Exhibit (2)-1
AGREEMENT AND PLAN OF MERGER
BETWEEN
WESTERN RESOURCES, INC.,
AND
KANSAS CITY POWER & LIGHT COMPANY
Dated as of February 7, 1997
TABLE OF CONTENTS
ARTICLE I
THE MERGER
Section 1.1 THE MERGER.................................................... 1
Section 1.2 EFFECTS OF THE MERGER......................................... 2
Section 1.3 EFFECTIVE TIME OF THE MERGER.................................. 2
ARTICLE II
TREATMENT OF SHARES
Section 2.1 EFFECT OF THE MERGER ON CAPITAL STOCK......................... 2
Section 2.2 ISSUANCE OF NEW CERTIFICATES.................................. 3
ARTICLE III
THE CLOSING
Section 3.1 CLOSING....................................................... 6
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF KCPL
Section 4.1 ORGANIZATION AND QUALIFICATION................................ 6
Section 4.2 SUBSIDIARIES.................................................. 6
Section 4.3 CAPITALIZATION................................................ 7
Section 4.4 AUTHORITY; NON-CONTRAVENTION; STATUTORY APPROVALS; COMPLIANCE. 8
Section 4.5 REPORTS AND FINANCIAL STATEMENTS.............................. 9
Section 4.6 ABSENCE OF CERTAIN CHANGES OR EVENTS.......................... 10
Section 4.7 LITIGATION.................................................... 10
Section 4.8 REGISTRATION STATEMENT AND PROXY STATEMENT.................... 10
Section 4.9 TAX MATTERS................................................... 11
Section 4.10 EMPLOYEE MATTERS; ERISA....................................... 13
Section 4.11 ENVIRONMENTAL PROTECTION...................................... 14
Section 4.12 REGULATION AS A UTILITY....................................... 16
Section 4.13 VOTE REQUIRED................................................. 17
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Section 4.14 ACCOUNTING MATTERS............................................ 17
Section 4.15 ARTICLE TWELFTH OF KCPL'S RESTATED ARTICLES OF CONSOLIDATION.. 17
Section 4.16 OPINION OF FINANCIAL ADVISOR.................................. 17
Section 4.17 INSURANCE..................................................... 17
Section 4.18 KCPL NOT A RELATED PERSON..................................... 17
Section 4.19 TAKEOVER STATUTES............................................. 18
Section 4.20 TERMINATION OF UTILICORP AGREEMENT............................ 18
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WESTERN RESOURCES
Section 5.1 ORGANIZATION AND QUALIFICATION................................ 18
Section 5.2 SUBSIDIARIES.................................................. 19
Section 5.3 CAPITALIZATION................................................ 19
Section 5.4 AUTHORITY; NON-CONTRAVENTION; STATUTORY APPROVALS; COMPLIANCE. 20
Section 5.5 REPORTS AND FINANCIAL STATEMENTS.............................. 21
Section 5.6 ABSENCE OF CERTAIN CHANGES OR EVENTS.......................... 22
Section 5.7 LITIGATION.................................................... 22
Section 5.8 REGISTRATION STATEMENT AND PROXY STATEMENT.................... 22
Section 5.9 TAX MATTERS................................................... 23
Section 5.10 EMPLOYEE MATTERS; ERISA....................................... 24
Section 5.11 ENVIRONMENTAL PROTECTION...................................... 26
Section 5.12 REGULATION AS A UTILITY....................................... 27
Section 5.13 VOTE REQUIRED................................................. 27
Section 5.14 ARTICLE XI (BUSINESS COMBINATION WITH INTERESTED SHAREHOLDER)
OF WESTERN RESOURCES' ARTICLES OF INCORPORATION............... 27
Section 5.15 OPINION OF FINANCIAL ADVISOR.................................. 27
Section 5.16 INSURANCE..................................................... 28
Section 5.17 WESTERN RESOURCES NOT AN INTERESTED SHAREHOLDER............... 28
Section 5.18 TAKEOVER STATUTES............................................. 28
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 COVENANTS OF KCPL............................................. 28
Section 6.2 COVENANTS OF WESTERN RESOURCES................................ 33
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ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 ACCESS TO INFORMATION......................................... 34
Section 7.2 JOINT PROXY STATEMENT AND REGISTRATION STATEMENT.............. 35
Section 7.3 REGULATORY MATTERS............................................ 36
Section 7.4 SHAREHOLDER APPROVAL.......................................... 36
Section 7.5 DIRECTORS' AND OFFICERS' INDEMNIFICATION...................... 37
Section 7.6 PUBLIC ANNOUNCEMENTS.......................................... 38
Section 7.7 RULE 145 AFFILIATES........................................... 38
Section 7.8 EMPLOYEE AGREEMENTS AND WORKFORCE MATTERS..................... 39
Section 7.9 EMPLOYEE BENEFIT PLANS........................................ 39
Section 7.10 STOCK OPTION AND OTHER STOCK PLANS............................ 40
Section 7.11 NO SOLICITATIONS.............................................. 41
Section 7.12 SURVIVING CORPORATION BOARD OF DIRECTORS...................... 42
Section 7.13 POST-MERGER OPERATIONS........................................ 43
Section 7.14 EXPENSES...................................................... 43
Section 7.15 TRANSITION MANAGEMENT......................................... 43
Section 7.16 TERMINATION OF WESTERN RESOURCES EXCHANGE OFFER............... 44
Section 7.17 POOLING AND TAX-FREE STATUS................................... 44
Section 7.18 FURTHER ASSURANCES............................................ 44
Section 7.19 INTERIM DIVIDENDS............................................. 45
ARTICLE VIII
CONDITIONS
Section 8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.... 45
Section 8.2 CONDITIONS TO OBLIGATION OF WESTERN RESOURCES TO
EFFECT THE MERGER............................................. 46
Section 8.3 CONDITIONS TO OBLIGATION OF KCPL TO EFFECT THE MERGER......... 48
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 TERMINATION................................................... 49
Section 9.2 EFFECT OF TERMINATION......................................... 51
Section 9.3 TERMINATION FEE; EXPENSES..................................... 51
Section 9.4 AMENDMENT..................................................... 52
Section 9.5 WAIVER........................................................ 52
Section 9.6 STANDSTILL AGREEMENT.......................................... 53
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ARTICLE X
GENERAL PROVISIONS
Section 10.1 NON-SURVIVAL; EFFECT OF REPRESENTATIONS AND WARRANTIES....... 53
Section 10.2 BROKERS...................................................... 53
Section 10.3 NOTICES...................................................... 54
Section 10.4 MISCELLANEOUS................................................ 55
Section 10.5 INTERPRETATION............................................... 55
Section 10.6 COUNTERPARTS; EFFECT......................................... 55
Section 10.7 PARTIES' INTEREST............................................ 55
Section 10.8 WAIVER OF JURY TRIAL AND CERTAIN DAMAGES..................... 56
Section 10.9 ENFORCEMENT.................................................. 56
Section 10.10 SEVERABILITY................................................. 56
Section 10.11 ANTI-DILUTION................................................ 56
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INDEX OF PRINCIPAL TERMS
TERM PAGE
NYSE........................................................................ 2
1935 Act.................................................................... 6
Acquisition Proposal........................................................ 42
Affiliate Agreement......................................................... 38
Affiliate................................................................... 17
Agreement................................................................... 1
Atomic Energy Act........................................................... 9
Canceled Shares............................................................. 3
Certificates................................................................ 3
Closing Agreement........................................................... 12
Closing Date................................................................ 6
Closing..................................................................... 6
Code........................................................................ 1
Confidentiality Agreement................................................... 34
Control..................................................................... 17
Conversion Ratio............................................................ 2
Dissenting Shares........................................................... 2
Dissenting Stockholders..................................................... 2
Effective Time.............................................................. 2
Electric Companies Index Price.............................................. 51
Electric Companies Ratio.................................................... 51
Environmental Claim......................................................... 15
Environmental Laws.......................................................... 16
Environmental Permits....................................................... 15
ERISA....................................................................... 13
Exchange Act................................................................ 9
Exchange Agent.............................................................. 3
FERC........................................................................ 9
Final Order................................................................. 45
GAAP........................................................................ 10
Governmental Authority...................................................... 8
Hazardous Materials......................................................... 16
HSR Act..................................................................... 36
Indemnified Liabilities..................................................... 37
Indemnified Parties......................................................... 37
Indemnified Party........................................................... 37
Investments................................................................. 28
IRS......................................................................... 13
Joint Proxy/Registration Statement.......................................... 35
KCPL Benefit Plans.......................................................... 13
KCPL Business Plan.......................................................... 28
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KCPL Common Stock........................................................... 2
KCPL Cumulative Preferred................................................... 7
KCPL Disclosure Schedule.................................................... 6
KCPL Financial Statements................................................... 10
KCPL Material Adverse Effect................................................ 10
KCPL Meeting................................................................ 36
KCPL No Par Preferred....................................................... 7
KCPL Preference Stock....................................................... 7
KCPL Preferred Stock........................................................ 7
KCPL Required Consents...................................................... 8
KCPL Required Statutory Approvals........................................... 9
KCPL SEC Reports............................................................ 9
KCPL Shareholders' Approval................................................. 17
KCPL Stock Awards........................................................... 40
KCPL Stock Option........................................................... 40
KCPL Stock Plans............................................................ 7
KCPL Subsidiary............................................................. 6
KCPL........................................................................ 1
KGCC........................................................................ 2
Merger...................................................................... 1
Merrill Lynch............................................................... 17
MGBCL....................................................................... 2
NRC......................................................................... 9
PBGC........................................................................ 13
PCBs........................................................................ 16
Person...................................................................... 5
Power Act................................................................... 9
Proxy Statement............................................................. 11
Registration. Statement..................................................... 11
Release..................................................................... 16
Representatives............................................................. 34
Salomon..................................................................... 27
Securities Act.............................................................. 9
SEC......................................................................... 9
Stock Price Termination Notice.............................................. 50
Subsidiary.................................................................. 6
Surviving Corporation Stock Awards.......................................... 41
Surviving Corporation Stock Benefits........................................ 41
Surviving Corporation....................................................... 1
Task Force.................................................................. 43
Tax Return.................................................................. 11
Tax Ruling.................................................................. 12
Taxes....................................................................... 11
Termination Date............................................................ 50
Utilicorp Agreement......................................................... 1
UtiliCorp Confidentiality Agreement......................................... 18
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UtiliCorp................................................................... 1
Violation................................................................... 8
Voting Debt................................................................. 7
Western Resources $100 Preferred............................................ 19
Western Resources Articles.................................................. 2
Western Resources Benefit Plans............................................. 24
Western Resources Common Stock.............................................. 2
Western Resources Disclosure Schedule....................................... 19
Western Resources Financial Statements...................................... 21
Western Resources Index Price............................................... 2
Western Resources Material Adverse Effect................................... 22
Western Resources Meeting................................................... 36
Western Resources No-Par Preferred.......................................... 19
Western Resources Preference Stock.......................................... 19
Western Resources Preferred Stock........................................... 19
Western Resources Required Consents......................................... 20
Western Resources Required Statutory Approvals.............................. 20
Western Resources SEC Reports............................................... 21
Western Resources Shareholders' Approval.................................... 27
Western Resources Subsidiary................................................ 18
Western Resources........................................................... 1
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AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of February
7, 1997, by and between Western Resources, Inc., a Kansas corporation ("Western
Resources") and Kansas City Power & Light Company, a Missouri corporation
("KCPL").
WHEREAS, the respective boards of directors of KCPL and Western
Resources have approved the merger of KCPL with and into Western Resources, with
Western Resources being the surviving corporation (the "Merger"), upon the terms
and subject to the conditions set forth in this Agreement;
WHEREAS, it is intended that, for federal income tax purposes, the
Merger shall qualify as a reorganization under the provisions of Section 368(a)
of the Internal Revenue Code of 1986, as amended, and the rules and regulations
promulgated thereunder (the "Code");
WHEREAS, Western Resources and KCPL desire to make certain
representations, warranties, covenants and agreements in connection with this
Agreement; and
WHEREAS, KCPL and UtiliCorp United, Inc., a Delaware corporation
("UtiliCorp"), were parties to that certain Amended and Restated Agreement and
Plan of Merger among KCPL, KC Merger Sub, Inc., a Delaware corporation,
UtiliCorp and KC United Corp., a Delaware corporation, dated as of January 19,
1996, as amended and restated as of May 20, 1996 (the "UtiliCorp Agreement"),
which KCPL has terminated in accordance with the terms thereof.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I
THE MERGER
Section 1.1 THE MERGER. Upon the terms and subject to the conditions of
this Agreement:
THE MERGER. At the Effective Time (as defined in Section 1.3), KCPL
shall be merged with and into Western Resources in accordance with the laws of
the States of Missouri and Kansas. Western Resources shall be the surviving
corporation in the Merger and shall continue its corporate existence under the
laws of the State of Kansas. Western Resources after the Effective Time is
sometimes referred to herein as the "Surviving Corporation." The effects and the
consequences of the Merger shall be as set forth in Section 1.2.
Section 1.2 EFFECTS OF THE MERGER. At the Effective Time, (i) the
Amended and Restated Articles of Incorporation of Western Resources (the
"Western Resources Articles"), as in effect immediately prior to the Effective
Time, shall be the articles of incorporation of the Surviving Corporation until
thereafter amended as provided by law and the Western Resources Articles, and
(ii) the by-laws of Western Resources, as in effect immediately prior to the
Effective Time, shall be the by-laws of the Surviving Corporation until
thereafter amended as provided by law, the Western Resources Articles, and such
by-laws. Subject to the foregoing, the additional effects of the Merger shall be
as provided in the applicable provisions of the General and Business Corporation
Law of Missouri (the "MGBCL") and the General Corporation Code of the State of
Kansas (the "KGCC").
Section 1.3 EFFECTIVE TIME OF THE MERGER. On the Closing Date (as
defined in Section 3.1), a certificate of merger shall be executed and filed by
Western Resources and KCPL with the Secretary of State of the State of Kansas
pursuant to the KGCC and articles of merger shall be executed and filed with the
Secretary of State of the State of Missouri pursuant to the MGBCL. The Merger
shall become effective upon the certification by the Secretary of State of the
State of Kansas that the certificate of merger relating to the Merger has been
duly filed (the "Effective Time").
ARTICLE II
TREATMENT OF SHARES
Section 2.1 EFFECT OF THE MERGER ON CAPITAL STOCK.
(a) CAPITAL STOCK OF KCPL. As of the Effective Time, by virtue of the
Merger and without any action on the part of any holder of any capital stock of
KCPL, subject to Section 2.1(b) and Section 2.2, each issued and outstanding
share of Common Stock, without par value, of KCPL ("KCPL Common Stock") (other
than shares of KCPL Common Stock beneficially owned by Western Resources or KCPL
either directly or through a wholly owned Subsidiary (as defined in Section 4.1)
and shares of KCPL Common Stock ("Dissenting Shares") that are owned by
stockholders ("Dissenting Stockholders") exercising appraisal rights pursuant to
Section 351.455 of the MGBCL), shall be converted into and become that number of
fully paid and nonassessable shares of Common Stock, par value $5.00 per share,
of Western Resources ("Western Resources Common Stock") equal to the Conversion
Ratio. The term "Conversion Ratio" means the quotient (rounded to the nearest
1/100,000) determined by dividing $32.00 by the Western Resources Index Price
(as defined below) provided, that the Conversion Ratio shall not be less than
0.917 nor greater than 1.100 except as otherwise specified in Section 9.1(f)
hereof. The term "Western Resources Index Price" means the aggregate of the
average of the high and low sales prices of Western Resources Common Stock (as
reported on the New York Stock Exchange (the "NYSE") Composite Transactions
reporting system as published in The Wall Street Journal or, if not published
therein, in another authoritative source) on each of the twenty consecutive NYSE
trading days ending the tenth NYSE trading day immediately preceding the
Effective Time, divided by 20. All such shares of KCPL Common Stock shall no
longer be outstanding and
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shall automatically be canceled and retired and shall cease to exist, and each
holder of a Certificate (as defined in Section 2.2(b)), formerly representing
any such shares shall cease to have any rights with respect to such shares,
except the right to receive shares of Western Resources Common Stock to be
issued in consideration therefor upon the surrender of such Certificate in
accordance with Section 2.2.
(b) CANCELLATION OF CERTAIN KCPL COMMON STOCK. As of the Effective
Time, by virtue of the Merger and without any action on the part of any holder
of any capital stock of KCPL, any shares of KCPL Common Stock that are owned by
KCPL as treasury stock or by Western Resources or by any wholly owned Subsidiary
of Western Resources or KCPL shall be canceled and retired and shall cease to
exist and no stock of Western Resources or other consideration shall be issued
or delivered in exchange therefor.
(c) REDEMPTION OF KCPL PREFERRED STOCK. Prior to the Effective Time,
the Board of Directors of KCPL shall call for redemption all outstanding shares
of KCPL Preferred Stock (as defined in Section 4.3) at a redemption price equal
to the amount set forth in the Restated Articles of Consolidation of KCPL,
together with all dividends accrued and unpaid to the date of such redemption.
All shares of KCPL Preferred Stock shall be redeemed so that no such 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.
Section 2.2 ISSUANCE OF NEW CERTIFICATES.
(a) DEPOSIT WITH EXCHANGE AGENT. As soon as practicable after the
Effective Time, Western Resources shall deposit, in trust for the benefit of
holders of Certificates, with Harris Trust Company of New York (the "Exchange
Agent"), certificates representing shares of Western Resources Common Stock
required to effect the issuance referred to in Section 2.1(a), together with
cash payable in respect of fractional shares pursuant to Section 2.2(d).
(b) ISSUANCE PROCEDURES. As soon as practicable after the Effective
Time, the Exchange Agent shall mail to each holder of record of a certificate or
certificates (the "Certificate" or the "Certificates") which immediately prior
to the Effective Time represented outstanding shares of KCPL Common Stock (the
"Canceled Shares") that were canceled and became instead the right to receive
shares of Western Resources Common Stock pursuant to Section 2.1(a): (i) a
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon actual delivery
of the Certificates to the Exchange Agent) and (ii) instructions for use in
effecting the surrender of the Certificates in exchange for certificates
representing shares of Western Resources Common Stock. Upon surrender of a
Certificate to the Exchange Agent for cancellation (or to such other agent or
agents as may be appointed by Western Resources), together with a duly executed
letter of transmittal and such other documents as the Exchange Agent shall
require, the holder of such Certificate shall be entitled to receive a
certificate or certificates representing that number of whole shares of Western
Resources Common Stock which such holder has the right to receive pursuant to
the provisions of this Article II. In the event of a transfer of ownership of
Canceled Shares which is not registered in the transfer records of
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KCPL, a certificate representing the proper number of shares of Western
Resources Common Stock may be issued to a transferee if the Certificate
representing such Canceled Shares is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer and
by evidence satisfactory to the Exchange Agent that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this Section
2.2, each Certificate shall be deemed at any time after the Effective Time to
represent only the right to receive upon such surrender the certificate
representing shares of Western Resources Common Stock and cash in lieu of any
fractional shares of Western Resources Common Stock as contemplated by this
Section 2.2.
