other hand except (a) transactions relating to
services rendered in the ordinary course of business pursuant to the
Contracts specified in Section 5.1(u) of the Company Disclosure Letter or
which individually, or in the aggregate, do not involve payments in excess
of $250,000 per year or are terminable upon 90 days' notice in any event
prior to the Effective Time, (b) as permitted under Section 3.2(a) hereof,
including without limitation the conversion of Convertible Preference
Shares into Convertible Preference Shares having amended voting terms on a
one-for-one basis; provided that any interest accruing or payable on the
intercompany receivable shall be at a rate not in excess of 8 1/2% or (c)
as contemplated by the Split-Off Agreements to occur prior to the Effective
Time;
(xii) except as may be required by applicable Law, neither the Company
nor any of its Subsidiaries shall make capital expenditures during any
fiscal year in excess of $400,000,000;
(xiii) the Company shall promptly notify PNM of any change or event
that has had or could reasonably be expected to have a Company Material
Adverse Effect or a material adverse effect under Section 8.2(f) hereto and
shall provide copies, in advance of filing the same, of any significant
regulatory filings proposed to be made by or on behalf of the Company or
any of its Utility Subsidiaries;
(xiv) except as otherwise required by law and only to the extent
material, all Tax Returns of the Company and any of its Subsidiaries and
Affiliates that are filed between the date hereof and the Closing Date
shall be prepared in a manner consistent with the allocation of tax
liability principles set forth in the agreement to be entered into between
the Company and Westar allocating Taxes between the Company and Westar
after the Split-Off (the "Tax Disaffiliation Agreement"); and
(xv) neither the Company nor any of its Subsidiaries will authorize or
enter into an agreement to do anything prohibited by the foregoing.
6.2. Covenants of Parent, Manzano, PNM, Merger Sub-1 and Merger Sub-2.
Parent, PNM and Manzano each covenants and agrees as to itself and its
Subsidiaries that after the date hereof and prior to the Effective Time, except
as expressly contemplated or permitted by this Agreement, as set forth on
Section 6.2 of the Parent Disclosure Letter, as required by Law or to the extent
the Company shall otherwise consent in writing, which decision regarding consent
shall be made as soon as reasonably practicable:
(i) the business of PNM and its Subsidiaries shall be conducted only
in the ordinary and usual course and, to the extent consistent therewith,
it and its Subsidiaries shall use their respective reasonable best efforts
to (a) subject to prudent management of workforce needs and ongoing
programs currently in force, preserve its business organization intact and
maintain its existing relations and goodwill with customers, suppliers,
distributors, creditors, lessors, employees and business associates, (b)
maintain and keep material properties and assets in good repair and
condition, subject to ordinary wear and tear and (c) maintain in effect all
existing material governmental permits pursuant to which PNM or any of its
Significant Subsidiaries currently operates;
(ii) PNM, Manzano and Parent shall not (w) amend its certificate of
incorporation or by-laws or the comparable governing instruments of any of
its Subsidiaries except for such amendments that would not prevent or
materially delay the consummation of the transactions contemplated by this
Agreement; (x) split, combine or reclassify its outstanding shares of
capital stock; (y) declare, set aside or pay any dividend payable in cash,
stock or property in respect of any capital stock (other than (A) dividends
from its direct or indirect wholly owned Subsidiaries to it or a wholly
owned Subsidiary, (B) dividends required to be paid on any preferred stock
of any Subsidiary of PNM outstanding on the date hereof or preferred stock
issued to refinance currently outstanding preferred stock, in each case, in
accordance with their respective terms and (C) regular quarterly dividends
on shares of PNM Common Stock with usual record and payment dates
(including any periodic increase thereon consistent with past practice) or
(z) repurchase, redeem or otherwise acquire any shares of its capital stock
or any securities convertible into or exchangeable or exercisable for any
shares of its capital stock or permit any of its Subsidiaries to purchase
or otherwise acquire, any shares of its capital stock or any securities
convertible into or exchangeable or exercisable for any shares of its
capital stock (other than (A) as required by the respective terms of any
preferred stock of any Subsidiary of PNM outstanding on the date hereof or
preferred stock issued to refinance currently outstanding preferred stock
in accordance with the terms of the this Agreement, (B) in connection with
refunding preferred stock of any Subsidiary of PNM with preferred stock or
debt at a lower cost of funds (calculating such cost on an after-tax basis)
and (C) for the purpose of funding or providing benefits under the PNM
Stock Plans and any dividend reinvestment plan in accordance with past
practice);
(iii) none of Parent, Manzano, PNM or any of their Subsidiaries shall
issue, sell, pledge, dispose of or encumber any shares of, or securities
convertible into or exchangeable or exercisable for, or options, warrants,
calls, commitments or rights of any kind to acquire, any shares of its
capital stock of any class or any Parent Voting Debt or any other property
or assets (other than (A) shares of PNM Common Stock issuable pursuant to
options (whether or not vested) outstanding on the date hereof under the
Parent Stock Plans, issuances of additional options or rights to acquire
shares of PNM Common Stock granted pursuant to the terms of the Parent
Stock Plans as in effect on the date hereof in the ordinary and usual
course of the operation of such Parent Stock Plans and issuances of shares
of PNM Common Stock pursuant to options granted after the date hereof
pursuant to the Parent Stock Plans, (B) issuances of shares of PNM Common
Stock in the ordinary and usual course of Parent Compensation and Benefits
Plans, each as in effect on the date hereof, and (C) the issuance of PNM
preferred shares in connection with the repurchase or redemption of
preferred stock outstanding on the date of this Agreement either at its
stated maturity or at a lower cost of funds (calculating such cost on an
after-tax basis));
(iv) neither PNM nor any of its Subsidiaries shall, other than in the
ordinary and usual course of business and other than transactions not in
excess of $50,000,000 in the aggregate in any calendar year, transfer,
lease, license, guarantee, sell, mortgage, pledge, dispose of or encumber
any other property or assets (including capital stock of any of its
Subsidiaries);
(v) neither PNM nor any of its Subsidiaries shall, by any means, make
any acquisition of, or investment (other than capital expenditures) in,
assets or stock (whether by way of merger, consolidation, tender offer,
share exchange or other activity) in any transaction or any series of
transactions (whether or not related) for an aggregate purchase price or
prices, including the assumption of any debt, in excess of $50,000,000 in
any calendar year;
(vi) neither PNM nor any of its Significant Subsidiaries shall, other
than in the ordinary and usual course of business, (i) modify, amend, or
terminate any Contract that is material to PNM and its Subsidiaries taken
as a whole, (ii) waive, release, relinquish or assign any such material
contract (or any of the material rights of PNM or any of its Subsidiaries
thereunder), right or claim, or (iii) cancel or forgive any material
indebtedness owed to PNM or any of its Subsidiaries;
(vii) neither PNM nor any of its Subsidiaries will (i) adopt a plan of
complete or partial liquidation, dissolution, merger, consolidation,
recapitalization or other similar reorganization of PNM or any Significant
Subsidiary of Parent, or (ii) accelerate or delay collection of notes or
accounts receivable in advance of or beyond their regular due dates, other
than in the usual and ordinary course of business;
(viii) neither PNM nor any of its Subsidiaries shall terminate,
establish, adopt, enter into, make any new grants or awards under, amend or
otherwise modify, any Parent Compensation and Benefit Plans (other than
issuances of additional shares of PNM Common Stock or options or rights to
acquire shares of PNM Common Stock granted pursuant to the terms of the
Parent Stock Plans as in effect on the date hereof in the ordinary and
usual course of the operation of such Parent Stock Plans), or increase the
salary, wage, bonus or other compensation of any employees except for (A)
grants or awards or increases under existing Parent Compensation and
Benefit Plans occurring in the ordinary and usual course of business (which
shall include normal periodic performance reviews and related compensation
and benefit increases), (B) annual reestablishment of Parent Compensation
and Benefit Plans and the provision of individual compensation or benefit
plans and agreements for newly hired or appointed officers and employees of
PNM and its Subsidiaries comparable in form and amount to such individual
compensation or benefit plans or agreements currently maintained by the
Parent and its Subsidiaries, provided such individual plans and agreements
shall not include change of control provisions which would be triggered
solely by the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby or (C) actions necessary to satisfy
existing contractual obligations under Parent Stock Plans or agreements
existing as of the date hereof or applicable law;
(ix) PNM shall, and shall cause its Subsidiaries to, maintain with
financially responsible insurance companies (or through self insurance)
insurance in such amounts and against such risks and losses as are
consistent with the insurance maintained by PNM and its Subsidiaries in the
ordinary course of business consistent with past practice;
(x) except in the ordinary and usual course of business or as may be
required by applicable Law, neither PNM nor any of its Subsidiaries shall
change any accounting principle, practice or method in a manner that is
inconsistent with past practice, except to the extent required by GAAP as
advised by Parent's regular independent accountants;
(xi) except as may be required by applicable Law, neither PNM nor any
of its Subsidiaries shall make capital expenditures during any fiscal year
in excess of $400,000,000;
(xii) PNM, Manzano and Parent shall promptly notify the Company of any
change or event that has had or could reasonably be expected to have a
Parent Material Adverse Effect or a material adverse effect under Section
8.2(e) hereto and shall provide copies, in advance of filing the same, of
any significant regulatory filings proposed to be made by or on behalf of
PNM or any Subsidiary;
(xiii) except as otherwise required by law and only to the extent
material, all Tax returns of PNM, Manzano, Parent and their Subsidiaries
that are filed between the date hereof and the Closing Date shall be filed
in a manner consistent with past practices; and
(xiv) none of PNM, Manzano, Parent or any of their Subsidiaries will
authorize or enter into an agreement to do anything prohibited by the
foregoing.
(b) 1935 Act.
None of the parties hereto shall, nor shall any such party permit any of
its Subsidiaries to, except as required or contemplated by this Agreement or the
Split-Off Agreements, engage in any activities that would cause a change in its
status, or that of its Subsidiaries, under the 1935 Act if such change would
prevent or delay the consummation of the transactions contemplated by this
Agreement.
6.3. Necessary Action.
(a) Neither the Company nor PNM, nor any of their respective Subsidiaries,
shall take or fail to take any action that is reasonably likely to (i) result in
any failure of the conditions to the Mergers set forth in Article VIII, (ii)
prevent or delay consummation of the transactions contemplated by this
Agreement, (iii) make any representation or warranty of the Company, PNM,
Manzano or Parent contained herein inaccurate in any material respect at, or as
of any time prior to, the Effective Time, or (iv) individually or in the
aggregate, have a Company Material Adverse Effect or a Parent Material Adverse
Effect, as the case may be.
(b) The parties shall cooperate and use their best efforts to ensure that
the Effective Time does not occur at a time when any of the adjustment events
listed in Sections 3.2(b)(ii)(A)(vi) or (vii) would take place in the ordinary
course between the Cut Off Date and the Effective Time.
Article VII.
Additional Agreements
7.1. Access.
PNM and the Company agree that upon reasonable notice, and except as may
otherwise be required by applicable Law, each shall (and shall cause its
Subsidiaries to) afford the other's officers, employees, counsel, accountants
and other authorized representatives ("Representatives") reasonable access,
during normal business hours throughout the period prior to the Effective Time,
to its executive officers, to its properties, books, contracts and records and,
during such period, each shall (and each shall cause its Subsidiaries to)
furnish promptly to the other all information concerning its business,
properties and personnel as may reasonably be requested but only to the extent
such access does not unreasonably interfere with the business and operations of
such party; provided that no investigation pursuant to this Section 7.1 shall
affect or be deemed to modify any representation or warranty made by the
Company, Parent, Manzano, PNM, Merger Sub-1 or Merger Sub-2, and provided
further that the foregoing shall not require any party to permit any inspection,
or to disclose any information, that in the reasonable judgment of such party,
would (i) result in the disclosure of any trade secrets of third parties or the
loss of any applicable attorney-client privilege, work-product doctrine,
self-audit privilege or other privilege or (ii) violate any of its obligations
with respect to confidentiality if such party shall have used reasonable efforts
to obtain the consent of such third party to such inspection or disclosure. All
requests for information made pursuant to this Section 7.1 shall be directed to
an executive officer of Manzano, PNM or the Company, as applicable, or such
Person as may be designated by either of its executive officers. All such
information shall be governed by the terms of the Confidentiality Agreements.
7.2. Acquisition Proposals.
Except pursuant to the Exchange Agreement, each of the Company, Manzano,
and PNM agrees that neither it nor any of its Subsidiaries nor any of its or its
Subsidiaries' officers and directors shall, and that it shall direct and use its
reasonable best efforts to cause its and its Subsidiaries' agents and other
representatives (including any investment banker, attorney or accountant
retained by it or any of its Subsidiaries) not to, directly or indirectly,
initiate, solicit, encourage or otherwise facilitate any inquiries or the making
of any proposal or offer with respect to (i) a merger, reorganization, share
exchange, consolidation or similar transaction involving it or its Significant
Subsidiaries or, in the case of the Company, its Utility Subsidiaries, (ii) any
sale, lease, exchange, mortgage, pledge, transfer or purchase of all or
substantially all of the assets or equity securities of, it and its
Subsidiaries, taken as a whole, in a single transaction or series of related
transactions or (iii) any tender offer or exchange offer for 20% or more of the
outstanding shares of the Company Common Stock or PNM Common Stock or Manzano
Common Stock (any such proposal or offer being hereinafter referred to as an
"Acquisition Proposal"). Each of the Company, Manzano and PNM further agrees
that neither it nor any of its Subsidiaries nor any of its or its Subsidiaries'
officers and directors shall, and that it shall direct and use its reasonable
best efforts to cause its and its Subsidiaries' agents and representatives not
to, directly or indirectly, engage in any negotiations concerning, or provide
any confidential information or data to, or have any discussions with, any
person relating to an Acquisition Proposal, or otherwise facilitate any effort
or attempt to make or implement an Acquisition Proposal; provided, however, that
nothing contained in this Agreement shall prevent the Board of Directors of the
Company or of Manzano and PNM, or their respective representatives from, prior
to the time their respective required shareholders approvals have been obtained
(A) complying with Rule 14e-2 promulgated under the Exchange Act with regard to
an Acquisition Proposal or otherwise complying with the Exchange Act; (B)
providing information in response to a request therefor by a person who has made
a bona fide unsolicited Acquisition Proposal; (C) engaging in any negotiations
or discussions with any person who has made a bona fide unsolicited Acquisition
Proposal or otherwise facilitating any effort or attempt to implement an
Acquisition Proposal; or (D) withdrawing or modifying the approval or
recommendation by such Board of Directors of this Agreement, approving or
recommending any Acquisition Proposal or causing the applicable party to enter
into any letter of intent, agreement in principle, acquisition agreement or
other similar agreement relating to any Acquisition Proposal, if, and only to
the extent that in each such case referred to in clause (B), (C) or (D) above,
the Board of Directors of the Company, Manzano or PNM, as the case may be,
determines in good faith, after consultation with outside legal counsel that
such action is necessary to act in a manner consistent with the directors'
fiduciary duties under applicable law and determines in good faith after
consultation with its financial advisors that the person or group making such
Acquisition Proposal has adequate sources of financing to consummate such
Acquisition Proposal and that such Acquisition Proposal, if consummated as
proposed, is materially more favorable to the shareholders of such party from a
financial point of view (any such more favorable Acquisition Proposal being
referred to as a "Superior Proposal") and (y) in the case of clause (D) above
the Board of Directors of the Company or Manzano or PNM, as the case may be,
determines in good faith that such Acquisition Proposal is reasonably capable of
being consummated, taking into account legal, financial, regulatory and other
aspects of the proposal and the person making the proposal, and prior to taking
any such action set forth in clause (B), (C) or (D) above (other than with
respect to actions related to entering into a confidentiality agreement), the
Company or Manzano or PNM, as the case may be, provides reasonable notice to the
other party to the effect that it is taking such action and receives from the
person making the Acquisition Proposal an executed confidentiality agreement in
reasonably customary form and, in any event, containing terms not materially
more favorable to such third party than those contained in the Confidentiality
Agreements (as defined in Section 10.7). Prior to or substantially
contemporaneous with providing any information to or entering into any
discussions or negotiations with any person in connection with an Acquisition
Proposal by such person, the Company or Manzano or PNM, as the case may be,
shall notify the other party of such Acquisition Proposal (including, without
limitation, the material terms and conditions thereof and the identity of the
person making it), and, subject to the confidentiality agreement required to be
entered into, as specified above, shall provide the other party with a copy of
any written Acquisition Proposal or amendment or supplements thereto and shall
thereafter inform the other party on a prompt basis of any material changes to
the terms and conditions of such Acquisition Proposal. Each of the Company and
Manzano and PNM agrees that it will immediately cease and cause to be terminated
any existing discussions or negotiations with any parties conducted heretofore
with respect to any Acquisition Proposal. Each of the Company and each of
Manzano and PNM agrees that it will take the necessary steps to promptly inform
the individuals or entities referred to in the first sentence hereof of the
obligations undertaken in this Section 7.2.
7.3. Information Supplied.
The Company, Parent, Manzano and PNM each agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be supplied by it or
its Subsidiaries for inclusion or incorporation by reference in (i) the
Registration Statement on Form S-4 to be filed with the SEC by Parent in
connection with the issuance of shares of Parent Common Stock in the Mergers
(including the joint proxy statement and prospectus (the "Prospectus/Proxy
Statement") constituting a part thereof) (the "S-4 Registration Statement")
will, at the time the S-4 Registration Statement becomes effective under the
Securities Act, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and (ii) the Prospectus/Proxy Statement and any amendment or
supplement thereto will, at the date of mailing to shareholders of the Company
and shareholders of Manzano or PNM, as the case may be, and at the time of the
meeting of shareholders of the Company and at the time of the meeting of the
shareholders of Manzano or PNM, as the case may be, to be held in connection
with this Agreement and the transactions contemplated hereby, 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 were made, not misleading.
7.4. Shareholders Meetings.
The Company will take, in accordance with applicable law and its restated
articles of incorporation, as amended, and by-laws, all action necessary to
convene a meeting of holders of Company Common Stock as promptly as practicable
after the Proxy Statement/Prospectus is mailed to its shareholders to consider
and vote upon the approval of this Agreement and the transactions contemplated
hereby. Manzano or PNM will take, in accordance with its certificate and
by-laws, all action necessary to convene a meeting of holders of Manzano Common
Stock or PNM Common Stock, as the case may be, as promptly as practicable after
the Proxy Statement/Prospectus is mailed to its shareholders to consider and
vote upon the approval of this Agreement and the transactions contemplated
hereby. Subject to fiduciary obligations under applicable law, each of the
Company's and Manzano's or PNM' board of directors shall recommend such approval
and shall take all lawful action to solicit such approval.
7.5. Filings; Other Actions; Notification.
(a) Parent, Manzano or PNM and the Company shall promptly, following the
date hereof, prepare and file with the SEC the Prospectus/Proxy Statement, and
Parent shall promptly, following the date hereof, prepare and file with the SEC
the S-4 Registration Statement. Parent and the Company each shall use its best
efforts to have the S-4 Registration Statement declared effective under the
Securities Act as promptly as practicable after such filing, and as soon as
practicable thereafter mail the Prospectus/Proxy Statement to the shareholders
of the Company and the shareholders of Manzano or PNM, as the case may be, and,
if necessary after the Prospectus/Proxy Statement is mailed, promptly circulate
amended supplemental proxy material, and, if required, resolicit proxies. Parent
shall also use its best efforts to obtain prior to the effective date of the S-4
Registration Statement all necessary state securities law or "blue sky" permits
and approvals required in connection with the Mergers and to consummate the
other transactions contemplated hereby and will pay all expenses incident
thereto.
(b) The Company, Manzano or PNM, as the case may be, each shall use its
reasonable best efforts to cause to be delivered to the other party and its
directors a letter of its independent auditors, dated (i) the date on which the
S-4 Registration Statement shall become effective and (ii) the Closing Date, and
addressed to the other party and its directors, in form and substance customary
for "comfort" letters delivered by independent public accountants in connection
with registration statements similar to the S-4 Registration Statement.
(c) 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 under the HSR Act, and the rules and regulations promulgated thereunder
with respect to the transactions contemplated hereby. Each party hereto will use
all commercially reasonable efforts to make such filings in a timely manner and
to respond on a timely basis to any requests for additional information made by
either of such agencies.
(d) The Company, Manzano and PNM shall cooperate with each other and use
(and shall cause their respective Subsidiaries to use) their respective
reasonable best efforts to take or cause to be taken all actions, and do or
cause to be done all things, necessary, proper or advisable on its part under
this Agreement and applicable Laws to consummate and make effective the
Transaction and the other transactions contemplated hereby as soon as
practicable, including preparing and filing as soon as practicable all
documentation to effect all necessary notices, reports and other filings and to
obtain as soon as practicable all consents, registrations, approvals, permits
and authorizations necessary or advisable to be obtained from any third party
and/or any Governmental Entity in order to consummate the Transaction or any of
the other transactions contemplated hereby. Subject to applicable Laws relating
to the exchange of information and the preservation of any applicable
attorney-client privilege, work-product doctrine, self-audit privilege or other
similar privilege, each of Manzano, PNM and the Company shall have the right to
review and comment on in advance, and to the extent practicable each will
consult the other on, all the information relating to such party, and any of
their respective Subsidiaries, that appear in any filing made with, or written
materials submitted to, any third party and/or any Governmental Entity in
connection with the Transaction and the other transactions contemplated hereby.
In exercising the foregoing right, each of the Company, Manzano and PNM shall
act reasonably and as promptly as practicable.
(e) Subject to applicable Laws and the preservation of any applicable
attorney-client privilege, the Company, PNM and Manzano each shall, upon request
by the other, furnish the other with all information concerning itself, its
Subsidiaries, directors, officers and shareholders and such other matters as may
be reasonably necessary or advisable in connection with the Prospectus/Proxy
Statement, the S-4 Registration Statement or any other statement, filing, notice
or application made by or on behalf of Parent, Manzano, PNM, the Company or any
of their respective Subsidiaries to any third party and/or any Governmental
Entity in connection with the Mergers and the other transactions contemplated
hereby.
(f) Subject to any confidentiality obligations and the preservation of any
attorney-client privilege, the Company and Manzano and PNM each shall keep the
other apprised of the status of matters relating to completion of the
transactions contemplated hereby, including promptly furnishing the other with
copies of notices or other communications received by Parent, Manzano, PNM or
the Company, as the case may be, or any of its Subsidiaries, from any third
party and/or any Governmental Entity with respect to the Transaction and the
other transactions contemplated hereby.
7.6. Affiliates.
At least 10 days prior to the date of the shareholders meeting of the
Company with respect to this Agreement, the Company shall deliver to Parent a
list of names and addresses of those Persons who the Company expects will be, as
of 30 days prior to the Effective Time, "affiliates" of the Company within the
meaning of Rule 145 under the Securities Act. There shall be added to such list
the names and addresses of any other Person subsequently identified by the
Company as a Person who may be deemed within 30 days prior to the Effective Time
to be an affiliate of the Company for the purposes described above. The Company
shall exercise commercially reasonable efforts to deliver or cause to be
delivered to Parent, prior to the date of its shareholders meeting with respect
to this Agreement, from each affiliate of the Company identified in the
foregoing list (as the same may be supplemented as aforesaid), a letter dated as
of the date of such shareholders meeting substantially in the form attached as
Exhibit D (the "Affiliates Letter").
7.7. Stock Exchange Listing and De-listing.
Parent shall use its best efforts to cause the shares of Parent Common
Stock to be issued in the Mergers to be approved for listing on the NYSE,
subject to official notice of issuance, prior to the Closing Date. The Surviving
Corporation shall use its best efforts to cause the shares of Company Common
Stock to be removed from quotation on the NYSE and de-registered under the
Exchange Act as soon as practicable following the Effective Time.
7.8. Publicity.
The initial press release shall be a joint press release and thereafter the
Company and PNM each shall consult with the other prior to issuing any press
releases or otherwise making public announcements with respect to the Mergers
and the other transactions contemplated hereby and prior to making any filings
with any third party and/or any Governmental Entity with respect thereto, except
as may be required by Law or by obligations pursuant to any listing agreement
with or rules of any national securities exchange or national market system.
7.9. Benefits and Other Employee Matters.
(a) Stock Plans.
With respect to each Stock Plan that remains in effect following the
Effective Time and each award granted prior to the Effective Time pursuant to a
Stock Plan that is to be settled in shares of Company Common Stock (a "Stock
Award") which Stock Award remains outstanding following the Effective Time, the
Company and Parent shall take all corporate action necessary or appropriate to
(i) provide for the issuance or purchase in the open market of Parent Common
Stock rather than Company Common Stock pursuant thereto, (ii) obtain shareholder
approval with respect to such Stock Plans to the extent such approval is
required for purposes of the Code or other applicable law, (iii) reserve for
issuance under such Stock Plans or otherwise provide a sufficient number of
shares of Parent Common Stock for delivery upon payment of benefits, grant of
awards or exercise of options under such Stock Plans or Stock Award and (iv) as
soon as practicable after the Effective Time, file registration statements on
Form S-8 or amendments on such forms to the Form S-4 Registration Statement, as
the case may be (or any successor or other appropriate forms), with respect to
the shares of Parent Common Stock subject to such Stock Plans or Stock Award to
the extent such registration statement is required under applicable law, and
Parent 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 Merger will be subject to the reporting requirements under
Section 16(a) of the Exchange Act, the Surviving Corporation shall administer
the Stock Plans after the Effective Time, where applicable, in a manner that
complies with Rule 16b-3 promulgated under the Exchange Act.
(b) Contributions to Rabbi Trusts.
Prior to the Effective Time, the Company shall contribute to the rabbi
trusts maintained or to be established by the Company and its Subsidiaries for
(i) the Executive Stock Compensation Program under the Long Term Incentive and
Share Award Plan, (ii) the Restricted Share Unit Program under the Long Term
Incentive and Share Award Plan, and (iii) the Executive Salary Continuation
Plan, the amount of cash or shares of Company Common Stock that it reasonably
believes will be required to satisfy outstanding awards or other obligations
under such plans (other than any such awards that will be converted to Merger
Consideration that is immediately distributed to the holder thereof), and at or
prior to the end of each year commencing with the year in which the Closing
occurs, Parent shall contribute or cause to be contributed to the rabbi trust
any amount of cash or securities required to make up any shortfall in earnings
and any additional amounts to keep all benefits and estimated expenses fully
funded.
(c) Employee Benefits.
Parent agrees that, during the period commencing at the Effective Time and
ending on the second anniversary thereof, the non-union employees of the Company
and its Subsidiaries who continue to be employees of the Surviving Corporation,
Parent or their respective Subsidiaries (the "Non-Union Employees") will
continue to be provided with benefits under employee benefit plans that are no
less favorable in the aggregate than those currently provided by the Company and
its Subsidiaries to such employees. Following the Effective Time, Parent shall
cause service by Non-Union Employees of the Company and its Subsidiaries (and
any predecessor entities) to be taken into account for all purposes (including,
without limitation, eligibility to participate, eligibility to commence
benefits, vesting, benefit accrual and severance) under the Compensation and
Benefit Plans or any other benefit plans of Parent or its Subsidiaries in which
such employees participate.
From and after the Effective Time, Parent shall (i) cause to be waived any
pre-existing condition limitations under benefit plans, policies or practices of
Parent or its Subsidiaries in which employees of the Company or its Subsidiaries
participate and (ii) cause to be credited any deductibles and out-of-pocket
expenses incurred by such employees and their beneficiaries and dependents
during the portion of the calendar year prior to participation in the benefit
plans provided by Parent and its Subsidiaries.
Parent shall, and shall cause the Surviving Corporation to, honor all
employee benefit obligations to current and former employees and directors under
the Compensation and Benefit Plans and to honor all collective bargaining
agreements or other labor agreements in effect at the Effective Time. Parent
shall cause the Surviving Corporation to assume in writing the rights and
obligations under the employment agreements and change of control agreements to
which the Company is a party at the Effective Time as required by such
agreements; provided, however, that the foregoing shall not prevent Parent or
the Surviving Corporation from enforcing such employment agreements and change
of control agreements in accordance with their terms, including, without
limitation, any reserved right to amend, modify, suspend, revoke or terminate
any such employment agreements and change of control agreements.
Parent acknowledges that the transactions contemplated by this Agreement
meet the definition of, and shall constitute, a "change in control" under each
Compensation and Benefit Plan listed in Section 7.9 of the Company Disclosure
Letter.
(d) Employees.
It is the present intention of Parent and the Company that following the
Effective Time, there will be no involuntary reductions in workforce at the
Surviving Corporation or its Subsidiaries, and that Parent, the Surviving
Corporation and their respective Subsidiaries will continue Parent's and the
Company's present strategy of achieving workforce reductions through attrition
or other voluntary means; provided, however, that if any reductions in workforce
in respect of employees of Parent and its Subsidiaries, including the Surviving
Corporation and its Subsidiaries, become necessary, they 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,
qualifications, and business needs without regard to whether employment prior to
the Effective Time was with the Company or its Subsidiaries or Parent or its
Subsidiaries, and any employees whose employment is terminated or jobs are
eliminated by Parent, the Surviving Corporation or any of their respective
Subsidiaries shall be entitled to participate on a fair and equitable basis in
the job opportunity and employment placement programs offered by Parent, the
Surviving Corporation or any of their respective Subsidiaries. Any workforce
reductions carried out following the Effective Time by Parent or the Surviving
Corporation and their respective Subsidiaries shall be done in accordance with
all applicable collective bargaining agreements, and all Laws and regulations
governing the employment relationship and termination thereof including, without
limitation, the Worker Adjustment and Retraining Notification Act and
regulations promulgated thereunder, and any comparable state or local law.
7.10. Board of Directors; Corporate Headquarters and Community Involvement.
(a) Election to Parent's Board of Directors.
At the Effective Time, Parent shall take such action as may be necessary to
cause two individuals selected by Parent from a pool of nominees designated by
the Company, including members of the Board of Directors of the Company, to be
appointed to the Board of Directors of Parent with each such designee serving in
a different class on the Parent Board of Directors. The directors designated by
the Company shall comply with the Parent's criteria for membership on its Board
of Directors as in effect for PNM as of the date hereof and set forth in Section
7.10 of the Parent Disclosure Schedule. Each of the directors designated by the
Company shall be appointed to serve on a committee of the Parent Board of
Directors. The rights set forth in this Section 7.10 are separate from and in
addition to any rights Westar shall have to designate members of the Board of
Directors of Parent pursuant to the terms of the Stockholder Agreement between
Westar and Parent to be entered into as of the Effective Time.
(b) Regional Headquarters.
Following the Effective Time, the Surviving Corporation shall maintain its
regional headquarters in Topeka, Kansas.
(c) Community Involvement.
Parent acknowledges that after the Effective Time, it intends to provide
charitable contributions and community support within the service areas of the
Company and its Subsidiaries at levels consistent with past practice.
7.11. Dividends.
The Company and Parent shall coordinate with each other the declaration,
setting of record dates and payment dates of dividends on shares of their
respective common stock so that holders of shares of Company Common Stock do not
receive dividends on both shares of Company Common Stock and Parent Common Stock
received in the Merger in respect of any single calendar quarter or fail to
receive a dividend on either shares of Company Common Stock or Parent Common
Stock received in the Merger in respect of any single calendar quarter.
7.12. Indemnification; Directors' and Officers' Insurance.
(a) Parent shall indemnify and hold harmless, to the fullest extent
permitted under applicable law and as required pursuant to the existing
indemnity agreements of the Company (and Parent shall also advance expenses as
incurred to the fullest extent permitted under applicable law and as required
pursuant to the existing indemnity agreements of the Company provided the Person
to whom expenses are advanced provides an undertaking to repay such advances if
it is ultimately determined that such Person is not entitled to
indemnification), each present and former director, officer and employee of the
Company and its Subsidiaries (collectively, the "Indemnified Parties") against
any costs or expenses (including attorneys' fees and expenses), judgments,
fines, losses, claims, damages or liabilities (collectively, "Costs") incurred
in connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of or pertaining
to matters existing or occurring at or prior to the Effective Time, including
the transactions contemplated hereby. In the event any claim or claims are
asserted or made within six years after the Effective Time, all rights to
indemnification in respect of any such claim or claims shall continue until
final disposition of any and all such claims.
(b) Any Indemnified Party wishing to claim indemnification under paragraph
(a) of this Section 7.12, upon receiving written notification of any such claim,
action, suit, proceeding or investigation, shall promptly notify the Surviving
Corporation thereof, but the failure to so notify shall not relieve the
Surviving Corporation of any liability it may have to such Indemnified Party if
such failure does not materially and irreversibly prejudice Parent. In the event
of any such claim, action, suit, proceeding or investigation (whether arising
before or after the Effective Time), (i) Parent shall pay the fees and expenses
of counsel selected by the Indemnified Party, which counsel shall be reasonably
satisfactory to Parent, promptly after statements therefor are received, and
otherwise advance to such Indemnified Party upon request reimbursement of
documented expenses reasonably incurred, (ii) Parent 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 applicable Law shall be made by independent counsel mutually
acceptable to Parent and the Indemnified Party; provided, however, that (A)
Parent shall be obligated pursuant to this paragraph (b) to pay for only one
firm of counsel for all Indemnified Parties in any jurisdiction, 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 the positions of such Indemnified Party and any other Indemnified
Party or Indemnified Parties, in which case each Indemnified Party with a
conflicting position on a significant issue shall be entitled to retain separate
counsel mutually satisfactory to Parent and such Indemnified Party, (B) the
Indemnified Parties shall cooperate in the defense of any such matter and (C)
Parent shall not be liable for any settlement effected without its prior written
consent (which consent may not be unreasonably withheld or delayed).
(c) The Surviving Corporation shall maintain the Company's existing
officers' and directors' liability insurance ("D&O Insurance") for a period of
six years after the Effective Time so long as the annual premium therefor is not
in excess of 200% of the last annual premium paid prior to the date hereof (the
"Current Premium"); provided, however, if the existing D&O Insurance is
terminated or cancelled during such six-year period, the Surviving Corporation
shall use its best efforts to obtain as much D&O Insurance as can be obtained
for the remainder of such period for a premium not in excess (on an annualized
basis) of 200% of the Current Premium and shall agree to indemnify the directors
and officers for any Costs not covered by such D&O Insurance; and (iii) if the
annual premiums for the existing D&O Insurance exceed 200% of the Current
Premium, the Surviving Corporation shall obtain as much D&O Insurance as can be
obtained for the remainder of such period for a premium not in excess (on an
annualized basis) of 200% of the Current Premium.
(d) If Parent or the Surviving Corporation or any of its successors or
assigns (i) shall consolidate with or merge into any other corporation or entity
and shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) shall transfer all or substantially all of its
properties and assets to any individual, corporation or other entity, then, and
in each such case, proper provisions shall be made so that the successors and
assigns of Parent or the Surviving Corporation shall assume all of the
obligations set forth in this Section 7.12.
(e) The provisions of this Section 7.12 are intended to be for the benefit of,
and shall be enforceable by, each of the Indemnified Parties, their heirs and
their representatives.
7.13. Expenses.
Subject to Sections 9.5(b) through (e), whether or not the Mergers are
consummated, all costs and expenses incurred in connection with the Mergers and
the other transactions contemplated hereby shall be paid by the party incurring
such expense, except that each of the Company and PNM shall bear and pay
one-half of the costs and expenses incurred in connection with the filing,
printing and mailing of the S-4 Registration Statement and the Prospectus/Proxy
Registration Statement (including SEC filing fees).
7.14. Takeover Statute.
If any Takeover Statute is or may become applicable to the Mergers or the
other transactions contemplated hereby, each of Parent, Manzano, PNM, Merger
Sub-1 Merger Sub-2 and the Company and their respective Board of Directors shall
grant such approvals and take such actions as are necessary so that such
transactions may be consummated as promptly as practicable on the terms
contemplated hereby and otherwise act to eliminate or minimize the effects of
such statute or regulation on such transactions.
7.15. Manzano Vote.
Parent and Manzano shall vote (or consent with respect to) or cause to be
voted (or a consent to be given with respect to) any shares of Company Common
Stock and any shares of common stock of Merger Sub-1 and Merger Sub-2
beneficially owned by it or any of its Affiliates or with respect to which it or
any of its Affiliates has the power (by agreement, proxy or otherwise) to cause
to be voted (or to provide a consent), in favor of the approval of this
Agreement and the transactions contemplated hereby at any meeting of
shareholders of the Company, Merger Sub-1 or Merger Sub-2, respectively, at
which this Agreement shall be submitted for approval and at all adjournments or
postponements thereof (or, if applicable, by any action of shareholders of
either the Company, Merger Sub-1 or Merger Sub-2 by consent in lieu of a
meeting).
7.16. Agreements Relating to the Split-Off.
The terms of the Split-Off Agreements may be amended by the Company and
Westar; provided however, that Parent's consent, which shall not be unreasonably
withheld, shall be required in connection with any revision to the terms of the
Split-Off Agreements in the forms attached hereto as Exhibit A that would
reasonably be expected to be adverse in any manner to the Company or to Parent.
