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EXHIBIT 2.1
[CONFORMED]
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
PUGET SOUND POWER & LIGHT COMPANY,
WASHINGTON ENERGY COMPANY
AND
WASHINGTON NATURAL GAS COMPANY
DATED AS OF OCTOBER 18, 1995
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TABLE OF CONTENTS
ARTICLE I THE MERGER ..................................................... 2
Section 1.1 The Merger .......................................... 2
Section 1.2 Effective Time of the Merger ........................ 2
Section 1.3 Articles of Incorporation ........................... 2
Section 1.4 Effects of Merger ................................... 3
ARTICLE II CONVERSION OF SHARES .......................................... 3
Section 2.1 Effect of Merger on Capital Stock ................... 3
Section 2.2 Dissenting Shares ................................... 4
Section 2.3 Exchange of Certificates ............................ 5
ARTICLE III THE CLOSING .................................................. 7
Section 3 Closing ............................................... 7
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF WECO AND WNG ................ 8
Section 4.1 Organization and Qualification ...................... 8
Section 4.2 Subsidiaries ........................................ 8
Section 4.3 Capitalization ...................................... 9
Section 4.4 Authority; Noncontravention; Statutory Approvals;
Compliance ............................................... 10
Section 4.5 Reports and Financial Statements .................... 12
Section 4.6 Absence of Certain Changes or Events ................ 13
Section 4.7 Litigation .......................................... 13
Section 4.8 Registration Statement and Proxy Statement .......... 14
Section 4.9 Tax Matters ......................................... 14
Section 4.10 Employee Matters; ERISA ............................ 17
Section 4.11 Environmental Protection ........................... 21
Section 4.12 Regulation as a Utility ............................ 24
Section 4.13 Vote Required ...................................... 24
Section 4.14 Accounting Matters ................................. 24
Section 4.15 Applicability of Certain Washington Law ............ 25
Section 4.16 Opinion of Financial Advisor ....................... 25
Section 4.17 Insurance .......................................... 25
Section 4.18 Ownership of Puget Common Stock .................... 25
ARTICLE V REPRESENTATIONS AND WARRANTIES OF PUGET ........................ 26
Section 5.1 Organization and Qualification ...................... 26
Section 5.2 Subsidiaries ........................................ 26
Section 5.3 Capitalization ...................................... 27
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Section 5.4 Authority; Noncontravention; Statutory Approvals;
Compliance ............................................... 29
Section 5.5 Reports and Financial Statements .................... 29
Section 5.6 Absence of Certain Changes or Events ................ 30
Section 5.7 Litigation .......................................... 30
Section 5.8 Registration Statement and Proxy Statement .......... 30
Section 5.9 Tax Matters ......................................... 31
Section 5.10 Employee Matters; ERISA ............................ 34
Section 5.11 Environmental Protection ........................... 37
Section 5.12 Regulation as a Utility ............................ 39
Section 5.13 Vote Required ...................................... 39
Section 5.14 Accounting Matters ................................. 39
Section 5.15 Applicability of Certain Washington Law ............ 39
Section 5.16 Opinion of Financial Advisor ....................... 40
Section 5.17 Insurance .......................................... 40
Section 5.18 Ownership of WeCo Common Stock ..................... 40
Section 5.19 Puget Rights Agreement ............................. 40
ARTICLE VI CONDUCT OF BUSINESS PENDING THE MERGER ........................ 41
Section 6.1 Ordinary Course of Business ......................... 41
Section 6.2 Dividends ........................................... 41
Section 6.3 Issuance of Securities .............................. 42
Section 6.4 Charter Documents ................................... 43
Section 6.5 No Acquisitions ..................................... 43
Section 6.6 Capital Expenditures ................................ 43
Section 6.7 No Dispositions ..................................... 43
Section 6.8 Indebtedness ........................................ 44
Section 6.9 Compensation; Benefits .............................. 44
Section 6.10 1935 Act; Federal Power Act ........................ 45
Section 6.11 Accounting ......................................... 45
Section 6.12 Pooling ............................................ 45
Section 6.13 Tax-Free Status .................................... 45
Section 6.14 Affiliate Transactions ............................. 46
Section 6.15 Cooperation, Notification .......................... 46
Section 6.16 Rate Matters ....................................... 46
Section 6.17 Third-Party Consents ............................... 47
Section 6.18 No Breach, Etc ..................................... 47
Section 6.19 Tax Matters ........................................ 47
Section 6.20 Discharge of Liabilities ........................... 47
Section 6.21 Insurance .......................................... 48
Section 6.22 Permits ............................................ 48
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ARTICLE VII ADDITIONAL AGREEMENTS ........................................ 48
Section 7.1 Access to Information ............................... 48