(c) DISTRIBUTIONS WITH RESPECT TO UNSURRENDERED SHARES. No dividends or
other distributions declared or made after the Effective Time with respect to
shares of Western Resources Common Stock with a record date after the Effective
Time shall be paid to the holder of any unsurrendered Certificate with respect
to the shares of Western Resources Common Stock represented thereby and no cash
payment in lieu of fractional shares shall be paid to any such holder pursuant
to Section 2.2(d) until the holder of record of such Certificate shall surrender
such Certificate. Subject to the effect of unclaimed property, escheat and other
applicable laws, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole shares of
Western Resources Common Stock issued in consideration therefor, without
interest, (i) at the time of such surrender, the amount of any cash payable in
lieu of a fractional share of Western Resources Common Stock to which such
holder is entitled pursuant to Section 2.2(d) and the amount of dividends or
other distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of Western Resources Common Stock and (ii) at
the appropriate payment date, the amount of dividends or other distributions
with a record date after the Effective Time but prior to surrender and a payment
date subsequent to surrender payable with respect to such whole shares of
Western Resources Common Stock.
(d) NO FRACTIONAL SECURITIES. No certificates or scrip representing
fractional shares of Western Resources Common Stock shall be issued upon the
surrender for exchange of Certificates and such fractional shares shall not
entitle the owner thereof to vote or to any other rights of a holder of Western
Resources Common Stock. A holder of KCPL Common Stock who would otherwise have
been entitled to a fractional share of Western Resources Common Stock shall be
entitled to receive a cash payment in lieu of such fractional share in an amount
equal to the product of such fraction multiplied by the Western Resources Index
Price, without any interest thereon.
(e) BOOK ENTRY. Notwithstanding any other provision of this Agreement,
the letter of transmittal referred to in Section 2.2(b) may, at the option of
Western Resources, provide for the ability of a holder of one or more
Certificates to elect that shares of Western Resources Common Stock to be
received in exchange for the Canceled Shares formerly represented by such
surrendered Certificates be issued in uncertificated form or to elect that such
shares of Western Resources Common Stock be credited to an account established
for the holder under the dividend reinvestment and stock purchase plan of
Western Resources.
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(f) CLOSING OF TRANSFER BOOKS. From and after the Effective Time, the
stock transfer books of KCPL shall be closed and no registration of any transfer
of any capital stock of KCPL shall thereafter be made on the records of KCPL.
If, after the Effective Time, Certificates are presented to Western Resources,
they shall be canceled and exchanged for certificates representing the
appropriate number of shares of Western Resources Common Stock, as provided in
this Section 2.2.
(g) TERMINATION OF EXCHANGE AGENT. Any certificates representing shares
of Western Resources Common Stock deposited with the Exchange Agent pursuant to
Section 2.2(a) and not exchanged within one year after the Effective Time
pursuant to this Section 2.2 shall be returned by the Exchange Agent to Western
Resources, which shall thereafter act as Exchange Agent. All funds held by the
Exchange Agent for payment to the holders of unsurrendered Certificates and
unclaimed at the end of one year from the Effective Time shall be returned to
Western Resources; after which time any holder of unsurrendered Certificates
shall look as a general creditor only to Western Resources for payment of such
funds to which such holder may be due, subject to applicable law. Western
Resources shall not be liable to any person for such shares or funds delivered
to a public official pursuant to any applicable abandoned property, escheat or
similar law. As used in this Agreement, the term "Person" shall mean any natural
person, corporation, general or limited partnership, limited liability company,
joint venture, trust, association or entity of any kind.
(h) DISSENTERS' RIGHTS. No Dissenting Stockholder shall be entitled to
shares of Western Resources Common Stock or cash in lieu of fractional shares
thereof or any dividends or other distributions pursuant to this Article II
unless and until the holder thereof shall have failed to perfect or shall have
effectively withdrawn or lost such holder's right to dissent from the Merger
under the MGBCL, and any Dissenting Stockholder shall be entitled to receive
only the payment provided by Section 351.455 of the MGBCL with respect to shares
of KCPL Common Stock owned by such Dissenting Stockholder. If any Person who
otherwise would be deemed a Dissenting Stockholder shall have failed to properly
perfect or shall have effectively withdrawn or lost the right to dissent with
respect to any shares of KCPL Common Stock, such shares of KCPL Common Stock
shall thereupon be treated as though such shares of KCPL Common Stock had been
converted into shares of Western Resources Common Stock pursuant to Section
2.1(a) hereof. KCPL shall give Western Resources (i) prompt notice of any
written demands for appraisal, attempted withdrawals of such demands, and any
other instruments served pursuant to applicable law received by KCPL relating to
stockholders' rights of appraisal and (ii) the opportunity to direct all
negotiations and proceedings with respect to demand for appraisal under the
MGBCL. KCPL shall not, except with the prior written consent of Western
Resources, voluntarily make any payment with respect to any demands for
appraisals of Dissenting Shares, offer to settle or settle any such demands or
approve any withdrawal of any such demands.
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ARTICLE III
THE CLOSING
Section 3.1 CLOSING. The closing of the Merger (the "Closing") shall
take place at the offices of Sullivan & Cromwell, 125 Broad Street, New York,
New York 10004 at 10:00 A.M., local time, on the tenth NYSE trading day
immediately following the date on which the last of the conditions set forth in
Article VIII hereof is fulfilled or has been waived or at such other time, date
and place as Western Resources and KCPL shall mutually agree (the "Closing
Date").
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF KCPL
KCPL makes the following representations and warranties to Western
Resources:
Section 4.1 ORGANIZATION AND QUALIFICATION. KCPL and each of the KCPL
Subsidiaries (as defined below) is a corporation or other entity duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has all requisite power and authority, and has
been duly authorized by all necessary approvals and orders to own, lease and
operate its assets and properties to the extent owned, leased and operated and
to carry on its business as it is now being conducted and is duly qualified and
in good standing to do business in each jurisdiction in which the nature of its
business or the ownership or leasing of its assets and properties makes such
qualification necessary other than in such jurisdictions where the failure so to
qualify would not have a KCPL Material Adverse Effect (as defined in Section
4.6). As used in this Agreement, the term "Subsidiary" of a person shall mean
any corporation or other entity (including partnerships and other business
associations) of which at least a majority of the voting power represented by
the outstanding capital stock or other voting securities or interests having
voting power under ordinary circumstances to elect directors or similar members
of the governing body of such corporation or entity shall at the time be held,
directly or indirectly, by such person. The term "KCPL Subsidiary" shall mean a
Subsidiary of KCPL in which KCPL's equity investment exceeds $25 million.
Section 4.2 SUBSIDIARIES. Section 4.2 of the schedule delivered by KCPL
to Western Resources on the date hereof (the "KCPL Disclosure Schedule") sets
forth a list as of the date hereof of all the KCPL Subsidiaries. Neither KCPL
nor any of the KCPL Subsidiaries is a "holding company," a "subsidiary company"
or an "affiliate" of any public utility company within the meaning of Section
2(a)(7), 2(a)(8) or 2(a)(11) of the Public Utility Holding Company Act of 1935,
as amended (the "1935 Act"), respectively and none of the KCPL Subsidiaries is a
"public utility company" within the meaning of Section 2(a)(5) of the 1935 Act.
Except as set forth in Section 4.2 of the KCPL Disclosure Schedule all of the
issued and outstanding shares of capital stock of each KCPL Subsidiary are
validly
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issued, fully paid, nonassessable and free of preemptive rights, and are owned,
directly or indirectly, by KCPL free and clear of any liens, claims,
encumbrances, security interests, charges and options of any nature whatsoever
and there are no outstanding subscriptions, options, calls, contracts, voting
trusts, proxies or other commitments, understandings, restrictions,
arrangements, rights or warrants, including any right of conversion or exchange
under any outstanding security, instrument or other agreement, obligating any
such KCPL Subsidiary to issue, deliver or sell, or cause to be issued, delivered
or sold, additional shares of its capital stock or obligating it to grant,
extend or enter into any such agreement or commitment.
Section 4.3 CAPITALIZATION. As of the date hereof, the authorized
capital stock of KCPL consists of 150,000,000 shares of KCPL Common Stock,
without par value, 401,157 shares of Cumulative Preferred Stock, par value
$100.00 per share ("KCPL Cumulative Preferred"), 1,572,000 shares of Cumulative
No Par Preferred Stock, without par value ("KCPL No Par Preferred"), and
11,000,000 shares of Preference Stock, without par value ("KCPL Preference
Stock") (KCPL Cumulative Preferred, KCPL No Par Preferred and KCPL Preference
Stock hereinafter collectively referred to as the "KCPL Preferred Stock"). At
the close of business on January 28, 1997, (i) 61,908,726 shares of KCPL Common
Stock were issued, not more than 10,000,000 shares of KCPL Common Stock were
reserved for issuance pursuant to KCPL's Long Term Incentive Plan and Employee
Savings Plus Plan (401(k) Plan) and Dividend Reinvestment Plan (such Plans,
collectively, the "KCPL Stock Plans"), (ii) 12,907 shares of KCPL Common Stock
were held by KCPL in its treasury or by its wholly owned Subsidiaries, (iii)
401,157 shares of KCPL Cumulative Preferred were issued and of such issued
shares, 10,534 were held by KCPL in its treasury or by its wholly owned
Subsidiaries, (iv) 500,000 shares of KCPL No Par Preferred were outstanding and
none were held by KCPL or its Subsidiaries in its treasury, (v) no shares of
KCPL Preference Stock were outstanding and (vi) no bonds, debentures, notes or
other indebtedness having the right to vote (or convertible into securities
having the right to vote) on any matters on which stockholders may vote ("Voting
Debt"), were issued or outstanding. All outstanding shares of KCPL Common Stock
and KCPL Preferred Stock are validly issued, fully paid and nonassessable and
are not subject to preemptive rights. As of the date hereof, except as set forth
in Section 4.3 of the KCPL Disclosure Schedule or pursuant to this Agreement and
the KCPL Stock Plans, there are no options, warrants, calls, rights, commitments
or agreements of any character to which KCPL or any Subsidiary of KCPL is a
party or by which any of them are bound obligating KCPL or any Subsidiary of
KCPL to issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock or any Voting Debt securities of KCPL or any
Subsidiary of KCPL or obligating KCPL or any Subsidiary of KCPL to grant, extend
or enter into any such option, warrant, call, right, commitment or agreement.
Except as set forth in Section 4.3 of the KCPL Disclosure Schedule, or other
than in connection with the KCPL Stock Plans, after the Effective Time, there
will be no option, warrant, call, right, commitment or agreement obligating KCPL
or any Subsidiary of KCPL to issue, deliver or sell, or cause to be issued,
delivered or sold, any shares of capital stock or any Voting Debt of KCPL or any
Subsidiary of KCPL, or obligating KCPL or any Subsidiary of KCPL to grant,
extend or enter into any such option, warrant, call, right, commitment or
agreement.
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Section 4.4 AUTHORITY; NON-CONTRAVENTION; STATUTORY APPROVALS;
COMPLIANCE.
(a) AUTHORITY. KCPL has all requisite power and authority to enter into
this Agreement and, subject to the receipt of the applicable KCPL Shareholders'
Approval (as defined in Section 4.13) and the applicable KCPL Required Statutory
Approvals (as defined in Section 4.4(c)), to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation by KCPL of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of KCPL, subject to
obtaining the applicable KCPL Shareholders' Approval. This Agreement has been
duly and validly executed and delivered by KCPL and, assuming the due
authorization, execution and delivery hereof by Western Resources, constitutes
the valid and binding obligation of KCPL enforceable against it in accordance
with the terms of this Agreement.
(b) NON-CONTRAVENTION. Except as set forth in Section 4.4(b) of the
KCPL Disclosure Schedule, the execution and delivery of this Agreement by KCPL
does not, and the consummation of the transactions contemplated hereby will not,
in any respect, violate, conflict with or result in a material breach of any
provision of, or constitute a material default (with or without notice or lapse
of time or both) under, or result in the termination or modification of, or
accelerate the performance required by, or result in a right of termination,
cancellation or acceleration of any obligation or the loss of a material benefit
under, or result in the creation of any material lien, security interest, charge
or encumbrance upon any of the properties or assets of KCPL or any of the KCPL
Subsidiaries (any such violation, conflict, breach, default, right of
termination, modification, cancellation or acceleration, loss or creation, is
referred to herein as a "Violation" with respect to KCPL and such term when used
in Article V having a correlative meaning with respect to Western Resources)
pursuant to any provisions of (i) the Restated Articles of Consolidation,
by-laws or similar governing documents of KCPL or any of the KCPL Subsidiaries,
(ii) subject to obtaining the KCPL Required Statutory Approvals and the receipt
of the KCPL Shareholders' Approval, any statute, law, ordinance, rule,
regulation, judgment, decree, order, injunction, writ, permit or license of any
Governmental Authority (as defined in Section 4.4(c)) applicable to KCPL or any
of the KCPL Subsidiaries or any of their respective properties or assets or
(iii) subject to obtaining the third-party consents set forth in Section 4.4(b)
of the KCPL Disclosure Schedule (the "KCPL Required Consents"), any material
note, bond, mortgage, indenture, deed of trust, license, franchise, permit,
concession, contract, lease or other instrument, obligation or agreement of any
kind to which KCPL or any of the KCPL Subsidiaries is a party or by which it or
any of its properties or assets may be bound or affected, except in the case of
clause (ii) or (iii) for any such Violation which would not have a KCPL Material
Adverse Effect (as defined in Section 4.6).
(c) STATUTORY APPROVALS. No declaration, filing or registration with,
or notice to or authorization, consent or approval of, any court, federal,
state, local or foreign governmental or regulatory body (including a stock
exchange or other self-regulatory body) or authority (each, a "Governmental
Authority") is necessary for the execution and delivery of this Agreement by
KCPL or the consummation by KCPL of the transactions contemplated
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hereby except as described in Section 4.4(c) of the KCPL Disclosure Schedule or
the failure of which to obtain would not result in a KCPL Material Adverse
Effect (the "KCPL Required Statutory Approvals," it being understood that
references in this Agreement to "obtaining" such KCPL Required Statutory
Approvals shall mean making such declarations, filings or registrations; giving
such notices; obtaining such authorizations, consents or approvals; and having
such waiting periods expire as are necessary to avoid a violation of law).
(d) COMPLIANCE. Except as set forth in Section 4.7, Section 4.10, or
Section 4.11 of the KCPL Disclosure Schedule, or as disclosed in the KCPL SEC
Reports (as defined in Section 4.5) filed prior to the date hereof, neither KCPL
nor any of the KCPL Subsidiaries is in violation of, is, to the knowledge of
KCPL, under investigation with respect to any violation of, or has been given
notice or been charged with any violation of, any law, statute, order, rule,
regulation, ordinance or judgment (including, without limitation, any applicable
environmental law, ordinance or regulation) of any Governmental Authority,
except for possible violations which individually or in the aggregate would not
have a KCPL Material Adverse Effect. Except as set forth in Section 4.11 of the
KCPL Disclosure Schedule or as disclosed in the KCPL SEC Reports filed prior to
the date hereof, KCPL and the KCPL Subsidiaries have all permits, licenses,
franchises and other governmental authorizations, consents and approvals
necessary to conduct their businesses as presently conducted which are material
to the operation of the businesses of KCPL and the KCPL Subsidiaries. KCPL and
each of the KCPL Subsidiaries is not in breach or violation of or in default in
the performance or observance of any term or provision of, and no event has
occurred which, with lapse of time or action by a third party, could result in a
default by KCPL or any KCPL Subsidiary under (i) its articles of incorporation
or by-laws or (ii) any contract, commitment, agreement, indenture, mortgage,
loan agreement, note, lease, bond, license, approval or other instrument to
which it is a party or by which KCPL or any KCPL Subsidiary is bound or to which
any of its property is subject, except for possible violations, breaches or
defaults which individually or in the aggregate would not have a KCPL Material
Adverse Effect.
Section 4.5 REPORTS AND FINANCIAL STATEMENTS. The filings required to
be made by KCPL and the KCPL Subsidiaries since January 1, 1992 under the
Securities Act of 1933, as amended (the "Securities Act"); the Securities
Exchange Act of 1934, as amended (the "Exchange Act"); the 1935 Act; the Federal
Power Act (the "Power Act"); the Atomic Energy Act of 1954, as amended (the
"Atomic Energy Act") and applicable state public utility laws and regulations
have been filed with the Securities and Exchange Commission (the "SEC"), the
Federal Energy Regulatory Commission (the "FERC"), the Nuclear Regulatory
Commission ("NRC") or the appropriate state public utilities commission, as the
case may be, including all forms, statements, reports, agreements (oral or
written) and all documents, exhibits, amendments and supplements appertaining
thereto, and complied, as of their respective dates, in all material respects
with all applicable requirements of the appropriate statutes and the rules and
regulations thereunder, except for such filings the failure of which to have
been made or to so comply would not result in a KCPL Material Adverse Effect.
"KCPL SEC Reports" shall mean each report, schedule, registration statement and
definitive proxy statement filed with the SEC by KCPL pursuant to the
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requirements of the Securities Act or Exchange Act since January 1, 1992 (as
such documents have since the time of their filing been amended). As of their
respective dates, the KCPL SEC Reports did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The audited consolidated financial
statements and unaudited interim financial statements of KCPL included in the
KCPL SEC Reports (collectively, the "KCPL Financial Statements") have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis ("GAAP") (except as may be indicated therein or in the notes
thereto and except with respect to unaudited statements as permitted by Form
10-Q of the SEC) and fairly present the financial position of KCPL as of the
dates thereof and the results of its operations and cash flows for the periods
then ended, subject, in the case of the unaudited interim financial statements,
to normal, recurring audit adjustments. True, accurate and complete copies of
the Restated Articles of Consolidation and by-laws of KCPL, as in effect on the
date hereof, are included (or incorporated by reference) in the KCPL SEC
Reports.
Section 4.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in the KCPL SEC Reports filed prior to the date hereof, since December 31, 1995,
KCPL and each of the KCPL Subsidiaries have conducted their business only in the
ordinary course of business consistent with past practice (except that the
operations of KLT, Inc. and KCPL's marketing business have been conducted in the
ordinary course of business consistent with the KCPL Business Plan (as defined
in Section 6.1)) and there has not been any KCPL Material Adverse Effect. For
purposes of this Agreement, a "KCPL Material Adverse Effect" shall mean the
existence of any fact or condition which has or is reasonably likely to have a
material adverse effect on the business, assets, financial condition, results of
operations or prospects of KCPL and the KCPL Subsidiaries taken as a whole.
Section 4.7 LITIGATION. Except as disclosed in the KCPL SEC Reports
filed prior to the date hereof or as set forth in Sections 4.7, 4.9 or 4.11 of
the KCPL Disclosure Schedule, (a) there are no claims, suits, actions or
proceedings by any court, governmental department, commission, agency,
instrumentality or authority or any arbitrator, pending or, to the knowledge of
KCPL, threatened, nor are there, to the knowledge of KCPL, any investigations or
reviews by any court, governmental department, commission, agency,
instrumentality or authority or any arbitrator pending or threatened against,
relating to or affecting KCPL or any of the KCPL Subsidiaries which would have a
KCPL Material Adverse Effect, (b) there have not been any significant
developments since December 31, 1995 with respect to such disclosed claims,
suits, actions, proceedings, investigations or reviews that would have a KCPL
Material Adverse Effect and (c) there are no judgments, decrees, injunctions,
rules or orders of any court, governmental department, commission, agency,
instrumentality or authority or any arbitrator applicable to KCPL or any of the
KCPL Subsidiaries, except for such that would not have a KCPL Material Adverse
Effect.