7.17. Redemption of Preferred Shares.
Prior to the Effective Time, the Board of Directors of the Company shall
call for redemption all outstanding Preferred Shares (not including the
Convertible Preference Shares) at a redemption price equal to the amount set
forth in the restated articles of incorporation of the Company, together with
all dividends accrued and unpaid to the date of such redemption and take all
other required action so that all Preferred Shares shall be redeemed and no such
Preferred Shares shall be deemed to be outstanding at the Effective Time or
entitled to vote on the approval of this Agreement and the transactions
contemplated hereby. The parties agree to cooperate in connection with
registering Parent as a "holding company" under Section 5 of the 1935 Act to use
the provisions of subparagraph (iv) of subdivision (c) of paragraph 6 of section
A of Article IV of the restated articles of incorporation of the Company as a
means of obviating the need to seek approval of this Agreement and the
transactions contemplated hereby by the holders of Preferred Shares as a
separate class, in which case the outstanding Preferred Shares shall not be
called for redemption and shall remain outstanding notwithstanding the Merger.
7.18. Conveyance Taxes.
The Company, Parent, PNM and Manzano shall cooperate in the preparation,
execution and filing of all returns, questionnaires, applications or other
documents regarding any real property transfer or gains, sales, use, transfer,
value added, stock transfer and stamp Taxes, any transfer, recording,
registration and other fees, and any similar Taxes which become payable in
connection with the transactions contemplated by this Agreement ("Transaction
Taxes") that are required or permitted to be paid on or before the Effective
Time. The Company shall pay, without deduction or withholding (except where such
deduction or withholding is required by applicable law) from any amount payable
to the holders of any shares of the Company Common Stock, any such Transaction
Taxes which become payable in connection with the Split-Off and Merger, on
behalf of the shareholders of the Company. Manzano, or PNM, as the case may be,
shall pay, without deduction or withholding (except where such deduction or
withholding is required by applicable law) from any amount payable to the
holders of any shares of Manzano Common Stock or PNM Common Stock, any such
Transfer Taxes which become payable in connection with the Transaction.
7.19. Transition Steering Team.
As soon as reasonably practicable after the date hereof, PNM and the
Company shall create a special transition steering team (the "Transition
Steering Team"), with representation from PNM and the Company, that will develop
recommendations concerning the future structure and operations of the Surviving
Corporation after the Effective Time, subject to applicable law. The members of
the Transition Steering Team shall be appointed by the Chief Executive Officers
of PNM and the Company. The functions of the Transition Steering Team shall
include (i) to direct the exchange of information and documents between the
parties and their subsidiaries as contemplated by Section 7.1, and (ii) the
development of regulatory plans and proposals, corporate organizational and
management plans, workforce combination proposals, and such other matters as
they deem appropriate.
7.20. Termination of Tax Sharing Agreements.
At the effective time of the Split-Off, the Company shall cause the Tax
sharing agreement with Protection One, Inc. and all other tax sharing agreements
and arrangements (other than the Disaffiliation Agreement) to be terminated or
no longer in effect with respect to periods following the date of the Split-Off
as between any member of the Western Group and its Affiliates (as those terms
are defined in the Tax Disaffiliation Agreement) on the one hand and any member
of the Westar Group and its Affiliates (as those terms are defined in the Tax
Disaffiliation Agreement) on the other hand.
7.21. Tax Disaffiliation Agreement.
At the Effective Time, Parent shall succeed to the rights and obligations
of the Company under the Tax Disaffiliation Agreement and shall perform all
agreements and covenants contained therein.
7.22. Shared Services Agreement.
Effective upon the Closing, the Company or such other affiliate of the
Company as shall be designated by Parent subject to Westar's approval shall
enter into a Shared Services Agreement in form and substance reasonably
satisfactory to each party and satisfying all requirements of the 1935 Act,
pursuant to which the Company shall provide services to Westar on the terms and
conditions specified in Exhibit B to the Allocation and Separation Agreement.
Effective as of the Closing Date, the Company will assign the Service Agreement
between the Company and Protection One, Inc., dated April 1, 1999, as amended,
to Westar.
7.23. Interim Reporting.
No later than the tenth Business Day of each calendar month through the
Cut-Off Date, the Company will deliver a statement with respect to the
immediately preceding calendar month, of (i) Additional Cash paid to the Company
(including information as to the source) during such month, (ii) the application
of such Additional Cash, and (iii) the option selected by Westar pursuant to
Section 3.2(a)(i), such statement also to include a summary of cumulative
amounts and any changes in amounts since the date hereof.
7.24. Possible Exchange.
The parties recognize that it would be beneficial for Parent if, in lieu of
the conversion of the Convertible Preference Shares into the Parent Convertible
Shares pursuant to Section 3.2(b)(iv) hereof (the "Conversion"), the Convertible
Preference Shares were instead exchanged (an "Exchange") for a principal amount
of 7.5% subordinated debt instruments of Parent equal to the aggregate
liquidation preference of the Convertible Preference Shares which debt
instruments ("Parent Convertible Debt") would be (i) convertible into shares of
Parent Common Stock at the same conversion ratio as the Convertible Preference
Shares, (ii) otherwise substantially in the form of the Company's 7-7/8%
Cumulative Quarterly Income Preferred Shares, Series A, and (iii) redeemable at
the option of Parent at par plus accrued interest on the same date on which the
Parent Convertible Shares would have been first redeemable at the option of
Parent. Accordingly, if, prior to satisfaction of the conditions contained in
Article VIII hereof, Parent proposes that an Exchange occur and such Exchange
would (i) not delay the Effective Time and (ii) otherwise preserves for Westar
the economic and tax benefits of ownership of Parent Convertible Shares that
otherwise would have been received upon conversion of the Convertible Preference
Shares including, but not limited to, the payment to Westar of cash in an amount
that reasonably compensates Westar for the reasonably estimated additional Tax
payments, if any, resulting from the Proposed Exchange (taking into account,
among other things, the amount (as reasonably projected on the Effective Date)
of (x) Westar's additional tax liability from the Exchange being taxable and
Westar subsequently receiving interest instead of dividends until the date that
the Parent Convertible Debt could have first been redeemed by Parent (the "First
Redemption Date") and (y) the utilization of or loss of any current or future
tax benefits of the Westar Group that could be used to offset tax liability of
any member of the Westar Group in any Tax period through the end of the Tax
period which includes the First Redemption Date), then the parties shall make a
good faith effort to effect an Exchange instead of a Conversion by means of
mutually agreed customary documentation that so preserves such benefits;
provided that if the Company Requisite Vote or the Parent Requisite Vote has
already been obtained, such Exchange does not require any additional approval of
the shareholders of the Company under the KGCC or other applicable law or the
shareholders of PNM or Parent under the NMBCA or other applicable law. In the
event that the parties adopt an Exchange, the Agreement shall be revised to
reflect such transaction as determined necessary by the parties hereto and prior
to effecting any such Exchange, all material third party and Governmental
Authority declarations, filings, registrations, notices, authorizations,
consents or approvals necessary for the effectuation of such Exchange shall have
been obtained and all other conditions to the parties' obligations to consummate
the Transaction and other transactions contemplated hereby, as applied to such
Exchange, shall have been satisfied or waived.
Article VIII.
Conditions
8.1. Conditions to Each Party's Obligation to Effect the Transaction.
The respective obligation of each party to effect the Mergers is subject to
the satisfaction or waiver at or prior to the Effective Time of each of the
following conditions:
(a) Shareholder Approval.
The Company Requisite Vote and the Parent Requisite Vote shall have been
obtained. This Agreement shall have been approved by the sole shareholder of
Merger Sub-1 and Merger Sub-2.
(b) NYSE Listing.
The shares of Parent Common Stock issuable to the shareholders of the
Company and Manzano in the Mergers pursuant to Article II shall have been
authorized for listing on the NYSE upon official notice of issuance.
(c) HSR.
The waiting period applicable to the consummation of the Mergers under the
HSR Act shall have expired or been earlier terminated.
(d) Other Regulatory Consents.
The Parent Required Statutory Approvals and the Company Required Statutory
Approvals shall have been obtained at or prior to the Effective Time, such
approvals shall have become Final Orders (as hereinafter defined), and no such
Final Order shall impose terms or conditions that would have, or would be
reasonably likely to have a material adverse effect on the financial condition,
business, assets or results of operations of Parent, Manzano, PNM and the
Company (together with their respective Subsidiaries) taken as a whole; it being
understood that the effect of any law, regulation, ruling, order or decree
referred to in Sections 8.2(f) and 8.3(e) shall not be taken into account in
making such determination. A "Final Order" means action (including the approval
of transfer, assignment or modification of Environmental Permits) by the
relevant regulatory authority that has not been reversed, stayed, enjoined, set
aside, annulled or suspended, with respect to which any waiting period
prescribed by law before the transactions contemplated hereby may be consummated
has expired, and as to which all conditions to the consummation of such
transactions prescribed by law, regulation or order have been satisfied.
(e) Injunction.
No court or Governmental Entity of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any statute, law, ordinance,
rule, regulation, judgment, decree, injunction or other order that is in effect
and permanently enjoins or otherwise prohibits consummation of the Mergers or
the other transactions contemplated hereby (collectively, an "Order").
(f) S-4.
The S-4 Registration Statement shall have become effective under the
Securities Act. No stop order suspending the effectiveness of the S-4
Registration Statement shall have been issued, and no proceedings for that
purpose shall have been initiated or be threatened, by the SEC.
(g) Split-Off.
The Split-Off shall have been consummated in accordance with the terms
hereof and of the Allocation and Separation Agreement and the Company shall have
received copies of the "solvency opinions" delivered in connection with the
Split-Off.
(h) Stockholder and Registration Rights Agreement.
Each of the Stockholder Agreement between Parent and Westar substantially
in the form attached hereto as Exhibit E and the Registration Rights Agreement
between Parent and Westar substantially in the form attached hereto as Exhibit F
shall have been executed by the parties thereto.
(i) Blue Sky Approvals.
Parent shall have received all state securities and "blue sky" permits and
approvals necessary to consummate the Mergers.
8.2. Conditions to Obligations of Parent, Merger Sub-1 and Merger Sub-2.
The obligations of Parent and Merger Sub 1 and Merger Sub-2 to effect the
Mergers are also subject to the satisfaction or waiver by Parent at or prior to
the Effective Time of the following conditions:
(a) Representations and Warranties.
The representations and warranties of the Company set forth in this
Agreement which are not modified by the words "Material Adverse Effect" shall be
true and correct as of the Closing Date as though made on and as of the Closing
Date, except for failures to be true and correct that individually or in the
aggregate would not reasonably be likely to have a Company Material Adverse
Effect (except to the extent any such representation or warranty expressly
speaks as of an earlier date, which representations and warranties shall be true
and correct as of such date in the same manner as specified above), and the
representations and warranties of the Company set forth in this Agreement which
are modified by the words "Material Adverse Effect" shall be true and correct as
of the Closing Date as though made on and as of the Closing Date (except to the
extent any such representation or warranty expressly speaks as of an earlier
date, which representations and warranties shall be true and correct as of such
date in the same manner as specified above), and Parent shall have received a
certificate signed on behalf of the Company by an executive officer of the
Company to such effect.
(b) Performance of Obligations of the Company.
The Company shall have performed in all material respects all material
obligations required to be performed by it under this Agreement at or prior to
the Closing Date, and Parent shall have received a certificate signed on behalf
of the Company by an executive officer of the Company to such effect.
(c) Tax Opinion.
Parent shall have received an opinion from Winthrop, Stimson, Putnam &
Roberts, tax counsel to Parent, in form and substance reasonably satisfactory to
Parent, dated as of the Closing Date, substantially to the effect that the
Mergers, taken together, will be treated as a transaction described in Section
351 of the Code or the Second Merger will be treated as a transaction described
in Section 368(a) of the Code, in each case in which neither the holders of PNM
Common Stock or the holders of Company Common Stock (other than Westar) nor
Parent or the Company will recognize taxable gain or loss. In rendering such
opinion, Winthrop, Stimson, Putnam & Roberts may require and rely upon
representations reasonably satisfactory to Winthrop, Stimson, Putnam & Roberts
contained in certificates of officers of the Company, Westar, Parent, Manzano,
PNM, Merger Sub-1 and Merger Sub-2.
(d) Consents Under Agreements.
The Company shall have obtained the consent or approval of each person
whose consent or approval shall be required under any material Company Contract
except for such consents or approvals the failure of which to obtain would not
be reasonably likely to result in a material adverse effect on Parent and the
Company (together with the Subsidiaries of Parent and the Company), taken as a
whole.
(e) Affiliates Letters.
Parent shall have received an Affiliates Letter from each person identified
as an affiliate of the Company pursuant to Section 7.6.
(f) No Adverse Regulatory Change.
Since the date of this Agreement, no law, regulation, ruling, order or
decree (or new interpretation of any of the foregoing) affecting the Company or
Kansas Gas and Electric Company shall have been adopted, amended or issued that,
individually or in the aggregate, would have a material adverse effect on the
financial condition, business, assets or results of operations of Parent,
Manzano, PNM and the Company (together with their respective Subsidiaries) taken
as a whole. In determining whether this condition has been satisfied, Parent (i)
shall also take into account the effects of any ruling, order or decree by any
Governmental Entity issued between the date hereof and the Closing Date on the
electric rates and charges of the Company and Kansas Gas and Electric Company or
on the revenue potential of the Company and Kansas Gas and Electric Company as
existing on the date of this Agreement, and (ii) shall not take into account the
Parent Required Statutory Approvals and the Company Required Statutory
Approvals.
8.3. Conditions to Obligation of the Company.
The obligation of the Company to effect the Merger is also subject to the
satisfaction or waiver by the Company at or prior to the Effective Time of the
following conditions:
(a) Representations and Warranties.
The representations and warranties of Parent, PNM, Manzano, Merger Sub-1
and Merger Sub-2 set forth in this Agreement which are not modified by the words
"Material Adverse Effect" shall be true and correct as of the Closing Date as
though made on and as of the Closing Date, except for failures to be true and
correct that individually or in the aggregate would not reasonably be likely to
have a Parent Material Adverse Effect (except to the extent any such
representation or warranty expressly speaks as of an earlier date, which
representations and warranties shall be true and correct as of such date in the
same manner as specified above) and the representations and warranties of
Parent, PNM, Manzano, Merger Sub-1 and Merger Sub-2 set forth in this Agreement
which are modified by the words "Material Adverse Effect" shall be true and
correct as of the Closing Date as though made on and as of the Closing Date
(except to the extent any such representation or warranty expressly speaks as of
an earlier date, which representations and warranties shall be true and correct
as of such date in the same manner as specified above), and the Company shall
have received a certificate signed on behalf of Parent by an executive officer
of Parent to such effect.
(b) Performance of Obligations of Parent and Merger Sub.
Each of Parent, Manzano, PNM, Merger Sub-1 and Merger Sub-2 shall have
performed in all material respects all material obligations required to be
performed by it under this Agreement at or prior to the Closing Date, and the
Company shall have received a certificate signed on behalf of Parent by an
executive officer of Parent to such effect.
(c) Tax Opinion.
The Company shall have received an opinion from LeBoeuf, Lamb, Greene &
MacRae L.L.P., tax counsel to the Company, in form and substance reasonably
satisfactory to the Company, dated as of the Closing Date, substantially to the
effect that (i) the Split-Off will be treated as a taxable exchange of the
Split-Off Portion of the Company Common Stock for shares of Westar Common Stock
and (ii) the Mergers, taken together, will be treated as a transaction described
in Section 351 of the Code or the Merger will be treated as a transaction
described in Section 368(a) of the Code; provided, however, that the condition
set forth in clause (i) above shall also be satisfied to the extent the Company
receives a private letter ruling from the Internal Revenue Service, in form and
substance reasonably satisfactory to the Company, substantially to the same
effect as the opinion described in clause (i) above. In rendering such opinion
LeBoeuf, Lamb, Greene & MacRae, L.L.P. may require and rely upon representations
reasonably satisfactory to LeBoeuf, Lamb, Greene & MacRae, L.L.P. contained in
certificates of officers of the Company, Westar, Parent, Manzano, PNM, Merger
Sub-1 or Merger Sub-2.
(d) Consents Under Agreements.
Parent shall have obtained the consent or approval of each Person whose
consent or approval shall be required under any material Parent Contract except
for such consents or approvals the failure of which to obtain would not be
reasonably likely to result in a material adverse effect on Parent and the
Company (together with the Subsidiaries of Parent and the Company) taken as a
whole.
(e) No Adverse Regulatory Change.
Since the date of this Agreement, no law, regulation, ruling, order or
decree (or new interpretation of any of the foregoing) affecting the Parent
shall have been adopted, amended or issued that, individually or in the
aggregate, would have a material adverse effect on the financial condition,
business, assets or results of operations of Parent, Manzano, PNM and the
Company (together with their respective Subsidiaries) taken as a whole. In
determining whether this condition has been satisfied, the Company (i) shall
also take into account the effects of any ruling, order or decree by any
Governmental Entity issued between the date hereof and the Closing Date on the
rates and charges of PNM (or any successor regulated as to rates by the NMPRC or
the FERC) or on the revenue potential of the Company and PNM (or any successor
regulated as to rates by the NMPRC or the FERC) as existing on the date of this
Agreement, and (ii) shall not take into account the Parent Required Statutory
Approvals and the Company Required Statutory Approvals.
(f) Ownership Percentage.
At the Effective Time, the holders of outstanding shares of Company Common
Stock, excluding Westar, will receive an amount of shares of Parent Common Stock
in excess of the number of shares of Parent Common Stock to be received by
shareholders of PNM or Manzano at the Effective Time.
Article IX.
Termination
9.1. Termination by Mutual Consent.
This Agreement may be terminated and the Mergers may be abandoned at any
time prior to the Effective Time, whether before or after receipt of the Company
Requisite Vote or the Parent Requisite Vote, by mutual written consent of the
Company and PNM by action of their respective Boards of Directors.
9.2. Termination by Either Parent or the Company.
This Agreement may be terminated and the Mergers may be abandoned at any
time prior to the Effective Time by action of the Board of Directors of either
PNM or the Company if (a) the Mergers shall not have been consummated by
December 31, 2001, whether such date is before or after the date of receipt of
the Company Requisite Vote or the Parent Requisite Vote (the "Termination
Date"), provided that the Termination Date shall be automatically extended for
twelve months if, on the Termination Date any of the conditions set forth in
Section 8.1(c), (d) or (g) shall not have been satisfied or waived but (x) each
of the other conditions to the consummation of the Mergers set forth in Article
VIII has been satisfied or waived or remains capable of satisfaction, and (y)
any approvals required by Section 8.1(c) or (d) that have not yet been obtained
are being pursued diligently and in good faith, (b) the Company Requisite Vote
or the Parent Requisite Vote shall not have been obtained at a meeting duly
convened therefor or at any adjournment or postponement thereof, or (c) any
Order permanently restraining, enjoining or otherwise prohibiting consummation
of the Mergers shall become final and non-appealable after the parties have used
their respective best efforts to have such Order removed, repealed or overturned
(whether before or after the approval by the shareholders of the Company);
provided, that the right to terminate this Agreement pursuant to clause (a)
above shall not be available to any party that has breached in any material
respect its obligations under this Agreement in any manner that shall have
proximately caused the occurrence of the failure of the Mergers to be
consummated.
9.3. Termination by the Company.
This Agreement may be terminated and the Mergers may be abandoned by action
of the Board of Directors of the Company at any time prior to (a) receipt of the
Company Requisite Vote, if the Board of Directors of the Company shall adopt an
agreement providing for a Superior Proposal; provided, however, that (i) the
Company is not then in breach of Section 7.2 and (ii) the termination pursuant
to this Section 9.3(a) shall not be effective unless the Company shall at or
prior to the time of such termination make the payment required by Section
9.5(b); or (b) the Effective Time, whether before or after receipt of the
Company Requisite Vote, if there has been a material breach by Parent, PNM,
Manzano, Merger Sub-1 or Merger Sub-2 of any material representation, warranty,
covenant or agreement contained in this Agreement that is not curable or, if
curable, is not cured within 20 days after written notice of such breach is
given by the Company to the party committing such breach or (c) to the Effective
Time if the Board of Directors of PNM or Manzano withdraws or adversely modifies
its adoption of this Agreement or its recommendation that the shareholders of
PNM or Manzano approve this Agreement.
9.4. Termination by Parent.
This Agreement may be terminated and the Mergers may be abandoned by action
of the Board of Directors of PNM at any time prior to (a) receipt of the Parent
Requisite Vote, if the Board of Directors of PNM or Manzano shall adopt an
agreement providing for a Superior Proposal; provided, however, that (i) such
party is not then in breach of Section 7.2 and (ii) the termination pursuant to
this Section 9.4(a) shall not be effective unless PNM shall at or prior to the
time of such termination make the payment required by Section 9.5(c); or (b) the
Effective Time, whether before or after receipt of the Parent Requisite Vote, if
there has been a material breach by the Company of any material representation,
warranty, covenant or agreement contained in this Agreement that is not curable
or, if curable, is not cured within 20 days after written notice of such breach
is given by PNM to the Company or (c) the Effective Time if the Board of
Directors of the Company withdraws or adversely modifies its adoption of this
Agreement or its recommendation that the shareholders of the Company approve
this Agreement.
9.5. Effect of Termination and Abandonment.
(a) In the event of termination of this Agreement and the abandonment of
the Mergers pursuant to this Article IX, this Agreement (other than as set forth
in Section 10.1) shall become void and of no effect with no liability on the
part of any party hereto (or of any of its directors, officers, employees,
agents, legal and financial advisors or other representatives); provided,
however, that except as otherwise provided herein, no such termination shall
relieve any party hereto of any liability or damages resulting from any breach
of this Agreement.
(b) In the event that this Agreement is terminated by the Company pursuant
to Section 9.3(a), then the Company shall promptly, but in no event later than
two days after the date of such termination, pay PNM a termination fee (as
liquidated damages) of $35 million by wire transfer of same day funds to an
account previously designated in writing by PNM to the Company. In the event
that an Acquisition Proposal shall have been made to the Company after the date
hereof or any person (other than PNM or any of its Affiliates) shall have
publicly announced after the date hereof an intention (whether or not
conditional) to make an Acquisition Proposal with respect to the Company and
thereafter this Agreement is terminated (i) by either PNM or the Company
pursuant to Section 9.2(b) (following the failure to obtain the Company
Requisite Vote at a time when such Acquisition Proposal remains outstanding) or
(ii) by PNM pursuant to Section 9.4(c) (following withdrawal or failure to
affirm the recommendation by the Company's Board of Directors), pay PNM a
termination fee (as liquidated damages) of $35 million by wire transfer of same
day funds to an account previously designated by PNM to the Company in writing.
(c) In the event that this Agreement is terminated by PNM pursuant to
Section 9.4(a), then PNM shall promptly, but in no event later than two days
after the date of such termination, pay the Company a termination fee (as
liquidated damages) of $35 million by wire transfer of same day funds to an
account previously designated in writing by the Company to PNM. In the event
that an Acquisition Proposal shall have been made to PNM or Manzano after the
date hereof or any person (other than the Company or any of its Affiliates)
shall have publicly announced after the date hereof an intention (whether or not
conditional) to make an Acquisition Proposal with respect to PNM and thereafter
this Agreement is terminated (i) by either the Company or PNM pursuant to
Section 9.2(b) (following the failure to obtain the Parent Requisite Vote at a
time when such Acquisition Proposal remains outstanding) or (ii) or by the
Company pursuant to Section 9.3(c) (following withdrawal or failure to affirm
the recommendation by Board of Directors of PNM or Manzano), pay the Company a
termination fee (as liquidated damages) of $35 million, by wire transfer of same
day funds to an account previously designated by the Company to PNM in writing.
(d) In the event that this Agreement is terminated by either PNM or the
Company pursuant to Section 9.2(b) as a result of failure to obtain the Company
Requisite Vote and at the time of the related meeting of Company Shareholders no
Acquisition Proposal for the Company is outstanding, then the Company shall
promptly, but in no event later than two days after the date of such
termination, pay to PNM by wire transfer of same day funds to an account
previously designated by PNM to the Company in writing an amount equal to $17.5
million. In the event that this Agreement is terminated by either the Company or
PNM pursuant to Section 9.2(b) as a result of failure to obtain the Parent
Requisite Vote and at the time of the related meeting of PNM or Manzano
shareholders, as the case may be, no Acquisition Proposal for PNM or Manzano is
outstanding, then PNM shall promptly, but in no event later than five days after
the date of such termination, pay to the Company by wire transfer of same day
funds to an account previously designated by the Company to PNM in writing an
amount equal to $17.5 million.
(e) In the event that this Agreement is terminated by PNM pursuant to
Section 9.4(c) following withdrawal or failure to affirm the recommendation by
the Company's Board of Directors and at such time no Acquisition Proposal for
the Company is outstanding, then the Company shall promptly, but in no event
later than two days after the date of such termination, pay to PNM by wire
transfer of same day funds to an account previously designated by PNM to the
Company in writing an amount equal to $25 million. In the event this Agreement
is terminated by the Company pursuant to Section 9.3(c) following withdrawal or
failure to affirm the recommendation by the Board of Directors of PNM or Manzano
and at such time no Acquisition Proposal for PNM or Manzano is outstanding, then
PNM shall promptly, but is no event later than two days after the date of such
termination, pay to the Company by wire transfer of same day funds to an account
previously designated by the Company to PNM in writing as amount equal to $25
million.
(f) The parties acknowledge that the agreements contained in Sections
9.5(b) through (e) are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements the other party would not have
entered into this Agreement; accordingly, if any party fails to promptly pay any
amounts due pursuant to Sections 9.5(b) through (e) and in order to obtain such
payment the other party commences a suit which results in a judgement against
the defaulting party for payment of all or a portion of a termination fee, the
defaulting party shall pay to the other party its costs and expenses (including
its reasonable attorneys' fees) incurred in connection with such suit, together
with interest from the date of termination of this Agreement on the amounts owed
at the prime rate of Citibank, N.A. in effect from time to time during such
period. The payment of such termination fee shall be the sole and exclusive
remedy of the other party with respect to the facts and circumstances giving
rise to such payment obligation and the Termination Fee is payable whether or
not there has been a breach of this Agreement.
Article X.
Miscellaneous and General
10.1. Survival.
This Article X and the agreements of the Company, Parent, Manzano, PNM,
Merger Sub-1 and Merger Sub-2 contained in Sections 7.7 (Stock Exchange Listing
and De-listing), 7.9 (Benefits and Other Employee Matters), 7.12
(Indemnification; Directors' and Officers' Insurance), 7.13 (Expenses) and 7.21
(Tax Disaffiliation Agreement) shall survive the consummation of the Mergers.
This Article X, the agreements of the Company, Parent, Manzano and PNM Sub
contained in Section 7.13 (Expenses), Section 9.5 (Effect of Termination and
Abandonment) and the Confidentiality Agreements shall survive the termination of
this Agreement. All other representations, warranties, covenants and agreements
in this Agreement shall not survive the consummation of the Mergers or the
termination of this Agreement.
10.2. Modification or Amendment.
Subject to the provisions of applicable Law, at any time prior to the
Effective Time, the parties hereto may modify or amend this Agreement, by
written agreement executed and delivered by duly authorized officers of the
respective parties.
10.3. Waiver of Conditions.
The conditions to each of the parties' obligations to consummate the
Mergers are for the sole benefit of such party and may be waived by such party
in whole or in part to the extent permitted by applicable law.
10.4. Counterparts.
This Agreement may be executed in any number of counterparts, each such
counterpart being deemed to be an original instrument, and all such counterparts
shall together constitute the same agreement.
10.5. GOVERNING LAW AND VENUE.
THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN AND IN ALL RESPECTS SHALL BE
INTERPRETED, CONSTRUED AND GOVERNED BY AND IN ACCORDANCE WITH THE LAW OF THE
STATE OF NEW YORK APPLICABLE TO CONTRACTS TO BE WHOLLY PERFORMED IN SUCH STATE.
The parties hereby irrevocably submit to the jurisdiction of the courts of the
State of New York and the Federal courts of the United States of America located
in the State of New York in each case in the borough of Manhattan solely in
respect of the interpretation and enforcement of the provisions of this
Agreement and of the documents referred to in this Agreement, and in respect of
the Transactions, and hereby waive, and agree not to assert, as a defense in any
action, suit or proceeding for the interpretation or enforcement hereof or of
any such document, that it is not subject thereto or that such action, suit or
proceeding may not be brought or is not maintainable in said courts or that the
venue thereof may not be appropriate or that this Agreement or any such document
may not be enforced in or by such courts, and the parties hereto irrevocably
agree that all claims with respect to such action or proceeding shall be heard
and determined in such a State of New York or Federal court. The parties hereby
consent to and grant any such court jurisdiction over the person of such parties
and over the subject matter of such dispute and agree that mailing of process or
other papers in connection with any such action or proceeding in the manner
provided in Section 10.6 or in such other manner as may be permitted by law
shall be valid and sufficient service thereof.
10.6. Notices.
Any notice, request, instruction or other document to be given hereunder by
any party to the others shall be in writing and delivered personally or sent by
registered or certified mail, postage prepaid, or by facsimile:
if to Parent, PNM, Manzano, Merger Sub-1 or Merger Sub-2
Public Service Company of New Mexico and
Manzano Corporation
Alvarado Square,
Albuquerque, NM 87158
Attention: Chief Financial Officer
Fax: (505) 241-2368
with a copy to
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004
Attn: Timothy Michael Toy, Esq.
Stephen R. Rusmisel, Esq.
Fax: (212) 858-1500
if to the Company
Western Resources, Inc.
818 South Kansas Avenue
Topeka, KS 66612
Attention: Richard D. Terrill, Esq.
Executive Vice President and
General Counsel
Fax: (785) 575-1936
with a copy to
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, New York 10019
Attn: William S. Lamb, Esq.
Benjamin G. Clark, Esq.
Fax: (212) 424-8500
or to such other persons or addresses as may be designated in writing by
the party to receive such notice as provided above.
10.7. Entire Agreement; NO OTHER REPRESENTATIONS.
This Agreement (including any exhibits hereto), the Company Disclosure
Letter, the Parent Disclosure Letter and the Confidentiality Agreement dated
July 25 2000, between PNM and the Company and the Confidentiality Agreement
dated October 24, 2000 between the Company and PNM (collectively, the
"Confidentiality Agreements") constitute the entire agreement, and supersede all
other prior agreements, understandings, representations and warranties both
written and oral, among the parties, with respect to the subject matter hereof.
EACH PARTY HERETO AGREES THAT, EXCEPT FOR THE REPRESENTATIONS AND WARRANTIES
CONTAINED IN THIS AGREEMENT, NEITHER PARENT, MERGER SUB-1 AND MERGER SUB-2, NOR
THE COMPANY MAKES ANY OTHER REPRESENTATIONS OR WARRANTIES, AND EACH HEREBY
DISCLAIMS ANY OTHER REPRESENTATIONS OR WARRANTIES MADE BY ITSELF OR ANY OF ITS
OFFICERS, DIRECTORS, EMPLOYEES, AGENTS, FINANCIAL AND LEGAL ADVISORS OR OTHER
REPRESENTATIVES, WITH RESPECT TO THE EXECUTION AND DELIVERY OF THIS AGREEMENT OR
THE TRANSACTIONS, NOTWITHSTANDING THE DELIVERY OR DISCLOSURE TO THE OTHER OR THE
OTHER'S REPRESENTATIVES OF ANY DOCUMENTATION OR OTHER INFORMATION WITH RESPECT
TO ANY ONE OR MORE OF THE FOREGOING.
10.8. No Third-Party Beneficiaries.
Other than with respect to the matters set forth in Section 7.12
(Indemnification; Directors' and Officers' Insurance) and Section 7.21 (Tax
Disaffiliation Agreement), this Agreement is not intended to confer upon any
Person other than the parties hereto any rights or remedies hereunder.
10.9. Obligations of Parent and of the Company.
Except as otherwise specifically provided herein, whenever this Agreement
requires a Subsidiary of Parent or PNM to take any action, such requirement
shall be deemed to include an undertaking on the part of Parent or PNM to cause
such Subsidiary to take such action. Whenever this Agreement requires a
Subsidiary of the Company to take any action, such requirement shall be deemed
to include an undertaking on the part of the Company to cause such Subsidiary to
take such action and, after the Effective Time, on the part of the Surviving
Corporation to cause such Subsidiary to take such action.
10.10. Severability.
The provisions of this Agreement shall be deemed severable and the
invalidity or unenforceability of any provision shall not affect the validity or
enforceability of the other provisions hereof. If any provision of this
Agreement, or the application thereof to any Person or any circumstance, is
invalid or unenforceable, (a) a suitable and equitable provision shall be
substituted therefor in order to carry out, so far as may be valid and
enforceable, the intent and purpose of such invalid or unenforceable provision
and (b) the remainder of this Agreement and the application of such provision to
other Persons or circumstances shall not be affected by such invalidity or
unenforceability, nor shall such invalidity or unenforceability affect the
validity or enforceability of such provision, or the application thereof, in any
other jurisdiction.
10.11. Interpretation.
The table of contents and headings herein are for convenience of reference
only, do not constitute part of this Agreement and shall not be deemed to limit
or otherwise affect any of the provisions hereof. Where a reference in this
Agreement is made to a Section or Exhibit, such reference shall be to a Section
of or Exhibit to this Agreement unless otherwise indicated. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation."
10.12. Assignment.
This Agreement shall not be assignable by operation of law or otherwise;
provided, however, that Parent may designate, by written notice to the Company,
another wholly owned direct or indirect subsidiary to be a constituent
corporation in lieu of Merger Sub-1 or Merger Sub-2, so long as such designation
would not reasonably be expected to (i) impose any material delay in the
obtaining of, or significantly increase the risk of not obtaining any Parent
Required Statutory Approval or Company Required Statutory Approval or the
expiration or termination of any applicable waiting period, (ii) significantly
increase the risk of any Governmental Entity entering an order prohibiting the
consummation of the Mergers, (iii) significantly increase the risk of not being
able to remove any such order on appeal or otherwise or (iv) materially delay
the consummation of the Mergers. If the requirements of the previous sentence
are met and Parent wishes to designate another wholly owned direct or indirect
subsidiary to be a constituent corporation in lieu of Merger Sub-1 or Merger
Sub-2, then, all references herein to Merger Sub-1 or Merger Sub-2, as the case
may be, shall be deemed references to such other subsidiary, except that all
representations and warranties made herein with respect to Merger Sub-1 or
Merger Sub-2, as the case may be, as of the date of this Agreement shall be
deemed representations and warranties made with respect to such other subsidiary
as of the date of such designation.
IN WITNESS WHEREOF, this Agreement has been duly executed, acknowledged
and delivered by the duly authorized officers of the parties hereto as of the
date first written above.
WESTERN RESOURCES, INC.
By: /s/David C. Wittig
--------------------------------
Name: David C. Wittig
Title: Chairman of the Board,
President and Chief
Executive Officer
HVOLT ENTERPRISES, INC.
By: /s/ Jeffry E. Sterba
--------------------------------
Name: Jeffry E. Sterba
Title: President
HVK, INC.
By: /s/ Jeffry E. Sterba
--------------------------------
Name: Jeffry E. Sterba
Title: President
HVNM, INC.
By: /s/ Jeffry E. Sterba
--------------------------------
Name: Jeffry E. Sterba
Title: President
PUBLIC SERVICE COMPANY OF NEW MEXICO
By: /s/ Jeffry E. Sterba
--------------------------------
Name: Jeffry E. Sterba
Title: Chairman, President &
Chief Executive Officer
Pursuant to Section 3.8 of this foregoing Agreement, the undersigned hereby
joins in such Agreement this __ day of ___________, 2001.
MANZANO CORPORATION
By:
--------------------------------
Name:
Title:
Exhibit 99.2
ASSET ALLOCATION AND
SEPARATION AGREEMENT
between
Western Resources, Inc.
and
Westar Industries, Inc.