Section 7.2 Joint Proxy Statement and Registration Statement .... 49
Section 7.3 Regulatory Matters .................................. 50
Section 7.4 Shareholder Approval ................................ 51
Section 7.5 Directors' and Officers' Indemnification ............ 51
Section 7.6 Disclosure Schedules ................................ 53
Section 7.7 Public Announcements ................................ 54
Section 7.8 Rule 145 Affiliates ................................. 54
Section 7.9 Employee Agreements and Work-Force Matters .......... 55
Section 7.10 Employee Benefit Plans ............................. 55
Section 7.11 Incentive, Stock and Other Plans ................... 60
Section 7.12 Indebtedness ....................................... 61
Section 7.13 No Solicitations ................................... 62
Section 7.14 Company Board of Directors ......................... 63
Section 7.15 Company Officers ................................... 63
Section 7.16 Employment Contracts ............................... 64
Section 7.17 Transition Management .............................. 64
Section 7.18 Expenses ........................................... 64
Section 7.19 Further Assurances ................................. 64
ARTICLE VIII CONDITIONS ................................................... 65
Section 8.1 Conditions to Each Party's Obligations to Effect
the Merger ............................................... 65
Section 8.2 Conditions to Obligations of WeCo and WNG to Effect
the Merger ............................................... 66
Section 8.3 Conditions to Obligations of Puget to Effect the
Merger ................................................... 68
ARTICLE IX TERMINATION, AMENDMENT AND WAIVER ............................. 69
Section 9.1 Termination ......................................... 69
Section 9.2 Effect of Termination ............................... 72
Section 9.3 Termination Fee; Expenses ........................... 72
Section 9.4 Amendment ........................................... 74
Section 9.5 Waiver .............................................. 74
ARTICLE X GENERAL PROVISIONS ............................................. 75
Section 10.1 Nonsurvival of Representations, Warranties,
Covenants and Agreements ................................. 75
Section 10.2 Brokers ............................................ 75
Section 10.3 Notices ............................................ 75
Section 10.4 Miscellaneous ...................................... 77
Section 10.5 Interpretation ..................................... 77
Section 10.6 Counterparts; Effect ............................... 78
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Section 10.7 Parties in Interest............................. 78
Section 10.8 Remedies........................................ 78
Exhibit 1.3 Form of Amendment to Amended and Restated Articles of
Incorporation of the Company and Certificate of
Designation relating to New Series II Preferred Stock
and New Series III Preferred Stock
Exhibit 7.8 Form of Affiliate Agreement
Exhibit 7.16.1 Employment Agreement between the Company and Xxxxxxx
X. Xxxxxxxxx
Exhibit 7.16.2 Employment Agreement between the Company and Xxxxxxx
X. Xxxxxxx
Exhibit A Puget Stock Option Agreement
Exhibit B WeCo Stock Option Agreement
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Index of Defined Terms
Term Page
---- ----
1935 Act .................................................................. 8
affiliate ................................................................. 24
Affiliate Agreement ....................................................... 54
Agreement ................................................................. 1
Business Combination ...................................................... 70
Certificates .............................................................. 5
Closing ................................................................... 7
Closing Agreement ......................................................... 16
Closing Date .............................................................. 7
Code ...................................................................... 1
Company ................................................................... 1
Company Common Stock ...................................................... 3
Company Preferred Stock ................................................... 4
Company Shares ............................................................ 5
Company Stock Plan ........................................................ 58
Confidentiality Agreement ................................................. 49
control ................................................................... 24
Converted Shares .......................................................... 5
Disclosure Schedules ...................................................... 53
Effective Time ............................................................ 2
Environmental Claim ....................................................... 22
Environmental Laws ........................................................ 23
Environmental Permits ..................................................... 21
Exchange Act .............................................................. 12
Exchange Agent ............................................................ 5
FERC ...................................................................... 12
Final Order ............................................................... 66
GAAP ...................................................................... 13
Governmental Authority .................................................... 11