Section 4.8 REGISTRATION STATEMENT AND PROXY STATEMENT. None of the
information supplied or to be supplied by or on behalf of KCPL for inclusion or
incorporation by reference in (a) the registration statement on Form S-4 or any
post-effective amendment to a registration statement on Form S-4 to be filed
with the SEC by Western
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Resources in connection with the issuance of shares of Western Resources Common
Stock in the Merger (the "Registration Statement") will, at the time the
Registration Statement is filed with the SEC and at the time it becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading and (b) the joint proxy
statement, in definitive form, relating to the meetings of KCPL and Western
Resources shareholders to be held in connection with the Merger and the
transactions related thereto (the "Proxy Statement") will, at the dates mailed
to shareholders and at the times of the meetings of shareholders to be held in
connection with the Merger, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Registration Statement and the Proxy
Statement will comply as to form in all material respects with the provisions of
the Securities Act and the Exchange Act and the rules and regulations
thereunder.
Section 4.9 TAX MATTERS. "Taxes," as used in this Agreement, means any
federal, state, county, local or foreign taxes, charges, fees, levies or other
assessments, including all net income, gross income, sales and use, ad valorem,
transfer, gains, profits, excise, franchise, real and personal property, gross
receipt, capital stock, production, business and occupation, disability,
employment, payroll, license, estimated, stamp, custom duties, severance or
withholding taxes or charges imposed by any governmental entity, and includes
any interest and penalties (civil or criminal) on or additions to any such
taxes. "Tax Return," as used in this Agreement, means a report, return or other
information required to be supplied to a governmental entity with respect to
Taxes including, where permitted or required, combined or consolidated returns
for any group of entities that includes KCPL or any KCPL Subsidiary or Western
Resources or any Western Resources Subsidiary, as the case may be.
Except as set forth in Section 4.9 of the KCPL Disclosure Schedule and
except as would not result in a KCPL Material Adverse Effect:
(a) FILING OF TIMELY TAX RETURNS. KCPL and each of the KCPL
Subsidiaries have filed (or there has been filed on its behalf) all Tax
Returns required to be filed by each of them under applicable law. All
such Tax Returns were and are in all material respects true, complete
and correct and filed on a timely basis.
(b) PAYMENT OF TAXES. KCPL and each of the KCPL Subsidiaries have,
within the time and in the manner prescribed by law, paid all Taxes
that are currently due and payable, except for those contested in good
faith and for which adequate reserves have been taken.
(c) TAX RESERVES. KCPL and the KCPL Subsidiaries have established
on their books and records reserves adequate to pay all Taxes and
reserves for deferred income taxes in accordance with GAAP.
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(d) TAX LIENS. There are no Tax liens upon the assets of KCPL or
any of the KCPL Subsidiaries except liens for Taxes not yet due.
(e) WITHHOLDING TAXES. KCPL and each of the KCPL Subsidiaries have
complied in all material respects with the provisions of the Code
relating to the withholding of Taxes, as well as similar provisions
under any other laws, and have, within the time and in the manner
prescribed by law, withheld and paid over to the proper governmental
authorities all amounts required.
(f) AUDIT, ADMINISTRATIVE AND COURT PROCEEDINGS. No audits or
other administrative proceedings or court proceedings are presently
pending with regard to any Taxes or Tax Returns of KCPL or any of the
KCPL Subsidiaries.
(g) TAX RULINGS. Neither KCPL nor any of the KCPL Subsidiaries has
received a Tax Ruling (as defined below) or entered into a Closing
Agreement (as defined below) with any taxing authority. "Tax Ruling,"
as used in this Agreement, shall mean a written ruling of a taxing
authority relating to Taxes. "Closing Agreement," as used in this
Agreement, shall mean a written and legally binding agreement with a
taxing authority relating to Taxes.
(h) TAX SHARING AGREEMENTS. Except as between affiliates of KCPL
as set forth in Sections 4.1 and 4.2 of the KCPL Disclosure Schedule,
neither KCPL nor any KCPL Subsidiary is a party to any agreement
relating to allocating or sharing of Taxes.
(i) CODE SECTION 280G. Except for the KCPL Benefit Plans neither
KCPL nor any of the KCPL Subsidiaries is a party to any agreement,
contract or arrangement that could result in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code or
any amount that would be non-deductible pursuant to Section 162(m) of
the Code.
(j) LIABILITY FOR OTHERS. Neither KCPL nor any of the KCPL
Subsidiaries has any liability for Taxes of any person other than KCPL
and the KCPL Subsidiaries (i) under Treasury Regulations Section
1.1502-6 (or any similar provision of state, local or foreign law),
(ii) by contract, or (iii) otherwise.
(k) SECTION 341(F). Neither KCPL nor any of the KCPL Subsidiaries
has, with regard to any assets or property held or acquired by any of
them, filed a consent to the application of Section 341(f)(2) of the
Code, or agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as such term is defined in
Section 341(f)(4) of the Code) owned by KCPL or any of the KCPL
Subsidiaries.
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Section 4.10 EMPLOYEE MATTERS; ERISA. Except as set forth in Section
4.10 of the KCPL Disclosure Schedule:
(a) BENEFIT PLANS. As of the date hereof, Section 4.10(a) of the KCPL
Disclosure Schedule contains a true and complete list of each written or oral
material employee benefit plan, policy or agreement covering employees, former
employees or directors of KCPL and each of the KCPL Subsidiaries or their
beneficiaries, or providing benefits to such persons in respect of services
provided to any such entity, including, but not limited to, any employee benefit
plans within the meaning of Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA") and any severance or change in
control agreement (collectively, the "KCPL Benefit Plans"). Since January 1,
1996, there have been no new plans adopted nor changes, additions or
modification to any existing plan.
(b) CONTRIBUTIONS. All material contributions and other payments
required to be made by KCPL or any of the KCPL Subsidiaries to any KCPL Benefit
Plan (or to any person pursuant to the terms thereof) have been made or the
amount of such payment or contribution obligation has been reflected in the KCPL
Financial Statements.
(c) QUALIFICATION; COMPLIANCE. Each of the KCPL Benefit Plans intended
to be "qualified" within the meaning of Section 401(a) of the Code has been
determined by the Internal Revenue Service (the "IRS") to be so qualified, and,
to the knowledge of KCPL, no circumstances exist that are reasonably expected by
KCPL to result in the revocation of any such determination. KCPL is in
compliance in all material respects with, and each of the KCPL Benefit Plans is
and has been operated in all material respects in compliance with, all
applicable laws, rules and regulations governing such plan, including, without
limitation, ERISA and the Code. Each KCPL Benefit Plan intended to provide for
the deferral of income, the reduction of salary or other compensation, or to
afford other income tax benefits, complies with the requirements of the
applicable provisions of the Code or other laws, rules and regulations required
to provide such income tax benefits. No prohibited transactions (as defined in
Section 406 or 407 of ERISA or Section 4975 of the Code) have occurred for which
a statutory exemption is not available with respect to any KCPL Benefit Plan,
and which could give rise to liability on the part of KCPL, any KCPL Benefit
Plan, or any fiduciary, party in interest or disqualified person with respect
thereto that would be material to KCPL or would be material to KCPL if it were
KCPL's liability.
(d) LIABILITIES. With respect to the KCPL Benefit Plans, individually
and in the aggregate, no event has occurred, and, to the knowledge of KCPL,
there does not now exist any condition or set of circumstances, that could
subject KCPL or any of the KCPL Subsidiaries to any material liability arising
under the Code, ERISA or any other applicable law (including, without
limitation, any liability to any such plan or the Pension Benefit Guaranty
Corporation (the "PBGC")), or under any indemnity agreement to which KCPL or any
of the KCPL Subsidiaries is a party, excluding liability for benefit claims and
funding obligations payable in the ordinary course.
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(e) WELFARE PLANS. None of the KCPL Benefit Plans that are "welfare
plans," within the meaning of Section 3(1) of ERISA, provide for any benefits
with respect to current or former employees for periods extending beyond their
retirement or other termination of service, other than continuation coverage
required to be provided under Section 4980B of the Code or Part 6 of Title I of
ERISA.
(f) PAYMENTS RESULTING FROM THE MERGER. The consummation or
announcement of any transaction contemplated by this Agreement will not (either
alone or upon the occurrence of any additional or further acts or events,
including, without limitation, the termination of employment of any officers,
directors, employees or agents of KCPL or any of the KCPL Subsidiaries) result
in any (i) payment (whether of severance pay or otherwise) becoming due from
KCPL or any of the KCPL Subsidiaries to any officer, employee, former employee
or director thereof or to the trustee under any "rabbi trust" or similar
arrangement, or (ii) benefit under any KCPL Benefit Plan becoming accelerated,
vested or payable.
(g) LABOR AGREEMENTS. As of the date hereof, neither KCPL nor any of
the KCPL Subsidiaries is a party to any collective bargaining agreement or other
labor agreement with any union or labor organization. To the knowledge of KCPL,
as of the date hereof, there is no current union representation question
involving employees of KCPL or any of the KCPL Subsidiaries, nor does KCPL know
of any activity or proceeding of any labor organization (or representative
thereof) or employee group to organize any such employees. Except as disclosed
in the KCPL SEC Reports filed prior to the date hereof or except to the extent
such would not have a KCPL Material Adverse Effect, (i) there is no unfair labor
practice, employment discrimination or other material complaint against KCPL or
any of the KCPL Subsidiaries pending, or to the knowledge of KCPL, threatened,
(ii) there is no strike, lockout or material dispute, slowdown or work stoppage
pending or, to the knowledge of KCPL, threatened against or involving KCPL, and
(iii) there is no proceeding, claim, suit, action or governmental investigation
pending or, to the knowledge of KCPL, threatened in respect of which any
director, officer, employee or agent of KCPL or any of the KCPL Subsidiaries is
or may be entitled to claim indemnification from KCPL or such KCPL Subsidiary
pursuant to their respective articles of incorporation or by-laws or as provided
in any indemnification agreements between such persons and KCPL or any KCPL
Subsidiary.
Section 4.11 ENVIRONMENTAL PROTECTION.
(a) Except as set forth in Section 4.11 of the KCPL Disclosure Schedule
or in the KCPL SEC Reports filed prior to the date hereof:
(i) COMPLIANCE. KCPL and each of the KCPL Subsidiaries is in
compliance with all applicable Environmental Laws (as defined in
Section 4.11(b)(ii)) and neither KCPL nor any of the KCPL Subsidiaries
has received any communication (written or oral), from any person or
Governmental Authority that alleges that KCPL or any of the KCPL
Subsidiaries is not in such compliance with applicable Environmental
Laws except in each foregoing case where the failure to so comply
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would not have a KCPL Material Adverse Effect. To the knowledge of
KCPL, compliance with all applicable Environmental Laws, will not
require KCPL or any KCPL Subsidiary to incur costs that will be
reasonably likely to result in a KCPL Material Adverse Effect.
(ii) ENVIRONMENTAL PERMITS. KCPL and each of the KCPL Subsidiaries
has obtained or has applied for all environmental, health and safety
permits and governmental authorizations (collectively, the
"Environmental Permits") necessary for the construction of their
facilities or the conduct of their operations except where the failure
to so obtain would not have a KCPL Material Adverse Effect, and all
such Environmental Permits are in good standing or, where applicable, a
renewal application has been timely filed and is pending agency
approval, and KCPL and the KCPL Subsidiaries are in material compliance
with all terms and conditions of the Environmental Permits.
(iii) ENVIRONMENTAL CLAIMS. There is no Environmental Claim (as
defined in Section 4.11(b)(i)) which would have a KCPL Material Adverse
Effect pending (A) against KCPL or any of the KCPL Subsidiaries, (B) to
the knowledge of KCPL, against any person or entity whose liability for
any Environmental Claim KCPL or any of the KCPL Subsidiaries has or may
have retained or assumed either contractually or by operation of law,
or (C) against any real or personal property or operations which KCPL
or any of the KCPL Subsidiaries owns, leases or manages, in whole or in
part.
(iv) RELEASES. KCPL has no knowledge of any Releases (as defined
in Section 4.11(b)(iv)) of any Hazardous Material (as defined in
Section 4.11(b)(iii)) that would be reasonably likely to form the basis
of any Environmental Claim against KCPL or any of the KCPL Subsidiaries
or against any person or entity whose liability for any Environmental
Claim KCPL or any of the KCPL Subsidiaries has or may have retained or
assumed either contractually or by operation of law except for any
Environmental Claim which would not have a KCPL Material Adverse
Effect.
(v) PREDECESSORS. KCPL has no knowledge, with respect to any
predecessor of KCPL or any of the KCPL Subsidiaries of any
Environmental Claim which would have a KCPL Material Adverse Effect
pending or threatened, or of any Release of Hazardous Materials that
would be reasonably likely to form the basis of any Environmental Claim
which would have a KCPL Material Adverse Effect.
(b) DEFINITIONS. As used in this Agreement:
(i) "Environmental Claim" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters,
directives, claims, liens, investigations, proceedings or notices of
noncompliance or violation (written or oral) by any person or entity
(including any Governmental Authority) alleging potential liability
(including, without limitation, potential responsibility for or
liability for enforcement, investigatory costs, cleanup costs,
governmental response costs, removal
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costs, remedial costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on or resulting
from (A) the presence, Release or threatened Release into the
environment of any Hazardous Materials at any location, whether or not
owned, operated, leased or managed by KCPL or any of the KCPL
Subsidiaries (for purposes of this Section 4.11) or by Western
Resources or any of the Western Resources Subsidiaries (for purposes of
Section 5.11); or (B) circumstances forming the basis of any violation
or alleged violation of any Environmental Law or (C) any and all claims
by any third party seeking damages, contribution, indemnification, cost
recovery, compensation or injunctive relief resulting from the presence
or Release of any Hazardous Materials.
(ii) "Environmental Laws" means all federal, state and local laws,
rules and regulations relating to pollution, the environment
(including, without limitation, ambient air, surface water,
groundwater, land surface or subsurface strata) or protection of human
health as it relates to the environment including, without limitation,
laws and regulations relating to Releases or threatened Releases of
Hazardous Materials, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport
or handling of Hazardous Materials.
(iii) "Hazardous Materials" means (A) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could
become friable, urea formaldehyde foam insulation and transformers or
other equipment that contain dielectric fluid containing
polychlorinated biphenyls ("PCBs"); (B) any chemicals, materials or
substances which are now defined as or included in the definition of
"hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic
substances," "toxic pollutants," or words of similar import under any
Environmental Law and (C) any other chemical, material, substance or
waste, exposure to which is now prohibited, limited or regulated under
any Environmental Law in a jurisdiction in which KCPL or any of the
KCPL Subsidiaries operates (for purposes of this Section 4.11) or in
which Western Resources or any of the Western Resources Subsidiaries
operates (for purposes of Section 5.11).
(iv) "Release" means any release, spill, emission, leaking,
injection, deposit, disposal, discharge, dispersal, leaching or
migration into the atmosphere, soil, surface water, groundwater or
property.
Section 4.12 REGULATION AS A UTILITY. KCPL is regulated as a public
utility in the States of Kansas and Missouri and in no other state. Except as
set forth in Section 4.12 of the KCPL Disclosure Schedule, neither KCPL nor any
"subsidiary company" or "affiliate" (as each such term is defined in the 1935
Act) of KCPL is subject to regulation as a public utility or public service
company (or similar designation) by any other state in the United States or any
foreign country.
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Section 4.13 VOTE REQUIRED. Provided that the KCPL Preferred Stock has
been redeemed pursuant to Section 2.1, the affirmative vote of two-thirds of the
shares of KCPL Common Stock outstanding on the record date for the meeting at
which such vote is taken (the "KCPL Shareholders' Approval") is the only vote of
the holders of any class or series of the capital stock of KCPL or any of its
Subsidiaries that is required to approve this Agreement, the Merger and the
other transactions contemplated hereby.
Section 4.14 ACCOUNTING MATTERS. Neither KCPL, nor, to KCPL's
knowledge, any of its Affiliates have taken or agreed to take any action that
would prevent the Surviving Corporation from accounting for the transactions to
be effected pursuant to this Agreement as a pooling of interests in accordance
with GAAP and applicable SEC regulations. As used in this Agreement, the term
"Affiliate," except where otherwise defined herein, shall mean, as to any
person, any other person which directly or indirectly controls, or is under
common control with, or is controlled by, such person. As used in this
definition, "Control" (including, with its correlative meanings, "Controlled By"
and "Under Common Control With") shall mean possession, directly or indirectly,
of power to direct or cause the direction of management or policies (whether
through ownership of securities or partnership or other ownership interests, by
contract or otherwise).
Section 4.15 ARTICLE TWELFTH OF KCPL'S RESTATED ARTICLES OF
CONSOLIDATION. The provisions of Article Twelfth of KCPL's Restated Articles of
Consolidation will not, prior to the termination of this Agreement, assuming the
accuracy of the representation contained in Section 5.17 (without giving effect
to the knowledge qualification thereof), apply to this Agreement, the Merger or
to the transactions contemplated hereby.
Section 4.16 OPINION OF FINANCIAL ADVISOR. KCPL has received the
opinion of Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill Lynch"),
dated as of the date hereof, to the effect that, as of the date thereof, the
Conversion Ratio is fair from a financial point of view to the holders of KCPL
Common Stock.
Section 4.17 INSURANCE. KCPL and each of the KCPL Subsidiaries is, and
has been continuously since January 1, 1992, insured with financially
responsible insurers in such amounts and against such risks and losses as are
customary in all material respects for companies conducting the business as
conducted by KCPL and the KCPL Subsidiaries during such time period. Except as
set forth in Section 4.17 of the KCPL Disclosure Schedule, neither KCPL nor any
of the KCPL Subsidiaries has received any notice of cancellation or termination
with respect to any material insurance policy of KCPL or any of the KCPL
Subsidiaries. The insurance policies of KCPL and each of the KCPL Subsidiaries
are valid and enforceable policies in all material respects.
Section 4.18 KCPL NOT A RELATED PERSON. As of the date hereof, neither
KCPL nor, to KCPL's reasonable knowledge, any of its Affiliates, is an
"Interested Shareholder" as such term is defined in Article XI of the Western
Resources Articles.
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Section 4.19 TAKEOVER STATUTES. No "fair price," "moratorium," "control
share acquisition" or other similar anti-takeover statute or regulation
(including Sections 351.407 and 351.459 of the MGBCL or Article Twelfth of
KCPL's Restated Articles of Consolidation) is, or at the Effective Time will be,
applicable to KCPL, Western Resources, the KCPL Common Stock, the Merger or the
other transactions contemplated by this Agreement.
Section 4.20 TERMINATION OF UTILICORP AGREEMENT. KCPL (i) has taken all
corporate action necessary to terminate the UtiliCorp Agreement pursuant to the
provisions of Section 9.1(d) thereof and except for provisions which survived
the termination thereof, including the payment of any fees due to UtiliCorp
thereunder, (ii) has no further obligation under the UtiliCorp Agreement or any
other agreements executed in connection with any proposed transaction involving
KCPL and UtiliCorp, other than continuing obligations under the Confidentiality
Agreement, dated as of November 28, 1995 (the "UtiliCorp Confidentiality
Agreement"), between KCPL and UtiliCorp. The aggregate amount of all fees and
expenses paid or payable by KCPL to UtiliCorp as a result of such termination,
whether pursuant to Section 9.2 of the UtiliCorp Agreement or otherwise, shall
not exceed $58 million. At all times KCPL has fully complied in all respects
with each of its obligations under the UtiliCorp Agreement, including without
limitation Sections 7.11 and 9.1 thereof. Until the Effective Time, Western
Resources shall not be bound by or subject to, in any respect, directly or
indirectly, any agreement between KCPL and UtiliCorp, including without
limitation the UtiliCorp Agreement and the UtiliCorp Confidentiality Agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF WESTERN RESOURCES
Western Resources makes the following representations and warranties to
KCPL:
Section 5.1 ORGANIZATION AND QUALIFICATION. Western Resources and each
of the Western Resources Subsidiaries (as defined below) is a corporation or
other entity duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation or organization, has all requisite
power and authority, and has been duly authorized by all necessary approvals and
orders to own, lease and operate its assets and properties to the extent owned,
leased and operated and to carry on its business as it is now being conducted
and is duly qualified and in good standing to do business in each jurisdiction
in which the nature of its business or the ownership or leasing of its assets
and properties makes such qualification necessary other than in such
jurisdictions where the failure so to qualify would not have a Western Resources
Material Adverse Effect (as defined in Section 5.6). As used in this Agreement,
the term "Western Resources Subsidiary" shall mean a Subsidiary of Western
Resources in which Western Resources' equity investment exceeds $25 million.