-----------------------
Dated as of November 8, 2000
TABLE OF CONTENTS
-----------------
PAGE
ARTICLE I DEFINITIONS..........................................................2
SECTION 1.01. DEFINITIONS...................................................2
ARTICLE II CONTRIBUTIONS AND ASSUMPTION OF LIABILITIES........................12
SECTION 2.01. TRANSFERS OF CERTAIN ASSETS TO WESTAR GROUP..................12
SECTION 2.02. INTERCOMPANY TRANSFERS AND SETTLEMENT OF INTERCOMPANY DEBT...12
SECTION 2.03. AGREEMENT RELATING TO CONSENTS NECESSARY TO TRANSFER ASSETS..13
SECTION 2.04. CERTAIN OFFICER LOANS........................................14
SECTION 2.05. SHARED SERVICES..............................................14
SECTION 2.06. SUBLEASE.....................................................14
ARTICLE III REPRESENTATIONS AND WARRANTIES....................................15
SECTION 3.01. REPRESENTATIONS AND WARRANTIES OF WESTAR.....................15
SECTION 3.02. REPRESENTATIONS AND WARRANTIES OF WESTERN....................15
ARTICLE IV THE SPLIT-OFF......................................................16
SECTION 4.01. COOPERATION PRIOR TO THE SPLIT-OFF...........................16
SECTION 4.02. WESTERN BOARD ACTION; CONDITIONS PRECEDENT TO THE SPLIT-OFF..17
SECTION 4.03. THE SPLIT-OFF................................................18
SECTION 4.04. FRACTIONAL SHARES............................................18
ARTICLE V INDEMNIFICATION AND OTHER MATTERS...................................18
SECTION 5.01. WESTAR INDEMNIFICATION OF WESTERN GROUP......................18
SECTION 5.02. WESTERN INDEMNIFICATION OF WESTAR GROUP......................20
SECTION 5.03. INSURANCE AND THIRD PARTY OBLIGATIONS; LIMITATION ON
LIABILITY..................................................20
SECTION 5.04. NOTICE AND PAYMENT OF CLAIMS.................................21
SECTION 5.05. NOTICE AND DEFENSE OF THIRD-PARTY CLAIMS.....................21
SECTION 5.06. EXCLUSIVITY OF REMEDIES......................................24
ARTICLE VI EMPLOYEE MATTERS AND TRANSITION SERVICES...........................24
SECTION 6.01. EMPLOYEE MATTERS GENERALLY...................................24
SECTION 6.02. SHARED SERVICES MATTERS GENERALLY............................24
ARTICLE VII ACCESS TO INFORMATION.............................................24
SECTION 7.01. PROVISION OF CORPORATE RECORDS...............................24
SECTION 7.02. ACCESS TO INFORMATION........................................24
SECTION 7.03. LITIGATION COOPERATION.......................................25
SECTION 7.04. REIMBURSEMENT................................................25
SECTION 7.05. RETENTION OF RECORDS.........................................26
SECTION 7.06. CONFIDENTIALITY..............................................26
SECTION 7.07. PRESERVATION OF PRIVILEGE....................................27
SECTION 7.08. INAPPLICABILITY OF ARTICLE VII TO TAX MATTERS................27
ARTICLE VIII CERTAIN OTHER AGREEMENTS.........................................27
SECTION 8.01. USE OF PROCEEDS AND INTERCOMPANY MATTERS.....................27
SECTION 8.02. TRADEMARKS; TRADE NAMES......................................28
SECTION 8.03. FURTHER ASSURANCES AND CONSENTS..............................28
SECTION 8.04. THIRD PARTY BENEFICIARIES....................................28
SECTION 8.05. INTELLECTUAL PROPERTY RIGHTS AND LICENSES....................29
SECTION 8.06. INSURANCE CLAIMS.............................................29
ARTICLE IX MISCELLANEOUS......................................................29
SECTION 9.01. NOTICES......................................................29
SECTION 9.02. AMENDMENTS; NO WAIVERS.......................................30
SECTION 9.03. EXPENSES.....................................................31
SECTION 9.04. SUCCESSORS AND ASSIGNS.......................................31
SECTION 9.05. GOVERNING LAW................................................31
SECTION 9.06. COUNTERPARTS; EFFECTIVENESS..................................32
SECTION 9.07. ENTIRE AGREEMENT.............................................32
SECTION 9.08. TAX DISAFFILIATION AGREEMENT; SET-OFF; PAYMENT OF AFTER-TAX
TAXES......................................................32
SECTION 9.09. JURISDICTION.................................................33
SECTION 9.10. PRE-LITIGATION DISPUTE RESOLUTION............................33
SECTION 9.11. SEVERABILITY.................................................33
SECTION 9.12. SURVIVAL.....................................................33
SECTION 9.13. CAPTIONS.....................................................33
SECTION 9.14. SPECIFIC PERFORMANCE.........................................33
Schedules and Exhibits
Schedule 1.01(a) Group Insurance Policies
Schedule 1.01(b) Westar Trademark Rights
Schedule 1.01(c) Westar Litigation
Schedule 1.01(d) Western Balance Sheet
Schedule 1.01(e) Westar Balance Sheet
Schedule 1.01(g) Western Subsidiaries
Schedule 1.01(h) Westar Subsidiaries
Schedule 2.01 Transferred Assets
Schedule 3.02(c) Required Western Consents
Schedule 3.02(d) Required Western Government Authorizations
Schedule 4.02 Schedule of Split Dollar Life Insurance
Schedule 8.01(b) Intercompany Agreements Not to Survive Closing
Schedule 8.05 Software Licenses
Exhibit A Shared Services Agreement between Western and Westar
Exhibit B Option Agreement between Westar and Western
Exhibit C Sublease Term Sheet
Exhibit D Tax Disaffiliation Agreement between Western and Westar
Exhibit E Trademark Assignment Agreement
ASSET ALLOCATION AND SEPARATION AGREEMENT
ASSET ALLOCATION AND SEPARATION AGREEMENT, dated as of November 8, 2000
(this "Agreement"), between WESTERN RESOURCES, INC., a Kansas corporation
("Western"), and WESTAR INDUSTRIES, INC., a Kansas corporation ("Westar").
W I T N E S S E T H:
WHEREAS, Westar is presently a wholly owned subsidiary of Western;
WHEREAS, the Board of Directors of Western has approved (i) the issuance of
non-transferable rights (the "Rights") to purchase up to 9.9% of the outstanding
shares of Westar Common Stock (as defined herein) issuable pursuant to the
Rights (the "Rights Offering Shares") and (ii) the terms and conditions of the
distribution and exercise of Rights as provided by the registration statement
filed by Westar under the Securities Act in connection therewith (the "Rights
Offering");
WHEREAS, the Board of Directors of Western has determined that it is in the
best interests of Western, its shareholders and Westar that all outstanding
shares of Westar Common Stock then held by Western be distributed to Western's
shareholders in exchange for a portion of the shares of Western common stock
held by such shareholders (provided that all conditions precedent to the
Split-Off (as defined herein) have been satisfied) and that, pursuant to an
agreement and plan of restructuring and merger, dated as of November 8, 2000
(the "Merger Agreement"), among Western, Public Service Company of New Mexico, a
New Mexico corporation ("PNM"), HVOLT Enterprises, Inc., a corporation organized
under the laws of Delaware ("Parent"), HVK, Inc.,. a Kansas corporation and a
wholly owned subsidiary of Parent ("Merger Sub-1") and HVNM, Inc., a New Mexico
corporation ("Merger Sub-2"), Merger Sub-1 be merged with and into Western, as a
result of which Western will become a wholly owned subsidiary of Parent (the
"Merger");
WHEREAS, for United States federal income Tax (as defined below) purposes,
it is intended that (i) the Split-Off will be treated as a taxable exchange of
the Split-Off Portion (as defined below) of the Western Common Stock for Westar
Common Stock, and (ii) the Mergers taken together will be treated as a
transaction described in Section 351 of the Internal Revenue Code of 1986, as
amended (the "Code");
WHEREAS, Western and Westar are concurrently herewith entering into, or
propose to enter into prior to or on the Separation Date (as defined below), the
Ancillary Agreements (as defined below); and
WHEREAS, the parties hereto desire to set forth herein the principal
corporate transactions to be effected in connection with the Rights Offering and
the Split-Off and certain other matters relating to the relationship and the
respective rights and obligations of the parties following the completion of the
Rights Offering and, subsequently, following the Split-Off.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. The following terms, as used herein, have the
following meanings:
"Action" means any claim, suit, action, arbitration, inquiry, investigation
or other proceeding of any nature (whether criminal, civil, legislative,
administrative, regulatory, prosecutorial or otherwise) by or before any
arbitrator or Governmental Entity or similar Person or body.
"Affiliate" shall have the meaning ascribed to such term in Rule 12b-2 of
the Exchange Act as of the date hereof, provided, however, that except when
referred to as an "Existing Affiliate," for purposes of this Agreement, no
member of one Group shall be treated as an Affiliate of any member of the other
Group.
"Agreement" has the meaning set forth in the recitals.
"Ancillary Agreements" means each of the Registration Rights Agreement, the
Tax Disaffiliation Agreement, the Shared Services Agreement, the Westar Option,
the Trademark Assignment Agreement and the Sublease Agreement.
"Average Trading Price" means the average of the daily volume-weighted
trading price per share of Western Common Stock or Westar Common Stock, as
applicable, on the New York Stock Exchange, as applicable, as reported by
Bloomberg Financial Markets, or if not reported thereby, another reasonably
agreed authoritative source.
"Business Day" means any day other than a Saturday, Sunday or one on which
banks are authorized or required by law to close in New York, New York.
"Commission" means the Securities and Exchange Commission.
"Company Disclosure Letter" shall have the meaning specified in the Merger
Agreement.
"Confidential Information" has the meaning set forth in Section 7.06.
"Confidentiality Agreements" means the Confidentiality Agreement, dated as
of July 25, 2000, between PNM and Western and the Confidentiality Letter between
Western and PNM dated October 20, 2000.
"Contracts" means any agreement, lease, license, contract, treaty, note,
mortgage, indenture, franchise, permit, concession, arrangement or other
obligation.
"Control" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Convertible Preference Stock" means convertible preference stock of
Western, with the terms specified in Exhibit B to the Merger Agreement.
"CPI Western Power Holdings" means CPI Western Power Holdings, Inc., a
Bermuda limited liability company.
"Cut Off Date" means 15 Business Days prior to the Closing Date (as defined
in the Merger Agreement).
"Damages" means, with respect to any Person, any and all damages (including
punitive and consequential damages), losses, Liabilities and expenses incurred
or suffered by such Person (including, but not limited to, all expenses of
investigation, all attorneys' and expert witnesses' fees and all other
out-of-pocket expenses incurred in connection with any Action or threatened
Action).
"Employment Agreements" means the employment agreements listed in Item 10
of Section 7.9 of the Company Disclosure Letter for the Merger Agreement.
"Environmental Law" means any federal, state or local laws (including,
without limitation, common law), regulations, codes, rules, ordinances, permits,
authorizations, decrees, orders, injunctions or judgments and any binding
administrative or judicial interpretations thereof relating to: (a) pollution;
(b) the protection of the environment (including air, water, soil, subsurface
strata and natural resources) or human health and safety from exposure to
Hazardous Substances and (c) the regulation of the generation, use, storage,
handling, transportation, treatment, release, remediation or disposal of
Hazardous Substances.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Existing Affiliate" means any Affiliate of Western as of the date hereof
and not giving effect to this Agreement, the Restructuring or the Merger.
"Finally Determined" means, with respect to any Action, threatened Action
or other matter, that the outcome or resolution of that Action, threatened
Action or other matter either (i) has been decided through binding arbitration
or by a Governmental Entity of competent jurisdiction by judgment, order, award,
or other ruling or (ii) has been settled or voluntarily dismissed by the parties
pursuant to the dispute resolution procedure set forth in Section 9.10 or
otherwise and, in the case of each of clauses (i) and (ii), the claimants'
rights to maintain that Action, threatened Action or other matter have been
finally adjudicated, waived, discharged or extinguished, and that judgment,
order, ruling, award, settlement or dismissal (whether mandatory or voluntary,
but if voluntary that dismissal must be final, binding and with prejudice as to
all claims specifically pleaded in that Action) is subject to no further appeal,
vacatur proceeding or discretionary review.
"Former Affiliate" means any Person (as defined below) that was, at any
time prior to the date hereof and without giving effect to this Agreement, but
has ceased to be, an Affiliate of Western.
"Governmental Entity" means any U.S. or non-U.S. governmental or regulatory
authority, agency, commission, tribunal, body or other governmental,
quasi-governmental or self-regulatory entity.
"Group" means, as the context requires, the Westar Group (as defined below)
or the Western Group (as defined below).
"Group Policies" means all Policies, current or past, which prior to the
Split-Off Time are or at any time were maintained by or on behalf of or for the
benefit or protection of Western, any Existing Affiliate or any Former Affiliate
(or any of their predecessors) and/or one or more of the current or past
directors, officers, employees or agents of any of the foregoing including,
without limitation, the Policies identified on Schedule 1.01(a).
"Gross-Up Payment" shall have the meaning set forth in the Employment
Agreements.
"Hazardous Substances" means (a) any substances, mixtures, chemicals,
products, materials or wastes that, pursuant to Environmental Law, are defined
by or regulated as or having the characteristics of "hazardous,' "toxic,"
"pollutant," "contaminant," "flammable," "corrosive," "reactive," "explosive" or
"radioactive"; or (b) any petroleum, petroleum products or by-products, friable
asbestos or any material or equipment containing regulated concentrations of
polychlorinated biphenyls.
"Indemnified Party" has the meaning set forth in Section 5.04.
"Indemnifying Party" has the meaning set forth in Section 5.04.
"Information Statement" means the information statement to be sent, if
necessary, to each Western Shareholder of record as of the Split-Off Record Date
in connection with the Split-Off.
"Intellectual Property Rights" means (i) inventions, whether or not
patentable, reduced to practice or made the subject of one or more pending
patent applications, (ii) national and multinational statutory invention
registrations, patents and patent applications (including all reissues,
divisions, continuations, continuations-in-part, extensions and reexaminations
thereof) registered or applied for in the United States and all other nations
throughout the world, and all improvements to the inventions disclosed in each
such registration, patent or patent application, (iii) trademarks, service
marks, trade dress, logos, domain names, trade names and corporate names
(whether or not registered) in the United States and all other nations
throughout the world, including all variations, derivations, combinations,
registrations and applications for registration of the foregoing and all
goodwill associated therewith, (iv) copyrights (whether or not registered) and
registrations and applications for registration thereof in the United States and
all other nations throughout the world, including all derivative works, moral
rights, renewals, extensions, reversions or restorations associated with such
copyrights, now or hereafter provided by law, regardless of the medium of
fixation or means of expression, (v) computer software (including source code,
object code, firmware, operating systems and specifications), (vi) trade secrets
and, whether or not confidential, business information (including pricing and
cost information, business and marketing plans and customer and supplier lists)
and know-how (including manufacturing and production processes and techniques
and research and development information), (vii) industrial designs (whether or
not registered), (viii) databases and data collections, (ix) copies and tangible
embodiments of any of the foregoing, in whatever form or medium, (x) all rights
to obtain and rights to apply for patents, and to register trademarks and
copyrights, (xi) all rights in all of the foregoing provided by treaties,
conventions and common law and (xii) all rights to sue or recover and retain
damages and costs and attorneys' fees for past, present and future infringement
or misappropriation of any of the foregoing.
"Intercompany Receivable" means the receivable evidencing the debt owed
from Western to Westar, as such amount shall be adjusted from time to time
pursuant to Section 3.02(a)(ii) of the Merger Agreement.
"Law" means any applicable federal, state, local or foreign law, statute,
ordinance, directive, rule, regulation, judgment, order, injunction, decree,
arbitration award, agency requirement, license or permit of any Governmental
Entity.
"Liability" or "Liabilities" means any and all claims, debts, liabilities,
assessments, costs (including, with respect to matters under Environmental Laws,
removal costs, remediation costs, closure costs and expenses of investigation
and ongoing monitoring), deficiencies, charges, demands, fines, penalties,
damages, losses, disgorgements and obligations, of any kind, character or
description (whether absolute, contingent, matured, not matured, liquidated,
unliquidated, accrued, known, unknown, direct, indirect, derivative or
otherwise) whenever arising, including, but not limited to, all costs, interest
and expenses relating thereto (including, but not limited to, all expenses of
investigation, all attorneys' and expert witnesses' fees and all other
out-of-pocket expenses in connection with any Action or threatened Action)
(except items relating to Taxes).
"Merger" has the meaning set forth in the recitals.
"Mergers" has the meaning set forth in the Merger Agreement.
"Merger Agreement" has the meaning set forth in the recitals.
"Merger Effective Time" shall have the meaning assigned to the term
"Effective Time" in the Merger Agreement.
"Merger Exchange Ratio" shall have the meaning assigned to the term
"Exchange Ratio" in the Merger Agreement.
"Merger Per Share Amount" shall have the meaning assigned to the term "Per
Share Amount" in the Merger Agreement.
"Merger Sub-1" has the meaning set forth in the recitals.
"NYSE" means the New York Stock Exchange, Inc.
"Parent" has the meaning set forth in the recitals.
"Person" means any individual, corporation (including any not-for-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, Governmental Entity or other
entity of any kind or nature, including any successor or predecessor thereto.
"PNM" has the meaning set forth in the recitals.
"Policy" or "Policies" means insurance policies and insurance contracts of
any kind, including, without limitation, primary, excess and umbrella policies,
directors and officers', errors and omissions, commercial general liability
policies, life and benefits policies and contracts, fiduciary liability,
automobile, aircraft, property and casualty, workers' compensation and employee
dishonesty insurance policies, bonds and self-insurance and captive insurance
company arrangements, together with the rights, benefits and privileges
thereunder.
"Properties" means the real property located at 800 South Kansas Avenue and
818 South Kansas Avenue in Topeka, Kansas.
"Proxy Statement" means the proxy statement of Western to be filed with the
Commission pursuant to the Exchange Act in connection with the Merger, and, if
necessary, the Split-Off.
"Purchase Date" means a date specified as the effective date for a purchase
of securities pursuant to Section 3.2(a)(i) or Section 3.2(a)(ii) of the Merger
Agreement.
"Purchase Notice" shall have the meaning specified in Section 2.02.
"Purchase Price" means (x) in the case of Western Common Stock, the Average
Trading Price of Western Common Stock for the 20 trading days ending on the
close of business on the trading day immediately preceding the applicable
purchase date, (y) in the case of Convertible Preference Stock, $100 per share,
and (z) in the case of Westar Common Stock, the Average Trading Price of the
Westar Common Stock for the 20 trading days ending on the close of business on
the Trading day immediately preceding the applicable conversion Purchase Date,
but in no event less than the per share exercise price of the Rights.
"Registration Rights Agreement" means the Registration Rights Agreement
between Parent and Westar in the form attached hereto as Exhibit F.
"Representatives" has the meaning set forth in Section 7.06.
"Request" has the meaning set forth in Section 7.03(b).
"Restructuring" means the Transfers pursuant to Section 2.01 hereof, the
settlement of intercompany accounts in accordance with Section 8.01 hereof, the
Rights Offering, the Split-Off and the other transactions contemplated by this
Agreement and the Ancillary Agreements.
"Rights" has the meaning set forth in the recitals.
"Rights Offering" has the meaning set forth in the recitals.
"Rights Offering S-1" means the registration statement filed with the
Commission on Form S-1 to register the shares of Westar Common Stock being
offered in the Rights Offering.
"Rights Offering Shares" has the meaning set forth in the recitals.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Separation" means the delivery of Rights Offering Shares to Western
Shareholders upon consummation of the Rights Offering.
"Separation Date" means the Business Day on which the Separation Time
occurs.
"Separation Time" means the earlier of (i) the time of delivery of the
Rights Offering Shares to the Western Shareholders upon consummation of the
Rights Offering and (ii) the Split-Off Time.
"Shared Services Agreement" means the Shared Services Agreement to be
entered into between Western and Westar on the Separation Date to be effective
as of the Separation Date, in substantially the form attached as Exhibit B
hereto.
"Split-Off" means the split-off by Western, pursuant to the terms and
subject to the conditions hereof, of all of the outstanding shares of Westar
Common Stock held by Western immediately prior to the Split-Off Time to the
Western Shareholders of record as of the Split-Off Record Date.
"Split-Off Agent" means the Exchange Agent (as defined in the Merger
Agreement).
"Split-Off Date" means the Business Day on which the Split-Off is effected.
"Split-Off Documents" means this Agreement and the Ancillary Agreements and
any other agreements or documents entered into to effect the transactions
contemplated hereby or by the Ancillary Agreements (but excluding the
Confidentiality Agreements and the Merger Agreement).
"Split-Off Portion" shall have the meaning specified in the Merger
Agreement.
"Split-Off Record Date" means the Split-off Time.
"Split-Off S-4" means the registration statement to be filed under the
Securities Act, if necessary, to register the shares of Westar Common Stock to
be distributed in the Split-Off.
"Split-Off Time" means the Merger Effective Time (as defined below).
"Sublease Agreements" means the Sublease Agreements to be entered into on
the Split-Off Date between Westar as Sublessor and Western as Sublessee to be
effective as of the Split-Off Time (or an Affiliate of Western, in which case
the obligations of such Affiliate shall be guaranteed by Western) in respect of
the Properties reflecting the terms set forth on Exhibit C.
"Subsidiary" means, with respect to any Person, any corporation or other
entity of which at least a majority of the securities or other ownership
interests having by their terms ordinary voting power to elect a majority of the
board of directors or other Persons performing similar functions are at the time
directly or indirectly owned or controlled by such Person or by one or more of
its respective Subsidiaries or by such Person and any one or more of its
respective Subsidiaries.
"Tax" or "Taxes" means Tax or Taxes as such terms are defined in the Tax
Disaffiliation Agreement.
"Tax Disaffiliation Agreement" means the Tax Disaffiliation Agreement
hereto to be entered into among Western and Westar on the Separation Date to be
effective as of the Split-Off Time in substantially the form attached as Exhibit
D.
"Third-Party Claim" has the meaning set forth in Section 5.05(a).
"Trademark Assignment Agreement" means the Trademark Assignment Agreement
to be entered into between Western and Westar on the Separation Date to be
effective at the Split-Off Time with respect to the Westar Name Rights,
reflecting the terms set forth on Exhibit E hereto.
"Transfer" has the meaning set forth in Section 2.01.
"Westar" has the meaning set forth in the recitals.
"Westar Assets" means all assets as reflected in the unaudited consolidated
balance sheet as of September 30, 2000 of the Westar Group attached hereto as
Schedule 1.01(e), together with all other assets, leases, properties and
businesses, of every kind and description, wherever located, real, personal or
mixed, tangible or intangible, owned by any member of the Westar Group or
otherwise used primarily in connection with the Westar Business. Without
limitation and for the avoidance of doubt, the following items are, and shall
be, "Westar Assets" (and are not, and shall not be, Western Assets):
(a) All rights of the Westar Group under the Split-Off Documents;
(b) The assets to be transferred from Western to Westar pursuant to Section
2.01, including those assets described on Schedule 2.01
(c) all Westar Intellectual Property Rights; and
(d) all goodwill associated with the Westar Group or the Westar Assets
prior to the Separation Time (excluding goodwill associated with the Western
Business or the Western Assets).
"Westar Business" means the businesses and operations of the Westar Group,
both as conducted on the date hereof, and as formerly conducted by any Westar
Subsidiary, irrespective of whether or not a Westar Subsidiary remains a
Subsidiary of Westar, but taking into account the Restructuring, and shall also
include all businesses and operations conducted on or after January 1, 1995 by
any Person at any time a Subsidiary of Western (other than a member of the
Western Group) except businesses and operations related to (i) the processing,
transmission, distribution or marketing of gas or (ii) the regulated generation,
transmission, distribution or marketing of electricity in the United States, or
any services related to (i) or (ii).
"Westar Common Stock" means the common stock, par value $.01 per share, of
Westar and the related preferred share purchase rights.
"Westar Group" means Westar and its direct and indirect Subsidiaries
(including all successors to each of those Persons).
"Westar Group Liabilities" means, except as otherwise specifically provided
in the Merger Agreement or any Split-Off Document, all Liabilities, whether
arising before, at or after the Separation Time, of or relating to any member of
the Westar Group or the Western Group to the extent arising from the conduct of,
in connection with or relating to, the Westar Business (including arising in
connection with or relating to the Wing Entities) or the ownership or use of the
Westar Assets (including ownership or investments in any Person).
Notwithstanding the foregoing, "Westar Group Liabilities" shall exclude any and
all: (1) Liabilities for Taxes (which Liabilities shall be governed by the Tax
Disaffiliation Agreement), and (2) other Liabilities to the extent specifically
retained or assumed by the Western Group.
"Westar Indemnitee" has the meaning set forth in Section 5.02(a).
"Westar Intellectual Property Rights" means all Intellectual Property
Rights (i) owned (x) by a member of the Westar Group or (y) by a member of the
Western Group and licensed to or used exclusively by a member of the Westar
Group or (ii) owned by a third party and licensed or sublicensed to a member of
the Westar Group or to the Western Group for the use and benefit of any member
of the Westar Group, in each case excluding the Western Intellectual Property
Rights but including without limitation:
(a) all right, title and interest in and use of the "Westar" name and
any derivative thereof including, without limitation, all trademarks,
service marks, trade dress, logos, domain names, trade names and corporate
names (whether or not registered) in the United States and all other
nations throughout the world, including all variations, derivations,
combinations, registrations and applications for registration of the
foregoing and all goodwill associated therewith (collectively, the "Westar
Name Rights"); and
(b) the Intellectual Property Rights listed on Schedule 1.01(b)
hereto.
"Westar Litigation" means (i) the joint litigation that is identified on
Schedule 1.01 (c); and (ii) any filed, claimed or threatened litigation arising
from the conduct of, in connection with or relating to the conduct of the Westar
Business or the Westar Assets (except any litigation related to Taxes, which
matters shall be governed solely by the Tax Disaffiliation Agreement).
"Westar Litigation Liabilities" means all Liabilities relating to or
resulting from any filed, claimed or threatened litigation or other proceedings
relating to, or arising out of, any event, fact or circumstance (whether alleged
or otherwise) which are or become the subject of the matters identified in
Schedule 1.01(c).
"Westar Name Rights" has the meaning specified in the definition of Westar
Intellectual Property above.
"Westar Option" means the Stock Purchase Option Agreement to be entered
into by Western and Westar on the Separation Date to be effective as of the
Separation Time, in substantially the form attached hereto as Exhibit B.
"Westar Subsidiaries" means (i) each of the direct and indirect
Subsidiaries of Westar listed on Schedule 1.01(h) as supplemented to add Persons
that become Subsidiaries of Westar between the date hereof and the Split-Off
Time.
"Western" has the meaning set forth in the recitals.
"Western Assets" means all assets as reflected in the unaudited
consolidated balance sheet as of September 30, 2000 of the Western Group
attached hereto as Schedule 1.01(d), together with all other assets, leases,
properties and businesses, of every kind and description, wherever located,
real, personal or mixed, tangible or intangible, owned by any member of the
Western Group (other than those assets owned, held or used primarily in
connection with the Westar Business), or otherwise used primarily in connection
with the Western Business. Without limitation and for the avoidance of doubt,
the following items are, and shall be, "Western Assets" (and are not, and shall
not be, Westar Assets):
(a) all rights of the Western Group (but excluding any and all rights of
the Westar Group) under the Merger Agreement, the Confidentiality Agreements and
the Split-Off Documents;
(b) all Western Intellectual Property Rights; and
(c) all goodwill associated with the Western Business or the Western
Assets.
"Western Benefits Liabilities" means, except to the extent any member of
the Westar Group is obligated to indemnify any member of the Western Group
pursuant to Section 5.01(c), all Liabilities of any member of the Western Group
to any Person under any compensation or employee benefit plan.
"Western Business" means the businesses and operations of Western and the
Western Subsidiaries as conducted as of the date hereof and as formerly
conducted by any member of the Western Group (other than a member of the Westar
Group), and shall also include all businesses and operations of any current or
former Subsidiary of Western related to (i) the, processing, transmission,
distribution or marketing of gas or (ii) the regulated generation, transmission,
distribution or marketing of electricity in the United States, or any services
related to (i) or (ii).
"Western Common Stock" means the common stock, par value $5.00 per share,
of Western.
"Western Group" means Western, the Western Subsidiaries and all successors
to each of those Persons.
"Western Group Liabilities" means, except as otherwise specifically
provided in the Merger Agreement or any Split-Off Document, all of the following
Liabilities, whether arising before, at or after the Split-Off Time: (i) all
Liabilities of or relating to any member of the Western Group or the Westar
Group to the extent arising from the conduct of, in connection with or relating
to, the Western Business, or the ownership or use of the Western Assets in
connection therewith (including ownership or investments in any Person), and
(ii) the Western Benefits Liabilities. Notwithstanding the foregoing, "Western
Group Liabilities" shall exclude any and all: (1) Liabilities for Taxes (which
Liabilities shall be governed by the Tax Disaffiliation Agreement), (2) Westar
Litigation Liabilities, (3) Liabilities to the extent arising in connection with
or relating to the Wing Entities, and (4) other Liabilities to the extent
specifically retained or assumed by the Westar Group under any of the Split-Off
Documents.
"Western Indemnitee" has the meaning set forth in Section 5.01(a).
"Western Intellectual Property Rights" means all Intellectual Property
Rights (i) owned by a member of the Western Group or (ii) owned by a third party
and licensed or sublicensed to a member of the Western Group and held for use or
used primarily in the conduct of the Western Business, but excluding the Westar
Name Rights.
"Western Officer Loan Liabilities" has the meaning set forth in Section
2.04.
"Western Resources (Bermuda)" means Western Resources (Bermuda) Ltd., a
Bermuda Company.
"Western Shareholders" means the holders of the Western Common Stock.
"Western Subsidiaries" means the direct and indirect Subsidiaries of
Western listed on Schedule 1.01 (g), as supplemented to add Persons that become
Subsidiaries of Western between the date hereof and the Split-Off Time, but
excluding Westar Subsidiaries.
"Wing Colombia" means Wing Colombia, L.L.C., a Delaware limited liability
company.
"Wing Entities" means Wing Columbia, Wing Group, Wing International, Wing
Turkey, CPI Western Power Holdings Ltd., and Western Resources (Bermuda),
collectively.
"Wing Group" means The Wing Group Limited Co., a Delaware corporation.
"Wing International" means Wing International Ltd., a Texas limited
liability company.
"Wing Turkey" means Wing Turkey, Inc., a Delaware corporation and a wholly
owned subsidiary of Western.
ARTICLE II
CONTRIBUTIONS AND ASSUMPTION OF LIABILITIES
Section 2.01. Transfers of Certain Assets to Westar Group. Upon the terms
and subject to the conditions set forth herein, effective as of the Separation
Time, Western shall, or, if requested, shall cause the relevant member of the
Western Group to, assign, contribute, convey, transfer and deliver ("Transfer")
to Westar or to one or more of Westar's wholly-owned Subsidiaries all of the
right, title and interest of Western, or such member of the Western Group, in
and to all Westar Assets that are owned by a member of the Western Group, as the
Westar Assets shall exist on the Separation Date or on such later date as a
particular Transfer may occur, including without limitation, the assets
described on Schedule 2.01.
Section 2.02. Intercompany Transfers and Settlement of Intercompany Debt At
any time between the date hereof and the Cut Off Date, Westar may (a) pay cash
to Western as provided in Section 3.2(a)(i) of the Merger Agreement for the
purposes and subject to the limits provided therein and (b) convert any
outstanding amount of the Intercompany Receivable as provided in Section
3.2(a)(ii) of the Merger Agreement. provided any remaining balance of the
Intercompany Receivable that has not been converted on or before the Merger
Effective Time shall be so converted at the Effective Time, and Westar shall
provide written notice to Western of its choice of conversion options on or
prior to the Cut Off Date. In addition, Western may pay cash to Westar as
provided in Section 3.2(a)(ii) of the Merger Agreement for the purposes and
subject to the limits provided therein.
In order to either (A) convert the Intercompany Receivable (in whole or in
part pursuant to Section 3.2(a)(i) of the Merger Agreement), or (B) purchase
securities pursuant to Section 3.2(a)(ii) of the Merger Agreement, Westar shall
deliver to Western with a copy to PNM by facsimile a notice ("Purchase Notice")
at least five Business Days prior to the applicable Purchase Date specified in
the Purchase Notice, specifying (i) the amount of the Intercompany Receivable to
be converted or cash to be advanced; (ii) the class of securities to be
purchased; (iii) the applicable Purchase Price and (iv) the applicable Purchase
Date. Western and PNM shall have the opportunity to review and comment on such
Purchase Notice. Such Purchase Notice shall also be immediately forwarded to
Western by overnight courier or hand delivery. Except as set forth below, the
Purchase Notice and election once given shall be irrevocable.
If Western agrees with the calculation of the Purchase Price in the
Purchase Notice, Western shall issue and deliver to Westar, or its designee,
within three Business Days after the applicable Purchase Date, a certificate or
certificates for the number and class of shares of Stock to which Westar shall
be entitled as aforesaid. If Western in good faith disputes the calculation of
the Purchase Price or the number of shares issuable pursuant to such Purchase
Notice, Western shall give written notice of any such objection to Westar within
two Business Days of receipt of the Purchase Notice, and the parties shall
attempt in good faith to resolve such dispute prior to the specified Purchase
Date. If such dispute is not resolved prior to the Purchase Date, the parties
shall refer the matter to a nationally recognized accounting firm selected by
Westar and reasonably acceptable to Western, the decision of which shall be
final and binding on Western and Westar.
Westar acknowledges and agrees that regulatory approval for the issuance of
Convertible Preference Stock may be required prior to the initial issuance of
Convertible Preference Stock, and Western agrees to use commercially reasonable
efforts to obtain such regulatory approval. If after delivery by Westar of a
Purchase Notice notifying Western of Westar's election to purchase Convertible
Preference Stock conversion of all or part of the Intercompany Receivable, a
regulatory authority of competent jurisdiction prohibits Western from issuing
Convertible Preference Stock, or any such regulatory authority conditions its
approval on a change in the terms of such security, Westar may revoke its
Purchase Notice with respect to such Convertible Preference Stock.
No fractional shares of Stock or scrip representing fractional shares of
any Stock shall be issuable hereunder. The number of shares of Stock that are
issuable upon any conversion shall be rounded up or down to the nearest whole
share.
Section 2.03. Agreement Relating to Consents Necessary to Transfer Assets.
Notwithstanding anything in this Agreement to the contrary, this Agreement shall
not constitute an agreement to transfer or assign any asset or any claim or
right or any benefit arising thereunder or resulting therefrom if an attempted
assignment thereof, without the necessary consent of a third party, would
constitute a breach or other contravention thereof or in any way materially and
adversely affect the rights of Westar, or any member of the Westar Group, or
Western, or any member of the Western Group, thereunder. Westar and Western
shall cooperate with each other, keep each other informed and will, subject to
Section 8.03, use all commercially reasonable efforts necessary to obtain the
consent of any third party or any Governmental Entity, if any, required in
connection with the transfer or assignment pursuant to Section 2.01 of any such
asset or any claim or right or any benefit arising thereunder. Until such
required consent is obtained, or if such consent cannot be obtained or an
attempted assignment or assumption thereof would be ineffective or would
adversely affect the rights of the transferor thereunder so that the intended
transferee would not in fact receive substantially all such rights, Westar and
Western will cooperate in a mutually agreeable arrangement under which the
intended transferee would obtain the benefits and assume the obligations
thereunder in accordance with this Agreement including (but not limited to)
sub-contracting, sub-licensing or sub-leasing to such transferee, or under which
the transferor would enforce for the benefit of the transferee and (except as
otherwise provided herein or in any Ancillary Agreement) at the transferor's
expense any and all rights of the transferor against, with the transferee
assuming the transferor's obligations to, each third party thereto. In the case
of any Transfer involving a third party consent, the transferor shall not agree
to any terms of transfer (without the prior written consent of the transferee)
which have the effect of materially altering the rights or benefits arising
under any of the particular Westar Assets, Western Assets, Westar Group
Liabilities or Western Group Liabilities, as the case may be, subject to the
Transfer.
Section 2.04. Certain Officer Loans. Westar shall use commercially
reasonable efforts to obtain the release of Western (and each member of the
Western Group that may be obligated) from all liability (whether by way of
guaranty, indemnity or otherwise) (collectively, the "Western Officer Loan
Liabilities") in respect of loans to officers or directors in connection with
their purchase of Westar Common Stock, if any, prior to the Split-Off Date.
Section 2.05. Shared Services. As between Western Group, on the one hand,
and the Westar Group, on the other hand, notwithstanding any other provision of
this Agreement to the contrary, the parties have agreed that (i) provision of
services pursuant to the P1 Agreement (as defined on the Shared Services
Agreement) shall be part of the Westar Business for purposes of this Agreement
and not part of the Western Business and, (ii) with respect to the provision by
Western of services pursuant to the Share Services Agreement, the respective
rights, liabilities and obligations of the parties thereto shall be governed by
the Shared Services Agreement and not by this Agreement.
Section 2.06. Subleases. Western and the other members of the Western Group
may not assign or sublease their rights under the Sublease Agreements without
the consent of Westar. Western shall give Westar notice of its intent to assign
or sublease under one or both Sublease Agreements, which notice shall disclose
the identity of the proposed assignee or sublesse. Westar shall have 30 days
following receipt of such notice to either terminate the Sublease Agreement in
question (without necessity for any further action by any member of the Westar
Group) or consent to the sublease or assignment. If Westar does not deliver
notice of termination during such 30 day period, Western may assign or sublease
the Sublease Agreement in question to the Person indicated in the original
notice. Such right to assign or sublease shall terminate if not exercised within
180 days.