Hazardous Materials ....................................................... 23
HSR Act ................................................................... 50
Indemnified Party ......................................................... 52
Initial Termination Date .................................................. 69
IRS ....................................................................... 17
Joint Proxy Statement/Prospectus .......................................... 14
joint venture ............................................................. 9
Merger .................................................................... 2
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New Series II Preferred Stock ............................................. 4
New Series III Preferred Stock ............................................ 4
NYSE ...................................................................... 7
Puget ..................................................................... 1
Puget Disclosure Schedule ................................................. 53
Puget Financial Statements ................................................ 30
Puget Joint Ventures ...................................................... 27
Puget Material Adverse Effect ............................................. 26
Puget Preferred Stock ..................................................... 27
Puget Required Consents ................................................... 28
Puget Required Statutory Approvals ........................................ 28
Puget Rights Agreement .................................................... 3
Puget SEC Reports ......................................................... 29
Puget Shareholders' Approval .............................................. 39
Puget Special Meeting ..................................................... 51
Puget Stock Option Agreement .............................................. 1
Puget Subsidiaries ........................................................ 26
Ratio ..................................................................... 3
Registration Statement .................................................... 14
Representatives ........................................................... 48
Rights .................................................................... 3
SEC ....................................................................... 12
Securities Act ............................................................ 12
Shareholder Disapproval ................................................... 73
subsidiary ................................................................ 8
Target Party .............................................................. 73
Task Force ................................................................ 64
Tax Return ................................................................ 14
Tax Ruling ................................................................ 16
Taxes ..................................................................... 14
Three-Year Period ......................................................... 78
Violation ................................................................. 11
WBCA ...................................................................... 2
WeCo ...................................................................... 1
WeCo Common Shareholders' Approval ........................................ 24
WeCo Common Stock ......................................................... 3
WeCo Disclosure Schedule .................................................. 53
WeCo Dissenting Common Shares ............................................. 4
WeCo Dissenting Shares .................................................... 5
WeCo Financial Statements ................................................. 13
WeCo Joint Venture ........................................................ 9
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WeCo Material Adverse Effect .............................................. 8
WeCo Preferred Stock ...................................................... 9
WeCo Required Consents .................................................... 11
WeCo Required Statutory Approvals ......................................... 11
WeCo SEC Reports .......................................................... 13
WeCo Special Meetings ..................................................... 51
WeCo Stock Option Agreement ............................................... 1
WeCo Stock Plans .......................................................... 60
WeCo/Puget Merger ......................................................... 2
WeCo/WNG/Puget Merger ..................................................... 2
WNG ....................................................................... 1
WNG Common Stock .......................................................... 3
WNG Dissenting Preferred Shares ........................................... 5
WNG Preferred Shareholders' Approval ...................................... 24
WNG Series II Preferred Stock ............................................. 4
WNG Series III Preferred Stock ............................................ 4
WNG Subsidiaries .......................................................... 8
WUTC ...................................................................... 8
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 18, 1995 (this
"Agreement"), by and among Puget Sound Power & Light Company, a Washington
corporation ("Puget," and after the Effective Time (as defined below), the
"Company"), Washington Energy Company, a Washington corporation ("WeCo"), and
Washington Natural Gas Company, a Washington corporation and a wholly owned
subsidiary of WeCo ("WNG").