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Section 5.2 SUBSIDIARIES. Section 5.2 of the schedule delivered by
Western Resources to KCPL on the date hereof (the "Western Resources Disclosure
Schedule") sets forth a list as of the date hereof of all the Western Resources
Subsidiaries. Except as set forth in Section 5.2 of the Western Resources
Disclosure Schedule, all of the issued and outstanding shares of capital stock
of each Western Resources Subsidiary are validly issued, fully paid,
nonassessable and free of preemptive rights, and are owned, directly or
indirectly, by Western Resources free and clear of any liens, claims,
encumbrances, security interests, charges and options of any nature whatsoever,
and there are no outstanding subscriptions, options, calls, contracts, voting
trusts, proxies or other commitments, understandings, restrictions,
arrangements, rights or warrants, including any right of conversion or exchange
under any outstanding security, instrument or other agreement, obligating any
such Western Resources Subsidiary to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of its capital stock or obligating
it to grant, extend or enter into any such agreement or commitment.
Section 5.3 CAPITALIZATION. As of the date hereof, the authorized
capital stock of Western Resources consists of (i) 85,000,000 shares of Western
Resources Common Stock, par value $5.00 per share, (ii) 600,000 shares of
Preferred Stock par value $100.00 per share (the "Western Resources $100
Preferred" and 6,000,000 shares of Preferred Stock without par value (the
"Western Resources No-Par Preferred"), and (iii) 4,000,000 shares of Preference
Stock, without par value (the "Western Resources Preference Stock" and, together
with the Western Resources $100 Preferred and the Western Resources No-Par
Preferred, the "Western Resources Preferred Stock"). At the close of business on
January 28, 1997, (i) 64,773,828 shares of Western Resources Common Stock were
issued and outstanding, (ii) no shares of Western Resources Common Stock were
held by Western Resources in its treasury or by its wholly owned Subsidiaries,
(iii) 138,576 shares of 4 1/2% Series Preferred Stock, par value $100 per share,
60,000 shares of 4 1/4% Series Preferred Stock, par value $100 per share, and no
shares of Western Resources No-Par Preferred Stock were issued and outstanding,
and of such issued shares, none were held by Western Resources in its treasury
or by its wholly owned Subsidiaries, (iv) 500,000 shares of 7.58% Series
Preference Stock were issued and outstanding, and of such issued shares, none
were held by Western Resources in its treasury or by its wholly owned
Subsidiaries, and (v) no Voting Debt was issued or outstanding. All outstanding
shares of Western Resources Common Stock and Western Resources Preferred Stock
are validly issued, fully paid and nonassessable and are not subject to
preemptive rights. As of the date hereof, except as disclosed in the Western
Resources SEC Reports filed prior to the date hereof or as set forth in Section
5.3 of the Western Resources Disclosure Schedule or pursuant to this Agreement
and the Western Resources Benefit Plans, there are no options, warrants, calls,
rights, commitments or agreements of any character to which Western Resources or
any Subsidiary of Western Resources is a party or by which any of them are bound
obligating Western Resources or any Subsidiary of Western Resources to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares of
capital stock or any Voting Debt securities of Western Resources or any
Subsidiary of Western Resources or obligating Western Resources or any
Subsidiary of Western Resources to grant, extend or enter into any such option,
warrant, call, right, commitment or agreement.
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Section 5.4 AUTHORITY; NON-CONTRAVENTION; STATUTORY APPROVALS;
COMPLIANCE.
(a) AUTHORITY. Western Resources has all requisite power and authority
to enter into this Agreement and, subject to the receipt of the applicable
Western Resources Shareholders' Approval (as defined in Section 5.13) and the
applicable Western Resources Required Statutory Approvals (as defined in Section
5.4(c)), to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation by Western Resources of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Western Resources, subject to obtaining the
applicable Western Resources Shareholders' Approval. This Agreement has been
duly and validly executed and delivered by Western Resources and, assuming the
due authorization, execution and delivery hereof by KCPL, constitutes the valid
and binding obligation of Western Resources enforceable against it in accordance
with the terms of this Agreement.
(b) NON-CONTRAVENTION. Except as set forth in Section 5.4(b) of the
Western Resources Disclosure Schedule, the execution and delivery of this
Agreement by Western Resources does not, and the consummation of the
transactions contemplated hereby will not, result in a Violation with respect to
Western Resources or any of the Western Resources Subsidiaries pursuant to any
provisions of (i) the certificate of incorporation, by-laws or similar governing
documents of Western Resources or any of the Western Resources Subsidiaries,
(ii) subject to obtaining the Western Resources Required Statutory Approvals and
the receipt of the Western Resources Shareholders' Approval, any statute, law,
ordinance, rule, regulation, judgment, decree, order, injunction, writ, permit
or license of any Governmental Authority applicable to Western Resources or any
of the Western Resources Subsidiaries or any of their respective properties or
assets or (iii) subject to obtaining the third-party consents set forth in
Section 5.4(b) of the Western Resources Disclosure Schedule (the "Western
Resources Required Consents"), any material note, bond, mortgage, indenture,
deed of trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which Western Resources or
any of the Western Resources Subsidiaries is a party or by which it or any of
its properties or assets may be bound or affected, except in the case of clause
(ii) or (iii) for any such Violation which would not have a Western Resources
Material Adverse Effect.
(c) STATUTORY APPROVALS. No declaration, filing or registration with,
or notice to or authorization, consent or approval of, any Governmental
Authority is necessary for the execution and delivery of this Agreement by
Western Resources or the consummation by Western Resources of the transactions
contemplated hereby except as described in Section 5.4(c) of the Western
Resources Disclosure Schedule or the failure of which to obtain would not result
in a Western Resources Material Adverse Effect (the "Western Resources Required
Statutory Approvals," it being understood that references in this Agreement to
"obtaining" such Western Resources Required Statutory Approvals shall mean
making such declarations, filings or registrations; giving such notices;
obtaining such authorizations, consents or approvals; and having such waiting
periods expire as are necessary to avoid a violation of law).
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(d) COMPLIANCE. Except as set forth in Section 5.7 of the Western
Resources Disclosure Schedule or as disclosed in the Western Resources SEC
Reports (as defined in Section 5.5) filed prior to the date hereof, neither
Western Resources nor any of the Western Resources Subsidiaries is in violation
of, is, to the knowledge of Western Resources, under investigation with respect
to any violation of, or has been given notice or been charged with any violation
of, any law, statute, order, rule, regulation, ordinance or judgment (including,
without limitation, any applicable environmental law, ordinance or regulation)
of any Governmental Authority, except for possible violations which individually
or in the aggregate would not have a Western Resources Material Adverse Effect.
Except as disclosed in the Western Resources SEC Reports filed prior to the date
hereof, Western Resources and the Western Resources Subsidiaries have all
permits, licenses, franchises and other governmental authorizations, consents
and approvals necessary to conduct their businesses as presently conducted which
are material to the operation of the businesses of Western Resources and the
Western Resources Subsidiaries. Western Resources and each of the Western
Resources Subsidiaries is not in breach or violation of or in default in the
performance or observance of any term or provision of, and no event has occurred
which, with lapse of time or action by a third party, could result in a default
by Western Resources or any Western Resources Subsidiary under (i) its
certificate of incorporation or by-laws or (ii) any contract, commitment,
agreement, indenture, mortgage, loan agreement, note, lease, bond, license,
approval or other instrument to which it is a party or by which Western
Resources or any Western Resources Subsidiary is bound or to which any of its
property is subject, except for possible violations, breaches or defaults which
individually or in the aggregate would not have a Western Resources Material
Adverse Effect.
Section 5.5 REPORTS AND FINANCIAL STATEMENTS. The filings required to
be made by Western Resources and the Western Resources Subsidiaries since
January 1, 1992 under the Securities Act, the Exchange Act, the 1935 Act, the
Power Act, the Atomic Energy Act, and applicable state public utility laws and
regulations have been filed with the SEC, the FERC, the NRC or the appropriate
state public utilities commission, as the case may be, including all forms,
statements, reports, agreements (oral or written) and all documents, exhibits,
amendments and supplements appertaining thereto, and complied, as of their
respective dates, in all material respects with all applicable requirements of
the appropriate statutes and the rules and regulations thereunder, except for
such filings the failure of which to have been made or to so comply would not
result in a Western Resources Material Adverse Effect. "Western Resources SEC
Reports" shall mean each report, schedule, registration statement and definitive
proxy statement filed with the SEC by Western Resources pursuant to the
requirements of the Securities Act or Exchange Act since January 1, 1992, as
such documents have since the time of their filing been amended. As of their
respective dates, the Western Resources SEC Reports did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim financial statements of
Western Resources included in the Western Resources SEC Reports (collectively,
the "Western Resources Financial Statements") have been prepared in accordance
with GAAP (except as may be indicated therein or in the notes thereto and except
with respect to unaudited statements as permitted by Form 10-Q of the SEC) and
fairly
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present the financial position of Western Resources as of the dates thereof and
the results of operations and cash flows for the periods then ended, subject, in
the case of the unaudited interim financial statements, to normal, recurring
audit adjustments. True, accurate and complete copies of the Western Resources
Articles and Western Resources' By-Laws, as in effect on the date hereof, are
included (or incorporated by reference) in the Western Resources SEC Reports.
Section 5.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in the Western Resources SEC Reports filed prior to the date hereof, since
December 31, 1995, Western Resources and each of the Western Resources
Subsidiaries have conducted their business only in the ordinary course of
business (except for acquisitions and dispositions) and there has not been any
Western Resources Material Adverse Effect. For purposes of this Agreement, a
"Western Resources Material Adverse Effect" shall mean the existence of any fact
or condition which has or is reasonably likely to have a material adverse effect
on the business, assets, financial condition, results of operations or prospects
of Western Resources and the Western Resources Subsidiaries taken as a whole.
Section 5.7 LITIGATION. Except as disclosed in the Western Resources
SEC Reports filed prior to the date hereof or as disclosed in Section 5.7 of the
Western Resources Disclosure Schedule, (a) there are no claims, suits, actions
or proceedings by any court, governmental department, commission, agency,
instrumentality or authority or any arbitrator, pending or, to the knowledge of
Western Resources, threatened, nor are there, to the knowledge of Western
Resources, any investigations or reviews by any court, governmental department,
commission, agency, instrumentality or authority or any arbitrator pending or
threatened against, relating to or affecting Western Resources or any of the
Western Resources Subsidiaries which would have a Western Resources Material
Adverse Effect, (b) there have not been any significant developments since
December 31, 1995 with respect to such disclosed claims, suits, actions,
proceedings, investigations or reviews that would have a Western Resources
Material Adverse Effect and (c) there are no judgments, decrees, injunctions,
rules or orders of any court, governmental department, commission, agency,
instrumentality or authority or any arbitrator applicable to Western Resources
or any of the Western Resources Subsidiaries, except for such that would not
have a Western Resources Material Adverse Effect.
Section 5.8 REGISTRATION STATEMENT AND PROXY STATEMENT. None of the
information supplied or to be supplied by or on behalf of Western Resources for
inclusion or incorporation by reference in (a) the Registration Statement will,
at the time the Registration Statement is filed by Western Resources with the
SEC and at the time it becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
and (b) the Proxy Statement will, at the dates mailed to shareholders and at the
times of the meetings of shareholders to be held in connection with the Merger,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Registration Statement and the Proxy
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Statement will comply as to form in all material respects with the provisions of
the Securities Act and the Exchange Act and the rules and regulations
thereunder.
Section 5.9 TAX MATTERS. Except as set forth in Section 5.9 of the
Western Resources Disclosure Schedule and except as would not result in a
Western Resources Material Adverse Effect:
(a) FILING OF TIMELY TAX RETURNS. Western Resources and each of
the Western Resources Subsidiaries have filed (or there has been filed
on its behalf) all Tax Returns required to be filed by each of them
under applicable law. All such Tax Returns were and are in all material
respects true, complete and correct and filed on a timely basis.
(b) PAYMENT OF TAXES. Western Resources and each of the Western
Resources Subsidiaries have, within the time and in the manner
prescribed by law, paid all Taxes that are currently due and payable,
except for those contested in good faith and for which adequate
reserves have been taken.
(c) TAX RESERVES. Western Resources and the Western Resources
Subsidiaries have established on their books and records reserves
adequate to pay all Taxes and reserves for deferred income taxes in
accordance with GAAP.
(d) TAX LIENS. There are no Tax liens upon the assets of Western
Resources or any of the Western Resources Subsidiaries except liens for
Taxes not yet due.
(e) WITHHOLDING TAXES. Western Resources and each of the Western
Resources Subsidiaries have complied in all material respects with the
provisions of the Code relating to the withholding of Taxes, as well as
similar provisions under any other laws, and have, within the time and
in the manner prescribed by law, withheld and paid over to the proper
governmental authorities all amounts required.
(f) AUDIT, ADMINISTRATIVE AND COURT PROCEEDINGS. No audits or
other administrative proceedings or court proceedings are presently
pending with regard to any Taxes or Tax Returns of Western Resources or
any of the Western Resources Subsidiaries.
(g) TAX RULINGS. Neither Western Resources nor any of the Western
Resources Subsidiaries has received a Tax Ruling or entered into a
Closing Agreement with any taxing authority.
(h) TAX SHARING AGREEMENTS. Except as between affiliates of
Western Resources as set forth in Sections 5.1 and 5.2 of the Western
Resources Disclosure Schedule, neither Western Resources nor any
Western Resources Subsidiary is a party to any agreement relating to
allocating or sharing of Taxes.
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(i) CODE SECTION 280G. Except for the Western Resources Benefit
Plans, neither Western Resources nor any of the Western Resources
Subsidiaries is a party to any agreement, contract or arrangement that
could result in the payment of any "excess parachute payments" within
the meaning of Section 280G of the Code or any amount that would be
non-deductible pursuant to Section 162(m) of the Code.
(j) LIABILITY FOR OTHERS. Neither Western Resources nor any of the
Western Resources Subsidiaries has any liability for Taxes of any
person other than Western Resources and the Western Resources
Subsidiaries (i) under Treasury Regulations Section 1.1502-6 (or any
similar provision of state, local or foreign law), (ii) by contract, or
(iii) otherwise.
(k) SECTION 341(F). Neither Western Resources nor any of the
Western Resources Subsidiaries has, with regard to any assets or
property held or acquired by any of them, filed a consent to the
application of Section 341(f)(2) of the Code, or agreed to have Section
341(f)(2) of the Code apply to any disposition of a subsection (f)
asset (as such term is defined in Section 341(f)(4) of the Code) owned
by Western Resources or any of the Western Resources Subsidiaries.
Section 5.10 EMPLOYEE MATTERS; ERISA. Except as set forth in
Section 5.10 of the Western Resources Disclosure Schedule:
(a) BENEFIT PLANS. Section 5.10(a) of the Western Resources
Disclosure Schedule contains a true and complete list as of the date
hereof of each written or oral material employee benefit plan, policy
or agreement covering employees, former employees or directors of
Western Resources and each of the Western Resources Subsidiaries or
their beneficiaries, or providing benefits to such persons in respect
of services provided to any such entity, including, but not limited to,
any employee benefit plans within the meaning of Section 3(3) of ERISA
and any severance or change in control agreement (collectively, the
"Western Resources Benefit Plans").
(b) CONTRIBUTIONS. All material contributions and other payments
required to be made by Western Resources or any of the Western
Resources Subsidiaries to any Western Resources Benefit Plan (or to any
person pursuant to the terms thereof) have been made or the amount of
such payment or contribution obligation has been reflected in the
Western Resources Financial Statements.
(c) QUALIFICATION; COMPLIANCE. Each of the Western Resources
Benefit Plans intended to be "qualified" within the meaning of Section
401(a) of the Code has been determined by the IRS to be so qualified,
or to the knowledge of Western Resources, no circumstances exist that
are reasonably expected by Western Resources to result in the
revocation of any such determination or prevent any such plans from
being qualified. Western Resources is in compliance in all material
respects with, and each of the Western Resources Benefit Plans is and
has been operated in all material respects in compliance with, all
applicable laws, rules and regulations governing such plan, including,
without limitation, ERISA and the Code. Each Western Resources
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Benefit Plan intended to provide for the deferral of income, the
reduction of salary or other compensation, or to afford other income
tax benefits, complies with the requirements of the applicable
provisions of the Code or other laws, rules and regulations required to
provide such income tax benefits. No prohibited transactions (as
defined in Section 406 or 407 of ERISA or Section 4975 of the Code)
have occurred for which a statutory exemption is not available with
respect to any Western Resources Benefit Plan, and which could give
rise to liability on the part of Western Resources, any Western
Resources Benefit Plan, or any fiduciary, party in interest or
disqualified person with respect thereto that would be material to
Western Resources or would be material to Western Resources if it were
Western Resources' liability.
(d) LIABILITIES. With respect to the Western Resources Benefit
Plans, individually and in the aggregate, no event has occurred, and,
to the knowledge of Western Resources, there does not now exist any
condition or set of circumstances, that could subject Western Resources
or any of the Western Resources Subsidiaries to any material liability
arising under the Code, ERISA or any other applicable law (including,
without limitation, any liability to any such plan or the PBGC), or
under any indemnity agreement to which Western Resources or any of the
Western Resources Subsidiaries is a party, excluding liability for
benefit claims and funding obligations payable in the ordinary course.
(e) PAYMENTS RESULTING FROM THE MERGER. Except as disclosed in the
Western Resources SEC Reports filed prior to the date hereof, the
consummation or announcement of any transaction contemplated by this
Agreement will not (either alone or upon the occurrence of any
additional or further acts or events, including, without limitation,
the termination of employment of officers, directors, employees or
agents of Western Resources or any of the Western Resources
Subsidiaries) result in any (i) payment (whether of severance pay or
otherwise) becoming due from Western Resources or any of the Western
Resources Subsidiaries to any officer, employee, former employee or
director thereof or to the trustee under any "rabbi trust" or similar
arrangement, or (ii) benefit under any Western Resources Benefit Plan
becoming accelerated, vested or payable.
(f) LABOR AGREEMENTS. As of the date hereof, (i) neither Western
Resources nor any of the Western Resources Subsidiaries is a party to
any collective bargaining agreement or other labor agreement with any
union or labor organization and (ii) to the knowledge of Western
Resources, there is no current union representation question involving
employees of Western Resources or any of the Western Resources
Subsidiaries, nor does Western Resources know of any activity or
proceeding of any labor organization (or representative thereof) or
employee group to organize any such employees. Except as disclosed in
the Western Resources SEC Reports filed prior to the date hereof or
except to the extent such would not have a Western Resources Material
Adverse Effect, (i) there is no unfair labor practice, employment
discrimination or other material complaint against Western Resources or
any of the Western Resources Subsidiaries pending, or to the knowledge
of Western Resources, threatened, (ii) there is no strike, lockout or
material dispute, slowdown or
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work stoppage pending or, to the knowledge of Western Resources,
threatened against or involving Western Resources, and (iii) there is
no proceeding, claim, suit, action or governmental investigation
pending or, to the knowledge of Western Resources, threatened in
respect of which any director, officer, employee or agent of Western
Resources or any of the Western Resources Subsidiaries is or may be
entitled to claim indemnification from Western Resources or such
Western Resources Subsidiary pursuant to their respective articles of
incorporation or by-laws or as provided in any indemnification
agreements between such persons and Western Resources or any Western
Resources Subsidiary.