ARTICLE III
Representations and warrantieS
Section 3.01. Representations and Warranties of Westar. Westar represents
and warrants to Western as follows:
(a) Westar is a corporation duly organized, validly existing and in good
standing under the laws of the State of Kansas and has all requisite corporate
power and authority to own and operate its properties and to carry on its
business as now being conducted.
(b) Westar has all requisite power and authority to execute this Agreement
and the Ancillary Agreements and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary action on the part of Westar. This Agreement has been duly
executed and delivered by Westar and constitutes a legal, valid and binding
obligation of Westar enforceable against it in accordance with its terms, except
as may be limited by applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance or other similar laws affecting the enforcement of
creditors' rights generally, and except that the availability of equitable
remedies, including specific performance, may be subject to the discretion of
any court before which any proceedings may be brought.
(c) The execution, delivery and performance by Westar of this Agreement
will not contravene, violate, result in a reach of or constitute a default under
(i) any provision of applicable law or of the articles of incorporation or
by-laws of Westar, (ii) any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to Westar or any of its properties or assets, or
(iii) any material contract to which Westar is a party or by which Westar or any
of its properties is bound.
(d) No consent, approval, order, authorization of, or registration,
declaration or filing with, any Governmental Entity is required in connection
with the making or performance by Westar of this Agreement, subject to
compliance with applicable securities laws.
Section 3.02. Representations and Warranties of Western. Western represents
and warrants to Westar as follows:
(a) Western is a corporation duly organized, validly existing and in good
standing under the laws of the State of Kansas and has all requisite corporate
power and authority to own and operate its properties and to carry on its
business as now being conducted.
(b) Western has all requisite power and authority to execute this Agreement
and the Ancillary Agreements and to consummate the transactions contemplated
thereby and hereby. The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary action on the part of Western. This Agreement has been duly
executed and delivered by Western and constitutes a legal, valid and binding
obligation of Western enforceable against it in accordance with its terms,
except as may be limited by applicable bankruptcy, insolvency, reorganization,
fraudulent conveyance or other similar laws affecting the enforcement of
creditors' rights generally, and except that the availability of equitable
remedies, including specific performance, may be subject to the discretion of
any court before which any proceedings may be brought.
(c) Except as set forth on Schedule 3.02(c), the execution, delivery and
performance by Western of this Agreement will not contravene, violate, result in
a breach of or constitute a default under (i) any provision of applicable law or
of the articles of incorporation or by-laws of Western, (ii) any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Western
or any of its properties or assets, or (iii) any material contract to which
Western is a party or by which Western or any of its properties is bound.
(d) Except as set forth on Schedule 3.02(d), no consent, approval, order,
authorization of, or registration, declaration or filing with, any Governmental
Entity is required in connection with the making or performance by Western of
this Agreement, subject to compliance with applicable securities laws.
ARTICLE IV
THE SPLIT-OFF
Section 4.01. Cooperation Prior to the Split-Off.
(a) Western and Westar shall cooperate in the preparation, filing and
mailing, as applicable, of the Split-Off S-4, the Information Statement and any
proxy statement that is required to be prepared in connection with the
Split-Off.
(b) Western and Westar shall cooperate in preparing, filing with the
Commission and causing to become effective any registration statements or
amendments thereto that are appropriate to reflect the establishment of or
amendments to any employee benefit and other plans contemplated by the Ancillary
Agreements.
(c) Western and Westar shall take all such action as may be necessary or
appropriate under the securities or blue sky laws of states or other political
subdivisions of the United States and shall use all commercially reasonable
efforts necessary to comply with all applicable foreign securities laws in
connection with the Split-Off or by the Ancillary Agreements.
(d) Westar shall prepare, file and pursue an application to permit the
listing of the Westar Common Stock to be distributed in the Split-Off on the
NYSE.
(e) Westar and Western shall execute and deliver each of the Ancillary
Agreements on or prior to the Separation Date or the Split-Off Date, as
applicable.
Section 4.02. Western Board Action; Conditions Precedent to the Split-Off.
Western's Board of Directors shall establish (or delegate authority to
establish) appropriate procedures in connection with the Split-Off. In no event
shall the Split-Off occur unless the following conditions shall have been
satisfied or waived by both parties:
(a) the Westar Common Stock shall have been registered under the Exchange
Act, and any registration statement required under the Securities Act for the
Split-Off shall be effective and shall not be the subject of any stop order or
proceeding by the Commission seeking a stop order;
(b) the Westar Common Stock to be delivered in the Split-Off shall have
been approved for listing on the NYSE, subject to official notice of issuance;
(c) each of the Western Board of Directors and the Westar Board of
Directors (i) shall have received an opinion, addressed and reasonably
satisfactory to each of them from an independent solvency firm selected by those
boards of directors, and (ii) shall otherwise be reasonably satisfied, (A) that
after giving effect to the Split-Off (x) neither Western nor Westar will be
insolvent or will have unreasonably small capital or assets with which to engage
in their respective businesses, and (y) each of Western and Westar will be able
to pay its respective debts as they become due in the usual course of business
and (B) that the Split-Off, when effected in accordance with the terms of this
Agreement and the Ancillary Agreements, shall have been effected in accordance
with the provisions of Kansas law relating to distributions and applicable
fraudulent transfer and fraudulent conveyance laws;
(d) each condition to the Merger set forth in the Merger Agreement shall
have been satisfied or waived (other than those conditions relating to the
Split-Off and those that are designed to be satisfied after the Split-Off);
(e) no temporary restraining order, preliminary or permanent injunction or
other order issued by any Governmental Entity of competent jurisdiction or other
legal restraint or prohibition preventing the consummation of the Split-Off
shall be in effect (each party agreeing to use all reasonable efforts to have
any such order reversed or injunction lifted) and all authorizations from
Governmental Entities and other consents required for the consummation of the
Split-Off shall have been obtained, including without limitation those listed in
Schedules 3.02(c) and 3.02(d);
(f) Westar shall be exempt from registration under the Investment Company
Act of 1940;
(g) Each of the Ancillary Agreements shall have been duly executed and
delivered by the parties thereto and such Ancillary Agreements shall be in full
force and effect; and
(h) Westar shall have been released from any obligations under the split
dollar life insurance policies described on Schedule 4.02 and any guarantee of
the financial obligations of Westar Generating, Inc.
Section 4.03. The Split-Off. Subject to the terms and conditions set forth
in this Agreement, the Split-Off shall be effected as of the Split-Off Time in
accordance with the Merger Agreement. Immediately prior to the Split-Off Time,
Western shall deliver to the Split-off Agent, for the benefit of the Western
Shareholders of record on the Spit-Off Record Date, a stock certificate or
certificates, endorsed by Western in blank, representing all of the then
outstanding shares of Westar Common Stock owned by Western. The Merger and
Split-Off shall be effected such that the Merger Consideration (as defined in
the Merger Agreement) and the Split-Off Consideration are payable only to the
same Western Shareholders.
Section 4.04. Fractional Shares. No certificates representing fractional
shares of Westar Common Stock will be distributed in the Split-Off. The
Split-Off Agent will be directed to determine the number of whole shares and
fractional shares of Westar Common Stock allocable to each Western Shareholder
of record as of the Split-Off Record Date. Upon the determination by the
Split-Off Agent of such number of fractional shares, as soon as practicable
after the Split-Off Date, the Split-Off Agent, acting on behalf of the holders
thereof, shall sell such fractional shares for cash on the open market in each
case at the then prevailing market prices and shall disburse to each holder
entitled thereto, in lieu of any fractional share, without interest, that
holder's ratable share of the proceeds of that sale, after making appropriate
deductions of the amount required, if any, to be withheld for United States
federal income Tax purposes.
ARTICLE V
INDEMNIFICATION AND OTHER MATTERS
Section 5.01. Westar Indemnification of Western Group.
(a) Subject to Section 5.03, from and after the Split-Off Date, Westar
shall indemnify, defend and hold harmless each member of the Western Group,
their Affiliates (including, for the avoidance of doubt, Parent) and their
respective officers, directors and employees (each, a "Western Indemnitee") from
and against any and all Damages incurred or suffered by any Western Indemnitee
arising out of (i) any and all Westar Group Liabilities other than those
relating to Taxes, (ii) the breach by any member of the Westar Group of any
obligation under this Agreement, and (iii) any Western Officer Loan Liability.
Notwithstanding anything to the contrary contained in this Agreement, all
indemnities relating to Taxes or a breach of any obligation under the Tax
Disaffiliation Agreement shall be governed solely by the specific terms of the
Tax Disaffiliation Agreement.
(b) Subject to Section 5.03, from and after the Split-Off Date, Westar
shall indemnify, defend and hold harmless each Western Indemnitee and each
Person, if any, who controls any Western Indemnitee within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act from and
against any and all Damages caused by any untrue statement or alleged untrue
statement of a material fact contained in the Split-Off S-4 or Rights Offering
S-1 or any amendment thereof or the Information Statement, Proxy Statement or
Prospectus (in each case as amended or supplemented if Westar shall have
furnished any amendments or supplements thereto), or caused by any omission or
alleged omission to state therein a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except to the extent such Damages were caused by
information provided by any member of the Western Group specifically for
inclusion therein.
(c) Westar shall indemnify Western and Parent to the extent the Net Present
Value (as defined below) of (x) any Gross-Up Payments, (y) any other incremental
payments and benefits, net of any tax benefits to Western, Parent or any of
their Affiliates, made, or to be made, by Western under the Employment
Agreements to a covered employee (provided, however, that such incremental
payments or benefits result from both a termination of employment and a change
in control (as defined therein) occurring by reason of transactions contemplated
by the Merger Agreement (excluding any payments attributable to stock options,
restricted stock, restricted share units and other equity-based compensation)),
and (z) any incremental payments or benefits, net of any tax benefits to
Western, Parent or any of their Affiliates, that Western employees become
entitled to receive under the Western Executive Salary Continuation Plan solely
as a result of a change in control (as defined therein), exceeds (i) if there
are Gross-Up Payments (or additional Tax is due by Western attributable to the
loss of deduction under Section 280G of the Code for such payments),
$80,000,000, and (ii) if there are no Gross-Up Payments (and no additional Tax
is due by Western attributable to the loss of deduction under Section 280G of
the Code for such payments), $55,000,000. For purposes of clarification,
payments or benefits which were vested prior to the date of the change in
control (as defined in the applicable agreement or plan) or which are earned
after such date shall not be considered for purposes of this indemnification.
For purposes of this provision, Net Present Value determined under subsection
(z) above, shall be the amount necessary to purchase single premium annuities
from an insurance company with an A.M. Best rating of A+ or better to provide
the incremental benefits described in said subsection (z), and under subsections
(x) and (y) above shall be (I) for any single-sum payment or benefit made within
90 days after the Effective Date, the actual amount of the payment or benefit,
and (II) for any other payment or benefit, the amount determined using a
discount rate of 120% of the applicable federal rate and other reasonable
assumptions. Such Net Present Value shall initially be calculated (the "Employee
Payments Calculation") by Western prior to, but as of, the Effective Time
assuming (i) there will be no Gross-Up Payments (unless prior to the Effective
Date Western, Westar and PNM mutually agree otherwise), and (ii) Western will
receive a full tax benefit based on Western's top effective tax rates for
Western's tax year in which the Effective Date occurs. The Employee Payments
Calculation shall be delivered to Parent on or prior to the Cut-Off Date (as
defined in the Merger Agreement) and shall have sufficient detail to enable
Parent to ascertain whether or not such calculation was made in conformity with
the provisions of this Agreement. The notice and dispute provisions of Section
3.2(b)(ii) of the Merger Agreement applicable to the Adjustment Calculation (as
defined therein) shall also apply to the Employee Payments Calculation. If such
Gross-Up Payments assumption is Finally Determined to not have been correct, the
indemnification provided above shall be recalculated based on the corrected
assumptions. If as a result of such recalculation, Westar's indemnification
obligation under this Section 5.03(c) exceeds any prior amounts paid by Westar
pursuant to this Section 5.03(c), Westar shall pay to Western such excess amount
together with interest thereon at the rate of 120% of the applicable federal
rate (in effect on the Effective Date) for the period beginning on the Effective
Date and ending on the date such payment is made. The payment, if any, under the
prior sentence shall be made within 30 days of the date Finally Determined.
(d) Each of Western and Westar shall, and shall cause the other members of
their respective Groups and their respective Affiliates to, use reasonable
efforts in good faith (not extending, however, to any obligation to continue to
employ any person or to continue any employment benefit or compensation beyond
what the parties are otherwise obligated to do pursuant to this Agreement, the
other Split-Off Documents or the Merger Agreement) to avoid the imposition of
any Gross-Up Payments.
Section 5.02. Western Indemnification of Westar Group.
(a) Subject to Section 5.03, from and after the Split-Off Date, Western
shall indemnify, defend and hold harmless each member of the Westar Group, their
Affiliates and their respective officers, directors and employees (each, a
"Westar Indemnitee") from and against any and all Damages incurred or suffered
by any Westar Indemnitee arising out of (i) any and all Western Group
Liabilities other than those relating to Taxes and (ii) the breach by any member
of the Western Group of any obligation under this Agreement. Notwithstanding
anything to the contrary contained in this Agreement, all indemnities relating
to Taxes or a breach of any obligation under the Tax Disaffiliation Agreement
shall be governed solely by the specific terms of the Tax Disaffiliation
Agreement).
(b) Subject to Section 5.03, from and after the Split-Off Date, Western
shall indemnify, defend and hold harmless each Westar Indemnitee and each
Person, if any, who controls any Westar Indemnitee within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act from and
against any and all Damages caused by any untrue statement or alleged untrue
statement of a material fact contained in the Rights Offering S-1, the Split-Off
S-4 or any amendment thereof or the Information Statement, Proxy Statement or
Prospectus (in each case as amended or supplemented if Westar shall have
furnished any amendments or supplements thereto), or caused by any omission or
alleged omission to state therein a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, in each case to the extent, but only to the extent, that
those Damages are caused by any such untrue statement or omission or alleged
untrue statement or omission based upon information that is furnished to Westar
by Western or any of its Affiliates (other than any member of the Westar Group)
specifically for use therein.
(c) Except as provided in Section 5.01(c), Western shall indemnify each
member of the Westar Group for any and all Liabilities related to (i) any
Gross-Up Payments, (ii) any other payments made under the Employment Agreements
and (iii) any payments or benefits under the Western Executive Salary
Continuation Plan, including, without limitation any shareholder or other third
party Claims.
Section 5.03. Insurance and Third Party Obligations; Limitation on
Liability.
(a) Upon indemnification of an Indemnified Party (as defined below), the
Indemnifying Party shall be subrogated to the rights of the Indemnified Party
against the insurer, to the extent permitted by any applicable Policy, or other
third party (other than a third party which is a member of the same Group of
which the Indemnified Party is a member) with respect to such indemnified
amount. It is expressly agreed that no insurer or any other third party shall be
(i) entitled to a benefit it would not be entitled to receive in the absence of
the foregoing indemnification provisions, (ii) relieved of the responsibility to
pay any insured claims or any other claims to which it is obligated or (iii)
entitled to any subrogation rights with respect to any obligation hereunder.
(b) Each party shall use all commercially reasonable efforts to mitigate
its Damages and not to cause or worsen any Liability which would be a Liability
of the other party. If an Indemnified Party shall receive any amount of
insurance proceeds or any other amount from a third party in connection with a
specific Liability giving rise to indemnification hereunder (i) at any time
subsequent to the actual receipt of a payment in full indemnification of such
Liability hereunder, then such Indemnified Party shall reimburse the
Indemnifying Party for any such indemnification payment made up to the amount of
such insurance proceeds or other amounts actually received or (ii) at any time
prior to the receipt of any indemnification payment in respect of such Liability
hereunder, then the indemnification to be paid under Section 5.01 or 5.02 shall
be paid net of the amount of any such insurance proceeds or other amounts
actually received. Notwithstanding this Section 5.03, (x) in no event shall any
Indemnified Party be required (i) to take any action, or forebear from
exercising any right, under the Merger Agreement or any Split-Off Document or
(ii) to take any action with respect to, make any demand under or claim any
coverage in connection with, any Policy, and (y) nothing herein shall permit any
Indemnifying Party to delay or refrain from making any payment to any
Indemnified Party because of the availability or alleged availability of any
Policy or insurance proceeds (provided that the foregoing shall not limit the
subrogation rights of an Indemnifying Party under Section 5.03(a)).
Section 5.04. Notice and Payment of Claims. If any Western Indemnitee or
Westar Indemnitee (the "Indemnified Party") determines that it is or may be
entitled to indemnification by any party (the "Indemnifying Party") under this
Article V (other than in connection with any Action subject to Section 5.05),
the Indemnified Party shall deliver to the Indemnifying Party a written notice
specifying, to the extent reasonably practicable, the basis for its claim for
indemnification and the amount for which the Indemnified Party reasonably
believes it is entitled to be indemnified. Within 30 calendar days after receipt
of such notice, the Indemnifying Party shall pay the Indemnified Party such
amount in cash or other immediately available funds unless the Indemnifying
Party objects in writing to the claim for indemnification or the amount thereof.
Section 5.05. Notice and Defense of Third-Party Claims.
(a) Promptly (and in any event within 10 Business Days) following the
earlier of (i) receipt of notice, whether by service of process or otherwise, of
the commencement by a third party of any Action against or otherwise involving
any Indemnified Party or (ii) receipt of information from a third party alleging
the existence of a claim against an Indemnified Party, in either case, with
respect to which indemnification may be sought pursuant to this Agreement (a
"Third-Party Claim"), the Indemnified Party shall give the Indemnifying Party
written notice thereof. The failure of the Indemnified Party to give notice as
provided in this Section 5.05 shall not relieve the Indemnifying Party of its
obligations under this Agreement, except to the extent that the Indemnifying
Party is actually and materially prejudiced by such failure to give notice.
(b) Within 30 calendar days after receipt of notice from the Indemnified
Party pursuant to Section 5.05(a), the Indemnifying Party may (by giving written
notice thereof to the Indemnified Party) elect at its option to, and shall at
the request of the Indemnified Party, assume the defense of any Third-Party
Claim seeking monetary Damages at the Indemnifying Party's sole cost and expense
unless the Indemnifying Party objects in writing to such indemnification claim
(in which case the Indemnified Party may not require the Indemnifying Party to
assume the defense and the Indemnifying Party shall only assume the defense with
the consent of the Indemnified Party). During such 30-calendar day period,
unless and until the Indemnifying Party assumes the defense of such a
Third-Party Claim or objects in writing, the Indemnified Party shall take such
action as it deems appropriate, acting in good faith, and at Indemnifying
Party's expense in connection with such Third-Party Claim; provided, however,
that the Indemnified Party shall not settle or compromise, or make any offer to
settle or compromise, such Third-Party Claim without the prior written consent
of the Indemnifying Party (which shall not be unreasonably withheld); and
provided further, that in the event that a Third Party Claim seeks injunctive or
other non-monetary relief, the Indemnified Party shall be entitled to control
the defense of the Third Party Claim at the cost and expense of the Indemnifying
Party.
(c) If the Indemnifying Party assumes the defense of a Third-Party Claim,
(w) it shall keep the Indemnified Party timely informed of all significant
developments in connection therewith, (x) the defense shall be conducted by
counsel retained by the Indemnifying Party (which counsel shall be reasonably
satisfactory to the Indemnified Party), provided that the Indemnified Party
shall have the right to participate in such proceedings and to be represented by
counsel of its own choosing, and if such Third Party Claim only seeks monetary
Damages, such participation shall be at the Indemnified Party's sole cost and
expense; and (y) the Indemnifying Party may settle or compromise the Third-Party
Claim without the prior written consent of the Indemnified Party so long as such
settlement or compromise includes an unconditional release of the Indemnified
Party from all claims that are the subject of such Third-Party Claim, provided
that the Indemnifying Party may not agree to any such settlement or compromise
pursuant to which there is any finding or admission of any violation of Law or
pursuant to which any remedy or relief (including but not limited to the
imposition of a consent order, injunction or decree which would restrict the
future activity or conduct of the Indemnified Party or any Subsidiary or
Affiliate thereof), other than monetary damages for which the Indemnifying Party
shall be responsible hereunder, shall be applied to or against the Indemnified
Party, without the prior written consent of the Indemnified Party (which shall
not be unreasonably withheld).
(d) If the Indemnifying Party has not objected in writing to such
indemnification claim, and, if at the end of the 30-calendar day period referred
to in Section 5.05(b) the Indemnifying Party has not assumed the defense of such
claim, or, if earlier, beginning at such time as the Indemnifying Party has
declined in writing to assume the defense of a Third-Party Claim, (x) the
Indemnified Party will take such steps as it deems appropriate to defend that
Third-Party Claim and the defense shall be conducted by counsel retained by the
Indemnified Party, provided that the Indemnifying Party shall have the right to
participate in such proceedings and to be represented by counsel of its own
choosing at the Indemnifying Party's sole cost and expense; and (y) the
Indemnifying Party shall reimburse the Indemnified Party on a current basis (and
in any event within 30-calendar days after the submission of invoices and bills
by an Indemnified Party) for its expenses of investigation, attorneys' and
expert witnesses' fees and other out-of-pocket expenses incurred in defending
against such Third-Party Claim and the Indemnifying Party shall be bound by the
result obtained with respect thereto by the Indemnified Party; provided,
further, that the Indemnified Party shall not settle or compromise, or make any
offer to settle or compromise, the Third-Party Claim without the prior written
consent of the Indemnifying Party (which shall not be unreasonably withheld).
(e) The Indemnifying Party shall pay to (or at the direction of) the
Indemnified Party in cash the amount, if any, for which the Indemnified Party is
entitled to be indemnified hereunder within 15 calendar days after such Third
Party Claim has been Finally Determined, in the case of an indemnity claim as to
which the Indemnifying Party has acknowledged liability or, in the case of any
indemnity claim as to which the Indemnifying Party has not acknowledged
liability, within 15 calendar days after such Indemnifying Party's liability, if
any, hereunder has been Finally Determined.
(f) Notwithstanding any other provision of this Agreement, Western
acknowledges and agrees that following the Split-Off Time, Westar shall (solely
at its own cost and expense) assume and continue the defense of all the Westar
Litigation and that, as long as such settlement or compromise includes an
unconditional release of all Western Indemnitees, Westar shall be permitted to
settle or compromise such Actions without the consent of Western or any of its
Affiliates, provided that Westar may not agree to any such settlement or
compromise pursuant to which there is any finding or admission of any violation
of Law or pursuant to which any remedy or relief (including but not limited to
the imposition of a consent order, injunction or decree which would restrict the
future activity or conduct of the Western Indemnitees), other than monetary
damages for which the Westar Group shall be responsible hereunder, shall be
applied to or against any such Western Indemnitee, without the prior written
consent of such Western Indemnitee (which shall not be unreasonably withheld);
provided, further, that Westar shall use all commercially reasonable efforts to
defend any Western Indemnitee and to cause any Western Indemnitee to be
dismissed with prejudice as a party to any pending or future Westar Litigation
and, to the extent any Western Indemnitee believes, in its reasonable judgment,
that Westar has failed to diligently pursue such defense or dismissal, the
Western Indemnitee shall be entitled (at its own cost and expense) to
independently move for or otherwise pursue such defense or dismissal and to take
such related actions as it may deem necessary or appropriate in connection
therewith. Notwithstanding the foregoing, the parties may agree to allocate
costs and expenses in any other manner pursuant to a settlement to which Western
consents. Westar shall keep Western timely informed of all significant
developments with respect to the Westar Litigation to which any Western
Indemnitee is a party.
(g) Subject to Article VII, each party shall cooperate, and cause their
respective Representatives to cooperate, in the defense or prosecution of any
Third-Party Claim and shall furnish or cause to be furnished such records,
information and testimony, and attend such conferences, discovery proceedings,
hearings, trials or appeals, as may be reasonably requested in connection
therewith.
Section 5.06. Exclusivity of Remedies. The remedies provided for in this
Article V shall be the sole remedy for Damages incurred by an Indemnified Party
under this Agreement; provided, if the indemnification provided for in this
Article V is unavailable to any Indemnified Party (x) on the grounds that such
Indemnified Party was a former Affiliate of the Indemnifying Party or (y) on
other public policy grounds, then the Indemnifying Party shall pay to the
Indemnified Party's parent such amount that represents the diminution in value
to such parent as a result of the Indemnifying Party's inability to so indemnify
such Indemnified Party (provided that such amount shall not exceed the amount
that would otherwise have been payable by the Indemnifying Party to such
Indemnified Party in respect of such claim pursuant to this Article V).
ARTICLE VI
EMPLOYEE MATTERS AND TRANSITION SERVICES
Section 6.01. Employee Matters Generally. Prior to the Split-Off Date, the
employees of Westar shall be eligible to participate in all applicable employee
benefit plans on the same terms as provided by Western to its employees.
Section 6.02. Shared Services Matters Generally. With respect to the
provision of certain services by either Group to the other Group after the
Separation Time, the parties hereto agree as set forth herein and in the Shared
Services Agreement.
ARTICLE VII
ACCESS TO INFORMATION
Section 7.01. Provision of Corporate Records. Except as otherwise
specifically set forth in this Agreement or any Ancillary Agreement, immediately
prior to or as soon as practicable following the Split-Off Date, each Group
shall provide to the other Group all documents, Contracts, books, records and
data (including but not limited to minute books, stock registers, stock
certificates and documents of title) in its possession relating primarily to the
other Group or its business, assets and affairs (after giving effect to the
transactions contemplated hereby); provided that if any such documents,
Contracts, books, records or data relate to both Groups or the business and
operations of both Groups, each such Group shall provide to the other Group true
and complete copies of such documents, Contracts, books, records or data. Data
stored in electronic form shall be provided in the format in which it existed at
the Split-Off Date, except as otherwise specifically set forth in this Agreement
or any Ancillary Agreement.
Section 7.02. Access to Information. From and after the Split-Off Date and
for a reasonable period of time after the Split-Off Date, each Group shall,
afford promptly to the other Group and its accountants, counsel and other
designated Representatives reasonable access during normal business hours to all
documents, Contracts, books, records, computer data and other data in such
Group's possession relating to such other Group or the business and affairs of
such other Group (after giving effect to the transactions contemplated hereby)
(other than data and information subject to (i) an attorney/client or other
privilege that is not specifically subject to the provisions of this Article VII
or (ii) in the case of access provisions in any joint defense arrangements
between a member or members of one Group and a member or members of the other
Group, the terms of the relevant joint defense agreement), insofar as such
access is reasonably required by such other Group, including, without
limitation, for audit, accounting, litigation, regulatory compliance and
disclosure and reporting purposes.
Section 7.03. Litigation Cooperation. From and after the Split-Off Date:
(a) Each Group shall use all commercially reasonable efforts to make
available to the other Group and its accountants, counsel, and other designated
representatives, upon written request, its current and former directors,
officers, employees and representatives as witnesses, and shall otherwise
cooperate with the other Group, to the extent reasonably required in connection
with any Action or threatened Action arising out of either Group's business and
operations in which the requesting party may from time to time be involved.
(b) Each party hereto shall promptly notify the other party hereto, upon
its receipt or the receipt by any of its Affiliates, of a request or requirement
(by oral questions, interrogatories, requests for information or documents,
subpoenas, civil investigative demands or other similar processes) which relates
to the business and operations of the other party (a "Request") reasonably
regarded as calling for the inspection or production of any documents or other
information in its possession, custody or control, as received from any Person
that is a party in any Action, or in the event the Person delivering the Request
is not a party to such Action, as received from such Person. In addition to
complying with the applicable provisions of Section 7.06, each party shall
assert and maintain, or cause its Affiliates to assert and maintain, any
applicable claim to privilege, immunity, confidentiality or protection in order
to protect such documents and other information from disclosure, and shall seek
to condition any disclosure which may be required on such protective terms as
may be appropriate. No party may waive, undermine or fail to take any action
necessary to preserve an applicable privilege without the prior written consent
of the affected party hereto (or any affected Affiliate or Affiliates of any
such party) except, in the opinion of such party's counsel, as required by law.
(c) Each of Western, on its own behalf and on behalf of all members of the
Western Group, and Westar, on its own behalf and on behalf of all members of the
Westar Group, hereby waives any conflict which might preclude counsel currently
representing Western, Westar or any of their respective Affiliates from
representing Westar and/or any of its Affiliates following the Split-Off Date in
connection with the Westar Litigation existing at the Merger Effective Time.
(d) Western and Westar shall enter into such joint defense agreements, in
customary form, as Western and Westar shall determine are advisable.
Section 7.04. Reimbursement. Except to the extent that any member of one
Group is obligated to indemnify any member of the other Group under Article V
for that cost or expense, each Group providing information or witnesses to the
other Group, or otherwise incurring any expense in connection with cooperating,
under Sections 7.01, 7.02 or 7.03 shall be entitled to receive from the
recipient thereof, upon the presentation of invoices therefor, payment for all
out-of-pocket costs and expenses that may be incurred in providing such
information, witnesses or cooperation.
Section 7.05. Retention of Records. From and after the Split-Off Date,
except as otherwise required by law or agreed to in writing, each party shall,
and shall cause the members of its respective Group to, retain all information
relating to the other Group's business and operations in accordance with the
then general practice of such party with respect to information relating to its
own business and operations but in any event for not less than seven years from
the Separation Time. Notwithstanding the foregoing sentence, any party may
destroy or otherwise dispose of any such information at any time, provided that,
prior to such destruction or disposal, (i) such party shall provide not less
than 90 calendar days' prior written notice to the other party, specifying the
information proposed to be destroyed or disposed of and the scheduled date for
such destruction or disposal, and (ii) if the recipient of such notice shall
request in writing prior to the scheduled date for such destruction or disposal
that any of the information proposed to be destroyed or disposed of be delivered
to such requesting party, the party proposing the destruction or disposal shall
promptly arrange for the delivery of such of the information as was requested at
the expense of the requesting party.
Section 7.06. Confidentiality. From and after the Split-Off Date, each
party shall hold and shall cause its Affiliates and their respective directors,
officers, employees, counsel, accountants, agents, consultants, advisors and
other authorized representatives ("Representatives") to hold in strict
confidence all documents and other information (other than any such documents
and other information relating solely to the business or affairs of such party)
concerning the other party and/or its Affiliates ("Confidential Information")
unless such party is compelled to disclose such documents and/or other
information by judicial or administrative process or, in the opinion of its
counsel, by other requirements of law or the rules of any applicable stock
exchange. Confidential Information shall not include such documents and/or other
information which can be shown to have been (A) in the public domain through no
fault of such party, (B) lawfully acquired after the Split-Off Date on a
non-confidential basis from other sources or (C) acquired or developed
independently by such party without violating this Section 7.06 or the
Confidentiality Agreements. Notwithstanding the foregoing, such party may
disclose such Confidential Information to its Representatives so long as such
Persons are informed by such party of the confidential nature of such
Confidential Information and are directed by such party to treat such documents
and/or other information confidentially. In the event that such party or any of
its Representatives is requested or required (by oral questions,
interrogatories, requests for information or documents, subpoenas, civil
investigative demands or other similar processes) to disclose any of the
Confidential Information, such party will promptly notify the other party so
that the other party may seek a protective order or other remedy or waive such
party's compliance with this Section 7.06. Such party shall exercise all
commercially reasonable efforts necessary to preserve the confidentiality of the
Confidential Information, including, but not limited to, by cooperating with the
other party to obtain an appropriate protective order or other reliable
assurance that confidential treatment will be accorded the Confidential
Information. If, in the absence of a protective order or other remedy or the
absence of receipt of a waiver of the other party, such party or any of its
Representatives is nonetheless legally compelled to disclose any of the
Confidential Information, such party or such Representative may disclose only
that portion of the Confidential Information which is legally required to be
disclosed. Such party agrees to be responsible for any breach of this Section
7.06 by it and/or its Representatives.
Section 7.07. Preservation of Privilege. The parties hereto recognize that
as a consequence of the transactions contemplated by this Agreement or the
Merger Agreement or the Ancillary Agreements, the parties may have common
interests in the defense of certain pending or threatened litigation which may
necessitate the exchange between the parties or their counsel of documents or
other information that is subject to the attorney-client privilege, the work
product doctrine or other legally recognized privileges, protections or
immunities from discovery. Each party agrees to take in addition to, and not in
limitation of, its obligations under Section 7.03(b) all commercially reasonable
efforts necessary to protect and maintain, and to cause its Affiliates to
protect and maintain, any applicable claim to privilege, immunity, protection or
confidentiality in order to protect such documents and other information from
improper disclosure or use. In addition to, and not in limitation of, its
obligations under Section 7.03(b) and without limiting the generality of the
foregoing, and to the maximum extent permitted by law, none of the parties or
their respective Affiliates may waive or undermine, or fail to defend in a
commercially reasonable manner, any privilege or protection or take or fail to
take any other commercially reasonable action (a) that could result in the
disclosure of any common-interest or joint-defense materials to any Person that
is neither a party to this Agreement nor an Affiliate of any such party or (b)
that would have the effect of waiving or undermining such privilege or
protection, in either case, without the prior written consent of the affected
party and any affected Affiliate of such affected party.
Section 7.08. Inapplicability of Article VII to Tax Matters.
Notwithstanding anything to the contrary in this Article VII, this Article VII
shall not apply with respect to documents, other information and/or other
matters relating to Taxes, all of which shall be governed by the Tax
Disaffiliation Agreement.
ARTICLE VIII
CERTAIN OTHER AGREEMENTS
Section 8.01. Use of Proceeds and Intercompany Matters.
(a) Except as otherwise specifically set forth herein or in any of the
Ancillary Agreements or in the Merger Agreement, effective as of the Split-Off
Time, all intercompany accounts receivable and accounts payable relating to (i)
any of the contracts and other arrangements specified in Section 5.1(u) of the
Company Disclosure Letter and (ii) Western's tax sharing and allocation policy
(Western Accounting Manual Section No. 6.90), (other than those governed by the
Tax Disaffiliation Agreement) (i) that were not fully paid, satisfied or
discharged upon or prior to the Separation Time (if earlier than the Split-Off
Time) or (ii) that arose or were incurred after the Separation Time and prior to
the Split-Off Time shall be paid in full, in cash or other immediately available
funds, by the party or parties owing such obligation on or prior to the
Split-Off Time.
(b) Except as otherwise contemplated hereby or as set forth on Schedule
8.01(b) or in any of the other Ancillary Agreements or in the Merger Agreement,
all prior agreements and arrangements, including those relating to goods, rights
or services provided or licensed, between any member of the Westar Group and any
member of the Western Group will terminate on or prior to the Split-Off Time.
Section 8.02. Trademarks; Trade Names.
(a) On or prior to the Separation Time, Western and Westar will enter into
the Trademark Assignment Agreement.
(b) From and after the Split-Off Date, each member of the Western Group
shall discontinue its use of the Westar name and logo and shall, as necessary,
change the name of any Western Subsidiary that incorporates the Westar name;
provided however, each member of the Western Group shall have a non-exclusive
license to use the flying star logo described in Exhibit 1.01(b) (i) with
respect to materials and supplies, until such materials and supplies are
consumed in the ordinary course of business and (ii) with respect to each piece
of equipment, building or other physical asset, until such asset is replaced or
repainted in the ordinary course of business, and such logo shall not be used by
any member of the Western Group for any purpose for which it is not currently
used. From and after the Split-Off Date, each member of the Starco group will
discontinue its use of the Western Resources name and logo and shall, as
necessary, change the name of any Starco Subsidiary that incorporates the
Western Resources name.
Section 8.03. Further Assurances and Consents. In addition to the actions
specifically provided for elsewhere in this Agreement, each of the parties
hereto shall use all commercially reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things, reasonably
necessary, proper or advisable under applicable laws, regulations and agreements
or otherwise to consummate and make effective the transactions contemplated by
this Agreement, including, without limitation, using all commercially reasonable
efforts to obtain any consents and approvals and to make any filings and
applications necessary or desirable in order to consummate the transactions
contemplated by this Agreement; provided that no party hereto shall be obligated
to pay any consideration therefor (except for filing fees and other similar
charges) to any third party from whom such consents or approvals are requested
or to take any action or omit to take any action if the taking of or the
omission to take such action would be materially and unreasonably burdensome to
the party, its Group or its Group's business. The parties agree to enter into
and execute such additional Split-Off Documents as may be reasonably necessary,
proper or advisable to effect the transactions contemplated by this Agreement or
the Ancillary Agreements, provided, however, that such additional Split-Off
Documents shall not diminish any of the rights granted or increase any of the
Liabilities assumed under this Agreement or the Ancillary Agreements.