WHEREAS, Puget, WeCo and WNG have determined to engage in a business
combination as peer firms in a merger of equals;
WHEREAS, in furtherance thereof the respective Boards of Directors of
Puget, WeCo and WNG, and WeCo as the sole holder of all outstanding shares of
common stock of WNG, have approved the merger of WeCo and WNG (or in certain
circumstances described herein, the merger of WeCo only) with and into Puget,
and the change of Puget's corporate name to a name to be chosen by mutual
agreement of the parties, all pursuant to the terms and conditions set forth in
this Agreement;
WHEREAS, the Board of Directors of Puget has approved and Puget has
executed an agreement with WeCo in the form of Exhibit A (the "Puget Stock
Option Agreement") and the Board of Directors of WeCo has approved and WeCo has
executed an agreement with Puget in the form of Exhibit B (the "WeCo Stock
Option Agreement") whereby each of Puget and WeCo, respectively, has granted to
the other an option to purchase shares of its common stock on the terms and
conditions provided in such agreement; and
WHEREAS, for federal income tax purposes, it is intended that the Merger
will constitute a reorganization under Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code");
NOW THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements contained herein, the parties hereto,
intending to be legally bound hereby, agree as follows:
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ARTICLE I
THE MERGER
SECTION 1.1 THE MERGER
(a) WeCo/WNG/Puget Merger. Upon the terms and subject to the conditions
of this Agreement, at the Effective Time (as defined in Section 1.2), each of
WeCo and WNG shall be merged with and into Puget (the "WeCo/WNG/Puget Merger"),
and the separate corporate existence and organization of each of WeCo and WNG
shall thereupon cease as and to the extent provided in Section 23B.11.060 of the
Washington Business Corporation Act (the "WBCA").
(b) WeCo/Puget Merger. Notwithstanding Section 1.1(a), if at the WeCo
Special Meetings (as defined in Section 7.4), the WeCo Common Shareholders'
Approval (as defined in Section 4.13) has been obtained but the WNG Preferred
Shareholders' Approval (as defined in Section 4.13) has not been obtained, then
upon the terms and subject to the conditions of this Agreement, at the Effective
Time, only WeCo shall be merged with and into Puget (the "WeCo/Puget Merger")
and the separate corporate existence and organization of WeCo shall thereupon
cease as and to the extent provided in Section 23B.11.060 of the WBCA. As used
in this Agreement, the term "Merger" shall refer to the WeCo/WNG/Puget Merger or
the WeCo/Puget Merger, as applicable.
(c) Surviving Corporation. Puget shall be the surviving corporation in
the Merger, the corporate name of Puget shall be changed to a name to be chosen
by mutual agreement of the parties, and the Company shall continue its existence
under the provisions of the WBCA.
SECTION 1.2 EFFECTIVE TIME OF THE MERGER
On the Closing Date (as defined in Section 3), articles of merger shall
be executed by the parties to the Merger and filed with the Secretary of State
of the State of Washington pursuant to the WBCA. The Merger shall become
effective at the time specified in the articles of merger as so filed, such time
being herein called the "Effective Time."
SECTION 1.3 ARTICLES OF INCORPORATION
The Articles of Incorporation of Puget shall as of the Effective Time be
amended as set forth in Exhibit 1.3, and such Articles of Incorporation as so
amended
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shall be the Articles of Incorporation of the Company after the Effective Time
until duly amended.
SECTION 1.4 EFFECTS OF MERGER
The Merger shall have the effects set forth in Section 23B.11.060 of the
WBCA.
ARTICLE II
CONVERSION OF SHARES
SECTION 2.1 EFFECT OF MERGER ON CAPITAL STOCK
At the Effective Time, by virtue of the Merger and without any action on
the part of any holder of any capital stock of WeCo, WNG, Puget or the Company:
(a) Cancellation of Certain WeCo Common Stock. Each share of WeCo Common
Stock (as defined in Section 2.1(b)) that is owned by direct or indirect
subsidiaries of WeCo or by Puget or any of its direct or indirect subsidiaries
shall be cancelled and cease to exist.