Section 5.11 ENVIRONMENTAL PROTECTION.
(a) Except as set forth in the Western Resources SEC Reports filed
prior to the date hereof:
(i) COMPLIANCE. Western Resources and each of the Western
Resources Subsidiaries is in compliance with all applicable
Environmental Laws and neither Western Resources nor any of the Western
Resources Subsidiaries has received any communication (written or oral)
from any person or Governmental Authority that alleges that Western
Resources or any of the Western Resources Subsidiaries is not in such
compliance with applicable Environmental Laws, except in each foregoing
case where the failure to so comply would not have a Western Resources
Material Adverse Effect. To the knowledge of Western Resources,
compliance with all applicable Environmental Laws will not require
Western Resources or any Western Resources Subsidiary to incur costs
that will be reasonably likely to result in a Western Resources
Material Adverse Effect.
(ii) ENVIRONMENTAL PERMITS. Western Resources and each of the
Western Resources Subsidiaries has obtained or has applied for all the
Environmental Permits necessary for the construction of their
facilities or the conduct of their operations except where the failure
to so obtain would not have a Western Resources Material Adverse
Effect, and all such Environmental Permits are in good standing or,
where applicable, a renewal application has been timely filed and is
pending agency approval, and Western Resources and the Western
Resources Subsidiaries are in material compliance with all terms and
conditions of the Environmental Permits.
(iii) ENVIRONMENTAL CLAIMS. There is no Environmental Claim which
would have a Western Resources Material Adverse Effect pending (A)
against Western Resources or any of the Western Resources Subsidiaries
(B) to the knowledge of Western Resources, against any person or entity
whose liability for any Environmental Claim Western Resources or any of
the Western Resources Subsidiaries has or may have retained or assumed
either contractually or by operation of law, or (C) against any real or
personal property or operations which Western Resources or any of the
Western Resources Subsidiaries owns, leases or manages, in whole or in
part.
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(iv) RELEASES. Western Resources has no knowledge of any Releases
of any Hazardous Material that would be reasonably likely to form the
basis of any Environmental Claim against Western Resources or any of
the Western Resources Subsidiaries or against any person or entity
whose liability for any Environmental Claim Western Resources or any of
the Western Resources Subsidiaries has or may have retained or assumed
either contractually or by operation of law except for any
Environmental Claim which would not have a Western Resources Material
Adverse Effect.
(v) PREDECESSORS. Western Resources has no knowledge, with respect
to any predecessor of Western Resources or any of the Western Resources
Subsidiaries, of any Environmental Claim which would have a Western
Resources Material Adverse Effect pending or threatened, or of any
Release of Hazardous Materials that would be reasonably likely to form
the basis of any Environmental Claim which would have a Western
Resources Material Adverse Effect.
Section 5.12 REGULATION AS A UTILITY. As of the date hereof, (1)
Western Resources is regulated as a public utility in the States of Kansas and
Oklahoma and in no other state, (2) Western Resources is an exempt Holding
Company under the 1935 Act, and (3) Kansas Gas and Electric Company and
Mid-Continent Market Center, Subsidiaries of Western Resources, are both
regulated as public utilities in the State of Kansas.
Section 5.13 VOTE REQUIRED. The approval of this Agreement, the Merger,
the issuance of the Western Resources Common Stock to be issued in the Merger,
and amendments to the Western Resources Articles increasing the number of shares
of Western Resources Common Stock authorized and increasing the size of the
board of directors, by a majority of the shares of Western Resources Common
Stock and Preferred Stock, voting together as a single class, outstanding on the
record date for such vote (the "Western Resources Shareholders' Approval") is
the only vote of the holders of any class or series of the capital stock of
Western Resources or any of its Subsidiaries required to approve this Agreement,
the Merger, the issuance of shares of Western Resources Common Stock to be
issued in the KCPL Merger and the other transactions contemplated hereby.
Section 5.14 ARTICLE XI (BUSINESS COMBINATION WITH INTERESTED
SHAREHOLDER) OF WESTERN RESOURCES' ARTICLES OF INCORPORATION. The provisions of
Article XI (business combination with interested shareholder) of the Western
Resources Articles will not, prior to the termination of this Agreement,
assuming the accuracy of the representation contained in Section 4.18 (without
giving effect to the knowledge qualification thereof), apply to this Agreement,
the Merger or to the transactions contemplated hereby.
Section 5.15 OPINION OF FINANCIAL ADVISOR. Western Resources has
received the opinion of Salomon Brothers Inc ("Salomon"), dated as of the date
hereof, to the effect that, as of the date thereof, the Conversion Ratio is fair
from a financial point of view to Western Resources.
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Section 5.16 INSURANCE. Western Resources and each of the Western
Resources Subsidiaries is, and has been continuously since January 1, 1992,
insured with financially responsible insurers in such amounts and against such
risks and losses as are customary in all material respects for companies
conducting the business as conducted by Western Resources and the Western
Resources Subsidiaries during such time period. Neither Western Resources nor
any of the Western Resources Subsidiaries has received any notice of
cancellation or termination with respect to any material insurance policy of
Western Resources or any of the Western Resources Subsidiaries. The insurance
policies of Western Resources and each of the Western Resources Subsidiaries are
valid and enforceable policies in all material respects.
Section 5.17 WESTERN RESOURCES NOT AN INTERESTED SHAREHOLDER. As of the
date hereof, neither Western Resources nor, to its reasonable knowledge, any of
its Affiliates, is an "Interested Shareholder" as such term is defined in
Article Twelfth of KCPL's Restated Articles of Consolidation.
Section 5.18 TAKEOVER STATUTES. No "fair price," "moratorium," "control
share acquisition" or other similar anti-takeover statute or regulation
(including Sections 17-1286 et seq. and 17-12,100, et seq. of the KGCC or
Article XI of the Western Resources Articles) is, or at the Effective Time
will be, applicable to KCPL, Western Resources, the KCPL Common Stock, the
Merger or the other transactions contemplated by this Agreement.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 COVENANTS OF KCPL. KCPL agrees, as to itself and as to each
of its Subsidiaries, that after the date hereof and prior to the Effective Time
or earlier termination of this Agreement, (i) except as expressly contemplated
or permitted in this Agreement, (ii) except as Western Resources may otherwise
agree in writing (which decision regarding agreement shall be made as soon as
reasonably practicable) and (iii) except as otherwise provided in the business
plan of KCPL in the form previously disclosed to Western Resources and attached
hereto as Section 6.1 of the KCPL Disclosure Schedule (the "KCPL Business
Plan"); provided, however, that for purposes of the preceding clause (iii) KCPL
shall obtain Western Resources' written agreement (which decision regarding
agreement shall be made as soon as reasonably practicable) prior to making or
committing to make any acquisitions or capital expenditures or incurring or
committing to incur any indebtedness, including guarantees but not including the
cost of routine regulated utility capital expenditures (such acquisitions,
capital expenditures and indebtedness, collectively, "Investments") subsequent
to the time when the aggregate value of the Investments made or committed to be
made by KCPL as permitted by this Section 6.1 exceeds in the aggregate
$150,000,000 during the period January 1, 1997 through December 31, 1997, which
aggregate limits shall be increased effective January 1, 1998 by $75,000,000 and
which upon the prior written approval of Western Resources shall be further
increased effective July 1,
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1998 by an additional $150,000,000 (such aggregate limits to exclude (A) the
cost of routine regulated utility capital expenditures and (B) any indebtedness
incurred or guaranteed in connection with the financing of acquisitions or
capital expenditures permitted pursuant to this sentence within such aggregate
limit); and provided further that, KCPL shall confer on a regular and frequent
basis with representatives of Western Resources in the course of KCPL's
implementation of the KCPL Business Plan:
(a) ORDINARY COURSE OF BUSINESS. KCPL shall, and shall cause its
respective Subsidiaries to, carry on their respective businesses in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted and use all commercially reasonable efforts to
preserve intact their present business organizations and goodwill,
preserve the goodwill and relationships with customers, suppliers and
others having business dealings with them and, subject to prudent
management of work force needs and ongoing programs currently in force,
keep available the services of their present officers and employees,
provided, however, that nothing shall prohibit KCPL or any of its
Subsidiaries from transferring operations to KCPL or any of its wholly
owned Subsidiaries. KCPL shall not, nor shall KCPL permit any of its
Subsidiaries to, enter into a new line of business involving any
material investment of assets or resources or any material exposure to
liability or loss to KCPL and the KCPL Subsidiaries taken as a whole.
(b) DIVIDENDS. KCPL shall not, nor shall KCPL permit any of its
Subsidiaries to, (i) declare or pay any dividends on or make other
distributions in respect of any of their capital stock other than to
KCPL or KCPL's Subsidiaries and other than (A) dividends required to be
paid on any KCPL Preferred Stock in accordance with the terms thereof
and (B) regular quarterly dividends on KCPL Common Stock with usual
record and payment dates not, during any period of any fiscal year, in
excess of the quarterly dividend most recently declared on such stock
as of the date hereof, (ii) split, combine or reclassify any of their
capital stock or issue or authorize or propose the issuance of any
other securities in respect of, in lieu of, or in substitution for,
shares of their capital stock or (iii) except as set forth in Section
6.1(b) of the KCPL Disclosure Schedule, redeem, repurchase or otherwise
acquire any shares of their capital stock, other than (A) redemptions,
purchases or acquisitions required by the terms of any series of KCPL
Preferred Stock or (B) for the purpose of funding employee stock
ownership plans in accordance with past practice. Notwithstanding the
foregoing, KCPL may redeem the KCPL Preferred Stock pursuant to the
provisions of Section 2.1.
(c) ISSUANCE OF SECURITIES. Except as set forth in Section 6.1(c)
of the KCPL Disclosure Schedule, KCPL shall not, nor shall KCPL permit
any of its Subsidiaries to, issue, agree to issue, deliver, sell,
award, pledge, dispose of or otherwise encumber or authorize or propose
the issuance, delivery, sale, award, pledge, disposal or other
encumbrance of, any shares of their capital stock of any class or any
securities convertible into or exchangeable for, or any rights,
warrants or options to acquire, any such shares or convertible or
exchangeable securities, other than (i) intercompany issuances of
capital stock and (ii) issuances in the ordinary
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course of business consistent with past practice of up to 2,000,000
shares of KCPL Common Stock during any fiscal year to be issued
pursuant to employee benefit plans, stock option and other incentive
compensation plans, directors plans and stock purchase and dividend
reinvestment plans existing prior to the date hereof and heretofore
disclosed to Western Resources or pursuant to plans adopted after the
date hereof which shall be reasonably acceptable to Western Resources.
The parties shall promptly furnish to each other such information as
may be reasonably requested including financial information and take
such action as may be reasonably necessary and otherwise fully
cooperate with each other in the preparation of any registration
statement under the Securities Act and other documents necessary in
connection with the issuance of securities as contemplated by this
Section 6.1(c), subject to obtaining customary indemnities.
(d) CHARTER DOCUMENTS. KCPL shall not amend or propose to amend
its charter, by-laws or regulations, or similar organic documents,
except as contemplated herein.
(e) NO ACQUISITIONS. KCPL shall not, nor shall KCPL permit any of
its Subsidiaries to, acquire, or publicly propose to acquire, or agree
to acquire, by merger or consolidation with, or by purchase or
otherwise, an equity interest in or a substantial portion of the assets
of, any business or any corporation, partnership, association or other
business organization or division thereof, nor shall KCPL acquire or
agree to acquire a material amount of assets other than in the ordinary
course of business consistent with past practice.
(f) CAPITAL EXPENDITURES. Except as required by law, KCPL shall
not, nor shall KCPL permit any Subsidiary of KCPL to, make capital
expenditures during any fiscal year in excess of the amount budgeted
for capital expenditures for such fiscal year in the KCPL Business
Plan.
(g) NO DISPOSITIONS. KCPL shall not, nor shall KCPL permit any of
its Subsidiaries to, sell or dispose of any of their assets other than
dispositions in the ordinary course of business consistent with past
practice.
(h) INDEBTEDNESS. KCPL shall not, nor shall KCPL permit any of its
Subsidiaries to, incur or guarantee any indebtedness (including any
debt borrowed or guaranteed or otherwise assumed including, without
limitation, the issuance of debt securities or warrants or rights to
acquire debt) or enter into any "keep well" or other agreement to
maintain any financial statement condition of another person or entity
or enter into any arrangement having the economic effect of any of the
foregoing other than (i) indebtedness or guarantees or "keep well" or
other agreements in the ordinary course of business consistent with
past practice (such as the issuance of commercial paper, the use of
existing credit facilities or hedging activities), (ii) other
indebtedness or "keep well" or other agreements not aggregating more
than $250 million, (iii) arrangements between KCPL and its Subsidiaries
or among its Subsidiaries, (iv) except as set forth in Section 6.1(h)
of the KCPL Disclosure Schedule, (v) in
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connection with the refunding of existing indebtedness, (vi) in
connection with the redemption of the KCPL Preferred Stock as set forth
in Section 2.1, or (vii) as may be necessary in connection with
acquisitions or capital expenditures provided for in the KCPL Business
Plan.
(i) COMPENSATION, BENEFITS. Except as may be required by
applicable law or as set forth in Section 6.1(i) of the KCPL Disclosure
Schedule, KCPL shall not, nor shall KCPL permit any of its Subsidiaries
to, (i) enter into, adopt or amend or increase the amount or accelerate
the payment or vesting of any benefit or amount payable under, any
employee benefit plan or other contract, agreement, commitment,
arrangement, plan, trust, fund or policy maintained by, contributed to
or entered into by KCPL or any of its Subsidiaries or increase, or
enter into any contract, agreement, commitment or arrangement to
increase in any manner, the compensation or fringe benefits, or
otherwise to extend, expand or enhance the engagement, employment or
any related rights, of any director, officer or other employee of KCPL
or any of its Subsidiaries, except for normal increases in the ordinary
course of business consistent with past practice that, in the
aggregate, do not result in a material increase in benefits or
compensation expense to KCPL or any of its Subsidiaries; (ii) enter
into or amend any employment, severance or special pay arrangement with
respect to the termination of employment or other similar contract,
agreement or arrangement with any director or officer or other employee
other than in the ordinary course of business consistent with past
practice; or (iii) deposit into any trust (including any "rabbi trust")
amounts in respect of any employee benefit obligations or obligations
to directors; provided that transfers into any trust, other than a
rabbi or other trust with respect to any non-qualified deferred
compensation, may be made in accordance with past practice.
(j) 1935 ACT. KCPL shall not, nor shall KCPL permit any of its
Subsidiaries to, except as required or contemplated by this Agreement,
engage in any activities which would cause a change in KCPL's status,
or that of its Subsidiaries, under the 1935 Act.
(k) ACCOUNTING. KCPL shall not, nor shall KCPL permit any of its
Subsidiaries to, make any changes in their accounting methods, except
as required by law, rule, regulation or GAAP.
(l) AFFILIATE TRANSACTIONS. Except as set forth in Section 6.1(l)
of the KCPL Disclosure Schedule, KCPL shall not, nor shall KCPL permit
any of its Subsidiaries to, enter into any material agreement or
arrangement with any of their Affiliates (other than wholly owned
Subsidiaries) on terms materially less favorable to such party than
could be reasonably expected to have been obtained with an unaffiliated
third-party on an arm's length basis.
(m) COOPERATION, NOTIFICATION. KCPL shall (i) confer on a regular
and frequent basis with one or more representatives of Western
Resources to discuss, subject to applicable law, material operational
matters and the general status of its
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ongoing operations, (ii) promptly notify Western Resources of any
significant changes in its business, properties, assets, condition
(financial or other), results of operations or prospects, and (iii)
promptly provide Western Resources with copies of all filings made by
KCPL or any of its Subsidiaries with any state or federal court,
administrative agency, commission or other Governmental Authority in
connection with this Agreement and the transactions contemplated
hereby.
(n) RATE MATTERS. Subject to applicable law, KCPL shall, and shall
cause its Subsidiaries to, discuss with Western Resources any changes
in its or its Subsidiaries' rates or the services it provides or
charges (other than pass-through fuel and gas rates or charges),
standards of service or accounting from those in effect on the date
hereof and consult with Western Resources prior to making any filing
(or any amendment thereto), or effecting any agreement, commitment,
arrangement or consent with governmental regulators, whether written or
oral, formal or informal, with respect thereto, and KCPL will not make
any filing to change its rates or the services it provides on file with
the FERC that would have a material adverse effect on the benefits
associated with the business combination provided for herein.
(o) THIRD-PARTY CONSENTS. KCPL shall, and shall cause its
Subsidiaries to, use all commercially reasonable efforts to obtain all
KCPL Required Consents. KCPL shall promptly notify Western Resources of
any failure or prospective failure to obtain any such consents and, if
requested by Western Resources, shall provide copies of all KCPL
Required Consents obtained by KCPL to Western Resources.
(p) NO BREACH, ETC. KCPL shall not, nor shall KCPL permit any of
its Subsidiaries to, willfully take any action that would or is
reasonably likely to result in a material breach of any provision of
this Agreement or in any of its representations and warranties set
forth in this Agreement being untrue on and as of the Closing Date.
(q) TAX-EXEMPT STATUS. KCPL shall not, nor shall KCPL permit any
of its Subsidiaries to, take any action that would likely jeopardize
the qualification of KCPL's or Western Resources' outstanding revenue
bonds which qualify on the date hereof under Section 142(a) of the Code
as "exempt facility bonds" or as tax-exempt industrial development
bonds under Section 103(b)(4) of the Internal Revenue Code of 1954, as
amended, prior to the Tax Reform Act of 1986.
(r) CONTRACTS. KCPL shall not, nor shall KCPL permit any
Subsidiary of KCPL to, except in the ordinary course of business
consistent with past practice, modify, amend, terminate, renew or fail
to use reasonable business efforts to renew any material contract or
agreement to which KCPL or any Subsidiary is a party or waive, release
or assign any material rights or claims.
(s) INSURANCE. KCPL shall, and shall cause its Subsidiaries to,
maintain with financially responsible insurance companies insurance in
such amounts and against such risks and losses as are customary for
companies engaged in the electric
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utility industry and employing methods of generating electric power and
fuel sources similar to those methods employed and fuels used by KCPL
or its Subsidiaries.
(t) PERMITS. KCPL shall, and shall cause its Subsidiaries to, use
reasonable efforts to maintain in effect all existing governmental
permits which are material to the operations of KCPL or its
Subsidiaries.
(u) TAX MATTERS. KCPL shall not (i) make or rescind any material
express or deemed election relating to taxes unless such election will
have the effect of minimizing the tax liabilities of KCPL or any of its
Subsidiaries, including elections for any and all joint ventures,
partnerships, limited liability companies, working interests or other
investments where KCPL has the capacity to make such binding elections,
(ii) without the written consent of Western Resources, which consent
will not be unreasonably withheld, settle or compromise any material
claim, action, suit, litigation, proceeding, arbitration,
investigation, audit or controversy relating to taxes unless such
settlement or compromise results in (A) a change in taxable income or
tax liability that will reverse in future periods and is therefore, by
its nature, a timing difference or (B) a change in taxable income or
tax liability that will not reverse in future periods and is therefore,
by its nature, a permanent difference unless the tax liability
resulting from the increase is less than $5 million, or (iii) change in
any material respect any of its methods of reporting income or
deductions for federal income tax purposes from those employed in the
preparation of its federal income tax return for the taxable year
ending December 31, 1995, except as may be required by applicable law
or except for such changes that would reduce consolidated federal
taxable income or alternative minimum taxable income.