Section 8.04. Third Party Beneficiaries. Parent shall be a third party
beneficiary of this Agreement. Except as contemplated in the preceding sentence,
nothing contained in this Agreement is intended to confer upon any Person or
entity other than the parties hereto, Parent, and their respective successors
and permitted assigns any benefit, right or remedies under or by reason of this
Agreement, except that the provisions of Article V shall inure to the benefit of
the Westar Indemnitees and the Western Indemnitees.
Section 8.05. Intellectual Property Rights and Licenses. Western shall take
all action necessary prior to the Split-Off Time to permit members of the Westar
Group to use the software set forth on Schedule 8.05 in the same manner as such
software is being used by members of the Westar Group for the term of the Shared
Services Agreement. Except as otherwise specifically set forth in this Agreement
or in any of the other Ancillary Agreements, neither Group shall have any right
or license in or to any technology, software, Intellectual Property Right or
other proprietary right owned, licensed or held for use by the other Group.
Section 8.06. Insurance Claims. At the Split-Off Time, Western shall assign
to Westar all rights to payments for claims related to the Westar Business and
covered by the Group Policies insofar as such payments relate to claims based on
occurrences prior to the Split-Off Time. Without the prior written consent of
Westar, both prior to and after the Split-Off Time, Western will take no action
that could adversely affect the coverage provided by the Group Policies nor will
Western fail to act with knowledge that such failure could adversely affect the
coverage provided by the Group Policies. Westar shall be responsible for
acquiring such insurance coverage as it deems necessary for periods after the
Split-Off Time.
ARTICLE IX
MISCELLANEOUS
Section 9.01. Notices. All notices and other communications to any party
hereunder shall be in writing (including telecopy or similar writing) and shall
be deemed given when received addressed as follows:
If to Western to:
Western, Inc.
818 South Kansas Avenue
Topeka, Kansas 66612
Telecopy (785) 575-1936
Attention: General Counsel
With copies to:
LeBoeuf, Lamb, Greene & MacRae
125 West 55th Street
New York, New York 10019
Telecopy: (212) 424-8500
Attention: William S. Lamb, Esq. and Benjamin G. Clark, Esq.
If to PNM, to:
Public Service Company of New Mexico
Alvarado Square
Albuquerque, New Mexico 87158
Telecopy: (505) 241-2368
Attention: Chief Financial Officer
With a copy to:
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
Attention: Timothy Michael Toy, Esq.
Stephen R. Rusmisel, Esq.
Telecopy: (212) 858-1500
If to Westar, to:
Westar
818 South Kansas Avenue
Topeka, Kansas 66612
Telecopy: (785) 575-1936
Attention: President
With a copy to:
LeBoeuf, Lamb, Greene & MacRae
125 West 55th Street
New York, New York 10019
Telecopy: (212) 424-8500
Attention: William S. Lamb, Esq. and
Benjamin G. Clark, Esq.
Any party may, by written notice so delivered to the other parties, change
the address to which delivery of any notice shall thereafter be made.
Section 9.02. Amendments; No Waivers.
(a) Any provision of this Agreement may be amended or waived if, and only
if, such amendment or waiver is in writing and signed, in the case of an
amendment, by Western and Westar, or in the case of a waiver, by the party
against whom the waiver is to be effective. In addition, unless the Merger
Agreement shall have been terminated in accordance with its terms, any such
amendment or waiver that is adverse in interest to any member of the Western
Group shall be subject to the written consent of Parent.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
Section 9.03. Expenses.
(a) All costs and expenses incurred by Western or Westar in connection with
the consummation of the Rights Offering (including the fees and expenses of all
counsel, accountants and financial and other advisors of both Groups in
connection therewith, and all expenses in connection with preparation, filing
printing and mailing of the prospectus used in the Rights Offering, the Rights
Offering S-1 and any filing necessary to register the Westar Common Stock under
the Exchange Act) shall be netted against the proceeds of the Rights Offering,
and all costs and expenses incurred by Western or Westar in connection with the
preparation execution and delivery of the Ancillary Agreements and the
consummation of the Split-Off and the other transactions contemplated hereby and
therein (including the fees and expenses of all counsel, accountants and
financial and other advisors of both Groups in connection therewith, and all
expenses in connection with preparation, filing printing and mailing of the
Split-Off S-4 the Information Statement and the Proxy Statement) shall be paid
by Western.
(b) Each reference in this Agreement to expenses, fees and out-of-pocket
costs shall mean such expenses, fees and out-of-pocket costs as the party
incurring such expenses, fees or out-of-pocket costs would reasonably incur in
connection with its own business under circumstances where such expenses, fees
and out-of-pocket costs are not subject to reimbursement.
Section 9.04. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns; provided that neither party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the prior written consent of the other party, which consent
shall not be unreasonably withheld, and unless the Merger Agreement shall have
been terminated in accordance with its terms, any such assignment shall require
the written consent of Parent. If any party or any of its successors or assigns
(i) shall consolidate with or merge into any other Person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or
(ii) shall transfer all or substantially all of its properties and assets to any
Person, then, and in each such case, proper provisions shall be made so that the
successors and assigns of such party shall assume all of the obligations of such
party under each of the Split-Off Documents.
Section 9.05. Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York, applicable to
contracts to be performed wholly in such State.
Section 9.06. Counterparts; Effectiveness. This Agreement may be signed in
any number of counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
a counterpart hereof signed by the other party hereto.
Section 9.07. Entire Agreement. This Agreement, the Merger Agreement, the
Confidentiality Agreements and the other Split-Off Documents constitute the
entire understanding of the parties with respect to the subject matter hereof
and thereof and supersede all prior agreements, understandings and negotiations,
both written and oral, between the parties with respect to the subject matter
hereof and thereof. No representation, inducement, promise, understanding,
condition or warranty not set forth herein or in the Confidentiality Agreements,
the Merger Agreement or the other Split-Off Documents has been made or relied
upon by any party hereto. To the extent that the provisions of this Agreement
are inconsistent with the provisions of any other Ancillary Agreement, the
provisions of such other Ancillary Agreement shall prevail.
Section 9.08. Tax Disaffiliation Agreement; Set-Off; Payment of After-Tax
Amounts; Certain Transfer Taxes.
(a) Except as otherwise specifically provided herein and not inconsistent
with the Tax Disaffiliation Agreement, this Agreement shall not govern any Tax
matters, and any and all claims, losses, damages, demands, costs, expenses or
liabilities relating to Taxes shall be exclusively governed by the Tax
Disaffiliation Agreement.
(b) If Western, Westar or any of their respective post-Separation
Affiliates makes a payment pursuant to Section 5.01 or 5.02 of this Agreement,
then (i) to the extent not already taken into account pursuant to the terms of
this Agreement, such payment shall be reduced as provided in Section 5(f) of the
Tax Disaffiliation Agreement if such payment gives rise to any Tax Asset (as
such term is defined in the Tax Disaffiliation Agreement), and (ii) such Person
shall also pay the recipient of such payment the related After-Tax Amount (as
defined in the Tax Disaffiliation Agreement). This Section 9.08(b) shall be
interpreted in accordance with the principles set forth in the Tax
Disaffiliation Agreement and shall be subject to the dispute resolution
provisions contained in Section 15 of the Tax Disaffiliation Agreement.
(c) Except as otherwise provided in the Tax Disaffiliation Agreement, all
transfer, documentary, sales, use, stamp and registration taxes and fees
(including any penalties and interest) incurred in connection with any of the
transactions described in Article II of this Agreement shall be borne and paid
50% by Western and 50% by Westar. The party that is required by applicable law
to file any Return (as defined in the Tax Disaffiliation Agreement) or make any
payment with respect to any of those taxes shall do so, and the other party
shall cooperate with respect to that filing or payment as necessary. If Westar
is required to make any payment, Western shall reimburse Westar in accordance
with this Section 9.08, as appropriate, within 5 Business Days after it receives
notice of the payment of those taxes. If Western is required to make any
payment, Westar shall reimburse Western in accordance with this Section 9.08(c),
as appropriate, within 5 Business Days after it receives notice of the payment
of those taxes. This Section 9.08(c) shall be interpreted in accordance with the
principles set forth in the Tax Disaffiliation Agreement and shall be subject to
the dispute resolution provisions contained in Section 15 of the Tax
Disaffiliation Agreement.
Section 9.09. Jurisdiction. Except as otherwise expressly provided in this
Agreement, any Action seeking to enforce any provision of, or based on any
matter arising out of or in connection with, this Agreement or the transactions
contemplated hereby may be brought in any U.S. federal or state court sitting in
Kansas, and each of the parties hereby consents to the jurisdiction of such
courts (and of the appropriate appellate courts therefrom) in any such Action
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such Action
in any such court or that any such Action which is brought in any such court has
been brought in an inconvenient forum. Process in any such Action may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 9.01 shall be deemed
effective service of process on such party.
Section 9.10. Pre-Litigation Dispute Resolution. Prior to the bringing of
any Action against the other, senior officers of Western and Westar shall
confer, consult and in good faith attempt for a period of 30 calendar days to
resolve any dispute between such parties relating to this Agreement or any of
the Ancillary Agreements (other than the Tax Disaffiliation Agreement) without
resort to legal remedies; provided that nothing in this Section 9.10 shall
prohibit any party hereto or its Affiliates from bringing any Action if such
party determines that any delay could reasonably be expected to prejudice such
party's rights owing to any applicable statute of limitations or similar legal
or equitable bar.
Section 9.11. Severability. If any one or more of the provisions contained
in this Agreement should be declared invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining provisions
contained in this Agreement shall not in any way be affected or impaired thereby
so long as the economic or legal substance of the transactions contemplated
hereby is not affected in any manner materially adverse to any party. Upon such
a declaration, the parties shall modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner so
that the transactions contemplated hereby are consummated as originally
contemplated to the fullest extent possible.
Section 9.12. Survival. All covenants and agreements of the parties
contained in this Agreement and the Confidentiality Agreements shall survive the
Split-Off Date indefinitely, unless a specific survival or other applicable
period is expressly set forth therein.
Section 9.13. Captions. The captions herein are included for convenience of
reference only and shall be ignored in the construction or interpretation
hereof.
Section 9.14. Specific Performance. Each party to this Agreement
acknowledges and agrees that monetary damages for a breach or threatened breach
of any of the provisions of this Agreement would be inadequate and irreparable
harm would occur. In recognition of this fact, each party agrees that, if there
is a breach or threatened breach, in addition to any monetary damages, the other
nonbreaching party to this Agreement, without posting any bond, shall be
entitled to seek and obtain equitable relief in the form of specific
performance, temporary restraining order, temporary or permanent injunction,
attachment, or any other equitable remedy which may then be available to
obligate the breaching party (i) to perform its obligations under this Agreement
or (ii) if the breaching party is unable, for whatever reason, to perform those
obligations, to take any other actions as are necessary, advisable or
appropriate to give the other party to this Agreement the economic effect which
comes as close as possible to the performance of those obligations (including,
but not limited to, transferring, or granting liens on, the assets of the
breaching party to secure the performance by the breaching party of those
obligations).
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the date first above
written.
WESTERN RESOURCES, INC.
By: /s/ David C. Wittig
----------------------------------------
David C. Wittig
Chairman of the Board, President and
Chief Executive Officer
WESTAR INDUSTRIES, INC.
By: /s/ Paul R. Geist
----------------------------------------
Paul R. Geist
President
Exhibit 99.3
FINAL FORM
FORM OF STOCKHOLDER AGREEMENT
between
Westar Industries, Inc.,
a Kansas corporation
and
HVOLT Enterprises, Inc.,
a Delaware corporation
Dated as of [ ], 200_
TABLE OF CONTENTS
Page
Article I Certain Definitions.................................................1
Article II Representations and Warranties.....................................6
Section 2.1 Representations and Warranties of the Company................6
Section 2.2 Representations and Warranties of the Stockholder............6
Article III Stockholder and Company Conduct...................................7
Section 3.1 Standstill Provision.........................................7
Section 3.2 Required Reduction of Ownership Percentage...................8
Section 3.3 Top-Up Rights................................................8
Section 3.4 Restrictions on Transfer.....................................8
Section 3.5 Buy-Back Options............................................10
Section 3.6 Charter and By-laws.........................................11
Section 3.7 Rights Agreement............................................11
Section 3.8 Taxes Upon Conversion or Exchange...........................11
Section 3.9 Prohibition on Senior Securities............................11
Section 3.10 Section 203 of the DGCL.....................................12
Article IV Board Representation and Voting....................................12
Section 4.1 Directors Designated by the Stockholder.....................12
Section 4.2 Resignation of Stockholder Nominees.........................14
Section 4.3 Voting......................................................14
Article V Effectiveness and Termination......................................16
Section 5.1 Effectiveness...............................................16
Section 5.2 Termination.................................................16
Article VI Miscellaneous.....................................................16
Section 6.1 Compliance With Law.........................................16
Section 6.2 Regulatory Matters..........................................16
Section 6.3 Injunctive Relief...........................................17
Section 6.4 Successors and Assigns......................................17
Section 6.5 Amendments; Waiver..........................................17
Section 6.6 Notices.....................................................17
Section 6.7 APPLICABLE LAW..............................................18
Section 6.8 Headings....................................................18
Section 6.9 Integration.................................................19
Section 6.10 Severability................................................19
Section 6.11 Consent to Jurisdiction.....................................19
Section 6.12 Counterparts................................................19
EXHIBIT A Stockholder Nominee Notice
This STOCKHOLDER AGREEMENT dated as of [ ], 200__ (this "Agreement") is
between HVOLT Enterprises, Inc. a Delaware corporation (the "Company"), and
Westar Industries, Inc., a Kansas corporation (the "Stockholder").
WITNESSETH:
WHEREAS, the Company, Western Resources, Inc., a Kansas corporation
("WRI"), Public Service Company of New Mexico, a New Mexico corporation ("PNM"),
HVK, Inc., a Kansas corporation and a wholly owned subsidiary of the Company and
HVNM, Inc., a New Mexico corporation and wholly owned subsidiary of the Company
have entered into an Agreement, dated as of November 8, 2000, (the "Merger
Agreement"), pursuant to which WRI will become a wholly owned subsidiary of the
Company (the "Merger") and pursuant to which the Stockholder has acquired
Beneficial Ownership (as defined in Article I hereof) of 55,000,000 shares of
common stock of the Company, par value $.001 per share (the "Common Stock") and
up to shares of Series ____ Convertible Preferred Stock of the Company, par
value $.001 per share the "Convertible Preferred Stock");
WHEREAS, prior to the consummation of the Merger (the "Closing"), the
Company and the Stockholder desire to establish in this Agreement certain terms
and conditions concerning the acquisition and disposition of securities of the
Company by the Stockholder, and related provisions concerning the Stockholder's
relationship with and investment in the Company; and
WHEREAS, concurrently with the execution and delivery hereof, the Company
and the Stockholder are entering into a Registration Rights Agreement, dated as
of the date hereof (the "Registration Rights Agreement"):
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth herein and for other good and valuable consideration, receipt and
sufficiency of which is hereby acknowledged, the parties hereto hereby agree as
follows:
Article I
Certain Definitions
Section 1.1 In addition to other terms defined elsewhere in this Agreement,
as used in this Agreement, the following terms shall have the meanings ascribed
to them below:
"Affiliate" shall mean, with respect to any person, any other person that
directly or indirectly through one or more intermediaries controls or is
controlled by or is under common control with such person. For the purposes of
this definition, "control," when used with respect to any particular person,
means the power to direct the management and policies of such person, directly
or indirectly, whether through the ownership of voting securities, by contract
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agreement" shall have the meaning assigned to such term in the
introduction hereto.
"Beneficial Owner" (and, with correlative meanings, "Beneficially Own" and
"Beneficial Ownership") of any interest means a Person who, together with his or
its Affiliates, is or may be deemed a beneficial owner of such interest for
purposes of Rule 13d-3 or 13d-5 under the Exchange Act, or who, together with
his or its Affiliates, has the right to become such a beneficial owner of such
interest (whether such right is exercisable immediately or only after the
passage of time) pursuant to any agreement, arrangement or understanding, or
upon the exercise, conversion or exchange of any warrant, right or other
instrument, or otherwise.
"Board" shall mean the Board of Directors of the Company in office at the
applicable time, as elected in accordance with the Charter and By-laws of the
Company and with the provisions of this Agreement.
"Buy-Back Offer" shall have the meaning assigned to such term in Section
3.7(a) hereof.
"By-laws" shall mean the by-laws of the Company, in the form specified in
the Merger Agreement, as they may be amended from time to time.
"Change in Control" shall mean the occurrence of any one of the following
events:
(1) any Person (other than the Stockholder Group) becoming the
Beneficial Owner, directly or indirectly, of Voting Securities, pursuant to
the consummation of a merger, consolidation, sale of all or substantially
all of the Company's assets, share exchange or similar form of corporate
transaction involving the Company or any of its subsidiaries that requires
the approval of the Company's stockholders, whether for such transaction or
the issuance of securities in such transaction, so as to cause such
Person's Voting Ownership Percentage to exceed the Control Percentage (as
defined below); provided, however, that the event described in this
paragraph (1) shall not be deemed to be a Change in Control if it occurs as
the result of any of the following acquisitions: (A) by any employee
benefit plan sponsored or maintained by the Company or any Affiliate, or
(B) by any underwriter temporarily holding securities pursuant to an
offering of such securities;
(2) the consummation of a merger, consolidation, sale of all or
substantially all of the Company's assets, share exchange or similar form
of corporate transaction involving the Company or any of its subsidiaries
that requires the approval of the Company's stockholders, whether for such
transaction or the issuance of securities in such transaction, unless
immediately following such transaction more than 50% of the total voting
power of (x) the corporation resulting from such transaction, or (y) if
applicable, the ultimate parent corporation that directly or indirectly has
Beneficial Ownership of 100% of the voting securities eligible to elect
directors of such resulting corporation, is represented by Voting
Securities that were outstanding immediately prior to such transaction (or,
if applicable, shares into which such Voting Securities were converted
pursuant to such transaction), and such voting power among the holders of
such Voting Securities that were outstanding immediately prior to such
transaction is in substantially the same proportion as the voting power of
such Voting Securities among the holders thereof immediately prior to such
transaction; or
(3) the consummation of a plan of complete liquidation or dissolution
of the Company.
"Charter" shall mean the Certificate of Incorporation of the Company, in
the form specified in the Merger Agreement, as it may be amended from time to
time.
"Clearly Credible Tender Offer" shall mean any bona fide offer, tender
offer or exchange offer that is subject to Section 14 of the Exchange Act, other
than any such offer with respect to which (i) the Board of Directors of the
Company is advised in writing by outside counsel of recognized standing that the
consummation of such offer would be in violation of applicable law, or (ii) the
party making such offer has not obtained as of the date of the commencement of
such offer definitive commitment letters from reputable financial institutions
in customary form with respect to the financing of such offer.
"Closing" shall have the meaning assigned in the second recital of this
Agreement.
"Commission" shall mean the United States Securities and Exchange
Commission.
"Common Stock" shall have the meaning assigned in the first recital of this
Agreement.
"Company" shall have the meaning assigned in the introduction of this
Agreement.
"Company Repurchase Notice" shall have the meaning assigned in Section
3.5(b) hereof.
"Control Percentage" shall mean a Voting Ownership Percentage of 15%.
"Conversion" shall mean the conversion of shares of Convertible Preferred
Stock into shares of Common Stock pursuant to the Charter.
"Convertible Preferred Stock" shall have the meaning assigned in the first
recital of this Agreement.
"DGCL" shall have the meaning assigned in Section 3.6 hereof.
"Director" shall mean any member of the Board of Directors of the Company
in office at the applicable time, as elected in accordance with the provisions
of the By-laws of the Company.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Independent Director" shall mean any person who is not a Stockholder
Nominee and is independent of and otherwise unaffiliated with any member of the
Stockholder Group, and who is not a director, officer, employee, consultant or
advisor (financial, legal or other) of any member of the Stockholder Group and
has not served in any such capacity in the previous three (3) years; provided
that any consultant or advisor that has not provided $60,000 or more per annum
of services to the Company in the current or previous two years shall be deemed
an Independent Director for purposes of this Agreement.
"Initial Stockholder Nominee Notice" shall have the meaning assigned in
Section 4.1(b) of this Agreement.
"Initial Stockholder Nominees" shall have the meaning assigned in Section
4.1(b) of this Agreement.
"Maximum Ownership Percentage" shall mean, calculated at a particular point
in time, a Total Ownership Percentage equal to the Total Ownership Percentage at
the time of the Closing.
"Merger" shall have the meaning set forth in the first recital of this
Agreement.
"Merger Agreement" shall have the meaning set forth in the first recital of
this Agreement.
"1935 Act" shall mean the Public Utility Holding Company Act of 1935, as
amended.
"Nominating Committee" shall mean the committee comprised of members of the
Board whose functions include recommendations to the Board of nominees for
election as directors. In the event there shall not be such a committee,
"Nominating Committee" shall mean the Board itself.
"NYSE" shall mean the New York Stock Exchange Inc.
"Person" shall mean any individual, partnership, joint venture,
corporation, trust, unincorporated organization, government or department or
agency of a government.
"Registration Rights" shall mean the rights and obligations of the
Stockholder Group and the corresponding rights and obligations of the Company
set forth in the Registration Rights Agreement.
"Registration Rights Agreement" shall have the meaning assigned in the
third recital of this Agreement.
"Repurchase" shall have the meaning assigned in Section 3.5(a) of this
Agreement.
"Sale Notice" shall have the meaning assigned in Section 3.4(b)(i) of this
Agreement.
"Sale Option" shall have the meaning assigned in Section 3.4(b) of this
Agreement.
"Sale Period" shall have the meaning assigned in Section 3.4(b)(ii) of this
Agreement.
"Sale Securities" shall have the meaning assigned in Section 3.4(b)(i) of
this Agreement.
"Securities" shall mean any equity securities of the Company.
"Securities Act" shall mean the Securities Act of 1993, as amended.
"Seller" shall have the meaning assigned in Section 3.4 of this Agreement.
"Stockholder" shall have the meaning assigned in the introduction to this
Agreement, as well as any successor to the rights and obligations to the holder
of Securities hereunder.
"Stockholder Affiliate" shall mean any Affiliate of the Stockholder.
"Stockholder Group" shall mean the Stockholder, any Stockholder Affiliate
and any Person with whom any Stockholder or any Affiliate of any Stockholder is
part of a 13D Group.
"Stockholder Nominees" shall have the meaning set forth in Section 4.1(d)
of this Agreement.
"Successor Stockholder Nominee Notice" shall have the meaning assigned in
Section 4.1(d) of this Agreement.
"Successor Stockholder Nominees" shall have the meaning assigned in Section
4.1(d) of this Agreement.
"13D Group" shall mean any group of Persons acquiring, holding, voting or
disposing of any Voting Security which would be required under Section 13(d) of
the Exchange Act and the rules and regulations thereunder to file a statement on
Schedule 13D with the Commission as a "person" within the meaning of Section
13(d)(3) of the Exchange Act.
"Total Ownership Percentage" shall mean, calculated at a particular point
in time, the Voting Power which would be represented by the Securities
Beneficially Owned by the Person whose Total Ownership Percentage is being
determined if all shares of Convertible Preferred Stock (or other Securities
convertible into Voting Securities) Beneficially Owned by such Person were
converted into shares of Common Stock (or other Voting Security).
"Total Voting Power" shall mean, calculated at a particular point in time,
the aggregate Votes represented by all then outstanding Voting Securities.
"Transfer" shall mean any sale, transfer, pledge, encumbrance or other
disposition to any Person, and to "Transfer" shall mean to sell, transfer,
pledge, encumber or otherwise dispose of to any Person.
"Transferee" shall mean any person to whom Voting Securities are
Transferred.
"Unrestricted Ownership Percentage" shall mean a Voting Ownership
Percentage of 9.9%.
"Votes" shall mean votes entitled to be cast generally in the election of
Directors, not including the votes that would be able to be cast by holders of
shares of Convertible Preferred Stock upon Conversion to shares of Common Stock
unless such Conversion shall occur or be deemed to occur.
"Voting Ownership Percentage" shall mean, calculated at a particular point
in time, the Voting Power represented by the Voting Securities Beneficially
Owned by the Person whose Voting Ownership Percentage is being determined.
"Voting Power" shall mean, calculated at a particular point in time, the ratio,
expressed as a percentage, of (a) the Votes represented by the Voting Securities
with respect to which the Voting Power is being determined to (b) Total Voting
Power.
"Voting Securities" shall mean the Common Stock and shares of any other
class of capital stock of the Company then entitled to vote generally in the
election of Directors, and shall not include Convertible Preferred Stock (or
other Securities convertible into Voting Securities) prior to Conversion into
Common Stock (or other Voting Security).
Article II
Representations and Warranties
Section 2.1 Representations and Warranties of the Company. The Company
represents and warrants to the Stockholder as of the date hereof as follows:
(a) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the state of its incorporation
and has all necessary corporate power and authority to enter into this Agreement
and to carry out its obligations hereunder.
(b) This Agreement has been duly and validly authorized by the Company and
all necessary and appropriate action has been taken by the Company to execute
and deliver this Agreement and to perform its obligations hereunder.
(c) This Agreement has been duly executed and delivered by the Company and
assuming due authorization and valid execution and delivery by the Stockholder,
this Agreement is a valid and binding obligation of the Company, enforceable in
accordance with its terms.
Section 2.2 Representations and Warranties of the Stockholder. The
Stockholder represents and warrants to the Company as of the date hereof as
follows:
(a) The Stockholder has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the state of its incorporation
and has all necessary corporate power and authority to enter into this Agreement
and to carry out its obligations hereunder.
(b) This Agreement has been duly and validly authorized by the Stockholder
and all necessary and appropriate action has been taken by the Stockholder to
execute and deliver this Agreement and to perform its obligations hereunder.
(c) This Agreement has been duly executed and delivered by the Stockholder
and assuming due authorization and valid execution and delivery by the Company,
this Agreement is a valid and binding obligation of the Stockholder, enforceable
in accordance with its terms.
(d) As of the effectiveness of this Agreement, the Stockholder Group
Beneficially Owns [_________] shares of Common Stock and [___________] shares of
Convertible Preferred Stock and does not Beneficially Own any other Voting
Security, warrant, option, convertible security or other similar right to
acquire Common Stock or shares of any other class of capital stock of the
Company which are entitled to vote generally in the election of directors.
Article III
Stockholder and Company Conduct
Section 3.1 Standstill Provision. Subject to the provisions of this
Agreement, during the term of this Agreement, the Stockholder agrees with the
Company that, without the prior approval of a majority of the Board, the
Stockholder will not, and will cause each Stockholder Affiliate not to, take any
of the following actions:
(a) singly or as part of a partnership, limited partnership, syndicate or
other 13D Group, directly or indirectly, acquire Beneficial Ownership of any
Voting Security so as to cause the Stockholder Group's Voting Ownership
Percentage to exceed the Unrestricted Ownership Percentage; or
(b) singly or as part of a partnership, limited partnership, syndicate or
other 13D Group, directly or indirectly, acquire, propose to acquire, or
publicly announce or otherwise disclose an intention to propose to acquire, or
offer or agree to acquire, by purchase or otherwise, Beneficial Ownership of any
Security so as to cause the Stockholder Group's Total Ownership Percentage to
exceed the Maximum Ownership Percentage; or
(c) deposit (either before or after the date of the execution of this
Agreement) any Security in a voting trust or subject any Security to any similar
arrangement or proxy with respect to the voting of such Security; or
(d) make, or in any way participate, directly or indirectly, in any
"solicitation" of "proxies", or become a "Participant" in a "solicitation" (as
such terms are used in Regulation 14A under the Exchange Act) to seek to advise
or influence any person to vote against any proposal or director nominee
recommended to the stockholders of the Company or any of its subsidiaries by at
least a majority of the Board of Directors; or
(e) form, join or in any way participate in a 13D Group with respect to any
Security of the Company or any securities of its subsidiaries; or
(f) commence (including by means of proposing or publicly announcing or
otherwise disclosing an intention to propose, solicit, offer, seek to effect or
negotiate) a merger, acquisition or other business combination transaction
relating to the Company; or
(g) initiate a "proposal," as such term is used in Rule 14a-8 under the
Exchange Act, "propose", or otherwise solicit the approval of, one or more
stockholders for a "proposal" or induce or attempt to induce any other person to
initiate a "proposal"; or
(h) otherwise act, alone or in concert with others, to seek to control or
influence the management, the Board or policies of the Company; or
(i) take any other action to seek or effect control of the Company other
than in a manner consistent with the terms of this Agreement.
This Section 3.1 shall not be interpreted to restrict the Stockholder or
any Stockholder Affiliate from taking any action or exercising any right
consistent with the terms of this Agreement, including engaging in private and
confidential discussions with the Board or the management of the Company. In
addition, this section shall not be deemed to restrict the Stockholder Nominees
from participating as board members in the direction of the Company.
Section 3.2 Required Reduction of Ownership Percentage. If at any time the
Stockholder becomes aware that the Stockholder Group's Total Ownership
Percentage exceeds the Maximum Ownership Percentage (other than as a result of
action on the part of the Company or any of its Affiliates), then the
Stockholder shall, or shall cause the Stockholder Affiliates to, consistent with
the provisions of Section 3.4 of this Agreement, promptly take all action
necessary to reduce the amount of Securities Beneficially Owned by the
Stockholder Group such that the Stockholder Group's Total Ownership Percentage
is not greater than the Maximum Ownership Percentage.
Section 3.3 Top-Up Rights. (a) During the term of this Agreement, if the
Stockholder Group's Voting Ownership Percentage falls below the Unrestricted
Ownership Percentage, the Stockholder may purchase Voting Securities from time
to time in the open market or otherwise in an amount sufficient in order to
restore the Stockholder Group's Voting Ownership Percentage to the Unrestricted
Ownership Percentage.
(b) All Securities acquired by purchase pursuant to this Section 3.3 shall
be subject to the terms of this Agreement.
Section 3.4 Restrictions on Transfer. None of the members of the
Stockholder Group shall directly or indirectly Transfer any Securities without
the prior written consent of a majority of the Independent Directors, except the
following Transfers:
(a) Transfers of Securities representing Voting Power (assuming the
conversion of all Convertible Preferred Stock to be transferred) of less than
5.0% to any Transferee, without prior notice to the Company, so long as such
Transferee and any Affiliate of such Transferee and any such person who is a
member of a 13D Group with such Transferee does not have a Voting Ownership
Percentage (assuming the conversion of all Convertible Preferred Stock to be
transferred) of 5.0% or more immediately after giving effect to such Transfer.
(b) Transfers of Securities representing Voting Power (assuming the
conversion of all Convertible Preferred Stock to be transferred) of 5.0% or more
pursuant to the following procedure (the "Sale Option"):
(i) If a member of the Stockholder Group (the "Seller") determines
that it wishes to seek a buyer for any of the Securities in a transaction
that would result in a purchaser other than a member of the Stockholder
Group holding 5.0% or more of the Voting Power (assuming the conversion of
all Convertible Preferred Stock to be transferred), Seller shall provide
written notice (a "Sale Notice") of its intention to sell such Securities
(the "Sale Securities"). The Sale Notice shall specify the number of Sale
Securities and the cash price per share at which the Company or its
designee may purchase the Sale Securities.
(ii) The Company shall give notice to the Seller within 15 days of
receiving the Sale Notice of whether the Company intends to purchase the
Sale Securities, and if the Company elects to purchase such Sale
Securities, the Company shall have a period ending on the later of fifteen
(15) days after the date of the Sale Notice and five (5) days from the date
of receipt of all necessary regulatory approvals (the "Sale Period")
(provided, that in no event shall the Sale Period exceed one hundred eighty
(180) days) within which to effect a closing of the Company's or its
designee's purchase of all, but not less than all, of the Sale Securities.
(iii) If the Company or its designee shall not give the Seller notice
of its election to purchase the Sale Securities within the specified period
or shall for any reason fail to effect a closing of the purchase of all of
the Sale Securities within the Sale Period, the Seller shall have the
right, for a period of one year following such notice of election not to
purchase or failure to purchase, to sell all or part of such Sale
Securities to any other person for a price equal to or exceeding the price
specified in the Sale Notice; provided however that before the Seller may
sell the Sale Securities to any such person pursuant to this Section
3.4(b), such person shall have entered into a stockholders agreement
containing substantially the same terms as this Agreement, except for
Sections 4.1 and 4.2 hereto.
(c) Transfers of Securities to the public in a bona fide underwritten
offering pursuant to the Registration Rights Agreement; provided, however, that
the Seller and the representative or representatives of the underwriters
previously agree in writing with the Company that all reasonable efforts will be
made to achieve a wide distribution of the Voting Securities in such offering
and to ensure that no Transferee in such offering acquires for its own account
Beneficial Ownership of Securities representing upon Transfer Voting Power of
3.0% or more.
(d) Direct or indirect transfers of all or part of the Stockholder Group's
Securities pursuant to a distribution of Securities among the stockholders of
the Stockholder on either a pro rata basis or a basis otherwise designed to
widely distribute such Securities among the Stockholder's existing stockholders.
(e) Transfers of Securities among members of the Stockholder Group;
provided, however, that any such Transferee shall agree with the Company in
writing prior to each such transfer to be bound by the terms of this Agreement
with respect to its Beneficial Ownership of Securities, and that upon such
agreement such Transferee shall be considered the Stockholder for purposes of
this Agreement.
(f) Transfers in connection with a financing transaction in which the
Stockholder grants a security interest in or otherwise collateralizes a
financing with Securities; provided, however, that the lender in any such
transaction shall have entered into a stockholders agreement containing
substantially the same terms as this Agreement, except for Sections 4.1 and 4.2
hereto.
(g) If a Clearly Credible Tender Offer for the Company has been commenced,
at the Stockholder's option Transfers of Securities by means of tenders into
such Clearly Credible Tender Offer in an amount not exceeding the percentage (on
the basis of total Votes and assuming the conversion of all shares of
Convertible Preferred Stock into shares of Common Stock) of the Voting
Securities of which it is the Beneficial Owner equal to the highest percentage
(on the basis of total Votes) of the aggregate of all Voting Securities not
Beneficially Owned by any member of the Stockholder Group which has ever been
announced to have been tendered into such Clearly Credible Tender Offer.
Section 3.5 Buy-Back Options. (a) During the term of this Agreement, if the
Company purchases Securities from the public, whether by tender offer, open
market purchase or otherwise (a "Repurchase"), the Company shall
contemporaneously with the Repurchase offer to repurchase from the Stockholder
on the same terms and conditions, including price, as in the Repurchase, a
percentage (on the basis of total Votes and assuming the conversion of all
shares of Convertible Preferred Stock into shares of Common Stock) of those
Securities Beneficially Owned by the Stockholder equal to the percentage (on the
basis of total Votes and assuming the conversion of all shares of Convertible
Preferred Stock into shares of Common Stock) of Securities to be Repurchased
from the Beneficial Owners of Securities other than the Stockholder or any
Stockholder Affiliate (the "Buy-Back Offer"). The Stockholder may accept such
Buy-Back Offer in its sole discretion.
(b) The Company shall provide notice to the Stockholder of its intention to
engage in a Repurchase not less than 30 days in advance of the date on which the
Repurchase is to begin (the "Company Repurchase Notice"). The Stockholder must
provide notice to the Company within ten (10) days of receipt of the Company
Repurchase Notice of whether the Stockholder intends to accept the Buy-Back
Offer.
Section 3.6 Charter and By-laws. During the term of this Agreement the
Company shall not amend, alter or repeal, or propose the amendment, alteration
or repeal of, any provision of the Charter or the By-laws in any manner which is
inconsistent with the terms of this Agreement and which adversely affects the
rights of the Stockholder Group under the terms of this Agreement. If at any
time during the term of this Agreement the provisions of this Agreement shall
conflict with the provisions of the Charter and the By-laws, the provisions of
this Agreement shall, to the extent permitted by the Delaware General
Corporation Law (the "DGCL"), be controlling.
Section 3.7 Rights Arrangement. During the term of this Agreement, the
Company hereby agrees not to implement or amend any provision of any rights
agreement or similar form of stockholder rights or stockholder protective device
(a "Rights Arrangement") in any manner which is inconsistent with the terms of
this Agreement or the Merger Agreement and which adversely affects the rights of
the Stockholder Group under the terms of this Agreement; provided, however, that
this provision shall not preclude the Company from implementing a Rights
Arrangement in customary form for holding companies registered under the 1935
Act; provided, further, that such Rights Arrangement shall (i) exempt the
Stockholder from its provisions pursuant to which ownership of a beneficial
interest in the Company's securities affects the exercisability of the rights
and (ii) not apply to any person that acquires less than a 20% beneficial
ownership interest in the Company's voting securities.
Section 3.8 Taxes Upon Conversion or Exchange. The Company hereby agrees to
pay any and all stock transfer and documentary stamp taxes that may be payable
in respect of any issuance or delivery of (i) any shares of Convertible
Preferred Stock, (ii) any shares of Common Stock issued in a Conversion of
shares of Convertible Preferred Stock, or (iii) any exchange of shares of Common
Stock for shares of Convertible Preferred Stock, or certificates or instruments
evidencing any of such shares or securities. The Company shall not, however, be
required to pay any such tax which may be payable in respect of any transfer
involved in the issuance or delivery of shares of Common Stock in a Conversion
of shares of Convertible Preferred Stock in a name other than that in which the
shares of such Convertible Preferred Stock were registered.