(b) Conversion of WeCo Common Stock. Each issued and outstanding share of
Common Stock of WeCo, par value $5 per share (the "WeCo Common Stock"), other
than WeCo Dissenting Common Shares (as defined in Section 2.2(a)) and shares
cancelled pursuant to Section 2.1(a), shall be converted into the right to
receive 0.86 (the "Ratio") fully paid and nonassessable shares of Common Stock,
stated value $10 per share, of the Company (the "Company Common Stock"),
together with the associated purchase rights (the "Rights") under the Rights
Agreement between Puget and The Chase Manhattan Bank, N.A. dated as of January
15, 1991, as amended (the "Puget Rights Agreement"). Upon such conversion, all
such shares of WeCo Common Stock shall be cancelled and cease to exist, and each
holder of a certificate representing any such shares shall cease to have any
rights with respect thereto, except the right to receive the shares of Company
Common Stock and Rights to be issued in consideration therefor upon the
surrender of such certificate in accordance with Section 2.3.
(c) Cancellation of WNG Common Stock. If pursuant to Section 1.1 the
WeCo/WNG/Puget Merger is to be effected, each share of Common Stock, par value
$5 per share, of WNG (the "WNG Common Stock") shall be cancelled and cease to
exist.
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(d) Conversion of WNG Preferred Stock. If pursuant to Section 1.1 the
WeCo/WNG/Puget Merger is to be effected, each issued and outstanding share of
7.45% Series II Preferred Stock of WNG, par value $25 per share (the "WNG Series
II Preferred Stock"), other than WNG Dissenting Preferred Shares (as defined in
Section 2.2(b)), shall be converted into the right to receive one fully paid and
nonassessable share of a series of 7.45% preferred stock of the Company (the
"New Series II Preferred Stock") with like rights and preferences (including par
value, dividends, redemption provisions and rights upon liquidation) to the
cancelled series of WNG Series II Preferred Stock. The rights and preferences of
the New Series II Preferred Stock are set forth in the form of Certificate of
Designation attached in Exhibit 1.3. If pursuant to Section 1.1 the
WeCo/WNG/Puget Merger is to be effected, each issued and outstanding share of
8.50% Series III Preferred Stock of WNG, par value $25 per share (the "WNG
Series III Preferred Stock"), other than WNG Dissenting Preferred Shares, shall
be converted into the right to receive one fully paid and nonassessable share of
a series of 8.50% preferred stock of the Company (the "New Series III Preferred
Stock") with like rights and preferences (including par value, dividends,
redemption provisions and rights upon liquidation) to the cancelled series of
WNG Series III Preferred Stock. The rights and preferences of the New Series III
Preferred Stock are set forth in the form of Certificate of Designation attached
in Exhibit 1.3. Upon such conversion, all such shares of WNG Series II Preferred
Stock and WNG Series III Preferred Stock shall be cancelled and cease to exist,
and each holder of a certificate representing any such shares shall cease to
have any rights with respect thereto, except the right to receive the shares of
New Series II Preferred Stock and New Series III Preferred Stock, as the case
may be (collectively, the "Company Preferred Stock"), to be issued in
consideration therefor upon surrender of such certificate in accordance with
Section 2.3.
SECTION 2.2 DISSENTING SHARES
(a) WeCo Dissenting Common Shares. Shares of WeCo Common Stock held by
any holder entitled to and seeking relief as a dissenting shareholder under
Section 23B.13.020 of the WBCA (the "WeCo Dissenting Common Shares") shall not
be converted into the right to receive Company Common Stock but shall be
converted into such consideration as may be due with respect to such shares
pursuant to the applicable provisions of the WBCA, unless and until the right of
such holder to receive fair cash value for such WeCo Dissenting Common Shares
terminates in accordance with Section 23B.13.020 of the WBCA. If such right is
terminated otherwise than by the purchase of such shares by the Company, then
such shares shall cease to be WeCo Dissenting Common Shares and shall be
converted into and represent the right to receive Company Common Stock as
provided in Section 2.1(b).
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(b) WNG Dissenting Preferred Shares. If pursuant to Section 1.1 the
WeCo/WNG/Puget Merger is to be effected, shares of WNG Series II Preferred Stock
or WNG Series III Preferred Stock held by any holder entitled to and seeking
relief as a dissenting shareholder under Section 23B.13.020 of the WBCA (the
"WNG Dissenting Preferred Shares" and, together with the WeCo Dissenting Common
Shares, the "WeCo Dissenting Shares") shall not be converted into the right to
receive Company Preferred Stock but shall be converted into such consideration
as may be due with respect to such shares pursuant to the applicable provisions
of the WBCA, unless and until the right of such holder to receive fair cash
value for such WNG Dissenting Preferred Shares terminates in accordance with
Section 23B.13.020 of the WBCA. If such right is terminated otherwise than by
the purchase of such shares by the Company, then such shares shall cease to be
WNG Dissenting Preferred Shares and shall be converted into and represent the
right to receive Company Preferred Stock as provided in Section 2.1(d).