(v) DISCHARGE OF LIABILITIES. KCPL shall not, nor shall KCPL
permit any of its Subsidiaries to, pay, discharge or satisfy any
material claims, liabilities or obligations (absolute, accrued,
asserted or unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction, in the ordinary course of business
consistent with past practice (which includes the payment of final and
unappealable judgments) or in accordance with their terms, of
liabilities reflected or reserved against in, or contemplated by, the
most recent consolidated financial statements (or the notes thereto) of
KCPL included in KCPL's reports filed with the SEC, or incurred in the
ordinary course of business consistent with past practice.
Section 6.2 COVENANTS OF WESTERN RESOURCES. Western Resources agrees,
as to itself and to each of its Subsidiaries, that after the date hereof and
prior to the Effective Time or earlier termination of this Agreement:
(a) COOPERATION, NOTIFICATION. Western Resources shall (i) confer
on a regular and frequent basis with one or more representatives of
KCPL to discuss, subject to applicable law, material operational
matters and the general status of its ongoing operations, (ii) promptly
notify KCPL of any significant changes in its business, properties,
assets, condition (financial or other), results of operations or
prospects, and (iii) promptly provide KCPL with copies of all filings
made by
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Western Resources or any of its Subsidiaries with any state or federal
court, administrative agency, commission or other Governmental
Authority in connection with this Agreement and the transactions
contemplated hereby.
(b) THIRD-PARTY CONSENTS. Western Resources shall, and shall cause
its Subsidiaries to, use all commercially reasonable efforts to obtain
all Western Resources Required Consents. Western Resources shall
promptly notify KCPL of any failure or prospective failure to obtain
any such consents and, if requested by KCPL, shall provide copies of
all Western Resources Required Consents obtained by Western Resources
to KCPL.
(c) NO BREACH, ETC. Western Resources shall not, nor shall Western
Resources permit any of its Subsidiaries to, willfully take any action
that would or is reasonably likely to result in a material breach of
any provision of this Agreement or in any of its representations and
warranties set forth in this Agreement being untrue on and as of the
Closing Date.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 ACCESS TO INFORMATION. Upon reasonable notice, each party
shall, and shall cause its Subsidiaries to, afford to the officers, directors,
employees, accountants, counsel, investment bankers, financial advisors and
other representatives of the other (collectively, "Representatives") reasonable
access, during normal business hours throughout the period prior to the
Effective Time, to all of its properties, books, contracts, commitments and
records (including, but not limited to, Tax Returns) and, during such period,
each party shall, and shall cause its Subsidiaries to, furnish promptly to the
other (i) access to each report, schedule and other document filed or received
by it or any of its Subsidiaries pursuant to the requirements of federal or
state securities laws or filed with or sent to the SEC, the FERC, the NRC, the
Department of Justice, the Federal Trade Commission, or any other federal or
state regulatory agency or commission and (ii) access to all information
concerning themselves, their Subsidiaries, directors, officers and shareholders
and such other matters as may be reasonably requested by the other party in
connection with any filings, applications or approvals required or contemplated
by this Agreement or for any other reason related to the transactions
contemplated by this Agreement. All documents and information supplied by one
party to the other pursuant to this Section 7.1 shall be deemed to be
"Evaluation Material" as defined in the Confidentiality Agreement, dated
December 20, 1996, between KCPL and Western Resources, as it may be amended from
time to time (the "Confidentiality Agreement"), and shall be kept confidential
in accordance with the terms of such Agreement.
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Section 7.2 JOINT PROXY STATEMENT AND REGISTRATION STATEMENT.
(a) PREPARATION AND FILING. The parties will prepare and file with the
SEC as soon as reasonably practicable after the date hereof the Registration
Statement and the Proxy Statement (together, the "Joint Proxy/Registration
Statement"). The parties hereto shall each use reasonable efforts to cause the
Registration Statement to be declared effective under the Securities Act as
promptly as practicable after such filing. Each party hereto shall also take
such action as may be reasonably required to cause the shares of Western
Resources Common Stock issuable in connection with the Merger to be registered
or to obtain an exemption from registration under applicable state "blue sky" or
securities laws; provided, however, that no party shall be required to register
or qualify as a foreign corporation or to take other action which would subject
it to service of process in any jurisdiction where the Surviving Corporation
will not be, following the Merger, so subject. Each of the parties hereto shall
furnish all information concerning itself which is required or customary for
inclusion in the Joint Proxy/Registration Statement. The parties shall use
reasonable efforts to cause the shares of Western Resources Common Stock
issuable in the Merger to be approved for listing on the NYSE upon official
notice of issuance. The information provided by any party hereto for use in the
Joint Proxy/Registration Statement shall be true and correct in all material
respects without omission of any material fact which is required to make such
information not false or misleading. No representation, covenant or agreement is
made by any party hereto with respect to information supplied by any other party
for inclusion in the Joint Proxy Statement/Registration Statement.
(b) LETTER OF KCPL'S ACCOUNTANTS. KCPL shall use its best efforts to
cause to be delivered to Western Resources letters of Coopers & Lybrand, dated a
date within two business days before the date of the Joint Proxy/Registration
Statement, and addressed to Western Resources, in form and substance reasonably
satisfactory to Western Resources and customary in scope and substance for "cold
comfort" letters delivered by independent public accountants in connection with
registration statements on Form S-4.
(c) LETTER OF WESTERN RESOURCES' ACCOUNTANTS. Western Resources shall
use its best efforts to cause to be delivered to KCPL a letter of Arthur
Andersen & Co., dated a date within two business days before the date of the
Joint Proxy/Registration Statement, and addressed to KCPL, in form and substance
reasonably satisfactory to KCPL and customary in scope and substance for "cold
comfort" letters delivered by independent public accountants in connection with
registration statements on Form S-4.
(d) FAIRNESS OPINIONS. It shall be a condition to the mailing of the
Joint Proxy/Registration Statement to the shareholders of KCPL and Western
Resources that (i) KCPL shall have received an opinion from Merrill Lynch, dated
the date of the Joint Proxy/Registration Statement, to the effect that, as of
the date thereof, the Conversion Ratio is fair from a financial point of view to
the holders of KCPL Common Stock and (ii) Western Resources shall have received
an opinion from Salomon, dated the date of the Joint Proxy/Registration
Statement, to the effect that, as of the date thereof, the Conversion Ratio is
fair from a financial point of view to Western Resources.
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Section 7.3 REGULATORY MATTERS.
(a) HSR FILINGS. Each party hereto shall file or cause to be filed with
the Federal Trade Commission and the Department of Justice any notifications
required to be filed by their respective "ultimate parent" companies under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), and the rules and regulations promulgated thereunder with respect to the
transactions contemplated hereby. Such parties will use all commercially
reasonable efforts to make such filings in a timely manner and to respond on a
timely basis to any requests for additional information made by either of such
agencies.
(b) OTHER REGULATORY APPROVALS. Each party hereto shall cooperate and
use its best efforts to promptly prepare and file all necessary documentation,
to effect all necessary applications, notices, petitions, filings and other
documents, and to use all commercially reasonable efforts to obtain all
necessary permits, consents, approvals and authorizations of all Governmental
Authorities necessary or advisable to obtain the KCPL Required Statutory
Approvals and the Western Resources Required Statutory Approvals.
Section 7.4 SHAREHOLDER APPROVAL.
(a) APPROVAL OF KCPL SHAREHOLDERS. Subject to the provisions of Section
7.4(c) and Section 7.4(d), KCPL shall, as soon as reasonably practicable after
the date hereof (i) take all steps necessary to duly call, give notice of,
convene and hold a meeting of its shareholders (the "KCPL Meeting") for the
purpose of securing the KCPL Shareholders' Approval, (ii) distribute to its
shareholders the Proxy Statement in accordance with applicable federal and state
law and with its Restated Articles of Consolidation and by-laws, (iii) subject
to the fiduciary duties of its Board of Directors, recommend to its shareholders
the approval of the Merger, this Agreement and the transactions contemplated
hereby, and (iv) cooperate and consult with Western Resources with respect to
each of the foregoing matters.
(b) APPROVAL OF WESTERN RESOURCES SHAREHOLDERS. Subject to the
provisions of Section 7.4(c) and Section 7.4(d), Western Resources shall, as
soon as reasonably practicable after the date hereof (i) take all steps
necessary to duly call, give notice of, convene and hold a meeting of its
shareholders (the "Western Resources Meeting") for the purpose of securing the
Western Resources Shareholders' Approval, (ii) distribute to its shareholders
the Proxy Statement in accordance with applicable federal and state law and with
the Western Resources Articles and Western Resources By-Laws, (iii) subject to
the fiduciary duties of its Board of Directors, recommend to its shareholders
the approval of the Merger, this Agreement and the transactions contemplated
hereby, including without limitation the issuance of Western Resources Common
Stock in the Merger, and (iv) cooperate and consult with KCPL with respect to
each of the foregoing matters.
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(c) MEETING DATE. The Western Resources Meeting for the purpose of
securing the Western Resources Shareholders' Approval and the KCPL Meeting for
the purpose of securing the KCPL Shareholders' Approval shall be held as soon as
practicable, or at such time as KCPL and Western Resources shall mutually
determine.
(d) FAIRNESS OPINIONS NOT WITHDRAWN. It shall be a condition to the
obligation of KCPL to hold the KCPL Meeting that the opinion of Merrill Lynch,
referred to in Section 7.2(d), shall not have been withdrawn, and it shall be a
condition to the obligation of Western Resources to hold the Western Resources
Meeting that the opinion of Salomon, referred to in Section 7.2(d), shall not
have been withdrawn.
Section 7.5 DIRECTORS' AND OFFICERS' INDEMNIFICATION.
(a) INDEMNIFICATION. To the extent, if any, not provided by an existing
right of indemnification or other agreement or policy, from and after the
Effective Time, the Surviving Corporation shall, to the fullest extent permitted
by applicable law, indemnify, defend and hold harmless each person who is now,
or has been at any time prior to the date hereof, or who becomes prior to the
Effective Time, an officer, director or employee of any of the parties hereto or
their respective Subsidiaries (each an "Indemnified Party" and collectively, the
"Indemnified Parties") against (i) all losses, expenses (including reasonable
attorney's fees and expenses), claims, damages or liabilities or, subject to the
proviso of the next succeeding sentence, amounts paid in settlement, arising out
of actions or omissions occurring at or prior to the Effective Time (and whether
asserted or claimed prior to, at or after the Effective Time) that are, in whole
or in part, based on or arising out of the fact that such person is or was a
director, officer or employee of such party (the "Indemnified Liabilities"), and
(ii) all Indemnified Liabilities to the extent they are based on or arise out of
or pertain to the transactions contemplated by this Agreement. In the event of
any such loss, expense, claim, damage or liability (whether or not arising
before the Effective Time), (i) the Surviving Corporation shall pay the
reasonable fees and expenses of counsel selected by the Indemnified Parties,
which counsel shall be reasonably satisfactory to the Surviving Corporation,
promptly after statements therefor are received and otherwise advance to such
Indemnified Party upon request reimbursement of documented expenses reasonably
incurred, in either case to the extent not prohibited by the KGCC, (ii) the
Surviving Corporation 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 the KGCC and the
certificate of incorporation or by-laws of the Surviving Corporation shall be
made by independent counsel mutually acceptable to the Surviving Corporation and
the Indemnified Party; provided, however, that the Surviving Corporation shall
not be liable for any settlement effected without its written consent (which
consent shall not be unreasonably withheld). The Indemnified Parties as a group
may retain only one law firm with respect to each related matter except to the
extent there is, in the opinion of counsel to an Indemnified Party, under
applicable standards of professional conduct, a conflict on any significant
issue between positions of such Indemnified Party and any other Indemnified
Party or Indemnified Parties.
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(b) INSURANCE. For a period of six years after the Effective Time, the
Surviving Corporation shall cause to be maintained in effect policies of
directors and officers' liability insurance maintained by KCPL and Western
Resources for the benefit of those persons who are currently covered by such
policies on terms no less favorable than the terms of such current insurance
coverage; provided, however, that the Surviving Corporation shall not be
required to expend in any year an amount in excess of 150% of the annual
aggregate premiums currently paid by KCPL and Western Resources for such
insurance; and provided, further, that if the annual premiums of such insurance
coverage exceed such amount, the Surviving Corporation shall be obligated to
obtain a policy with the best coverage available, in the reasonable judgment of
the Board of Directors of the Surviving Corporation, for a cost not exceeding
such amount.
(c) SUCCESSORS. In the event the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person or
entity and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person or entity, then and in either such case,
proper provisions shall be made so that the successors and assigns of the
Surviving Corporation shall assume the obligations set forth in this Section
7.5.
(d) SURVIVAL OF INDEMNIFICATION. To the fullest extent permitted by
law, from and after the Effective Time, all rights to indemnification as of the
date hereof in favor of the employees, agents, directors and officers of KCPL,
Western Resources and their respective Subsidiaries with respect to their
activities as such prior to the Effective Time, as provided in their respective
articles of incorporation and by-laws in effect on the date thereof, or
otherwise in effect on the date hereof, shall survive the Merger and shall
continue in full force and effect for a period of not less than six years from
the Effective Time.
(e) BENEFIT. The provisions of this Section 7.5 are intended to be for
the benefit of, and shall be enforceable by, each Indemnified Party, his or her
heirs and his or her representatives.
Section 7.6 PUBLIC ANNOUNCEMENTS. Subject to each party's disclosure
obligations imposed by law, KCPL and Western Resources will cooperate with each
other in the development and distribution of all news releases and other public
information disclosures with respect to this Agreement or any of the
transactions contemplated hereby and shall not issue any public announcement or
statement with respect hereto or thereto without the consent of the other party
(which consent shall not be unreasonably withheld).
Section 7.7 RULE 145 AFFILIATES. KCPL shall identify in a letter to
Western Resources all persons who are, and to KCPL's knowledge who will be at
the Closing Date, "affiliates" of KCPL as such term is used in Rule 145 under
the Securities Act (or otherwise under applicable SEC accounting releases with
respect to pooling-of-interests accounting treatment). KCPL shall use all
reasonable efforts to cause its affiliates (including any person who may be
deemed to have become such an affiliate after the date of the letter referred to
in
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the prior sentence) to deliver to Western Resources on or prior to the Closing
Date a written agreement substantially in the form attached as Exhibit 7.7 (each
an "Affiliate Agreement").
Section 7.8 EMPLOYEE AGREEMENTS AND WORKFORCE MATTERS.
(a) CERTAIN EMPLOYEE AGREEMENTS. Subject to Section 7.9 and Section
7.10, the Surviving Corporation and its Subsidiaries shall honor, without
modification, all contracts, agreements, collective bargaining agreements,
severance agreements between KCPL and certain of its officers and commitments of
the parties prior to the date hereof that have previously been provided to
Western Resources and that are disclosed in Section 4.10 of the KCPL Disclosure
Schedule and that apply to any current or former employee or current or former
director of the parties hereto; provided, however, that this undertaking is not
intended to prevent the Surviving Corporation from enforcing such contracts,
agreements, collective bargaining agreements and commitments in accordance with
their terms, including, without limitation, any reserved right to amend, modify,
suspend, revoke or terminate any such contract, agreement, collective bargaining
agreement or commitment.
(b) WORKFORCE MATTERS. Subject to applicable bargaining agreements,
Western Resources shall treat the employees of the Surviving Corporation as a
single workforce, and shall use its best effort to conduct its employee
management practices on a fair and equitable basis, without regard to any
employee's place of employment prior to the Effective Time.
Section 7.9 EMPLOYEE BENEFIT PLANS.
(a) COMPANY PLANS. (i) From the Effective Time until the first
anniversary of the Effective Time, Western Resources shall provide to employees
of the Surviving Corporation who were employees of KCPL prior to the Effective
Time ("KCPL Employees") benefits which are no less favorable in the aggregate
than the benefits provided to employees of KCPL as of the date hereof, (ii)
between the first and second anniversaries of the Effective Time, Western may
either provide KCPL Employees benefits which are no less favorable in the
aggregate than the benefits provided to employees of KCPL as of the date hereof
or provide to KCPL Employees benefits on the same terms as those applicable to
other similarly situated Western Resources employees, and (iii) after the second
anniversary of the Effective Time, Western shall provide to KCPL Employees
benefits on the same terms as those applicable to other similarly situated
Western Resources employees. In the event Western Resources is unable to provide
benefits to KCPL Employees on the same terms applicable to other similarly
situated Western Resources employees after the second anniversary of the
Effective Time, it shall continue to provide benefits which are no less
favorable in the aggregate than the benefits provided to KCPL Employees as of
the date hereof until such other benefits can be provided. For purposes of this
Section 7.9(a), the term "benefits" shall not include the following plans of
KCPL: the Long Term Incentive Plan for Executives, the Auto Allowance, the
Financial/Tax Allowance, the Incentive Compensation Plan, the Executive
Long-Term and Short-Term Incentive Plan, the RESULTS Incentive Compensation
Plan, and the KLT, Inc. Annual Incentive Pay Plan and Long Term Incentive Plan.
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(b) EFFECT OF THE MERGER. The consummation of the Merger shall not be
treated as a termination of employment for purposes of any Western Resources
Benefit Plan or KCPL Benefit Plan.
(c) CREDIT FOR PAST SERVICE. Without limitation of the foregoing
provisions of this Section 7.9, each participant in any benefit plan of the
Surviving Corporation shall receive credit for service with KCPL or Western
Resources, as the case may be, for purposes of (i) eligibility to participate,
vesting and eligibility to receive benefits under any benefit plan of the
Surviving Corporation or any of its Subsidiaries or affiliates and (ii) benefit
accrual under any severance or vacation pay plan; provided, however, that such
crediting of service shall not operate to duplicate any benefit to any such
participant or the funding for any such benefit.
Section 7.10 STOCK OPTION AND OTHER STOCK PLANS.
(a) KCPL STOCK OPTIONS. As of the Effective Time, each option to
purchase shares of KCPL Common Stock (a "KCPL Stock Option") which is
outstanding as of the Effective Time shall be assumed by the Surviving
Corporation and converted into an option (or a new substitute option shall be
granted) to purchase the number of shares of Western Resources Common Stock
(rounded up to the nearest whole share) equal to the number of shares of KCPL
Common Stock subject to such option multiplied by the Conversion Ratio, at an
exercise price per share of Western Resources Common Stock (rounded down to the
nearest penny) equal to the former exercise price per share of KCPL Common Stock
under such option immediately prior to the Effective Time divided by the
Conversion Ratio; provided, however, that in the case of any KCPL Stock Option
to which Section 421 of the Code applies by reason of its qualification under
Section 422 of the Code, the conversion formula shall be adjusted, if necessary,
to comply with Section 424(a) of the Code. Except as provided above, the
converted or substituted KCPL Stock Options shall be subject to the same terms
and conditions (including, without limitation, expiration date, vesting and
exercise provisions) as were applicable to KCPL Stock Options immediately prior
to the Effective Time, except that the acceleration of vesting and
exercisability as a result of the Merger shall not be given effect. The Merger
shall not be treated as an event which shall affect the period for exercising
KCPL Stock Options or provide for any cash payment by KCPL to any holder of a
KCPL Stock Option. KCPL Stock Options shall not be treated as expiring as of the
Effective Time solely due to the fact that KCPL shall cease to exist as of the
Effective Time. If required to allow the Surviving Corporation to account for
the transactions to be effected pursuant to this Agreement as a
pooling-of-interests in accordance with GAAP and applicable SEC regulations,
KCPL shall take all necessary action, including obtaining any applicable
consents from option holders, to provide for the occurrence of the foregoing.