Section 3.9 Prohibition on Senior Securities. During the term of this
Agreement, the Company hereby agrees that it shall not, except as may otherwise
be contemplated by this Agreement, create, authorize or reclassify any
authorized stock of the Company into (x) any class or series of the Company's
capital stock ranking prior to the Convertible Preferred Stock as to dividends
or as to distributions of assets upon liquidation, dissolution or winding up of
the Company, whether voluntary or involuntary, or (y) any class or series of the
Company's capital stock entitled to vote separately as a class on any matter
whatsoever, other than an amendment to the Charter which would have the effect
of modifying the voting powers, designations, preferences, rights and
qualifications, limitations or restrictions of such class or series so as to
affect the holders thereof adversely, or (z) any security convertible into
shares of any class or series described in (x) or (y) above.
Section 3.10 Section 203 of the DGCL. The Board of Directors of the Company
shall take such actions as are necessary to ensure that the provisions of
Section 203 of the DGCL shall not be applicable to the Stockholder.
Article IV
Board Representation and Voting
Section 4.1 Directors Designated by the Stockholder. (a) During the term of
this Agreement, the size of the Board shall be nine (9), ten (10) or twelve (12)
directorships. During the term of this Agreement, the Company agrees to not
cause or allow the size of the Board to be eleven (11) directorships.
Immediately following the Closing, if the size of the Board is nine (9) or ten
(10) directorships, the Board shall appoint as a Director one (1) Stockholder
Nominee (as defined in Section 4.1(b) below and in addition to any Directors
that may be appointed pursuant to Section 7.10(a) of the Merger Agreement) who
has been designated by the Stockholder in the Stockholder Nominee Notice (as
defined in Section 4.1(b) below and attached as Exhibit A hereto). If the size
of the Board, at the time of the Closing, is twelve (12) directorships, the
Board shall appoint as Directors two (2) Stockholder Nominees (in addition to
any Directors that may be appointed pursuant to the Merger Agreement) who have
been designated by the Stockholder in the Stockholder Nominee Notice. To the
closest extent possible, the Stockholder Nominee (and the nominees to be
appointed pursuant to Section 7.10(a) of the Merger Agreement) shall be placed
evenly in each class of Directors and, if more Stockholder Nominees are
appointed pursuant to this Section 4.1 than there are classes of Directors, then
the classes of Directors latest standing for election shall have placed in them
additional Stockholder Nominees, with one Director placed in each successive
class, so as to keep all classes as even as possible with respect to the number
of Stockholder Nominees in each. In the event of a vacancy caused by the
disqualification, removal, resignation or other cessation of service of any
Stockholder Nominee from the Board, the Board shall elect as a Director (to
serve the balance of the predecessor nominee's term) a new Stockholder Nominee
who has been designated by the Stockholder in an additional Stockholder Nominee
Notice that has been provided to the Company at least seven (7) days prior to
the date of a regular meeting of the Board. In the event that the Size of the
Board is, at the time of the Closing, nine (9) or ten (10) directorships, and is
subsequently during the term of this Agreement, expanded to twelve (12)
directorships, then, upon such expansion, the Board shall appoint as an
additional Director, a Stockholder Nominee who has been designated by the
Stockholder in a Stockholder Nominee Notice. Such additional Director shall be
placed in the class of Directors latest standing for election, provided,
however, that if placing such additional Director in such class would cause the
classes of Directors then existing to have a differential in number of
Stockholder Nominees therein in excess of one (1), then such additional
Directors shall be placed in such classes so as to cause such differential to be
one (1) or less.
(b) The Stockholder shall provide notice to the Company (the "Stockholder
Nominee Notice") as required by Section 4.1(a) above, which notice shall contain
the following information: (i) the name of the person(s) it has designated to
become Director(s) (the "Stockholder Nominees"), and (ii) all information
required by Item 5(b) of Schedule 14A under the Exchange Act with respect to
each such Stockholder Nominee.
(c) During the term of this Agreement, at each annual meeting of
stockholders of the Company at which the term of any Stockholder Nominee is to
expire or (ii) a vacancy is caused by the removal, resignation, retirement,
death, disability or disqualification or other cessation of service of any
Stockholder Nominee, the Stockholder shall provide notice to the Company in
writing ninety (90) days prior to the date of the proxy statement for the prior
year's annual meeting of the Company's stockholders ("Successor Stockholder
Nominee Notice"), indicating (x) the name of the person(s) it has designated to
become Director(s) ("Successor Stockholder Nominees" and together with
Stockholder Nominees, "Stockholder Nominees"), if any, (y) the class of
Directors to which each such Successor Stockholder Nominee shall be assigned,
and (z) all information required by Regulation 14A and Schedule 14A under the
Exchange Act with respect to each such Successor Stockholder Nominee.
(d) The Stockholder shall consult with the Company in connection with the
identity of any proposed Stockholder Nominee. In the event the Company is
advised in writing by its outside counsel that a proposed Stockholder Nominee
would not be qualified under the Company's Charter or By-laws or any applicable
statutory or regulatory standards to serve as a Director, or if the Company
otherwise reasonably objects to a proposed Stockholder Nominee, including
without limitation because such Stockholder Nominee either (i) is a director or
officer of a direct competitor of the Company, (ii) does not satisfy the good
faith reasonable criteria for Board membership of PNM in effect as of the date
of the Merger Agreement, or (iii) has engaged in any adverse conduct that would
require disclosure under Item 7 of Schedule 14A promulgated under the Exchange
Act, the Stockholder agrees to withdraw such proposed Stockholder Nominee and
nominate a replacement therefor (which replacement would be subject to the
requirements of this Section 4.1(e)). Any such objection by the Company must be
made no later than one (1) month after the Stockholder first informs the Company
of the identity of the proposed Stockholder Nominee; provided, however, that the
Company shall in all cases notify the Stockholder of any such objection
sufficiently in advance of the date on which proxy materials are mailed by the
Company in connection with such election of directors to enable the Stockholder
to propose an alternate Stockholder Nominee pursuant to and in accordance with
the terms of this Agreement. Stockholder Nominees may not be officers or
employees of the Stockholder.
(e) During the term of this Agreement the Company agrees to include each
Stockholder Nominee to be added to or retained on the Board pursuant to this
Agreement in the slate of nominees recommended by the Board to the Company's
stockholders for election as Directors and shall use its best efforts to cause
the election or reelection of each such Stockholder Nominee to the Board,
including soliciting proxies in favor of the election of such persons.
(f) During the term of this Agreement, the Stockholder shall be entitled to
designate each Stockholder Nominee (including the Directors that may be
appointed by the Stockholder pursuant to the Merger Agreement) to be a member of
one committee of the Board (including without limitation the executive
committee, the audit committee and the executive compensation committee),
provided however, that if all such Stockholder Nominees are designated to serve
on a committee at a time when an executive committee does not exist, then if an
executive committee is so formed, the Stockholder shall be entitled to designate
one Stockholder Nominee to serve on such committee in addition to serving on the
committee on which such Stockholder Nominee serves at such time.
Section 4.2 Resignation of Stockholder Nominees. Unless otherwise agreed by
the Company, the Stockholder shall cause each of the Stockholder Nominees then
serving on the Board to offer their resignations from the Board immediately upon
the earlier to occur of the following:
(a) The termination of this Agreement pursuant to and in accordance with
Section 5.2 hereof; and
(b) The Stockholder Group's Total Ownership Percentage falling below 10%.
Section 4.3 Voting. During the term of this Agreement, the Stockholder, as
a holder of shares of Voting Securities, agrees that:
(a) The Stockholder shall, and shall cause each Stockholder Affiliate to,
be present, in person or by proxy, at all meetings of stockholders of the
Company such that the percentage of the total number of Voting Securities having
voting rights which are Beneficially Owned by the Stockholder and the
Stockholder Affiliates which are counted for the purpose of determining the
presence of a quorum at such meetings shall be equal to the percentage of Voting
Securities Beneficially Owned by other than the Stockholder or the Stockholder
Affiliate which are present, in person or by proxy, at such meeting of
stockholders of the Company, and which are counted for the purpose of
determining the presence of a quorum at such meetings.
(b) With respect to all matters submitted to a vote of the Company's
stockholders during the term of this Agreement, the Stockholder and each member
of the Stockholder Group shall vote all Voting Securities which are counted for
the purpose of determining the presence of a quorum at a meeting of stockholders
in accordance with Section 4.3(a) hereof, with respect to all matters voted on
by the stockholders of the Company (whether at a regular or special meeting or
pursuant to a unanimous written consent) in the same proportion as all Voting
Securities (other than those Beneficially Owned by the Stockholder or the
Stockholder Affiliate) are voted with respect to such matters.
(c) Each Transferee of any Voting Securities who acquires such Voting
Securities, directly or indirectly, from the Stockholder or any member of the
Stockholder Group agrees that:
(i) The Transferee shall be present, in person or by proxy, at all
meetings of stockholders of the Company so that all Voting Securities
having voting rights which are Beneficially Owned by the Transferee may be
counted for the purpose of determining the presence of a quorum at such
meetings.
(ii) (A) With respect to the election of Directors, the Transferee
shall vote all Voting Securities Beneficially Owned by the Transferee in
favor of the election of all candidates for Director nominated by the
Company's Board (including the Stockholder Nominees) and (B) with respect
to any proposal initiated by a stockholder of the Company relating to any
matter (other than nonbinding precatory resolutions with respect to which
subsection (iii) hereof shall apply), the Transferee shall vote all Voting
Securities Beneficially Owned by the Transferee in accordance with the
recommendation of the Board.
(iii) The Transferee shall vote as requested by a majority of the
Board on compensatory stock plans submitted to stockholders of the Company
for their approval, provided that (i) the Transferee shall not be obligated
to so vote if the stock plan at issue involves the potential issuance of
more than 5% of the equity securities of the Company, on a fully diluted
basis, and (ii) the Transferee shall not be obligated to so vote if the
aggregate of all such plans involves the potential issuance of more than 5%
of the equity securities of the Company, on a fully diluted basis, in any
rolling five-year period.
(iv) With respect to all other matters submitted to a vote of the
Company's stockholders during the term of this Agreement, (i) the
Transferee may vote in its sole discretion a number of Voting Securities
Beneficially Owned by the Transferee having voting rights with respect to
such other matters representing in the aggregate a Voting Ownership
Percentage not in excess of the Unrestricted Ownership Percentage, and (ii)
the Transferee shall vote all Voting Securities Beneficially Owned by the
Transferee having voting rights with respect to such other matters
representing in the aggregate a Voting Ownership Percentage in excess of
the Unrestricted Ownership Percentage in the same proportion (based on
total Votes) as all Voting Securities voted on any such other matter are
voted by the stockholders of the Company other than the Transferee,
provided, however, that the Transferee may vote any or all of the Voting
Securities Beneficially Owned by it in its sole discretion with respect to
a vote of the Company's stockholders on any transaction or series of
transactions which would, if consummated, constitute a Change in Control of
the Company.
(v) At all times the Transferee may exercise in its sole discretion
such voting rights as the Convertible Preferred Stock may have from time to
time pursuant to the Charter and with respect to an amendment to the
Charter which would have the effect of modifying the voting powers,
designations, preferences, rights and qualifications, limitations or
restrictions of such class or series so as to affect the holders thereof
adversely.
Article V
Effectiveness and Termination
Section 5.1 Effectiveness. This Agreement shall take effect immediately
upon the Closing and shall remain in effect until it is terminated pursuant to
Section 5.2 hereof.
Section 5.2 Termination. Unless otherwise agreed in writing by the
Stockholder, this Agreement shall terminate upon the earliest to occur of the
following:
(a) The Company's failure to pay the stated quarterly dividend on any
series of Convertible Preferred Stock in any four (4) quarters during the term
of this Agreement.
(b) The election to the Board of a majority of Directors other than those
nominated by the Nominating Committee of the Board.
(c) The size of the Board being increased to more than twelve (12)
directors.
(d) The Stockholder Group's Total Ownership Percentage falling below 10%
for a period of 365 consecutive days.
(e) Any material breach of this Agreement by the Company, provided that the
Company has not cured the breach within sixty (60) days after receiving notice
of such breach, or if cure within such time is not possible, the Company has not
made reasonable good faith efforts to cure such breach, provided, further that
in no event shall such cure period extend longer than ninety (90) days from the
date of first notice of such breach.
(f) Mutual written agreement of the Company and the Stockholder at any time
to terminate this Agreement, which termination shall occur at a time to be fixed
in such mutual agreement.
Article VI
Miscellaneous
Section 6.1 Compliance With Law. Notwithstanding anything to the contrary
in this Agreement, no Transfer of Securities shall be deemed to be required or
permitted pursuant to this Agreement if such Transfer would require regulatory
approvals which, individually or in the aggregate with respect to such Transfer,
would have a material adverse impact on the Company or any of its subsidiaries
or the Stockholder or any Stockholder Affiliate.
Section 6.2 Regulatory Matters. During the term of this Agreement, the
Company agrees to take all commercially reasonable steps to assist the
Stockholder in securing such regulatory approvals as would not reasonably be
expected to have a material adverse effect on the Company and as may be
necessary to allow the Stockholder to exercise its rights under the Agreement at
all times, including without limitation the right of the Stockholder to Transfer
Securities free of the restrictions and limitations imposed by Section 6.1.
Section 6.3 Injunctive Relief. Each party hereto acknowledges that it would
be impossible to determine the amount of damages that would result from any
breach of any of the provisions of this Agreement and that the remedy at law for
any breach, or threatened breach, of any of such provisions would likely be
inadequate and, accordingly, agrees that each other party shall, in addition to
any other rights or remedies which it may have, be entitled to seek such
equitable and injunctive relief as may be available from any court of competent
jurisdiction to compel specific performance of, or restrain any party from
violating, any of such provisions. In connection with any action or proceeding
for injunctive relief, each party hereto hereby waives the claim or defense that
a remedy at law alone is adequate and agrees, to the maximum extent permitted by
law, to have each provision of this Agreement specifically enforced against him
or it, without the necessity of posting bond or other security against him or
it, and consents to the entry of injunctive relief against him or it enjoining
or restraining any breach or threatened breach of such provisions of this
Agreement.
Section 6.4 Successors and Assigns. This Agreement shall be binding upon,
shall inure to the benefit of and shall be enforceable by the Company and by the
Stockholder and their respective successors and permitted assigns, and no such
term or provision is for the benefit of, or intended to create any obligations
to, any other Person.
Section 6.5 Amendments; Waiver. (a) This Agreement may be amended only by
an agreement in writing executed by the parties hereto. Any approval of an
amendment of this Agreement upon the part of the Company shall require the
approval of a majority of the Independent Directors at a duly convened meeting
thereof or all of the Company's directors by written consent thereto.
(b) Either party may waive in whole or in part any benefit or right
provided to it under this Agreement, such waiver being effective only if
contained in a writing executed by the waiving party. No failure by any party to
insist upon the strict performance of any covenant, duty, agreement or condition
of this Agreement or to exercise any right or remedy consequent upon breach
thereof shall constitute a waiver of any such breach or of any other covenant,
duty, agreement or condition, nor shall any delay or omission of either party to
exercise any right hereunder in any manner impair the exercise of any such right
accruing to it thereafter. Any waiver of any benefit or right provided to the
Company under this Agreement shall require the approval of a majority of the
Board and a majority of the Independent Directors at a duly convened meeting
thereof or all of the Company's directors by written consent thereto.
Section 6.6 Notices. Except as otherwise provided in this Agreement, all
notices, requests, claims, demands, waivers and other communications hereunder
shall be in writing and shall be deemed to have been duly given when delivered
by hand, when delivered personally or by courier, three days after being
deposited in the mail (registered or certified mail, postage prepaid, return
receipt requested), or when received by facsimile transmission if promptly
confirmed by one of the foregoing means, as follows:
If to the Company:
Public Service Company or New Mexico and
HVOLT Enterprises, Inc.
Alvarado Square,
Albuquerque, NM 87158
Attention: Chief Financial Officer
Fax: (505) 241-2368
with a copy to:
Winthrop, Stimson, Putnam & Roberts
One Battery Park Plaza
New York, New York 10004
Attention: Timothy Michael Toy, Esq.
Stephen R. Rusmisel, Esq.
Fax: (212) 858-1500
If to the Stockholder:
Westar Industries, Inc.
818 South Kansas Avenue
Topeka, KS 66612
Attention: President
Fax: (785) 575-1936
with a copy to:
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, New York 10019
Attention: William S. Lamb, Esq.
Benjamin G. Clark, Esq.
Fax: (212) 424-8500
or to such other address or facsimile number as either party may, from time to
time, designate in a written notice given in a like manner.
Section 6.7 APPLICABLE LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE WITHOUT
GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW.
Section 6.8 Headings. The descriptive headings of the several sections in
this Agreement are for convenience only and do not constitute a part of this
Agreement and shall not be deemed to limit or affect in any way the meaning or
interpretation of this Agreement.
Section 6.9 Integration. This Agreement and the other writings referred to
herein or delivered pursuant hereto which form a part hereof contain the entire
understanding of the parties with respect to its subject matter. This Agreement
supersedes all prior agreements and understandings between the parties with
respect to its subject matter. There are no restrictions, agreements, promises,
representations, warranties, covenants or undertakings with respect to its
subject matter other than those expressly set forth or referred to herein.
Section 6.10 Severability. If any term or provision of this Agreement or
any application thereof shall be declared or held invalid, illegal or
unenforceable, in whole or in part, whether generally or in any particular
jurisdiction, such provision shall be deemed amended to the extent, but only to
the extent, necessary to cure such invalidity, illegality or unenforceability,
and the validity, legality and enforceability of the remaining provisions, both
generally and in every other jurisdiction, shall not in any way be affected or
impaired thereby.
Section 6.11 Consent to Jurisdiction. In connection with any suit, claim,
action or proceeding arising out of this Agreement, the Stockholder and the
Company each hereby consent to the in personam jurisdiction of the United States
federal courts and state courts located in Topeka, Kansas; the Stockholder and
the Company each agree that service in the manner set forth in Section 6.5
hereof shall be valid and sufficient for all purposes; and the Stockholder and
the Company each agree to, and irrevocably waive any objection based on forum
non conveniens or venue not to, appear in any United States federal court state
court located in Topeka, Kansas.
Section 6.12 Counterparts. This Agreement may be executed by the parties
hereto in two or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the Company and the Stockholder have caused this
Agreement to be duly executed by their respective authorized officers as of the
date set forth at the head of this Agreement.
HVOLT ENTERPRISES, INC.
By:_____________________________
Name:
Title:
WESTAR INDUSTRIES, INC.
By:_____________________________
Name:
Title:
EXHIBIT A
Stockholder Nominee Notice
This Stockholder Nominee Notice is provided to HVOLT Enterprises, Inc. (the
"Company") by Westar Industries, Inc., (the "Stockholder") pursuant to Sections
4.1(a) and (b) of the Stockholder Agreement, dated as of [ ], 200_, between the
Stockholder and the Company. Additional sheets may be attached hereto as
necessary to answer each item below.
1. The Stockholder hereby designates the person set forth below (the
"Stockholder Nominee") to be a director of the Company:
Name: ________________________
Principal occupation or employment: ________________________________________
________________________________________
Principal business of the organization ________________________________________
by which ______________ is employed:
________________________________________
Mailing address: ________________________________________
________________________________________
________________________________________
Tel:____________________________________
Principal Business Address of
employer specified above: ________________________________________
________________________________________
________________________________________
________________________________________
Tel:____________________________________
2. Except as set forth below, the Stockholder Nominee has/has not, during the
past ten years, been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
(If answer is positive):
Dates: ___________________________
Nature of Conviction: ________________________________________
________________________________________
________________________________________
________________________________________
Name and location of
court: ________________________________________
________________________________________
________________________________________
________________________________________
Penalty imposed or other
disposition ________________________________________
________________________________________
________________________________________
________________________________________
3. The Stockholder Nominee beneficially owns, directly or indirectly, the
following securities of the Company:
Description of Security Quantity Owned
- ----------------------- --------------
- ------------------------------------------------- ----------------------
- ------------------------------------------------- ----------------------
- ------------------------------------------------- ----------------------
4. The Stockholder Nominee owns of record, but not beneficially, the following
securities of the Company:
Description of Security Quantity Owned
- ----------------------- --------------
- ------------------------------------------------- ----------------------
- ------------------------------------------------- ----------------------
- ------------------------------------------------- ----------------------
5. During the past two years, the Stockholder Nominee has purchased or sold
securities of the Company as set forth below:
Description of Security Date Purchased Date Sold
- ----------------------- -------------- ---------
- ----------------------- ---------------------- ----------------------
- ----------------------- ---------------------- ----------------------
- ----------------------- ---------------------- ----------------------
6. Of the securities described above, the following parts of the purchase price
or market value of the shares specified is represented by funds borrowed or
otherwise obtained for the purpose of acquiring or holding such securities:
Description of Security Amount of Indebtedness
- ----------------------- ----------------------
- ----------------------- ----------------------
- ----------------------- ----------------------
7. If the funds described above were borrowed or obtained otherwise than
pursuant to a margin account or bank loan in the regular course of business of a
bank, broker or dealer, a brief description of the transaction, including the
names of the parties, is set forth immediately below:
Description of Security
- -----------------------
- -----------------------
Description of Transaction
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
8. Within the past year, the Stockholder Nominee was/was not a party to any
contract, arrangements or understandings with any person with respect to any
securities of the Company, including, but not limited to joint ventures, loan or
option arrangements, puts or calls, guarantees against loss or guarantees of
profit, division of losses or profits, or the giving or withholding of proxies.
If the Stockholder Nominee has been such a party, a description of the
parties to such contracts, arrangements or understandings is set forth below:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
9. The Stockholder Nominee's associates beneficially own, directly or
indirectly, the following securities of the Company:
Description of
Associate Name Address Security Amount Owned
- ---------------- --------------- --------------- -----------------
- ---------------- --------------- --------------- -----------------
- ---------------- --------------- --------------- -----------------
- ---------------- --------------- --------------- -----------------
10. The Stockholder Nominee beneficially owns, directly or indirectly, the
following amounts of each class of securities of any parent or subsidiary of the
Company:
Description of Security Quantity Owned
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11. Set forth below is a description of any transaction, or series of similar
transactions, since the beginning of the Company's last fiscal year, or any
currently proposed transaction, or series of similar transactions, to which the
Company or any of its subsidiaries was or is to be a party, in which the amount
involved exceeds $60,000 and in which the Stockholder Nominee had, or will have,
a direct or indirect material interest, including a description of the nature of
the Stockholder Nominee's interest in the transaction(s), the amount of such
transaction(s) and, where practicable, the amount of such person's interest in
the transaction(s):
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12. Except as set forth below, neither the Stockholder Nominee (nor any
associate of the Stockholder Nominee) has any arrangement or understanding with
any person with respect to any future employment by the Company or its
affiliates or with respect to any future transactions to which the Company or
any of its affiliates will or may be a party:
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Submitted by:
Westar Industries, Inc.
By: _______________________________
Name: _______________________________
Title: _______________________________
Date: _______________________________
Exhibit 99.4
FORM OF
WESTERN RESOURCES, INC.
Certificate of Designations
for a Series of Preference Stock
designated as "7.5% Convertible Preference Stock"
(this "Certificate")
Pursuant to Section 17-6401(g) of the General
Corporation Code of the State of Kansas
Western Resources, Inc., a corporation of the State of Kansas (formerly
named "The Kansas Power and Light Company") (hereinafter called the
"Corporation"), by the President and Chief Executive Officer, an officer
authorized to exercise the duties ordinarily exercised by a Vice President, and
an Assistant Secretary, DOES HEREBY CERTIFY that the Board of Directors of the
Corporation, at a meeting duly convened and held on November 8, 2000, at which a
quorum was present and acting throughout, duly and unanimously adopted the
following resolutions authorizing the issuance of a series of the Corporation's
Preference Stock, and fixing the designations, preferences and relative,
participating, optional and other rights and the qualifications, limitations and
restrictions thereof other than those which would apply to all series of
Preference Stock of the Corporation as follows:
BE IT RESOLVED, that a new series of the Preference Stock, without par
value, of the Corporation be, and it hereby is, established;
FURTHER RESOLVED, that the following be, and it hereby is, a statement
of the designation and the powers, preferences and rights, and the
qualifications, limitations and restrictions, of such series, subject to
the provisions set forth in the Restated Articles of Incorporation of the
Corporation, as heretofore amended (the "Articles") (capitalized terms used
herein and not otherwise defined herein shall have the meanings given
thereto in the Articles; certain other terms used herein are defined in
Section 9 of this Certificate):
1. Designation. The Preference Stock created and authorized hereby
shall be designated as the "7.5% Convertible Preference Stock" (the "7.5%
Series"). The number of shares constituting the 7.5% Series shall be
4,000,000 and no more. The 7.5% Series comprises all of the 4,000,000
shares of Preference Stock that the Corporation is authorized to issue
pursuant to the Articles.
2. Dividends. The rate per annum of dividends on the 7.5% Series shall
be $7.50 per share and dividends thereon shall be cumulative from and
including the date of issuance. January 1, 2001 shall be the first dividend
payment date for shares issued before that date, and dividends shall be
payable thereafter on the first day of January, April, July and October of
each year. For any period during which any share of such series is
outstanding less or more than a full quarterly dividend period, the
dividends payable shall be computed on the basis of twelve 30-day months
and the actual number of days elapsed in the period for which the dividends
are payable.
3. Optional Redemption(a). (a) The shares of the 7.5% Series shall not
be redeemable prior to the earlier to occur of (i) the fourth anniversary
of the Lobos Merger Effective Time and (ii) the fourth anniversary of
termination of the Lobos Merger Agreement, and on or after such date such
shares shall be redeemable in whole or in part at the option of the
Corporation, subject to the terms, provisions and effect as generally
provided for redemption of shares of the Corporation's Preference Stock in
the Articles, at the Liquidation Preference, plus, in each case, an amount
equal to the accrued but unpaid dividends on said shares to the date of
redemption; provided, however, that no redemption shall be made if any
dividends payable on the 7.5% Series are in arrears, unless all shares of
the 7.5% Series are redeemed. In the case of an optional redemption of less
than all of the shares of the 7.5% Series at the time outstanding, the
Corporation shall select by lot the shares so to be redeemed.
(b) No sinking fund or redemption, purchase or similar account or fund
will be provided for shares of the 7.5% Series.
4. Liquidation, Dissolution or Winding Up. In the event of the
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, the holders of the 7.5% Series shall be entitled to receive
from any assets and funds of the Corporation remaining after payment of the
debts and other liabilities of the Corporation and after payment to the
holders of Preferred Stock of the preferential amount or amounts to which
such holders are entitled thereon) for each share an amount equal to the
Liquidation Preference, plus as to each share, an amount equal to the
accrued but unpaid dividends thereon to the dates of distribution.
5. Voting Rights. Subject to the special voting rights provided to
holders of the Corporation's Preferred Stock and the special rights stated
below as provided to holders of the Corporation's Preference Stock, as
stated in replacement Paragraph 1 of Section D of Article IV of the
Articles (set forth in the Certificate of Amendment to the Restated
Articles dated and filed May 12, 1998) each holder of shares of the 7.5%
Series shall have one vote for each share held by such holder for the
election of directors and upon all other matters requiring stockholder
action; provided, however, that whenever, as provided in or pursuant to the
Articles, the Preference Stockholders are entitled to vote separately as a
class for the election of certain directors, each holder of shares of the
7.5% Series shall be entitled to vote such shares only for the directors to
be elected by the holders of the Preference Stock.
As stated in Subdivision (a) of Paragraph 5 of Section D of Article IV
of the Articles (said Article IV being the former Article VI which article
was renumbered as specified in the Certificate of Amendment to Restated
Articles dated May 26, 1994). The holders of all Preference Stock shall be
entitled to the following special voting rights:
(a) If at any time, dividends payable on the Corporation's Preference
Stock are in default in an amount equivalent to six or more full quarterly
dividends, whether or not consecutive, the holders of all outstanding
shares of the Corporation's Preference Stock, voting separately as a class
and without regard to series, and in the manner provided in Paragraph 1 of
Section D of Article IV of the Articles, shall be entitled until, but only
until, all dividends in default shall have been paid or deposited in trust
with a bank or trust company having the qualifications set forth in
Paragraph 3 of Section B of Article IV of the Articles for payment on or
before the next succeeding dividend payment date, to elect two directors to
the Board of Directors, and the holders of the Preferred Stock and the
Common Stock, voting together, or voting as provided in Section A of
Article IV of the Articles in the event that the holders of the Preferred
Stock are then entitled to special voting rights pursuant to Subdivision
(a) of Paragraph 6 of Section A of Article IV of the Articles, and in
either case in the manner provided in Paragraph 1 of Section D of Article
IV of the Articles, shall be entitled to elect the remaining directors. If
and when all dividends then in default on the Preference Stock shall
thereafter be paid (and such dividends shall be declared and paid out of
surplus or net profits legally available therefore as soon as reasonably
practicable) the Preference Stock shall thereupon be divested of any
special rights to elect such two directors to the Board of Directors, but
subject always to the same provisions for vesting of special rights in the
Preference Stock in the case of any similar future default or defaults.
(i) The foregoing right of the Preference Stock to elect two
directors to the Board of Directors of the Corporation may be
exercised at any annual meeting of stockholders held for such purpose.
Upon the accrual of such special right of the holders of Preference
Stock, a meeting (which may be a special meeting of the stockholders
held pursuant to Subdivision (a) of Paragraph 6 of Section A of
Article IV of the Articles) of the holders of the Preference Stock
shall be held upon notice promptly given as provided in the By-laws
for a special meeting, by the Chairman of the Board, President or
Secretary of the Corporation. If, within fifteen (15) days after the
accrual of such special right of the Preference Stockholders, the
Chairman of the Board, President and Secretary of the Corporation
shall fail to call such meeting, then, upon request signed by any
holder of record of Preference Stock then outstanding delivered to the
Corporation at its principal office, the President of the Corporation
shall call a special meeting of the Preference Stockholders (which may
be a special meeting of the stockholders called pursuant to
Subdivision (a) of Paragraph 6 of Section A of Article IV of the
Articles) to be held within sixty (60) days after the receipt of such
request for the purpose of electing two directors to the Board of
Directors by a vote of the Preference Stock as above provided, to
serve until the next annual meeting or until their successors shall be
elected and qualified. The term of office of two of the persons who
are directors of the Corporation at the time (who shall not be
directors who have been elected by the holders of Preferred Stock
pursuant to Subdivision (a) of Paragraph 6 of Section A of Article IV
of the Articles) shall be designated by a majority of the directors
then in office as the directors whose terms shall terminate upon the
election of the two directors to the Board of Directors by the
Preference Stockholders, notwithstanding that the term for which such
two directors have been elected shall not then have expired.
(ii) At such time as the Preference Stock shall be divested of
the right to elect two directors to the Board of Directors, the term
of such directors so elected by the holders of the Preference Stock
shall terminate and the vacancies in the Board of Directors effected
thereby may be filled by a majority of the remaining directors.
(iii) At any annual or special meeting of stockholders held for
the purpose of electing directors at which the holders of the
Preference Stock would be entitled to elect two directors to the Board
of Directors, the presence in person or by proxy of the holders of a
majority of the outstanding Preference Stock shall be required to
constitute a quorum of Preference Stock for the election by such class
of two directors to the Board of Directors; provided, however, that a
majority of the holders of the Preference Stock who are present in
person or by proxy shall have the power to adjourn such meeting for
the purpose of the election of such two directors by such shares from
time-to-time without notice other than an announcement at the meeting.
No delay or failure by the holders of any class of shares to elect the
members of the Board of Directors which such holders are entitled to
elect shall invalidate the election of the remaining members of the
Board of Directors by the holders of such other class or classes of
shares, and a majority of the directors so elected shall, in such
case, constitute a quorum for the transaction of business by the Board
of Directors.
(iv) If, during any interval between the annual meeting of
stockholders for the election of directors and while the Preference
Stock shall be entitled to elect two directors, a director in office
who has been elected by the holders of the Preference Stock shall have
resigned, died or been removed, then (x) such vacancy shall be filled
by the remaining director then in office who was elected by the
Preference Stockholders or who succeeded to the director so elected,
and (y) if both directors so representing the Preference Stockholders
shall have resigned, died or been removed, or if any vacancy which
occurred more than six months prior to the date of the next ensuing
annual meeting is not so filled within forty (40) days after the
occurrence thereof, the President of the Corporation shall call a
special meeting of the holders of the Preference Stock and such
vacancy shall be filled at such special meeting.
(v) Any director elected by the holders of Preference Stock may
be removed from office only by vote of the holders of a majority of
the outstanding shares of Preference Stock voted for his election or
for his predecessor in cases where such director was elected by the
Board of Directors.
(b) As stated in Subdivision (b) of Paragraph 5 of Section B of
Article IV of the Articles (as corrected by the Certificate of Correction
to Restated Articles dated and filed January 24, 1992), so long as any
shares of Preference Stock are outstanding, the Corporation shall not,
without the consent (given by vote in person or by proxy at a meeting
called for that purpose) of the holders of at least two-thirds (2/3) of the
shares of Preference Stock then outstanding, voting separately as a class
and without regard to series,
(i) Amend, alter, change or repeal any of the express terms or
provisions of then outstanding Preference Stock in a manner
substantially prejudicial to the holders thereof; provided, however,
that, if any such amendment, alteration, change or repeal adversely
affects the holders of some but not all of the outstanding shares of
Preference Stock, only the consent of the holders of two-thirds (2/3)
of the total number of shares so affected shall be required; or
(ii) Create any class of stock ranking prior to the Preference
Stock as to dividends or upon liquidation, or securities convertible
into shares ranking prior to the Preference Stock in respects
aforesaid; provided that no such consent shall be required with
respect to the taking of any such action relating to the Corporation's
Preferred Stock, par value $100 per share, or Preferred Stock, without
par value.
6. Conversion Rights.
(a) Right to Convert. Each share of the 7.5% Series may be
converted at the option of the holder thereof at any time and from
time to time, and without the payment of any additional consideration
therefor, into that number of fully paid and nonassessable shares of
Common Stock, $5.00 par value per share, of the Corporation (the
"Common Stock") as provided herein.
(b) Conversion Procedures. Each holder of the 7.5% Series who
elects to convert the same into shares of Common Stock shall surrender
the certificate or certificates therefor, duly endorsed, at the office
of the Corporation or any transfer agent for the 7.5% Series as may be
designated by the Board of Directors (the "Transfer Agent"), and shall
give written notice to the Corporation at such office that such holder
elects to convert the same and shall state therein the number of
shares of the 7.5% Series being converted; provided, however, such
number of shares shall not be fewer than 25,000. Thereupon, the
Corporation shall promptly issue and deliver at such office to such
holder a certificate or certificates for the number of shares of
Common Stock to which such holder is entitled upon such conversion.
Such conversion shall be deemed to have been made immediately prior to
the close of business on the date of such surrender of the certificate
or certificates representing the shares of the 7.5% Series to be
converted, and the person entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes
as the record holder of such shares of Common Stock on such date.
(c) Conversion Price. Each share of the 7.5% Series shall be
convertible in accordance with this Section 6 into the number of
shares of Common Stock that results from dividing the Liquidation
Preference for the 7.5% Series by the conversion price that is in
effect at the time of conversion (the "Conversion Price"). The initial
Conversion Price for the 7.5% Series shall be $32.40 per share. The
Conversion Price shall be subject to adjustment from time to time as
provided below.
(d) Adjustment of Conversion Price. The Conversion Price shall be
adjusted from time to time as follows:
(i) If the Corporation shall hereafter pay a dividend in or
make a distribution of Common Stock to all holders of any
outstanding class or series of Common Stock, the Conversion Price
in effect at the opening of business on the date following the
date fixed for the determination of stockholders entitled to
receive such dividend or other distribution shall be reduced by
multiplying such Conversion Price by a fraction of which the
numerator shall be the number of shares of Common Stock
outstanding at the close of business on the Record Date fixed for
such determination and the denominator shall be the sum of such
number of outstanding shares and the total number of shares
constituting such dividend or other distribution, such reduction
to become effective immediately after the opening of business on
the day following the Record Date. If any dividend or
distribution of the type described in this Section 6(d)(i) is
declared but not so paid or made, the Conversion Price shall
again be adjusted to the Conversion Price which would then be in
effect if such dividend or distribution had not been declared.