(b) OTHER KCPL STOCK AWARDS. Each outstanding stock award or other
grant under any KCPL benefit or compensation plan other than the KCPL Stock
Options (the "KCPL Stock Awards") shall constitute an award based upon the same
number of shares of Western Resources Common Stock as the holder of such KCPL
Stock Award would have been entitled to receive pursuant to the Merger in
accordance with Article II hereof had such
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holder been the absolute owner, immediately before the Effective Time, of the
shares of Common Stock on which such KCPL Stock Award is based, and otherwise on
the same terms and conditions as governed such KCPL Stock Award immediately
before the Effective Time (the "Surviving Corporation Stock Awards"). At the
Effective Time, the Surviving Corporation shall assume each agreement relating
to the KCPL Stock Awards. The Merger shall not be treated as an event which
shall affect the period for exercising KCPL Stock Awards or provide for any cash
payment by KCPL to any holder of a KCPL Stock Award. Notwithstanding the
foregoing, this paragraph shall not be construed, interpreted or applied so as
to cause a duplication of any benefit to any individual. If required to allow
the Surviving Corporation to account for the transactions to be effected
pursuant to this Agreement as a pooling-of-interests in accordance with GAAP and
applicable SEC regulations, KCPL shall take all necessary action, including
obtaining any applicable consents from award holders, to provide for the
occurrence of the foregoing.
(c) SURVIVING CORPORATION ACTION. As soon as practicable after the
Effective Time, the Surviving Corporation shall deliver to the holders of KCPL
Stock Options and KCPL Stock Awards appropriate notices setting forth such
holders' rights (the "Surviving Corporation Stock Benefits") and each underlying
stock award agreement, each as assumed by the Surviving Corporation. As soon as
practicable after the Effective Time the Surviving Corporation will cause to be
filed one or more registration statements on Form S-3 or Form S-8 under the
Securities Act (or any successor or other appropriate forms), in order to
register the shares of Western Resources Common Stock issuable in connection
with the Surviving Corporation Stock Benefits, and the Surviving Corporation
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. At or prior to the Effective Time, the Surviving Corporation
shall take all corporate action necessary to reserve for issuance a sufficient
number of shares of Western Resources Common Stock for delivery in connection
with the Surviving Corporation Stock Benefits. The Surviving Corporation shall
take all corporate action necessary or appropriate to obtain shareholder
approval with respect to the Surviving Corporation Stock Benefits to the extent
such approval is required for purposes of the Code or other applicable law. 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 with respect to
equity securities of the Surviving Corporation, the Surviving Corporation shall
administer such Surviving Corporation Stock Benefits, where applicable, in a
manner that complies with Rule 16b-3 promulgated under the Exchange Act.
Section 7.11 NO SOLICITATIONS. From and after the date hereof, KCPL
will not, and will not authorize or permit any of its Representatives to,
directly or indirectly, solicit, initiate or encourage (including by way of
furnishing information) or take any other action to facilitate knowingly any
inquiries or the making of any proposal which constitutes or may reasonably be
expected to lead to an Acquisition Proposal (as defined herein) from any person,
or engage in any discussion or negotiations relating thereto or accept any
Acquisition Proposal; provided, however, that notwithstanding any other
provision hereof, KCPL may (i) at any time prior to the time KCPL's stockholders
shall have voted to approve this Agreement, engage in discussions or
negotiations with a third party who (without any
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solicitation, initiation, encouragement, discussion or negotiation, directly or
indirectly, by or with KCPL or its Representatives after the date hereof) seeks
to initiate such discussions or negotiations and may furnish such third party
information concerning KCPL and its business, properties and assets if, and only
to the extent that, (A) (x) the third party has first made an Acquisition
Proposal that is financially superior to the Merger and has demonstrated that
financing for the Acquisition Proposal is reasonably likely to be obtained (as
determined in good faith by KCPL's Board of Directors after consultation with
its financial advisors) and (y) KCPL's Board of Directors shall conclude in good
faith, after considering applicable provisions of state law, on the basis of
oral or written advice of outside counsel that such action is necessary for the
KCPL Board of Directors to act in a manner consistent with its fiduciary duties
under applicable law and (B) prior to furnishing such information to or entering
into discussions or negotiations with such person or entity, KCPL (x) provides
prompt notice to Western Resources to the effect that it is planning to furnish
information to or enter into discussions or negotiations with such person or
entity and (y) receives from such person or entity an executed confidentiality
agreement in reasonably customary form on terms not in the aggregate materially
more favorable to such person or entity than the terms contained in the
Confidentiality Agreement, (ii) comply with Rule 14e-2 promulgated under the
Exchange Act with regard to a tender or exchange offer, and/or (iii) accept an
Acquisition Proposal from a third party, provided KCPL first terminates this
Agreement pursuant to Section 9.1(e). KCPL shall immediately cease and terminate
any existing solicitation, initiation, encouragement, activity, discussion or
negotiation with any parties conducted heretofore by KCPL or its Representatives
with respect to the foregoing. KCPL shall notify Western Resources orally and in
writing of any such inquiries, offers or proposals (including, without
limitation, the terms and conditions of any such proposal and the identify of
the person making it), within 24 hours of the receipt thereof, shall keep
Western Resources informed of the status and details of any such inquiry, offer
or proposal, and shall give Western Resources five days' advance notice of any
agreement to be entered into with or any information to be supplied to any
person making such inquiry, offer or proposal. As used herein, "Acquisition
Proposal" shall mean a proposal or offer (other than by Western Resources) for a
tender or exchange offer, merger, consolidation or other business combination
involving KCPL or any KCPL Subsidiary or any proposal to acquire in any manner a
substantial equity interest in or a substantial portion of the assets of KCPL or
any KCPL Subsidiary.
Section 7.12 SURVIVING CORPORATION BOARD OF DIRECTORS. The Board of
Directors of Western Resources will take such action as may be necessary
(including increasing the size of the Board of Directors of Western Resources
and seeking approval of its stockholders of an amendment to the Western
Resources Articles to increase the size of the Board of Directors) to appoint to
the Board of Directors of Western Resources as many persons, but in no event
more than six persons, who (1) are members of the KCPL Board of Directors as of
the date hereof, (2) are willing to serve on the Board of Directors of Western
Resources, and (3) would be eligible under Western Resources' by-laws to be so
nominated for election to the Western Resources Board of Directors at the next
Western Resources annual meeting following the Effective Time. The Nominating
Committee of the Western Resources Board of Directors shall allocate all persons
to be added to the Western Resources
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Board of Directors pursuant to this Section as evenly as possible among the
classes of the Western Resources Board of Directors.
Section 7.13 POST-MERGER OPERATIONS.
(a) PRINCIPAL CORPORATE OFFICES. At the Effective Time, the
headquarters of the KCPL division of Western Resources shall be in Kansas City,
Missouri; the headquarters of the KGE division of Western Resources and Kansas
Gas and Electric Company shall be in Wichita, Kansas; and the headquarters of
Western Resources and the KPL division of Western Resources shall be in Topeka,
Kansas. At the Effective Time, Western Resources' electric utility operations
shall be headquartered in Kansas City, Missouri.
(b) CHARITIES. After the Effective Time, the Surviving Corporation
currently intends to provide charitable contributions and community support
within the service areas of KCPL and Western Resources and each of their
respective Subsidiaries at annual levels substantially comparable to the annual
levels of charitable contributions and community support provided by KCPL and
Western Resources and their respective Subsidiaries within their service areas
during 1994 and 1995.
(c) KCPL BOARD OF DIRECTORS. For a period of not less than three years
following the Effective Time, the KCPL division of Western Resources shall
continue to have a Board of Directors.
(d) TERMINATION OF LITIGATION. The parties hereto shall immediately
dismiss, with each party bearing its own costs and litigation expenses, all
proceedings pending between themselves and their affiliates, including without
limitation KCPL v. Western Resources, Inc. et al, Civ. Action No. 96-552-CV-W-5
(W.D. Mo.), and each shall thereafter sign and deliver such further instruments
as may be necessary in connection with such dismissals.
(e) DIVIDENDS. Based on economic and financial conditions existing on
the date hereof, the management of Western Resources presently intends to
recommend to the Board of Western Resources that Western Resources declare and
pay an annual dividend of $2.14 per common share for fiscal year 1998.
Section 7.14 EXPENSES. Subject to Section 9.3, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses, except that those
expenses incurred in connection with printing the Joint Proxy/Registration
Statement, as well as the filing fee relating thereto, shall be shared equally
by KCPL and Western Resources.
Section 7.15 TRANSITION MANAGEMENT. The parties shall create a special
transition management task force (the "Task Force") which shall be jointly
headed by representatives appointed by and reasonably acceptable to the Chief
Executive Officers of
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each company. The Task Force shall examine various alternatives regarding the
manner in which to best organize and manage the business of the Surviving
Corporation after the Effective Time, subject to applicable law.
Section 7.16 TERMINATION OF WESTERN RESOURCES EXCHANGE OFFER.
Immediately following the execution and delivery of this Agreement by the
parties hereto, Western Resources shall terminate or allow to expire its offer
to exchange shares of Western Resources Common Stock for shares of KCPL Common
Stock made by means of Western Resources' prospectus dated July 3, 1996, as
amended, pursuant to the terms and conditions thereof.
Section 7.17 POOLING AND TAX-FREE STATUS. Each party hereto agrees, as
to itself and to each of its Subsidiaries, that after the date hereof and prior
to the Effective Time or earlier termination of this Agreement, except as
expressly contemplated or permitted in this Agreement:
(a) POOLING. Neither party hereto shall, nor shall such party
permit any of its Subsidiaries or any employees, officers or directors
of such party or of any of its Subsidiaries to, take any action which
would, or would be reasonably likely to, prevent the Surviving
Corporation from accounting for the transactions to be effected
pursuant to this Agreement as a pooling-of-interests in accordance with
GAAP and applicable SEC regulations, and such party shall use all
reasonable efforts to achieve such result (including taking such
commercially reasonable actions as may be necessary to cure any facts
or circumstances that could prevent such transactions from qualifying
for pooling-of-interests accounting treatment); provided, however, that
the covenant contained in this Section 7.17(a) shall no longer apply to
Western Resources if Western Resources shall deliver to KCPL a written
undertaking to the effect that Western Resources, pursuant to Section
9.5 hereof, waives the condition to Western Resources' obligation to
effect the Merger contained in Section 8.2(i) hereof.
(b) TAX-FREE STATUS. Neither party hereto shall, nor shall either
party hereto permit any of its Subsidiaries or any employees, officers
or directors of such party or of any of its Subsidiaries to, take any
actions which would, or would be reasonably likely to, adversely affect
the ability of the Merger to qualify for tax-free treatment under the
Code, both to the parties and their respective shareholders (except for
any cash received in lieu of fractional shares or by dissenting
shareholders), and each party hereto shall use all reasonable efforts
to achieve such result.
Section 7.18 FURTHER ASSURANCES. Each party will, and will cause its
Subsidiaries to, execute such further documents and instruments and take such
further actions, including the application for any necessary regulatory
approvals or exemptions, as may reasonably be requested by any other party in
order to consummate the Merger in accordance with the terms hereof.
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Section 7.19 INTERIM DIVIDENDS. The last record date of each of KCPL
and Western Resources on or prior to the Effective Time which relates to a
regular quarterly dividend on KCPL Common Stock or Western Resources Common
Stock, as the case may be, shall be the same date and shall be prior to the
Effective Time.
ARTICLE VIII
CONDITIONS
Section 8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligations of each party to effect the Merger shall be subject
to the satisfaction on or prior to the Closing Date of the following conditions,
except, to the extent permitted by applicable law, that such conditions may be
waived in writing pursuant to Section 9.5 by the joint action of the parties
hereto:
(a) SHAREHOLDER APPROVALS. The Western Resources Shareholders'
Approval and the KCPL Shareholders' Approval shall have been obtained.
(b) NO INJUNCTION. No temporary restraining order or preliminary
or permanent injunction or other order by any federal or state court
preventing consummation of the Merger shall have been issued and be
continuing in effect, and the Merger and the other transactions
contemplated hereby shall not have been prohibited under any applicable
federal or state law or regulation.
(c) REGISTRATION STATEMENT. The Registration Statement shall have
become effective in accordance with the provisions of the Securities
Act, and no stop order suspending such effectiveness shall have been
issued and remain in effect.
(d) LISTING OF SHARES. The shares of Western Resources Common
Stock issuable in the Merger pursuant to Article II shall have been
approved for listing on the NYSE upon official notice of issuance.
(e) REQUIRED STATUTORY APPROVALS. The KCPL Required Statutory
Approvals and the Western Resources Required Statutory Approvals shall
have been obtained at or prior to the Effective Time and such approvals
shall have become Final Orders (as defined below). A "Final Order"
means action by the relevant regulatory authority which has not been
reversed, stayed, enjoined, set aside, annulled or suspended, with
respect to which any waiting period prescribed by law before the
transactions contemplated hereby may be consummated has expired, and as
to which all conditions to the consummation of such transactions
prescribed by law, regulation or order have been satisfied.
(f) PERMITS. To the extent that the continued lawful operations of
the business of KCPL or any KCPL Subsidiary or Western Resources or any
Western Resources Subsidiary after the Merger require that any license,
permit or other
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governmental approval be transferred to the Surviving Corporation or
issued to the Surviving Corporation, such licenses, permits or other
authorizations shall have been transferred or reissued to the Surviving
Corporation at or before the Closing Date, except where the failure to
transfer or reissue such licenses, permits or other authorizations
would not have a material adverse effect on the business, assets,
financial condition, results of operations or prospects of the
Surviving Corporation and its Subsidiaries taken as a whole immediately
after the Effective Time.
Section 8.2 CONDITIONS TO OBLIGATION OF WESTERN RESOURCES TO EFFECT THE
MERGER. The obligation of Western Resources to effect the Merger shall be
further subject to the satisfaction, on or prior to the Closing Date, of the
following conditions, except as may be waived by Western Resources in writing
pursuant to Section 9.5:
(a) PERFORMANCE OF OBLIGATIONS OF KCPL. KCPL (and/or KCPL's
appropriate Subsidiaries) will have performed in all material respects
its agreements and covenants contained in or contemplated by this
Agreement which are required to be performed by it at or prior to the
Effective Time including, without limitation, agreements and covenants
contained in Section 2.1(c) hereof.
(b) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of KCPL set forth in this Agreement shall be true and
correct (i) on and as of the date hereof and (ii) on and as of the
Closing Date with the same effect as though such representations and
warranties had been made on and as of the Closing Date (except for
representations and warranties that expressly speak only as of a
specific date or time which need only be true and correct as of such
date or time) except in each of cases (i) and (ii) for such failures of
representations or warranties to be true and correct (without giving
effect to any materiality qualification or standard contained in any
such representations and warranties) which, individually or in the
aggregate, would not result in a KCPL Material Adverse Effect.
(c) CLOSING CERTIFICATES. Western Resources shall have received a
certificate signed by the chief financial officer of KCPL, dated the
Closing Date, to the effect that, to the best of such officer's
knowledge, the conditions set forth in Section 8.2(a) and Section
8.2(b) have been satisfied.
(d) KCPL MATERIAL ADVERSE EFFECT. No KCPL Material Adverse Effect
shall have occurred.
(e) TAX OPINION. Western Resources shall have received an opinion
from Sullivan & Cromwell, counsel to Western Resources, in form and
substance reasonably satisfactory to Western Resources, dated as of the
Effective Time, substantially to the effect that (i) no gain or loss
will be recognized by KCPL or Western Resources pursuant to the Merger,
and (ii) no gain or loss will be recognized by stockholders of Western
Resources as a result of the Merger. In rendering such opinion,
Sullivan & Cromwell may require and rely upon representations contained
in certificates of officers of KCPL, Western Resources and others.
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(f) KCPL REQUIRED CONSENTS. The KCPL Required Consents the failure
of which to obtain would have a KCPL Material Adverse Effect shall have
been obtained.
(g) AFFILIATE AGREEMENTS. Western Resources shall have received
Affiliate Agreements, duly executed by each "Affiliate" of KCPL,
substantially in the form of Exhibit 7.7, as provided in Section 7.7.
(h) DISSENTING SHARES. The aggregate number of Dissenting Shares
shall be less than 5.5% of the total number of outstanding shares of
KCPL Common Stock as of the Effective Time.
(i) POOLING. Western Resources shall have received a letter of its
independent public accountants, dated the Closing Date, in form and
substance reasonably satisfactory to Western Resources, stating that
the transactions to be effected pursuant to this Agreement will qualify
as a pooling of interests transaction under GAAP and applicable SEC
regulations. Such accountants may in their discretion be entitled to
rely in delivering such letter on consultations with, and/or the
written advice of, the office of the Chief Accountant of the SEC.
(j) 1935 ACT. Western Resources shall be reasonably satisfied
that, following the Effective Time, it shall be exempt from all
provisions of the 1935 Act other than Section 9(a)(2) thereof.
(k) STATUTORY APPROVALS. Western Resources shall be reasonably
satisfied that the Final Orders, other than any Final Order issued by
FERC, with respect to the KCPL Required Statutory Approvals and the
Western Resources Required Statutory Approvals shall not impose terms
or conditions which, individually or in the aggregate, would have, or
insofar as reasonably can be foreseen, are likely to have a material
adverse effect on the business, assets, financial condition or results
of operations of the Surviving Corporation or a material adverse effect
on the benefits anticipated by Western Resources as a result of the
consummation of the transactions contemplated by this Agreement.
(l) FERC APPROVAL. Western Resources shall be reasonably satisfied
that any Final Order issued by FERC with respect to the KCPL Required
Statutory Approvals and the Western Resources Required Statutory
Approvals shall not impose terms or conditions which, individually or
in the aggregate, would have, or insofar as reasonably can be foreseen,
are likely to have a material adverse effect on the business, assets,
financial condition or results of operations of the Surviving
Corporation or a material adverse effect on the benefits anticipated by
Western Resources as a result of the consummation of the transactions
contemplated by this Agreement.
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Section 8.3 CONDITIONS TO OBLIGATION OF KCPL TO EFFECT THE MERGER. The
obligation of KCPL to effect the Merger shall be further subject to the
satisfaction, on or prior to the Closing Date, of the following conditions,
except as may be waived by KCPL in writing pursuant to Section 9.5.
(a) PERFORMANCE OF OBLIGATIONS OF WESTERN RESOURCES. Western
Resources (and/or Western Resources' appropriate Subsidiaries) will
have performed in all material respects their agreements and covenants
contained in or contemplated by this Agreement which are required to be
performed by it at or prior to the Effective Time.
(b) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Western Resources set forth in this Agreement shall be
true and correct (i) on and as of the date hereof and (ii) on and as of
the Closing Date with the same effect as though such representations
and warranties had been made on and as of the Closing Date (except for
representations and warranties that expressly speak only as of a
specific date or time which need only be true and correct as of such
date or time) except in each of cases (i) and (ii) for such failures of
representations or warranties to be true and correct (without giving
effect to any materiality qualification or standard contained in any
such representations and warranties) which, individually or in the
aggregate, would not result in a Western Resources Material Adverse
Effect.
(c) CLOSING CERTIFICATES. KCPL shall have received a certificate
signed by the chief financial officer of Western Resources, dated the
Closing Date, to the effect that, to the best of such officer's
knowledge, the conditions set forth in Section 8.3(a) and Section
8.3(b) have been satisfied.
(d) WESTERN RESOURCES MATERIAL ADVERSE EFFECT. No Western
Resources Material Adverse Effect shall have occurred.
(e) TAX OPINION. KCPL shall have received an opinion from Skadden,
Arps, Slate, Meagher & Flom, LLP, counsel to KCPL, in form and
substance reasonably satisfactory to KCPL, dated as of the Effective
Time, substantially to the effect that (i) no gain or loss will be
recognized by KCPL or Western Resources pursuant to the Merger, and
(ii) no gain or loss will be recognized by stockholders of KCPL who
exchange their shares of KCPL Common Stock for shares of Western
Resources Common Stock as a result of the Merger (except to the extent
that cash is received in lieu of fractional share interests). In
rendering such opinion, Skadden, Arps, Slate, Meagher & Flom, LLP, may
require and rely upon representations contained in certificates of
officers of KCPL, Western Resources and others.
(f) WESTERN RESOURCES REQUIRED CONSENTS. The Western Resources
Required Consents the failure of which to obtain would have a Western
Resources Material Adverse Effect shall have been obtained.
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(g) STATUTORY APPROVALS. KCPL shall be reasonably satisfied that
the Final Orders, other than any Final Order issued by FERC, with
respect to the KCPL Required Statutory Approvals and the Western
Resources Required Statutory Approvals shall not impose terms or
conditions which, individually or in the aggregate, would have, or
insofar as reasonably can be foreseen, are likely to have a material
adverse effect on the business, assets, financial condition or results
of operations of the Surviving Corporation.
(h) FERC APPROVAL. KCPL shall be reasonably satisfied that any
Final Order issued by FERC with respect to the KCPL Required Statutory
Approvals and the Western Resources Required Statutory Approvals shall
not impose terms or conditions which, individually or in the aggregate,
would have, or insofar as reasonably can be foreseen, are likely to
have a material adverse effect on the business, assets, financial
condition or results of operations of the Surviving Corporation.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 TERMINATION. This Agreement may be terminated at any time
prior to the Closing Date, whether before or after approval by the shareholders
of the respective parties hereto contemplated by this Agreement:
(a) by mutual written consent of the Boards of Directors of KCPL
and Western Resources;
(b)(i) by either party if there has been any breach of any
representations, warranties, covenants or agreements on the part of the
other set forth in this Agreement, which breaches individually or in
the aggregate would result in a Western Resources Material Adverse
Effect or a KCPL Material Adverse Effect, as the case may be, and,
which breaches have not been cured within 20 business days following
receipt by the breaching party of notice of such breach or adequate
assurance of such cure shall not have been given by or on behalf of the
breaching party within such 20 business-day period, (ii) by either
party, if the KCPL Board of Directors or any committee of the KCPL
Board of Directors (A) shall withdraw or modify in any adverse manner
its approval or recommendation of this Agreement or the Merger, (B)
shall fail to reaffirm such approval or recommendation upon Western
Resources' request, (C) shall approve or recommend any acquisition of
KCPL or a material portion of its assets or any tender offer for shares
of capital stock of KCPL, in each case, other than by Western Resources
or an Affiliate thereof or (D) shall resolve to take any of the actions
specified in clause (A), (B) or (C), or (iii) by either party, if any
state or federal law, order, rule or regulation is adopted or issued,
which has the effect, as supported by the written opinion of outside
counsel for such party, of prohibiting the Merger, or by any party
hereto if any court of competent jurisdiction
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in the United States or any state shall have issued an order, judgment
or decree permanently restraining, enjoining or otherwise prohibiting
the Merger, and such order, judgment or decree shall have become final
and nonappealable;
(c) by either party hereto, by written notice to the other party,
if the Effective Time shall not have occurred on or before June 30,
1998 (the "Termination Date"); provided, however, that the right to
terminate the Agreement under this Section 9.1(c) shall not be
available to any party whose failure to fulfill any obligation under
this Agreement has been the cause of, or resulted in, the failure of
the Effective Time to occur on or before this date; and provided,
further, that if on the Termination Date the conditions to the Closing
set forth in Sections 8.1(e), 8.2(f) and/or 8.3(f) shall not have been
fulfilled but all other conditions to the Closing shall be fulfilled or
shall be capable of being fulfilled, then the Termination Date shall be
extended to June 30, 1999;
(d) by either party hereto, by written notice to the other party,
if the Western Resources Shareholders' Approval shall not have been
obtained at a duly held Western Resources Meeting, including any
adjournments thereof, or the KCPL Shareholders' Approval shall not have
been obtained at a duly held KCPL Meeting, including any adjournments
thereof;
(e) by KCPL, prior to the approval of this Agreement by the
shareholders of KCPL, upon five days' prior notice to Western
Resources, if, as a result of an Acquisition Proposal by a party other
than Western Resources or any of its Affiliates, the Board of Directors
of KCPL determines in good faith, after considering applicable
provisions of state law, on the basis of oral or written advice of
outside counsel that acceptance of the Acquisition Proposal is
necessary for the KCPL Board of Directors to act in a manner consistent
with its fiduciary duties under applicable law; provided, however, that
(i) the Board of Directors of KCPL shall have concluded in good faith,
after considering applicable provisions of state law and after giving
effect to all concessions which may be offered by Western Resources
pursuant to clause (ii) below, on the basis of oral or written advice
of outside counsel that such action is necessary for the Board of
Directors to act in a manner consistent with its fiduciary duties under
applicable law and (ii) prior to any such termination, KCPL shall, and
shall cause its respective financial and legal advisors to, negotiate
with Western Resources to make such adjustments in the terms and
conditions of this Agreement as would enable KCPL to proceed with the
transactions contemplated herein; or
(f) by KCPL, by the delivery of written notice (the "Stock Price
Termination Notice") to Western Resources not later than 5:00 p.m., New
York City time, on the fifth NYSE trading day prior to the scheduled
Effective Time (the parties agreeing that KCPL shall have at least ten
NYSE trading days' notice of the Effective Time), if the Western
Resources Index Price is less than $27.64; provided, however, that KCPL
shall not have the right to terminate this Agreement pursuant to this
Section 9.1(f) if the number obtained by dividing (x) the Western
Resources Index
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Price by (y) the aggregate of the average of the high and low sales
prices of Western Resources Common Stock (as reported on the NYSE
Composite Transactions reporting system as published in The Wall Street
Journal or, if not published therein, in another authoritative source)
on each of the twenty consecutive NYSE trading days ending the NYSE
trading day immediately prior to the date hereof, divided by 20, is not
less than 95% of the number (the "Electric Companies Ratio") obtained
by dividing (x) the Electric Companies Index Price (as defined below)
for the period ending on the tenth NYSE trading day immediately prior
to the scheduled Effective Time by (y) the Electric Companies Index
Price for the period ending on the NYSE trading day immediately prior
to the date hereof; and provided, further, that the Stock Price
Termination Notice shall be of no force or effect and KCPL shall
continue to be bound by the terms of this Agreement notwithstanding the
provisions of this Section 9.1(f) if, within five NYSE trading days
following the delivery of the Stock Price Termination Notice, Western
Resources notifies KCPL in writing that the Conversion Ratio shall be
equal to the product of (A) the quotient of $30.40 divided by the
Western Resources Index Price and (B) the Electric Companies Ratio. The
term "Electric Companies Index Price" shall mean the aggregate of the
closing values of the Standard & Poor's Electric Companies Index on
each of the twenty consecutive NYSE trading days ending on the NYSE
trading day immediately preceding the date on which the Electric
Companies Index Price is being determined, divided by 20.
Section 9.2 EFFECT OF TERMINATION. In the event of termination of this
Agreement by either KCPL or Western Resources pursuant to Section 9.1 there
shall be no liability on the part of either KCPL or Western Resources or their
respective officers or directors hereunder, except that Section 7.14 and Section
9.3, the agreement contained in the last sentence of Section 7.1, Section 10.2
and Section 10.8 shall survive the termination.
Section 9.3 TERMINATION FEE; EXPENSES.
(a) KCPL TERMINATION FEE. If (i) this Agreement (A) is terminated by
Western Resources pursuant to Section 9.1(b)(i), (B) is terminated by KCPL
pursuant to Section 9.1 (e), (C) is terminated as a result of KCPL's breach of
Section 7.4, or (D) is terminated because the shareholders of KCPL do not
approve the Merger, (ii) at the time of such termination or prior to the meeting
of KCPL's shareholders there shall have been made an Acquisition Proposal
involving KCPL or any of its Affiliates (whether or not such Acquisition
Proposal shall have been rejected or shall have been withdrawn prior to the time
of such termination or of such meeting) and (iii) within two and one-half years
of the termination of this Agreement KCPL or any of its Affiliates becomes a
Subsidiary of the party which has made such Acquisition Proposal or a Subsidiary
of an Affiliate of such party or accepts a written offer to consummate or
consummates an Acquisition Proposal with such party or an Affiliate thereof,
then KCPL (jointly and severally with its Affiliates), upon the signing of a
definitive agreement relating to such Acquisition Proposal, or, if no such
agreement is signed, then at the closing (and as a condition to the closing) of
KCPL becoming such a Subsidiary or of such Acquisition Proposal, shall pay to
Western Resources a termination fee equal to $50 million in cash.
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(b) WESTERN RESOURCES FEES. If on or before the Termination Date all of
the conditions to the Closing set forth in Sections 8.1, 8.2 and 8.3 hereof
other than any condition set forth in Sections 8.2(e), 8.2(i), 8.2(j), 8.2(k) or
8.2(l) hereof shall have been fulfilled, and Western Resources shall decline to
waive such condition, then immediately following the Termination Date Western
Resources shall reimburse KCPL for any and all expenses of KCPL with respect to
this Agreement and the transactions contemplated hereby, up to a maximum
reimbursement of KCPL by Western Resources of $5 million in the case of the
conditions set forth in Sections 8.2(e) or 8.2(k), $25 million in the case of
the conditions set forth in Sections 8.2(i) and 8.2(l), and $35 million in the
case of Section 8.2(j); provided, however, that Western Resources shall be
required to reimburse KCPL's expenses in respect of the failure of only one of
the foregoing closing conditions to be satisfied.
(c) EXPENSES. The parties agree that the agreements contained in this
Section 9.3 are an integral part of the transactions contemplated by this
Agreement and constitute liquidated damages and not a penalty. Notwithstanding
anything to the contrary contained in this Section 9.3, if one party fails to
promptly pay to the other any fee due under Sections 9.3(a) or (b), in addition
to any amounts paid or payable pursuant to such sections, the defaulting party
shall pay the costs and expenses (including legal fees and expenses) in
connection with any action, including the filing of any lawsuit or other legal
action, taken to collect payment, together with interest on the amount of any
unpaid fee at the publicly announced prime rate of Citibank, N.A. from the date
such fee was required to be paid.
Section 9.4 AMENDMENT. This Agreement may be amended by the Boards of
Directors of the parties hereto, at any time before or after approval hereof by
the shareholders of KCPL and Western Resources and prior to the Effective Time,
but after such approvals, no such amendment shall (a) alter or change the amount
or kind of shares, rights or any of the proceedings of the treatment of shares
under Article II or (b) alter or change any of the terms and conditions of this
Agreement if any of the alterations or changes, alone or in the aggregate, would
materially adversely affect the rights of holders of KCPL Common Stock or
Western Resources Common Stock, except for alterations or changes that could
otherwise be adopted by the Board of Directors of the Surviving Corporation,
without the further approval of such shareholders, as applicable. This Agreement
may not be amended except by an instrument in writing signed on behalf of each
of the parties hereto.
Section 9.5 WAIVER. At any time prior to the Effective Time, a party
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other party hereto, (b) waive any inaccuracies in the
representations and warranties of the other party contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions of the other party contained herein, to the extent
permitted by applicable law. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid if set forth in an instrument in writing
signed on behalf of such party.
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Section 9.6 STANDSTILL AGREEMENT. If this Agreement is terminated
pursuant to Section 9.1(a), 9.1(b), 9.1(c) or 9.1(d) hereof, other than for a
termination (i) by Western Resources pursuant to Section 9.1(b)(i), (ii) by
either party pursuant to Section 9.1(b)(ii), (iii) by either party pursuant to
Section 9.1(d) as a result of the failure to obtain the KCPL Shareholder's
Approval, and (iv) by either party pursuant to Section 9.1(c) if one or more of
the conditions set forth in Section 8.2(a), 8.2(b), 8.2(c), 8.2(d), 8.2(f) and
8.2(g) shall not have been fulfilled or waived by Western Resources, for a
period of three years from and after the date of such termination Western
Resources shall not, and shall not permit any of its Subsidiaries to, unless
permitted in writing by KCPL (a) in any manner acquire, agree to acquire or make
any proposal to acquire, directly or indirectly, any securities or property of
KCPL or any of its Subsidiaries, (b) seek or propose to enter into directly or
indirectly, any merger, business combination, tender offer, exchange offer, sale
or purchase of assets or securities, dissolution, liquidation, recapitalization,
restructuring or similar transaction of or involving KCPL or any of its
Subsidiaries or to purchase, directly or indirectly, a material portion of the
assets of KCPL or any of its Subsidiaries, (c) make, or in any way participate,
directly or indirectly, in any "solicitation" of "proxies" (as such terms are
used in the proxy rules of the SEC) or consents to vote, or seek to advise or
influence any person with respect to the voting of, any voting securities of
KCPL or any of its Subsidiaries, (d) form, join or in any way participate in a
"group" (within the meaning of Section 13(d)(3) of the Exchange Act) with
respect to any voting security of KCPL or any of its Subsidiaries, (e) otherwise
act, alone or in concert with others, to seek to control or influence the
management, Board of Directors or policies of KCPL, (f) have any discussions or
enter into any arrangements, understandings or agreements (whether written or
oral) with, or advise, finance, assist or encourage, any other persons in
connection with any of the foregoing, or make any investment in any other person
that engages, or offers or proposes to engage, in any of the foregoing (it being
understood that, without limiting the generality of the foregoing, Western
Resources shall not be permitted to act as a joint bidder or co-bidder with any
other person with respect to KCPL or any Subsidiary of KCPL), or (g) make any
publicly disclosed proposal regarding any of the foregoing. The provisions of
this Section 9.6 shall cease to apply in the event that a third party, not
acting in concert or affiliated with Western Resources, (i) makes a proposal to
acquire or merge with KCPL or to acquire all or substantially all of the assets
of KCPL or a KCPL Subsidiary or (ii) acquires 10% or more of the KCPL Common
Stock.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 NON-SURVIVAL; EFFECT OF REPRESENTATIONS AND WARRANTIES. No
representations or warranties in this Agreement shall survive the Effective
Time, except as otherwise provided in this Agreement.
Section 10.2 BROKERS. KCPL represents and warrants that, except for
Merrill Lynch whose fees have been disclosed to Western Resources prior to the
date hereof, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or
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commission in connection with the Merger or the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of KCPL. Western
Resources represents and warrants that, except for Salomon, whose fees have been
disclosed to KCPL prior to the date hereof, and except for certain soliciting
dealer arrangements the material terms and conditions of which have been
publicly disclosed by Western Resources prior to the date hereof, no broker,
finder or investment banker is entitled to any brokerage, finder's or other fee
or commission in connection with the Merger or the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Western
Resources.
Section 10.3 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given (a) when delivered personally, (b)
when sent by reputable overnight courier service, or (c) when telecopied (which
is confirmed by copy sent within one business day by a reputable overnight
courier service) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(i) If to KCPL, to:
Kansas City Power & Light Company
1201 Walnut
Kansas City, Missouri 64106
Attn: Chief Executive Officer
Telecopy: (816) 556-2418
Telephone: (816) 556-2200
with a copy to:
Skadden, Arps, Slate, Meagher & Flom, LLP
919 Third Avenue
New York, New York 10022
Attn: Nancy A. Lieberman, Esq.
Telecopy: (212) 735-2000
Telephone: (212) 735-3000
(ii) If to Western Resources, to:
Western Resources, Inc.
818 Kansas Ave.
Topeka, Kansas 66612
Attn. Chief Executive Officer
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with a copy to:
John K. Rosenberg
Executive Vice President and General Counsel
818 Kansas Ave.
Topeka, Kansas 66612
and
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
Attn: Francis J. Aquila, Esq.
Telecopy: (212) 558-3588
Telephone: (212) 558-4000
Section 10.4 MISCELLANEOUS. This Agreement (including the documents and
instruments referred to herein) (a) constitutes the entire agreement and
supersedes all other prior agreements and understandings, both written and oral,
among the parties, or any of them, with respect to the subject matter hereof
other than the Confidentiality Agreement, (b) shall not be assigned by either
party and (c) shall be governed by and construed in accordance with the laws of
the State of Kansas applicable to contracts executed in and to be fully
performed in such State, without giving effect to its conflicts of law rules or
principles and except to the extent the provisions of this Agreement (including
the documents or instruments referred to herein) are expressly governed by or
derive their authority from the KGCC.
Section 10.5 INTERPRETATION. When a reference is made in this Agreement
to Sections or Exhibits, such reference shall be to a Section or Exhibit of this
Agreement, respectively, unless otherwise indicated. The table of contents and
headings contained in this Agreement are for reference purposes only and shall
not affect in any way the meaning or interpretation of this Agreement. Whenever
the words "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation."
Section 10.6 COUNTERPARTS; EFFECT. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an original, but
all of which shall constitute one and the same agreement.
Section 10.7 PARTIES' INTEREST. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and, except for rights of
Indemnified Parties as set forth in Section 7.5, nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
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Section 10.8 WAIVER OF JURY TRIAL AND CERTAIN DAMAGES. Each party to
this Agreement waives, to the fullest extent permitted by applicable law, (a)
any right it may have to a trial by jury in respect of any action, suit or
proceeding arising out of or relating to this Agreement and (b) without
limitation to Section 9.3, any right it may have to receive damages from any
other party based on any theory of liability for any special, indirect,
consequential (including lost profits) or punitive damages.
Section 10.9 ENFORCEMENT. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in any court of the United States
located in the State of Kansas or in Kansas state court, this being in addition
to any other remedy to which they are entitled at law or in equity. In addition,
each of the parties hereto (a) consents to submit itself to the personal
jurisdiction of any federal court located in the State of Kansas or any Kansas
state court in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement, (b) agrees that it will not attempt
to deny such personal jurisdiction by motion or other request for leave from any
such court and (c) agrees that it will not bring any action relating to this
Agreement or any of the transactions contemplated by this Agreement in any court
other than a federal or state court sitting in the State of Kansas.
Section 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 entity
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, entities 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.
Section 10.11 ANTI-DILUTION. The Western Resources Index Price and the
Conversion Ratio and any Western Resources share price referred to in this
Agreement shall be appropriately adjusted in the case of any stock dividend,
reclassification, recapitalization, split-up, combination or subdivision with
respect to the common stock of Western Resources.
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IN WITNESS WHEREOF, KCPL and Western Resources have caused this
Agreement to be signed by their respective officers thereunto duly authorized as
of the date first written above.
KANSAS CITY POWER & LIGHT COMPANY
Attest: /s/ Jeanie Sell Latz By: /s/ A. Drue Jennings
-------------------- --------------------
Secretary A. Drue Jennings
Chairman of the Board, President
and Chief Executive Officer
WESTERN RESOURCES, INC.
Attest: /s/ Richard D. Terrill By: /s/ John E. Hayes, Jr.
---------------------- ----------------------
Secretary John E. Hayes, Jr.
Chairman of the Board and
Chief Executive Officer
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