(ii) If the Corporation shall offer to issue rights or
warrants to all holders of its outstanding Common Stock entitling
them to subscribe for or purchase Common Stock at a price per
share less than the Current Market Price on the Record Date fixed
for the determination of stockholders entitled to receive such
rights or warrants, the Conversion Price shall be adjusted so
that the same shall equal the price determined by multiplying the
Conversion Price in effect at the opening of business on the date
after such Record Date by a fraction of which the numerator shall
be the number of shares of Common Stock outstanding at the close
of business on the Record Date plus the number of shares of
Common Stock which the aggregate offering price of the total
number of shares of Common Stock subject to such rights or
warrants would purchase at such Current Market Price and of which
the denominator shall be the number of shares of Common Stock
outstanding at the close of business on the Record Date plus the
total number of additional shares of Common Stock subject to such
rights or warrants for subscription or purchase. Such adjustment
shall become effective immediately after the opening of business
on the day following the Record Date fixed for determination of
stockholders entitled to purchase or receive such rights or
warrants. For the purposes of this Section 6(d)(ii), the issuance
of rights or warrants to subscribe for or purchase securities
convertible into Common Stock shall be deemed to be the issuance
of rights or warrants to purchase the shares of Common Stock into
which such securities are convertible at an aggregate offering
price equal to the aggregate offering price of such securities
plus the minimum aggregate amount (if any) payable upon
conversion of such securities into shares of Common Stock. To the
extent that shares of Common Stock are not delivered pursuant to
such rights or warrants, upon the expiration or termination of
such rights or warrants the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect
had the adjustments made upon the issuance of such rights or
warrants been made on the basis of delivery of only the number of
shares of Common Stock actually delivered. If such rights or
warrants are not so issued, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect
if such date fixed for the determination of stockholders entitled
to receive such rights or warrants had not been fixed. In
determining whether any rights or warrants entitle the holders to
subscribe for or purchase Common Stock at less than such Current
Market Price, and in determining the aggregate offering price of
such shares of Common Stock, there shall be taken into account
any consideration received for such rights or warrants, with the
value of such consideration, if other than cash, to be determined
by the Board of Directors.
(iii) If the outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the
Conversion Price in effect at the opening of business on the day
following the day upon which such subdivision becomes effective
shall be proportionately reduced, and, conversely, if the
outstanding shares of Common Stock shall be combined into a
smaller number of shares of Common Stock, the Conversion Price in
effect at the opening of business on the day following the day
upon which such combination becomes effective shall be
proportionately increased, such reduction or increase, as the
case may be, to become effective immediately after the opening of
business on the day following the day upon which such subdivision
or combination becomes effective.
(iv) If the Corporation shall, by dividend or otherwise,
distribute to all holders of its shares of Common Stock shares of
any class of capital stock of the Corporation (other than any
dividends or distributions to which Section 6(d)(i) applies) or
evidences of its indebtedness, cash or other assets (including
securities, but excluding any rights or warrants of a type
referred to in Section 6(d)(ii) and excluding dividends and
distributions paid exclusively in cash and excluding any capital
stock, evidences of indebtedness, cash or assets distributed upon
a merger or consolidation to which Section 7(a) applies) (the
foregoing hereinafter in this Section 6(d)(iv) called the
"Distributed Securities"), then, in each such case, the
Conversion Price shall be reduced so that the same shall be equal
to the price determined by multiplying the Conversion Price in
effect immediately prior to the close of business on the Record
Date with respect to such distribution by a fraction of which the
numerator shall be the Current Market Price of the Common Stock
on such date less the fair market value (as determined by the
Board of Directors, whose determination shall be conclusive and
described in a resolution of the Board of Directors) on such date
of the portion of the Distributed Securities so distributed
applicable to one share of Common Stock and the denominator shall
be such Current Market Price, such reduction to become effective
immediately prior to the opening of business on the day following
the Record Date; provided, however, that, in the event the then
fair market value (as so determined) of the portion of the
Distributed Securities so distributed applicable to one share of
Common Stock is equal to or greater than the Current Market Price
on the Record Date, in lieu of the foregoing adjustment, adequate
provision shall be made so that each holder of the 7.5% Series
shall have the right to receive upon conversion of a share of the
7.5% Series (or any portion thereof) the amount of Distributed
Securities such holder would have received had such holder
converted such share of the 7.5% Series (or portion thereof)
immediately prior to such Record Date. If such dividend or
distribution is not so paid or made, the Conversion Price shall
again be adjusted to be the Conversion Price which would then be
in effect if such dividend or distribution had not been declared.
If the Board of Directors determines the fair market value of any
distribution for purposes of this Section 6(d)(iv) by reference
to the actual or when issued trading market for any securities
comprising all or part of such distribution, it must in doing so
consider the prices in such market over the same period used in
computing the Current Market Price to the extent possible.
Notwithstanding the foregoing, this Section 6(d)(iv) shall not
apply in the event that the Record Date for the distribution to
holders of the Common Stock of shares of Weststar Industries,
Inc. is the same as the Record Date for the receipt of Lobos
Parent Common Stock by holders of the Common Stock pursuant to
the Lobos Merger.
Rights or warrants distributed by the Corporation to all holders
of Common Stock entitling the holders thereof to subscribe for or
purchase shares of the Corporation's Capital Stock (either
initially or under certain circumstances), which rights or
warrants, until the occurrence of a specified event or events
("Dilution Trigger Event"): (i) are deemed to be transferred with
such Common Stock; (ii) are not exercisable; and (iii) are also
issued in respect of future issuances of Common Stock, shall be
deemed not to have been distributed for purposes of this Section
6(d)(iv) (and no adjustment to the Conversion Price under this
Section 6(d)(iv) shall be required) until the occurrence of the
earliest Dilution Trigger Event, whereupon such rights and
warrants shall be deemed to have been distributed and an
appropriate adjustment to the Conversion Price under this Section
6(d)(iv) shall be made. If any such rights or warrants, including
any such existing rights or warrants distributed prior to the
date hereof, are subject to subsequent events, upon the
occurrence of each of which such rights or warrants shall become
exercisable to purchase different securities, evidences of
indebtedness or other assets, then the occurrence of each such
event shall be deemed to be such date of issuance and record date
with respect to new rights or warrants (and a termination or
expiration of the existing rights or warrants without exercise by
the holder thereof). In addition, in the event of any
distribution (or deemed distribution) of rights or warrants, or
any Dilution Trigger Event with respect thereto, that was counted
for purposes of calculating a distribution amount for which an
adjustment to the Conversion Price under this Section 6(d)(iv)
was made, (1) in the case of any such rights or warrants which
shall all have been redeemed or repurchased without exercise by
any holders thereof, the Conversion Price shall be readjusted
upon such final redemption or repurchase to give effect to such
distribution or Dilution Trigger Event, as the case may be, as
though it were a cash distribution, equal to the per share
redemption or repurchase price received by a holder or holders of
Common Stock with respect to such rights or warrants (assuming
such holder had retained such rights or warrants), made to all
holders of Common Stock as of the date of such redemption or
repurchase, and (2) in the case of such rights or warrants which
shall have expired or been terminated without exercise by any
holders thereof, the Conversion Price shall be readjusted as if
such rights and warrants had not been issued.
Notwithstanding any other provision of this Section 6(d)(iv) to
the contrary, capital stock, rights, warrants, evidences of
indebtedness, other securities, cash or other assets (including
any rights distributed pursuant to any shareholder rights plan)
shall be deemed not to have been distributed for purposes of this
Section 6(d)(iv) if the Corporation makes proper provision so
that each holder of shares of the 7.5% Series who converts a
share of the 7.5% Series (or any portion thereof) after the date
fixed for determination of stockholders entitled to receive such
distribution shall be entitled to receive upon such conversion,
in addition to the Common Stock issuable upon such conversion,
the amount and kind of such distributions that such holder would
have been entitled to receive if such holder had, immediately
prior to such determination date, converted such share of the
7.5% Series into Common Stock.
For purposes of this Section 6(d)(iv) and Sections 6(d)(i) and
(ii), any dividend or distribution to which this Section 6(d)(iv)
is applicable that also includes Common Stock, or rights or
warrants to subscribe for or purchase Common Stock to which
Section 6(d)(ii) applies (or both), shall be deemed instead to be
(1) a dividend or distribution of the evidences of indebtedness,
cash, assets, shares of capital stock, rights or warrants other
than (A) such shares of Common Stock or (B) rights or warrants to
which Section 6(d)(2) applies (and any Conversion Price reduction
required by this Section 6(d)(iv) with respect to such dividend
or distribution shall then be made) immediately followed by (2) a
dividend or distribution of such Common Stock or such rights or
warrants (and any further Conversion Price reduction required by
Section 6(d)(i) and (ii) with respect to such dividend or
distribution shall then be made), except that (x) the Record Date
of such dividend or distribution shall be substituted as "the
Record Date fixed for the determination of stockholders entitled
to receive such dividend or other distribution", "Record Date
fixed for such determination" and "Record Date" within the
meaning of Section 6(d)(i) and as "the Record Date fixed for the
determination of stockholders entitled to receive such rights or
warrants", "the date fixed for the determination of the
stockholders entitled to receive such rights or warrants" and
"such Record Date" within the meaning of Section 6(d)(ii), and
(y) any share of Common Stock included in such dividend or
distribution shall not be deemed "outstanding at the close of
business on the date fixed for such determination" within the
meaning of Section 6(d)(i).
(v) If the Corporation shall, by dividend or otherwise,
distribute to all holders of its Common Stock cash (excluding any
cash that is distributed upon a merger or consolidation to which
Section 7(a) applies or as part of a distribution referred to in
paragraph 6(d)(iv)) in an aggregate amount that, combined
together with (1) the aggregate amount of any other such
distributions to all holders of its Common Stock made exclusively
in cash within the 12 months preceding the date of payment of
such distribution, and in respect of which no adjustment pursuant
to this Section 6(d)(v) has been made, and (2) the aggregate of
any cash plus the fair market value (as determined by the Board
of Directors, whose determination shall be conclusive and
described in a resolution of the Board of Directors) of
consideration payable in respect of any tender offer by the
Company or a Subsidiary of the Company for all or any portion of
the Common Stock concluded within the 12 months preceding the
date of payment of such distribution, and in respect of which no
adjustment pursuant to Section 6(d)(vi) has been made, exceeds
15% of the product of the Current Market Price on the Record Date
with respect to such distribution times the number of shares of
Common Stock outstanding on such date, then, and in each such
case, immediately after the close of business on such date, the
Conversion Price shall be reduced so that the same shall equal
the price determined by multiplying the Conversion Price in
effect immediately prior to the close of business on such Record
Date by a fraction (i) the numerator of which shall be equal to
the Current Market Price on the Record Date less an amount equal
to the quotient of (x) the excess of such combined amount over
such 15% amount divided by (y) the number of shares of Common
Stock outstanding on the Record Date and (ii) the denominator of
which shall be equal to the Current Market Price on such Record
Date; provided, however, that, if the portion of the cash so
distributed applicable to one share of Common Stock is equal to
or greater than the Current Market Price of the Common Stock on
the Record Date, in lieu of the foregoing adjustment, adequate
provision shall be made so that each holder of Convertible
Preferred Stock shall have the right to receive upon conversion
of a share of Convertible Preferred Stock (or any portion
thereof) the amount of cash such holder would have received had
such holder converted such share of Convertible Preferred Stock
(or portion thereof) immediately prior to such Record Date. If
such dividend or distribution is not so paid or made, the
Conversion Price shall again be adjusted to be the Conversion
Price which would then be in effect if such dividend or
distribution had not been declared.
(vi) If a tender or exchange offer made by the Company or
any of its Subsidiaries for all or any portion of the Common
Stock expires and such tender or exchange offer (as amended upon
the expiration thereof) requires the payment to stockholders
(based on the acceptance (up to any maximum specified in the
terms of the tender offer) of Purchased Shares) of an aggregate
consideration having a fair market value (as determined by the
Board of Directors, whose determination shall be conclusive and
described in a resolution of the Board of Directors) that,
combined together with (i) the aggregate of the cash plus the
fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a resolution
of the Board of Directors), as of the expiration of such tender
offer, of consideration payable in respect of any other tender
offers by the Company or any of its Subsidiaries for all or any
portion of the Common Stock expiring within the 12 months
preceding the expiration of such tender offer and in respect of
which no adjustment pursuant to this Section 6(d)(vi) has been
made and (ii) the aggregate amount of any distributions to all
holders of the Common Stock made exclusively in cash within 12
months preceding the expiration of such tender offer and in
respect of which no adjustment pursuant to Section 6(d)(v) has
been made, exceeds 15% of the product of the Current Market Price
as of the last time (the "Expiration Time") tenders could have
been made pursuant to such tender offer (as it may be amended)
times the number of shares of Common Stock outstanding (including
any tendered shares) at the Expiration Time, then, and in each
such case, immediately prior to the opening of business on the
day after the date of the Expiration Time, the Conversion Price
shall be adjusted so that the same shall equal the price
determined by multiplying the Conversion Price in effect
immediately prior to the close of business on the date of the
Expiration Time by a fraction of which the numerator shall be the
number of shares of Common Stock outstanding (including any
tendered shares) at the Expiration Time multiplied by the Current
Market Price of the Common Stock on the Trading Day next
succeeding the Expiration Time and the denominator shall be the
sum of (x) the fair market value (determined as aforesaid) of the
aggregate consideration payable to stockholders based on the
acceptance (up to any maximum specified in the terms of the
tender offer) of all shares validly tendered and not withdrawn as
of the Expiration Time (the shares deemed so accepted, up to any
such maximum, being referred to as the "Purchased Shares") and
(y) the product of the number of shares of Common Stock
outstanding (less any Purchased Shares) at the Expiration Time
and the Current Market Price of the Common Stock on the Trading
Day next succeeding the Expiration Time, such reduction (if any)
to become effective immediately prior to the opening of business
on the day following the Expiration Time. If the Company is
obligated to purchase shares pursuant to any such tender offer,
but the Company is permanently prevented by applicable law from
effecting any such purchases or all such purchases are rescinded,
the Conversion Price shall again be adjusted to be the Conversion
Price which would then be in effect if such tender offer had not
been made. If the application of this Section 6(d)(vi) to any
tender offer would result in an increase in the Conversion Price,
no adjustment shall be made for such tender offer under this
Section 6(d)(vi).
(vii) No adjustment in the Conversion Price shall be
required unless such adjustment would require an increase or
decrease of at least 1% in such price; provided, however, that
any adjustments which by reason of this Section 6(d)(vi) are not
required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this
Section 6(d) shall be made by the Corporation and shall be made
to the nearest cent or to the nearest one-hundredth of a share,
as the case may be. No adjustment need be made for a change in
the par value or no par value of the Common Stock.
(viii) Whenever the Conversion Price is adjusted as herein
provided, the Corporation shall promptly file with the Transfer
Agent an Officers' Certificate setting forth the Conversion Price
after such adjustment and setting forth a brief statement of the
facts requiring such adjustment. Promptly after delivery of such
certificate, the Corporation shall prepare a notice of such
adjustment of the Conversion Price setting forth the adjusted
Conversion Price and the date on which each adjustment becomes
effective and shall mail such notice of such adjustment of the
Conversion Price to each holder of the 7.5% Series at such
holder's last address appearing on the register of holders
maintained for that purpose within 20 days of the effective date
of such adjustment. Failure to deliver such notice shall not
affect the legality or validity of any such adjustment.
(ix) In any case in which this Section 6(d) provides that an
adjustment shall become effective immediately after a Record Date
for an event, the Corporation may defer until the occurrence of
such event issuing to the holder of any share of the 7.5% Series
converted after such Record Date and before the occurrence of
such event the additional Common Stock issuable upon such
conversion by reason of the adjustment required by such event
over and above the Common Stock issuable upon such conversion
before giving effect to such adjustment.
(x) For purposes of this Section 6(d), the number of shares
of Common Stock at any time outstanding shall not include shares
held in the treasury of the Corporation but shall include shares
issuable in respect of scrip certificates issued in lieu of
fractions of Common Stock. The Corporation shall not pay any
dividend or make any distribution on Common Stock held in the
treasury of the Corporation.
7. Corporate Events.
(a) Merger. In case of (i) any reclassification or change of
outstanding shares of Common Stock (other than a change in par value or
from par value to no par value or from no par value to par value, or as a
result of a subdivision or combination) or (ii) any consolidation or merger
of the Corporation with one or more other corporations (other than the
Lobos Merger or any consolidation or merger in which the Corporation is the
continuing corporation and which does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock
issuable upon conversion of the 7.5% Series), (iii) any sale or conveyance
to another corporation or other entity of all or substantially all of the
property of the Corporation, or (iv) any other transaction which would
constitute a Change of Control of the Corporation, then the Corporation, or
such successor corporation or other entity, as the case may be, shall make
appropriate provision so that the holder of each share of the 7.5% Series
then outstanding shall have the right thereafter, to convert such share of
the 7.5% Series into the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, sale,
reclassification, change or conveyance by a holder of the number of shares
of Common Stock into which such share of the 7.5% Series might have been
converted immediately prior to such consolidation, merger, sale,
reclassification, change or conveyance, subject to such adjustment which
shall be as nearly equivalent as may be practicable to the adjustments
provided in Section 6(d). The above provisions of this Section 7(a) shall
similarly apply to successive consolidations, mergers, conveyances or
transfers.
(b) Offer to Repurchase. In addition to the foregoing, upon the
occurrence of a Change of Control (other than the Lobos Merger), the
Corporation shall make an offer (a "Change of Control Offer") to each
holder of shares of the 7.5% Series to repurchase all or any part of each
such holder's shares of the 7.5% Series at an offer price in cash equal to
100% of the Liquidation Preference as of the Change of Control Payment Date
(the "Change of Control Payment"); provided, however, such Change of
Control Offer shall be limited to that number of shares of the 7.5% Series
equal to the total number of outstanding shares of the 7.5% Series
multiplied by a quotient equal to the total cash consideration paid to
stockholders pursuant to such Change of Control transaction divided by the
total consideration paid to stockholders pursuant to such Change of Control
transaction. The Corporation shall comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in
connection with the repurchase of shares of the 7.5% Series as a result of
a Change of Control, and the Corporation shall not be in violation of this
Certificate of Designation by reason of any act required by such rule or
other applicable law.
Within 25 days following any Change of Control, the Corporation shall mail
a notice to each holder of shares of the 7.5% Series stating:
(i) that the Change of Control Offer is being made pursuant to
this Section 7.5 and that up to the stated number of shares of the
7.5% Series tendered will be accepted for payment;
(ii) the purchase price and the purchase date, which shall be at
least 30 but no more than 60 days from the date on which the
Corporation mails notice of the Change of Control (the "Change of
Control Payment Date");
(iii) that any shares of the 7.5% Series not tendered will
continue to accrue dividends as provided in this Certificate of
Designation;
(iv) that, unless the Corporation defaults in the payment of the
Change of Control Payment, all shares of the 7.5% Series accepted for
payment pursuant to the Change of Control Offer shall cease to accrue
dividends after the Change of Control Payment Date;
(v) that holders of shares of the 7.5% Series electing to have
any shares of the 7.5% Series purchased pursuant to a Change of
Control Offer shall be required to surrender the shares of the 7.5%
Series to the Corporation or its designated agent (the "Paying Agent")
for such purpose, at the address specified in the notice prior to the
close of business on the third Business Day preceding the Change of
Control Payment Date; and
(vi) that holders of shares of the 7.5% Series will be entitled
to withdraw their election if the Corporation or the Paying Agent
receives, not later than the close of business on the second Business
Day preceding the Change of Control Payment Date, a telegram, telex,
facsimile transmission or letter setting forth the name of the holder
of shares of the 7.5% Series, the number of shares of the 7.5% Series
delivered for purchase, and a statement that such holder is
withdrawing his election to have such shares purchased.
On the Change of Control Payment Date, the Corporation shall, to the
extent lawful, (i) accept for payment all shares of the 7.5% Series
tendered pursuant to the Change of Control Offer; provided, however,
that if the number of such tendered shares exceeds the limits set
forth above, the Corporation shall accept such shares pro rata and
(ii) deposit with the Paying Agent an amount equal to the Change of
Control Payment in respect of all shares of the 7.5% Series so
accepted for payment. The Corporation shall promptly mail to each
holder of shares of the 7.5% Series so tendered the Change of Control
Payment for such shares. The Corporation shall publicly announce the
results of the Change of Control Offer on or as soon as practicable
after the Change of Control Payment Date.
(c) Notice of Record Date. In case at any time or from time to
time (i) the Corporation shall pay any stock dividend or make any
other non-cash distribution to the holders of its Common Stock, or
offer for subscription pro rata to the holders of its Common Stock any
additional shares of stock of any class or any other right, or (ii)
there shall be any capital reorganization or reclassification of the
Common Stock of the Corporation or consolidation or merger of the
Corporation with or into another corporation, or any sale or
conveyance to another corporation of the property of the Corporation
as an entirety or substantially as an entirety, or (iii) there shall
be a voluntary or involuntary dissolution, liquidation or winding up
of the Corporation, then, in any one or more of said cases the
Corporation shall give at least 20 days' prior written notice (the
time of mailing of such notice shall be deemed to be the time of
giving thereof) to the registered holders of the 7.5% Series at the
addresses of each as shown on the books of the Corporation maintained
by the Transfer Agent thereof of the date on which (A) a record shall
be taken for such stock dividend, distribution or subscription rights
or (B) such reorganization, reclassification, consolidation, merger,
sale or conveyance, dissolution, liquidation or winding up shall take
place, as the case may be; provided that, in the case of any
transaction to which clause (a) applies the Corporation shall give at
least 30 days' prior written notice as aforesaid. Such notice shall
also specify the date as of which the holders of the Common Stock of
record shall participate in said dividend, distribution or
subscription rights or shall be entitled to exchange their Common
Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale or
conveyance or participate in such dissolution, liquidation or winding
up, as the case may be. Failure to give such notice shall not
invalidate any action so taken.
8. Reservation of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized
but unissued shares of Common Stock solely for the purpose of
effecting the conversion of the shares of the 7.5% Series, such number
of its shares of Common Stock as shall from time to time be sufficient
to effect the conversion of all then outstanding shares of the 7.5%
Series; and if at any time the number of authorized but unissued
shares of Common Stock shall not be sufficient to effect the
conversion of all then outstanding shares of the 7.5% Series, the
Corporation will take such corporate action as may be necessary to
increase its authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purpose.
9. Definitions. Certain capitalized terms are used in this
Certificate as defined below:
"Affiliate" shall mean, with respect to any Person, any other
Person that directly or indirectly through one or more intermediaries
controls or is controlled by or is under common control with such
Person. For the purposes of this definition, "control," when used with
respect to any particular Person means the power to direct the
management and policies of such Person, directly or indirectly,
whether through ownership of voting securities, by contract or
otherwise.
"Beneficial Owner" (and with correlative meanings, "Beneficially
Own" and "Beneficial Ownership") of any interest means a Person who,
together with his, her or its Affiliates, is or may be deemed a
beneficial owner of such interest for purposes of Rule 13d-3 or 13d-5
under the Exchange Act, or who, together with his, her, or its
Affiliates, has the right to become such a beneficial owner of such
interest (whether such right is exercisable immediately or only after
the passage of time) pursuant to any agreement, arrangement or
understanding, or upon the exercise, conversion or exchange of any
warrant, right or other instrument, or otherwise.
"Board of Directors" shall mean the board of directors of the
Corporation.
"Business Day" shall mean any day other than a Saturday, a Sunday
or a day on which banking institutions in The City of New York or at a
place of payment are authorized by law, regulation or executive order
to remain closed.
"Change of Control" means the occurrence of any of the following:
(i) any Person becoming the Beneficial Owner, directly or indirectly,
of Voting Securities, pursuant to the consummation of a merger,
consolidation, sale of all or substantially all of the Corporation's
assets, share exchange or similar form of transaction that requires
the approval of the Corporation's stockholders, whether for such
transaction or the issuance of securities in such transaction, so as
to cause such Person's Voting Ownership Percentage to exceed 50% of
the Total Voting Power; provided, however, that the event described in
this clause (i) shall not be deemed to be a Change of Control if it
occurs as a result of the following acquisitions: (A) by any employee
benefit plan sponsored or maintained by the Corporation or any
Affiliate, or (B) by any underwriter temporarily holding securities
pursuant to an offering of such securities; (ii) the consummation of a
merger, consolidation, sale of all or substantially all of the
Corporation's assets, share exchange or similar form of corporate
transaction involving the Corporation or any of its subsidiaries that
requires the approval of the Corporation's shareholders whether for
such transaction or the issuance of securities in such transaction,
unless immediately following such transaction more than 50 percent of
the total voting power of (x) the corporation resulting from such
transaction, or (y) if applicable, the ultimate parent corporation
that directly or indirectly has Beneficial Ownership of 100 percent of
the voting securities eligible to elect directors of such resulting
corporation, is represented by Voting Securities that were outstanding
immediately prior to such transaction in substantially the same
proportion as the voting power of such Voting Securities among the
holders thereof immediately prior to such transaction; or (iii) the
consummation of a plan of complete liquidation or dissolution of the
Corporation.
"closing price" with respect to any securities on any day means
the last sale price on such day or, if no such sale takes place on
such day, the average of the reported high bid and low ask prices on
such day, in each case on the Nasdaq National Market or the New York
Stock Exchange, as applicable, or, if such security is not listed or
admitted to trading on such national market or exchange, on the
principal national securities exchange or quotation system on which
such security is quoted or listed or admitted to trading, or, if not
quoted or listed or admitted to trading on any national securities
exchange or quotation system, the average of the high bid and low ask
prices of such security on the over-the-counter market on the day in
question as reported by the National Quotation Bureau Incorporated or
a similar generally accepted reporting service, or, if not so
available, in such manner as furnished by any New York Stock Exchange
member firm selected from time to time by the Board of Directors for
that purpose, or a price determined in good faith by the Board of
Directors, whose determination shall be conclusive and described in a
resolution of the Board of Directors.
"Current Market Price" means the average of the daily closing
prices per share of Common Stock for the 20 consecutive Trading Days
immediately prior to the date in question; provided, however, that (A)
if the "ex" date (as hereinafter defined) for any event (other than
the issuance or distribution requiring such computation) that requires
an adjustment to the Conversion Price pursuant to Section 6(d)(i),
(ii), (iii) or (iv) occurs during such 20 consecutive trading days,
the closing price for each trading day prior to the "ex" date for such
other event shall be adjusted by multiplying such closing price by the
same fraction by which the Conversion Price is so required to be
adjusted as a result of such other event, (B) if the "ex" date for any
event (other than the issuance or distribution requiring such
computation) that requires an adjustment to the Conversion Price
pursuant to Section 6(d)(i), (ii), (iii) or (iv) occurs on or after
the "ex" date for the issuance or distribution requiring such
computation and prior to the date in question, the closing price for
each trading day on and after the "ex" date for such other event shall
be adjusted by multiplying such closing price by the reciprocal of the
fraction by which the Conversion Price is so required to be adjusted
as a result of such other event and (C) if the "ex" date for the
issuance or distribution requiring such computation is prior to the
day in question, after taking into account any adjustment required
pursuant to clause (A) or (B) of this proviso, the closing price for
each trading day on or after such "ex" date shall be adjusted by
adding thereto the amount of any cash and the fair market value (as
determined by the Board of Directors in a manner consistent with any
determination of such value for purposes of Section 6(d)(iv), whose
determination shall be conclusive and described in a resolution of the
Board of Directors) of the evidence of indebtedness, shares of Capital
Stock or assets being distributed applicable to one Common Stock as of
the close of business on the day before such "ex" date. For purposes
of this paragraph, the term "ex" date (I) when used with respect to
any issuance or distribution, means the first date on which the Common
Stock trades regular way on the relevant exchange or in the relevant
market from which the closing price was obtained without the right to
receive such issuance or distribution,(II) when used with respect to
any subdivision or combination of Common Stock, means the first date
on which the Common Stock trades regular way on such exchange or in
such market after the time at which such subdivision or combination
becomes effective and (III) when used with respect to any tender or
exchange offer means the first date on which the Common Stock trades
regular way on such exchange or in such market after the Expiration
Time of such offer. Notwithstanding the foregoing, whenever successive
adjustments to the Conversion Price are called for pursuant to this
Section 6(d), such adjustments shall be made to the Current Market
Price as may be necessary or appropriate to effectuate the intent of
this Section 6(d) and to avoid unjust or inequitable results, as
determined in good faith by the Board of Directors.
"fair market value" shall mean the amount which a willing buyer
would pay a willing seller in an arm's-length transaction.
"Record Date" shall mean, with respect to any dividend,
distribution or other transaction or event in which the holders of
Common Stock have the right to receive any cash, securities or other
property or in which the Common Stock (or other applicable security)
is exchanged for or converted into any combination of cash, securities
or other property, the date fixed for determination of stockholders
entitled to receive such cash, securities or other property (whether
such date is fixed by the Board of Directors or by statute, contract
or otherwise).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and
regulations of the SEC thereunder, all as the same shall be in effect
at the time. Reference to a particular section of the Exchange Act
shall include reference to the comparable section, if any, of any such
successor federal statute.
"Liquidation Preference" with respect to a share of the 7.5%
Series shall mean, as at any date, $100.00 per share (as adjusted for
any stock dividends, combinations or splits with respect to such
share), plus an amount equal to all accrued but unpaid dividends
(whether or not declared) on such share as at such date.
"Lobos Parent Common Stock" means the common stock, $0.001 par
value, of Parent.
"Lobos Merger" means the merger of Merger Sub-1 into the
Corporation pursuant to the terms of the Lobos Merger Agreement.
"Lobos Merger Agreement" means the Agreement and Plan of
Restructuring and Merger dated as of November 8, 2000, among the
Corporation, Public Service Company of New Mexico, Parent, Merger
Sub-1 and HVNM, Inc., as amended and in effect from time to time.
"Lobos Merger Effective Time" means the "Effective Time" as
defined in the Lobos Merger Agreement.
"Merger Sub-1 means HVK, Inc., a Kansas corporation
"Person" means any individual, "group" (as such term is used in
sections 13(d) and 14(d) of the Exchange Act), corporation,
partnership, joint venture, trust, unincorporated organization,
government or any agency or political subdivision thereof, or any
other entity.
"Parent" means HVOLT Enterprise Inc., a Delaware corporation.
"Total Voting Power" shall mean, calculated at a particular point
in time, the aggregate votes represented by then outstanding Voting
Securities.
"Trading Day" shall mean a day on which the principal national
securities exchange on which the Common Stock is listed or admitted to
trading is open for the transaction of business.
"Voting Ownership Percentage" shall mean, calculated at a
particular point in time, the Voting Power represented by the Voting
Securities Beneficially Owned by the Person whose Voting Ownership
Percentage is being determined.
"Voting Power" shall mean, calculated at a particular point in
time, the ratio, expressed as a percentage, of (a) the votes
represented by the Voting Securities with respect to which the Voting
Power is being determined to (b) Total Voting Power.
"Voting Securities" shall mean the Common Stock and shares of any
class of capital stock of the Corporation then entitled to vote
generally in the election of any member of the Board of Directors, as
elected in accordance with the provisions of the By-laws and Articles
of the Corporation and shall not include the shares of the 7.5% Series
prior to its conversion into Common Stock.
10. Conflicts. In the event of a conflict between any provision of this
Designation and the Articles, the Articles shall take precedence and shall
control the resolution of such conflict.
IN WITNESS WHEREOF, Western Resources, Inc. has made this Certificate of
Designations under its seal and the hand of the President and Chief Executive
Officer, an officer authorized to exercise the duties ordinarily exercised by a
Vice President, and an Assistant Secretary this ____ day of November, 2000.
WESTERN RESOURCES, INC.
By:____________________________________________
Name:__________________________________________
Title:_________________________________________
ATTEST:
____________________________________________
Name:_______________________________________
Title:______________________________________
STATE OF KANSAS )
) ss:
COUNTY OF SHAWNEE )
BE IT REMEMBERED, that on this ___ day of November, 2000, before me, the
undersigned, a Notary Public in and for the County and State aforesaid,
personally came _____________, _________ president of Western Resources, Inc., a
corporation duly organized, incorporated and existing under the laws of the
State of Kansas, who is personally known to me to such officer, and who is
personally known to me to be the same person who executed as such officer the
above instrument in writing, and he duly acknowledged execution of the same as
_______________ of said corporation.
IN WITNESS WHEREOF, I have hereunto subscribed my name and affixed my
official seal the day and year last above written.
-------------------------------
Notary Public
My commission expires:
- -------------------------------
Exhibit 99.5
FORM OF
HVOLT ENTERPRISES INC.
Certificate of Designations
for a Series of Preferred Stock
designated as "7.5% Convertible Preferred Stock"
(this "Certificate")
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
HVOLT Enterprises, Inc., a corporation of the State of Delaware
(hereinafter called the "Corporation") DOES HEREBY CERTIFY pursuant to Section
151(g) of the General Corporation Law of the State of Delaware that:
BE IT RESOLVED, that a new series of the Preferred Stock, $.001 par
value per share, of the Corporation be, and it hereby is, established;
FURTHER RESOLVED, that the following be, and it hereby is, a statement
of the designation and the powers, preferences and rights, and the
qualifications, limitations and restrictions, of such series, subject to
the provisions set forth in the Certificate of Incorporation of the
Corporation, as heretofore amended (the "Charter") (capitalized terms used
herein and not otherwise defined herein shall have the meanings given
thereto in the Charter; certain other terms used herein are defined in
Section 9 of this Certificate):
1. Designation. The Preferred Stock created and authorized hereby
shall be designated as the "7.5% Convertible Preferred Stock" (the "7.5%
Series"). The number of shares constituting the 7.5% Series shall be o and
more.
2. Dividends. The rate per annum of dividends on the 7.5% Series shall
be $7.50 per share and dividends thereon shall be cumulative from and
including the date of issuance. _________, 20__, shall be the first
dividend payment date for shares issued before such date, and dividends
shall be payable thereafter on the first day of January, April, July and
October of each year. For any period during which any share of such series
is outstanding less or more than a full quarterly dividend period, the
dividends payable shall be computed on the basis of twelve 30-day months
and the actual number of days elapsed in the period for which the dividends
are payable.
3. Optional Redemption. (a) The shares of the 7.5% Series shall not be
redeemable at the option of the Corporation prior to the fourth anniversary
of the date of original issue, and on or after such date, such shares shall
be redeemable in whole or in part at the option of the Corporation, subject
to the terms, provisions and effect as generally provided for redemption of
shares of the Corporation's Preferred Stock in the Charter, at the
Liquidation Preference, plus, in each case, an amount equal to the accrued
but unpaid dividends on said shares to the date of redemption. In the case
of an optional redemption of less than all of the shares of the 7.5% Series
at the time outstanding, the Corporation shall select by lot the shares so
to be redeemed. In lieu of exercising its right to redeem shares of the
7.5% Series under this Section 3, the Corporation may purchase shares from
the holder at the applicable redemption price, and such right to purchase
may be assigned.
(b) No sinking fund or redemption, purchase or similar account or fund
will be provided for shares of the 7.5% Series.
4. Liquidation, Dissolution or Winding Up. In the event of the
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, the holders of the 7.5% Series shall be entitled to receive
(on a pro rata basis with holders of any other series of Preferred Stock,
from any assets and funds of the Corporation remaining after payment of the
debts and other liabilities of the Corporation) for each share an amount
equal to the Liquidation Preference, plus as to each share, an amount equal
to the accrued but unpaid dividends thereon to the dates of distribution.
5. Voting Rights. (a) Subject to the special voting rights provided to
holders of the Corporation's Preferred Stock below, holders of shares of
the 7.5% Series shall not be entitled, by virtue of their being holders
thereof, to vote in any election of directors to the Board of Directors or
with respect to any other matter submitted to the stockholders of the
Corporation. Where a vote of the holders of the 7.5% Series, voting as a
separate class may be required by applicable law or by this Section 5, each
share of the 7.5% Series shall carry one vote.
(b) The holders of all Preferred Stock shall be entitled to the
following special voting rights:
(i) If at any time, dividends payable on the Corporation's Preferred
Stock are in default in an amount equivalent to six or more full quarterly
dividends, whether or not consecutive, the holders of all outstanding
shares of the Corporation's Preferred Stock, voting separately as a class
and without regard to series shall be entitled until, but only until, all
dividends in default shall have been paid or deposited in trust with a bank
or trust company for payment on or before the next succeeding dividend
payment date, to elect two directors to the Board of Directors, and the
holders of the Common Stock shall be entitled to elect the remaining
directors. If and when all dividends then in default on the Preferred Stock
shall thereafter be paid (and such dividends shall be declared and paid out
of surplus or net profits legally available therefore as soon as reasonably
practicable) the Preferred Stock shall thereupon be divested of any special
rights to elect such two directors to the Board of Directors, but subject
always to the same provisions for vesting of special rights in the
Preferred Stock in the case of any similar future default or defaults.
(I) The foregoing right of the Preferred Stock to elect two
directors to the Board of Directors of the Corporation may be
exercised at any annual meeting of stockholders held for such purpose.
Upon the accrual of such special right of the holders of Preferred
Stock, a meeting (which may be a special meeting of the stockholders)
of the holders of the Preferred Stock shall be held upon notice
promptly given as provided in the By-laws for a special meeting, by
the Chairman of the Board, President or Secretary of the Corporation.
If, within fifteen (15) days after the accrual of such special right
of the Preferred Stockholders, the Chairman of the Board, President
and Secretary of the Corporation shall fail to call such meeting,
then, upon request signed by any holder of record of Preferred Stock
then outstanding delivered to the Corporation at its principal office,
the President of the Corporation shall call a special meeting of the
Preferred Stockholders (which may be a special meeting of the
stockholders) to be held within sixty (60) days after the receipt of
such request for the purpose of electing two directors to the Board of
Directors by a vote of the Preferred Stock as above provided, to serve
until the next annual meeting or until their successors shall be
elected and qualified. The term of office of two of the persons who
are directors of the Corporation at the time shall be designated by a
majority of the directors then in office as the directors whose terms
shall terminate upon the election of the two directors to the Board of
Directors by the Preferred Stockholders, notwithstanding that the term
for which such two directors have been elected shall not then have
expired.
(II) At such time as the Preferred Stock shall be divested of the
right to elect two directors to the Board of Directors, the term of
such directors so elected by the holders of the Preferred Stock shall
terminate and the vacancies in the Board of Directors effected thereby
may be filled by a majority of the remaining directors.
(III) At any annual or special meeting of stockholders held for
the purpose of electing directors at which the holders of the
Preferred Stock would be entitled to elect two directors to the Board
of Directors, the presence in person or by proxy of the holders of a
majority of the outstanding Preferred Stock shall be required to
constitute a quorum of Preferred Stock for the election by such class
of two directors to the Board of Directors; provided, however, that a
majority of the holders of the Preferred Stock who are present in
person or by proxy shall have the power to adjourn such meeting for
the purpose of the election of such two directors by such shares from
time-to-time without notice other than an announcement at the meeting.
No delay or failure by the holders of any class of shares to elect the
members of the Board of Directors which such holders are entitled to
elect shall invalidate the election of the remaining members of the
Board of Directors by the holders of such other class or classes of
shares, and a majority of the directors so elected shall, in such
case, constitute a quorum for the transaction of business by the Board
of Directors.
(IV) If, during any interval between the annual meeting of
stockholders for the election of directors and while the Preferred
Stock shall be entitled to elect two directors, a director in office
who has been elected by the holders of the Preferred Stock shall have
resigned, died or been removed, then (x) such vacancy shall be filled
by the remaining director then in office who was elected by the
Preferred Stockholders or who succeeded to the director so elected,
and (y) if both directors so representing the Preferred Stockholders
shall have resigned, died or been removed, or if any vacancy which
occurred more than six months prior to the date of the next ensuing
annual meeting is not so filled within forty (40) days after the
occurrence thereof, the President of the Corporation shall call a
special meeting of the holders of the Preferred Stock and such vacancy
shall be filled at such special meeting.
(V) Any director elected by the holders of Preferred Stock may be
removed from office only by vote of the holders of a majority of the
outstanding shares of Preferred Stock voted for his election or for
his predecessor in cases where such director was elected by the Board
of Directors.
(ii) So long as any shares of Preferred Stock are outstanding, the
Corporation shall not, without the consent (given by vote in person or by
proxy at a meeting called for that purpose) of the holders of at least
two-thirds (2/3) of the shares of Preferred Stock then outstanding, voting
separately as a class and without regard to series,
(I) Amend, alter, change or repeal any of the express terms or
provisions of then outstanding Preferred Stock in a manner
substantially prejudicial to the holders thereof; provided, however,
that, if any such amendment, alteration, change or repeal adversely
affects the holders of some but not all of the outstanding shares of
Preferred Stock, only the consent of the holders of two-thirds (2/3)
of the total number of shares so affected shall be required; or
(II) Create any class of stock ranking prior to the Preferred
Stock as to dividends or upon liquidation, or securities convertible
into shares ranking prior to the Preferred Stock in respects
aforesaid.
6. Conversion Rights.
(a) Right to Convert. Each share of the 7.5% Series may be converted
at the option of the holder thereof at any time and from time to time, and
without the payment of any additional consideration therefor, into that
number of fully paid and nonassessable shares of Common Stock, $.001 par
value per share, of the Corporation (the "Common Stock") as provided
herein.
(b) Conversion Procedures. Each holder of the 7.5% Series who elects
to convert the same into shares of Common Stock shall surrender the
certificate or certificates therefor, duly endorsed, at the office of the
Corporation or any transfer agent for the 7.5% Series as may be designated
by the Board of Directors (the "Transfer Agent"), and shall give written
notice to the Corporation at such office that such holder elects to convert
the same and shall state therein the number of shares of the 7.5% Series
being converted; provided, however, such number of shares shall not be
fewer than 25,000. Thereupon, the Corporation shall promptly issue and
deliver at such office to such holder a certificate or certificates for the
number of shares of Common Stock to which such holder is entitled upon such
conversion. Such conversion shall be deemed to have been made immediately
prior to the close of business on the date of such surrender of the
certificate or certificates representing the shares of the 7.5% Series to
be converted, and the person entitled to receive the shares of Common Stock
issuable upon such conversion shall be treated for all purposes as the
record holder of such shares of Common Stock on such date.
(c) Conversion Price. Each share of the 7.5% Series shall be
convertible in accordance with this Section 6 into the number of shares of
Common Stock that results from dividing the Liquidation Preference for the
7.5% Series (including the stated liquidation preference and accrued but
unpaid dividends) by the conversion price that is in effect at the time of
conversion (the "Conversion Price"). The initial Conversion Price for the
7.5% Series shall be $32.40 per share. The Conversion Price shall be
subject to adjustment from time to time as provided below.
(d) Adjustment of Conversion Price. The Conversion Price shall be
adjusted from time to time as follows:
(i) If the Corporation shall hereafter pay a dividend in or make a
distribution of Common Stock to all holders of any outstanding class or
series of Common Stock, the Conversion Price in effect at the opening of
business on the date following the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution shall
be reduced by multiplying such Conversion Price by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at the
close of business on the Record Date fixed for such determination and the
denominator shall be the sum of such number of outstanding shares and the
total number of shares constituting such dividend or other distribution,
such reduction to become effective immediately after the opening of
business on the day following the Record Date. If any dividend or
distribution of the type described in this Section 6(d)(i) is declared but
not so paid or made, the Conversion Price shall again be adjusted to the
Conversion Price which would then be in effect if such dividend or
distribution had not been declared.
(ii) If the Corporation shall offer to issue rights or warrants to all
holders of its outstanding Common Stock entitling them to subscribe for or
purchase Common Stock at a price per share less than the Current Market
Price on the Record Date fixed for the determination of stockholders
entitled to receive such rights or warrants, the Conversion Price shall be
adjusted so that the same shall equal the price determined by multiplying
the Conversion Price in effect at the opening of business on the date after
such Record Date by a fraction of which the numerator shall be the number
of shares of Common Stock outstanding at the close of business on the
Record Date plus the number of shares of Common Stock which the aggregate
offering price of the total number of shares of Common Stock subject to
such rights or warrants would purchase at such Current Market Price and of
which the denominator shall be the number of shares of Common Stock
outstanding at the close of business on the Record Date plus the total
number of additional shares of Common Stock subject to such rights or
warrants for subscription or purchase. Such adjustment shall become
effective immediately after the opening of business on the day following
the Record Date fixed for determination of stockholders entitled to
purchase or receive such rights or warrants. For the purposes of this
Section 6(d)(ii), the issuance of rights or warrants to subscribe for or
purchase securities convertible into Common Stock shall be deemed to be the
issuance of rights or warrants to purchase the shares of Common Stock into
which such securities are convertible at an aggregate offering price equal
to the aggregate offering price of such securities plus the minimum
aggregate amount (if any) payable upon conversion of such securities into
shares of Common Stock. To the extent that shares of Common Stock are not
delivered pursuant to such rights or warrants, upon the expiration or
termination of such rights or warrants the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect had the
adjustments made upon the issuance of such rights or warrants been made on
the basis of delivery of only the number of shares of Common Stock actually
delivered. If such rights or warrants are not so issued, the Conversion
Price shall again be adjusted to be the Conversion Price which would then
be in effect if such date fixed for the determination of stockholders
entitled to receive such rights or warrants had not been fixed. In
determining whether any rights or warrants entitle the holders to subscribe
for or purchase Common Stock at less than such Current Market Price, and in
determining the aggregate offering price of such shares of Common Stock,
there shall be taken into account any consideration received for such
rights or warrants, with the value of such consideration, if other than
cash, to be determined by the Board of Directors.
(iii) If the outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Conversion Price in
effect at the opening of business on the day following the day upon which
such subdivision becomes effective shall be proportionately reduced, and,
conversely, if the outstanding shares of Common Stock shall be combined
into a smaller number of shares of Common Stock, the Conversion Price in
effect at the opening of business on the day following the day upon which
such combination becomes effective shall be proportionately increased, such
reduction or increase, as the case may be, to become effective immediately
after the opening of business on the day following the day upon which such
subdivision or combination becomes effective.
(iv) If the Corporation shall, by dividend or otherwise, distribute to
all holders of its shares of Common Stock shares of any class of capital
stock of the Corporation (other than any dividends or distributions to
which Section 6(d)(i) applies) or evidences of its indebtedness, cash or
other assets (including securities, but excluding any rights or warrants of
a type referred to in Section 6(d)(ii) and excluding dividends and
distributions paid exclusively in cash and excluding any capital stock,
evidences of indebtedness, cash or assets distributed upon a merger or
consolidation to which Section 7(a) applies) (the foregoing hereinafter in
this Section 6(d)(iv) called the "Distributed Securities"), then, in each
such case, the Conversion Price shall be reduced so that the same shall be
equal to the price determined by multiplying the Conversion Price in effect
immediately prior to the close of business on the Record Date with respect
to such distribution by a fraction of which the numerator shall be the
Current Market Price of the Common Stock on such date less the fair market
value (as determined by the Board of Directors, whose determination shall
be conclusive and described in a resolution of the Board of Directors) on
such date of the portion of the Distributed Securities so distributed
applicable to one share of Common Stock and the denominator shall be such
Current Market Price, such reduction to become effective immediately prior
to the opening of business on the day following the Record Date; provided,
however, that, in the event the then fair market value (as so determined)
of the portion of the Distributed Securities so distributed applicable to
one share of Common Stock is equal to or greater than the Current Market
Price on the Record Date, in lieu of the foregoing adjustment, adequate
provision shall be made so that each holder of the 7.5% Series shall have
the right to receive upon conversion of a share of the 7.5% Series (or any
portion thereof) the amount of Distributed Securities such holder would
have received had such holder converted such share of the 7.5% Series (or
portion thereof) immediately prior to such Record Date. If such dividend or
distribution is not so paid or made, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect if such
dividend or distribution had not been declared. If the Board of Directors
determines the fair market value of any distribution for purposes of this
Section 6(d)(iv) by reference to the actual or when issued trading market
for any securities comprising all or part of such distribution, it must in
doing so consider the prices in such market over the same period used in
computing the Current Market Price to the extent possible.
Rights or warrants distributed by the Corporation to all holders of
Common Stock entitling the holders thereof to subscribe for or
purchase shares of the Corporation's Capital Stock (either initially
or under certain circumstances), which rights or warrants, until the
occurrence of a specified event or events ("Dilution Trigger Event"):
(i) are deemed to be transferred with such Common Stock; (ii) are not
exercisable; and (iii) are also issued in respect of future issuances
of Common Stock, shall be deemed not to have been distributed for
purposes of this Section 6(d)(iv) (and no adjustment to the Conversion
Price under this Section 6(d)(iv) shall be required) until the
occurrence of the earliest Dilution Trigger Event, whereupon such
rights and warrants shall be deemed to have been distributed and an
appropriate adjustment to the Conversion Price under this Section
6(d)(iv) shall be made. If any such rights or warrants, including any
such existing rights or warrants distributed prior to the date hereof,
are subject to subsequent events, upon the occurrence of each of which
such rights or warrants shall become exercisable to purchase different
securities, evidences of indebtedness or other assets, then the
occurrence of each such event shall be deemed to be such date of
issuance and record date with respect to new rights or warrants (and a
termination or expiration of the existing rights or warrants without
exercise by the holder thereof). In addition, in the event of any
distribution (or deemed distribution) of rights or warrants, or any
Dilution Trigger Event with respect thereto, that was counted for
purposes of calculating a distribution amount for which an adjustment
to the Conversion Price under this Section 6(d)(iv) was made, (1) in
the case of any such rights or warrants which shall all have been
redeemed or repurchased without exercise by any holders thereof, the
Conversion Price shall be readjusted upon such final redemption or
repurchase to give effect to such distribution or Dilution Trigger
Event, as the case may be, as though it were a cash distribution,
equal to the per share redemption or repurchase price received by a
holder or holders of Common Stock with respect to such rights or
warrants (assuming such holder had retained such rights or warrants),
made to all holders of Common Stock as of the date of such redemption
or repurchase, and (2) in the case of such rights or warrants which
shall have expired or been terminated without exercise by any holders
thereof, the Conversion Price shall be readjusted as if such rights
and warrants had not been issued.
Notwithstanding any other provision of this Section 6(d)(iv) to the
contrary, capital stock, rights, warrants, evidences of indebtedness,
other securities, cash or other assets (including any rights
distributed pursuant to any shareholder rights plan) shall be deemed
not to have been distributed for purposes of this Section 6(d)(iv) if
the Corporation makes proper provision so that each holder of shares
of the 7.5% Series who converts a share of the 7.5% Series (or any
portion thereof) after the date fixed for determination of
stockholders entitled to receive such distribution shall be entitled
to receive upon such conversion, in addition to the Common Stock
issuable upon such conversion, the amount and kind of such
distributions that such holder would have been entitled to receive if
such holder had, immediately prior to such determination date,
converted such share of the 7.5% Series into Common Stock.
For purposes of this Section 6(d)(iv) and Sections 6(d)(i) and (ii),
any dividend or distribution to which this Section 6(d)(iv) is
applicable that also includes Common Stock, or rights or warrants to
subscribe for or purchase Common Stock to which Section 6(d)(ii)
applies (or both), shall be deemed instead to be (1) a dividend or
distribution of the evidences of indebtedness, cash, assets, shares of
capital stock, rights or warrants other than (A) such shares of Common
Stock or (B) rights or warrants to which Section 6(d)(2) applies (and
any Conversion Price reduction required by this Section 6(d)(iv) with
respect to such dividend or distribution shall then be made)
immediately followed by (2) a dividend or distribution of such Common
Stock or such rights or warrants (and any further Conversion Price
reduction required by Section 6(d)(i) and (ii) with respect to such
dividend or distribution shall then be made), except that (x) the
Record Date of such dividend or distribution shall be substituted as
"the Record Date fixed for the determination of stockholders entitled
to receive such dividend or other distribution", "Record Date fixed
for such determination" and "Record Date" within the meaning of
Section 6(d)(i) and as "the Record Date fixed for the determination of
stockholders entitled to receive such rights or warrants", "the date
fixed for the determination of the stockholders entitled to receive
such rights or warrants" and "such Record Date" within the meaning of
Section 6(d)(ii), and (y) any share of Common Stock included in such
dividend or distribution shall not be deemed "outstanding at the close
of business on the date fixed for such determination" within the
meaning of Section 6(d)(i).
(v) If the Corporation shall, by dividend or otherwise, distribute to
all holders of its Common Stock cash (excluding any cash that is
distributed upon a merger or consolidation to which Section 7(a) applies or
as part of a distribution referred to in paragraph (6)(d)(iv)) in an
aggregate amount that, combined together with (1) the aggregate amount of
any other such distributions to all holders of its Common Stock made
exclusively in cash within the 12 months preceding the date of payment of
such distribution, and in respect of which no adjustment pursuant to this
Section 6(d)(v) has been made, and (2) the aggregate of any cash plus the
fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a resolution of the
Board of Directors) of consideration payable in respect of any tender offer
by the Company or a Subsidiary of the Company for all or any portion of the
Common Stock concluded within the 12 months preceding the date of payment
of such distribution, and in respect of which no adjustment pursuant to
Section 6(d)(vi) has been made, exceeds 15% of the product of the Current
Market Price on the Record Date with respect to such distribution times the
number of shares of Common Stock outstanding on such date, then, and in
each such case, immediately after the close of business on such date, the
Conversion Price shall be reduced so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior
to the close of business on such Record Date by a fraction (i) the
numerator of which shall be equal to the Current Market Price on the Record
Date less an amount equal to the quotient of (x) the excess of such
combined amount over such 15% amount divided by (y) the number of shares of
Common Stock outstanding on the Record Date and (ii) the denominator of
which shall be equal to the Current Market Price on such Record Date;
provided, however, that, if the portion of the cash so distributed
applicable to one share of Common Stock is equal to or greater than the
Current Market Price of the Common Stock on the Record Date, in lieu of the
foregoing adjustment, adequate provision shall be made so that each holder
of the 7.5% Series shall have the right to receive upon conversion of a
share of the 7.5% Series (or any portion thereof) the amount of cash such
holder would have received had such holder converted such share of the 7.5%
Series (or portion thereof) immediately prior to such Record Date. If such
dividend or distribution is not so paid or made, the Conversion Price shall
again be adjusted to be the Conversion Price which would then be in effect
if such dividend or distribution had not been declared.
(vi) If a tender or exchange offer made by the Company or any of its
Subsidiaries for all or any portion of the Common Stock expires and such
tender or exchange offer (as amended upon the expiration thereof) requires
the payment to stockholders (based on the acceptance (up to any maximum
specified in the terms of the tender offer) of Purchased Shares (as defined
below)) of an aggregate consideration having a fair market value (as
determined by the Board of Directors, whose determination shall be
conclusive and described in a resolution of the Board of Directors) that,
combined together with (i) the aggregate of the cash plus the fair market
value (as determined by the Board of Directors, whose determination shall
be conclusive and described in a resolution of the Board of Directors), as
of the expiration of such tender offer, of consideration payable in respect
of any other tender offers by the Company or any of its Subsidiaries for
all or any portion of the Common Stock expiring within the 12 months
preceding the expiration of such tender offer and in respect of which no
adjustment pursuant to this Section 6(d)(vi) has been made and (ii) the
aggregate amount of any distributions to all holders of the Common Stock
made exclusively in cash within 12 months preceding the expiration of such
tender offer and in respect of which no adjustment pursuant to Section
6(d)(v) has been made, exceeds 15% of the product of the Current Market
Price as of the last time (the "Expiration Time") tenders could have been
made pursuant to such tender offer (as it may be amended) times the number
of shares of Common Stock outstanding (including any tendered shares) at
the Expiration Time, then, and in each such case, immediately prior to the
opening of business on the day after the date of the Expiration Time, the
Conversion Price shall be adjusted so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior
to the close of business on the date of the Expiration Time by a fraction
of which the numerator shall be the number of shares of Common Stock
outstanding (including any tendered shares) at the Expiration Time
multiplied by the Current Market Price of the Common Stock on the Trading
Day next succeeding the Expiration Time and the denominator shall be the
sum of (x) the fair market value (determined as aforesaid) of the aggregate
consideration payable to stockholders based on the acceptance (up to any
maximum specified in the terms of the tender offer) of all shares validly
tendered and not withdrawn as of the Expiration Time (the shares deemed so
accepted, up to any such maximum, being referred to as the "Purchased
Shares") and (y) the product of the number of shares of Common Stock
outstanding (less any Purchased Shares) at the Expiration Time and the
Current Market Price of the Common Stock on the Trading Day next succeeding
the Expiration Time, such reduction (if any) to become effective
immediately prior to the opening of business on the day following the
Expiration Time. If the Company is obligated to purchase shares pursuant to
any such tender offer, but the Company is permanently prevented by
applicable law from effecting any such purchases or all such purchases are
rescinded, the Conversion Price shall again be adjusted to be the
Conversion Price which would then be in effect if such tender offer had not
been made. If the application of this Section 6(d)(vi) to any tender offer
would result in an increase in the Conversion Price, no adjustment shall be
made for such tender offer under this Section 6(d)(vi).
(vii) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in
such price; provided, however, that any adjustments which by reason of this
Section 6(d)(vii) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment. All calculations under
this Section 6(d) shall be made by the Corporation and shall be made to the
nearest cent or to the nearest one-hundredth of a share, as the case may
be. No adjustment need be made for a change in the par value or no par
value of the Common Stock.
(viii) Whenever the Conversion Price is adjusted as herein provided,
the Corporation shall promptly file with the Transfer Agent an Officers'
Certificate setting forth the Conversion Price after such adjustment and
setting forth a brief statement of the facts requiring such adjustment.
Promptly after delivery of such certificate, the Corporation shall prepare
a notice of such adjustment of the Conversion Price setting forth the
adjusted Conversion Price and the date on which each adjustment becomes
effective and shall mail such notice of such adjustment of the Conversion
Price to each holder of the 7.5% Series at such holder's last address
appearing on the register of holders maintained for that purpose within 20
days of the effective date of such adjustment. Failure to deliver such
notice shall not affect the legality or validity of any such adjustment.
(ix) In any case in which this Section 6(d) provides that an
adjustment shall become effective immediately after a Record Date for an
event, the Corporation may defer until the occurrence of such event issuing
to the holder of any share of the 7.5% Series converted after such Record
Date and before the occurrence of such event the additional Common Stock
issuable upon such conversion by reason of the adjustment required by such
event over and above the Common Stock issuable upon such conversion before
giving effect to such adjustment.
(x) For purposes of this Section 6(d), the number of shares of Common
Stock at any time outstanding shall not include shares held in the treasury
of the Corporation but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of Common Stock. The Corporation
shall not pay any dividend or make any distribution on Common Stock held in
the treasury of the Corporation.
7. Corporate Events.
(a) Merger. In case of (i) any reclassification or change of
outstanding shares of Common Stock (other than a change in par value or
from par value to no par value or from no par value to par value, or as a
result of a subdivision or combination) or (ii) any consolidation or merger
of the Corporation with one or more other corporations (other than any
consolidation or merger in which the Corporation is the continuing
corporation and which does not result in any reclassification, conversion,
exchange or cancellation of outstanding shares of Common Stock issuable
upon conversion of the 7.5% Series), (iii) any sale or conveyance to
another corporation or other entity of all or substantially all of the
property of the Corporation, or (iv) any other transaction which would
constitute a Change of Control of the Corporation, then the Corporation, or
such successor corporation or other entity, as the case may be, shall make
appropriate provision so that the holder of each share of the 7.5% Series
then outstanding shall have the right thereafter, to convert such share of
the 7.5% Series into the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, sale,
reclassification, change or conveyance by a holder of the number of shares
of Common Stock into which such share of the 7.5% Series might have been
converted immediately prior to such consolidation, merger, sale,
reclassification, change or conveyance, subject to such adjustment which
shall be as nearly equivalent as may be practicable to the adjustments
provided in Section 6(d). The above provisions of this Section 7(a) shall
similarly apply to successive consolidations, mergers, conveyances or
transfers.
(b) Offer to Repurchase. In addition to the foregoing, upon the
occurrence of a Change of Control in which all or part of the consideration
payable to holders of Common Stock is in the form of cash, the Corporation
shall make an offer (a "Change of Control Offer") to each holder of shares
of the 7.5% Series to repurchase all or any part of each such holder's
shares of the 7.5% Series at an offer price in cash equal to 100% of the
Liquidation Preference as of the Change of Control Payment Date (the
"Change of Control Payment"); provided, however, such Change of Control
Offer shall be limited to that number of shares of the 7.5% Series equal to
the total number of outstanding shares of the 7.5% Series multiplied by a
quotient equal to the total cash consideration paid to stockholders
pursuant to such Change of Control transaction divided by the total
consideration paid to stockholders pursuant to such Change of Control
transaction. The Corporation shall comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in
connection with the repurchase of shares of the 7.5% Series as a result of
a Change of Control, and the Corporation shall not be in violation of this
Certificate of Designation by reason of any act required by such rule or
other applicable law.
Within 25 days following any Change of Control, the Corporation shall mail
a notice to each holder of shares of the 7.5% Series stating:
(i) that the Change of Control Offer is being made pursuant to this
Section 7 and that up to the stated number of all shares of the 7.5% Series
tendered will be accepted for payment;
(ii) the purchase price and the purchase date, which shall be at least
30 but no more than 60 days from the date on which the Corporation mails
notice of the Change of Control (the "Change of Control Payment Date");
(iii) that any shares of the 7.5% Series not tendered will continue to
accrue dividends as provided in this Certificate of Designation;
(iv) that, unless the Corporation defaults in the payment of the
Change of Control Payment, all shares of the 7.5% Series accepted for
payment pursuant to the Change of Control Offer shall cease to accrue
dividends after the Change of Control Payment Date;
(v) that holders of shares of the 7.5% Series electing to have any
shares of the 7.5% Series purchased pursuant to a Change of Control Offer
shall be required to surrender the shares of the 7.5% Series to the
Corporation or its designated agent (the "Paying Agent") for such purpose,
at the address specified in the notice prior to the close of business on
the third Business Day preceding the Change of Control Payment Date; and
(vi) that holders of shares of the 7.5% Series will be entitled to
withdraw their election if the Corporation or the Paying Agent receives,
not later than the close of business on the second Business Day preceding
the Change of Control Payment Date, a telegram, telex, facsimile
transmission or letter setting forth the name of the holder of shares of
the 7.5% Series, the number of shares of the 7.5% Series delivered for
purchase, and a statement that such holder is withdrawing his election to
have such shares purchased.
On the Change of Control Payment Date, the Corporation shall, to the extent
lawful, (i) accept for payment all shares of the 7.5% Series tendered
pursuant to the Change of Control Offer; provided, however, that if the
number of such tendered shares exceeds the limits set forth above, the
Corporation shall accept such shares pro rata and (ii) deposit with the
Paying Agent an amount equal to the Change of Control Payment in respect of
all shares of the 7.5% Series so accepted for payment. The Corporation
shall promptly mail to each holder of shares of the 7.5% Series so tendered
the Change of Control Payment for such shares. The Corporation shall
publicly announce the results of the Change of Control Offer on or as soon
as practicable after the Change of Control Payment Date.
(c) Notice of Record Date. In case at any time or from time to time
(i) the Corporation shall pay any stock dividend or make any other non-cash
distribution to the holders of its Common Stock, or offer for subscription
pro rata to the holders of its Common Stock any additional shares of stock
of any class or any other right, or (ii) there shall be any capital
reorganization or reclassification of the Common Stock of the Corporation
or consolidation or merger of the Corporation with or into another
corporation, or any sale or conveyance to another corporation of the
property of the Corporation as an entirety or substantially as an entirety,
or (iii) there shall be a voluntary or involuntary dissolution, liquidation
or winding up of the Corporation, then, in any one or more of said cases
the Corporation shall give at least 20 days' prior written notice (the time
of mailing of such notice shall be deemed to be the time of giving thereof)
to the registered holders of the 7.5% Series at the addresses of each as
shown on the books of the Corporation maintained by the Transfer Agent
thereof of the date on which (A) a record shall be taken for such stock
dividend, distribution or subscription rights or (B) such reorganization,
reclassification, consolidation, merger, sale or conveyance, dissolution,
liquidation or winding up shall take place, as the case may be; provided
that, in the case of any transaction to which clause (a) applies the
Corporation shall give at least 30 days' prior written notice as aforesaid.
Such notice shall also specify the date as of which the holders of the
Common Stock of record shall participate in said dividend, distribution or
subscription rights or shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale or conveyance or participate
in such dissolution, liquidation or winding up, as the case may be. Failure
to give such notice shall not invalidate any action so taken.
8. Reservation of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but
unissued shares of Common Stock solely for the purpose of effecting the
conversion of the shares of the 7.5% Series, such number of its shares of
Common Stock as shall from time to time be sufficient to effect the
conversion of all then outstanding shares of the 7.5% Series; and if at any
time the number of authorized but unissued shares of Common Stock shall not
be sufficient to effect the conversion of all then outstanding shares of
the 7.5% Series, the Corporation will take such corporate action as may be
necessary to increase its authorized but unissued shares of Common Stock to
such number of shares as shall be sufficient for such purpose.
9. Definitions. Certain capitalized terms are used in this Certificate
as defined below:
"Affiliate" shall mean, with respect to any Person, any other Person
that directly or indirectly through one or more intermediaries controls or
is controlled by or is under common control with such Person. For the
purposes of this definition, "control," when used with respect to any
particular Person means the power to direct the management and policies of
such Person, directly or indirectly, whether through ownership of voting
securities, by contract or otherwise.
"Beneficial Owner" (and with correlative meanings, "Beneficially Own"
and "Beneficial Ownership") of any interest means a Person who, together
with his, her or its Affiliates, is or may be deemed a beneficial owner of
such interest for purposes of Rule 13d-3 or 13d-5 under the Exchange Act,
or who, together with his, her, or its Affiliates, has the right to become
such a beneficial owner of such interest (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding, or upon the exercise, conversion or exchange
of any warrant, right or other instrument, or otherwise.
"Board of Directors" shall mean the board of directors of the
Corporation.
"Business Day" shall mean any day other than a Saturday, a Sunday or a
day on which banking institutions in The City of New York or at a place of
payment are authorized by law, regulation or executive order to remain
closed.
"Change of Control" means the occurrence of any of the following: (i)
any Person becoming the Beneficial Owner, directly or indirectly, of Voting
Securities, pursuant to the consummation of a merger, consolidation, sale
of all or substantially all of the Corporation's assets, share exchange or
similar form of transaction that requires the approval of the Corporation's
stockholders, whether for such transaction or the issuance of securities in
such transaction, so as to cause such Person's Voting Ownership Percentage
to exceed 50% of the Total Voting Power; provided however, that the event
described in this clause (i) shall not be deemed to be a Change of Control
if it occurs as a result of the following acquisitions: (A) by any employee
benefit plan sponsored or maintained by the Corporation or any Affiliate,
or (B) by any underwriter temporarily holding securities pursuant to an
offering of such securities; (ii) the consummation of a merger,
consolidation, sale of all or substantially all of the Corporation's
assets, share exchange or similar form of corporate transaction involving
the Corporation or any of its subsidiaries that requires the approval of
the Corporation's shareholders whether for such transaction or the issuance
of securities in such transaction, unless immediately following such
transaction more than 50 percent of the total voting power of (x) the
corporation resulting from such transaction, or (y) if applicable, the
ultimate parent corporation that directly or indirectly has Beneficial
Ownership of 100 percent of the voting securities eligible to elect
directors of such resulting corporation, is represented by Voting
Securities that were outstanding immediately prior to such transaction in
substantially the same proportion as the voting power of such Voting
Securities among the holders thereof immediately prior to such transaction;
or (iii) the consummation of a plan of complete liquidation or dissolution
of the Corporation.
"closing price" with respect to any securities on any day means the
last sale price on such day or, if no such sale takes place on such day,
the average of the reported high bid and low ask prices on such day, in
each case on the Nasdaq National Market or the New York Stock Exchange, as
applicable, or, if such security is not listed or admitted to trading on
such national market or exchange, on the principal national securities
exchange or quotation system on which such security is quoted or listed or
admitted to trading, or, if not quoted or listed or admitted to trading on
any national securities exchange or quotation system, the average of the
high bid and low ask prices of such security on the over-the-counter market
on the day in question as reported by the National Quotation Bureau
Incorporated or a similar generally accepted reporting service, or, if not
so available, in such manner as furnished by any New York Stock Exchange
member firm selected from time to time by the Board of Directors for that
purpose, or a price determined in good faith by the Board of Directors,
whose determination shall be conclusive and described in a resolution of
the Board of Directors.
"Current Market Price" means the average of the daily closing prices
per share of Common Stock for the 20 consecutive Trading Days immediately
prior to the date in question; provided, however, that (A) if the "ex" date
(as hereinafter defined) for any event (other than the issuance or
distribution requiring such computation) that requires an adjustment to the
Conversion Price pursuant to Section 6(d)(i), (ii), (iii) or (iv) occurs
during such 20 consecutive trading days, the closing price for each trading
day prior to the "ex" date for such other event shall be adjusted by
multiplying such closing price by the same fraction by which the Conversion
Price is so required to be adjusted as a result of such other event, (B) if
the "ex" date for any event (other than the issuance or distribution
requiring such computation) that requires an adjustment to the Conversion
Price pursuant to Section 6(d)(i), (ii), (iii) or (iv) occurs on or after
the "ex" date for the issuance or distribution requiring such computation
and prior to the date in question, the closing price for each trading day
on and after the "ex" date for such other event shall be adjusted by
multiplying such closing price by the reciprocal of the fraction by which
the Conversion Price is so required to be adjusted as a result of such
other event and (C) if the "ex" date for the issuance or distribution
requiring such computation is prior to the day in question, after taking
into account any adjustment required pursuant to clause (A) or (B) of this
proviso, the closing price for each trading day on or after such "ex" date
shall be adjusted by adding thereto the amount of any cash and the fair
market value (as determined by the Board of Directors in a manner
consistent with any determination of such value for purposes of Section
6(d)(iv), whose determination shall be conclusive and described in a
resolution of the Board of Directors) of the evidence of indebtedness,
shares of Capital Stock or assets being distributed applicable to one
Common Stock as of the close of business on the day before such "ex" date.
For purposes of this paragraph, the term "ex" date (I) when used with
respect to any issuance or distribution, means the first date on which the
Common Stock trades regular way on the relevant exchange or in the relevant
market from which the closing price was obtained without the right to
receive such issuance or distribution,(II) when used with respect to any
subdivision or combination of Common Stock, means the first date on which
the Common Stock trades regular way on such exchange or in such market
after the time at which such subdivision or combination becomes effective
and (III) when used with respect to any tender or exchange offer means the
first date on which the Common Stock trades regular way on such exchange or
in such market after the Expiration Time of such offer. Notwithstanding the
foregoing, whenever successive adjustments to the Conversion Price are
called for pursuant to this Section 6(d), such adjustments shall be made to
the Current Market Price as may be necessary or appropriate to effectuate
the intent of this Section 6(d) and to avoid unjust or inequitable results,
as determined in good faith by the Board of Directors.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, or any successor federal statute, and the rules and regulations of
the SEC thereunder, all as the same shall be in effect at the time.
Reference to a particular section of the Exchange Act shall include
reference to the comparable section, if any, of any such successor federal
statute.
"fair market value" shall mean the amount which a willing buyer would
pay a willing seller in an arm's-length transaction.
"Liquidation Preference" with respect to a share of the 7.5% Series
shall mean, as at any date, $100.00 per share (as adjusted for any stock
dividends, combinations or splits with respect to such share), plus an
amount equal to all accrued but unpaid dividends (whether or not declared)
on such share as at such date.
"Person" means any individual, "group" (as such term is used in
sections 13(d) and 14(d) of the Exchange Act), corporation, partnership,
joint venture, trust, unincorporated organization, government or any agency
or political subdivision thereof, or any other entity.
"Record Date" shall mean, with respect to any dividend, distribution
or other transaction or event in which the holders of Common Stock have the
right to receive any cash, securities or other property or in which the
Common Stock (or other applicable security) is exchanged for or converted
into any combination of cash, securities or other property, the date fixed
for determination of stockholders entitled to receive such cash, securities
or other property (whether such date is fixed by the Board of Directors or
by statute, contract or otherwise).
"Total Voting Power" shall mean, calculated at a particular point in
time, the aggregate votes represented by then outstanding Voting
Securities.
"Trading Day" shall mean a day on which the principal national
securities exchange on which the Common Stock is listed or admitted to
trading is open for the transaction of business.
"Voting Ownership Percentage" shall mean, calculated at a particular
point in time, the Voting Power represented by the Voting Securities
Beneficially Owned by the Person whose Voting Ownership Percentage is being
determined.
"Voting Power" shall mean, calculated at a particular point in time,
the ratio, expressed as a percentage, of (a) the votes represented by the
Voting Securities with respect to which the Voting Power is being
determined to (b) Total Voting Power.
"Voting Securities" shall mean the Common Stock and shares of any
class of capital stock of the Corporation then entitled to vote generally
in the election of any member of the Board of Directors, as elected in
accordance with the provisions of the By-laws and Charter of the
Corporation and shall not include the shares of the 7.5% Series prior to
its conversion into Common Stock.
10. Conflicts. In the event of a conflict between any provision of this
Certificate and the Charter, the Charter shall take precedence and shall control
the resolution of such conflict.
IN WITNESS WHEREOF, Western Resources, Inc. has made this Certificate under
its seal and the hand of the President and Chief Executive Officer, an officer
authorized to exercise the duties ordinarily exercised by a Vice President, and
an Assistant Secretary this ____ day of _____________, 20___.
HVOLT ENTERPRISES, INC.
By:______________________________
Name:____________________________
Title:___________________________
ATTEST:
______________________________
Name:_________________________
Title:________________________