SECTION 2.3 EXCHANGE OF CERTIFICATES
(a) Deposit With Exchange Agent. As soon as practicable after the
Effective Time, the Company shall deposit with a bank or trust company mutually
agreeable to Puget and WeCo (the "Exchange Agent") certificates representing
shares of Company Common Stock and Company Preferred Stock, if applicable,
required to effect the exchanges referred to in Section 2.1, together with cash
payable in respect of fractional shares pursuant to Section 2.3(d).
(b) Exchange Procedures. As soon as practicable after the Effective Time,
the Exchange Agent shall mail to each holder of record of a certificate or
certificates which immediately prior to the Effective Time represented
outstanding shares of WeCo Common Stock or WNG Preferred Stock, if applicable
(the "Certificates") that were converted (the "Converted Shares") into the right
to receive shares of Company Common Stock (and associated Rights) or Company
Preferred Stock, if applicable (together, the "Company Shares") pursuant to
Section 2.1, (i) a letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon actual delivery of the Certificates to the Exchange Agent) and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for certificates representing Company Shares and Rights (as applicable). Upon
surrender of a Certificate to the Exchange Agent (or to such other agent or
agents as may be appointed by agreement of Puget and WeCo), together with a duly
executed letter of transmittal and such other documents as the Exchange Agent
shall require, the holder of such Certificate shall be entitled to receive in
exchange therefor a certificate representing that number of whole Company Shares
and Rights (as applicable) which such holder has the right to receive pursuant
to the provisions of
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this Article II. In the event of a transfer of ownership of Converted Shares
which is not registered in the transfer records of Puget, WeCo or WNG, as the
case may be, a certificate representing the proper number of Company Shares and
Rights (as applicable) may be issued to a transferee if the Certificate
representing such Converted Shares is presented to the Exchange Agent,
accompanied by all documents required to evidence and effect such transfer and
by evidence satisfactory to the Exchange Agent that any applicable stock
transfer taxes have been paid. If any Certificate shall have been lost, stolen,
mislaid or destroyed, upon receipt of (i) an affidavit of that fact from the
holder claiming such Certificate to be lost, stolen, mislaid or destroyed, (ii)
such bond, security or indemnity as the Company or the Exchange Agent may
reasonably require, and (iii) any other documentation necessary to evidence and
effect the bona fide exchange thereof, the Exchange Agent shall issue to such
holder a certificate representing the number of Company Shares and Rights (as
applicable) into which the shares represented by such lost, stolen, mislaid or
destroyed Certificate shall have been converted. Until surrendered as
contemplated by this Section 2.3, each Certificate shall be deemed at any time
after the Effective Time to represent only the right to receive upon such
surrender a certificate representing Company Shares and Rights (as applicable)
and cash in lieu of any fractional shares of Company Common Stock as
contemplated by this Section 2.3.
(c) Distributions With Respect to Unexchanged Shares. No dividends or
other distributions declared or made after the Effective Time with respect to
Company Shares with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to the Company Shares
represented thereby, and no cash payment in lieu of fractional shares shall be
paid to any such holder pursuant to Section 2.3(d), until the holder of record
of such Certificate shall surrender such Certificate as contemplated by Section
2.3(b). Subject to the effect of unclaimed property, escheat and other
applicable laws, following surrender of any such Certificate, there shall be
paid to the record holder of the certificates representing whole Company Shares
issued in exchange therefor, without interest, (i) at the time of such
surrender, the amount of any cash payable in lieu of a fractional share of
Company Common Stock to which such holder is entitled pursuant to Section 2.3(d)
and the amount of dividends or other distributions with a record date after the
Effective Time theretofore paid with respect to such whole Company Shares 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
Company Shares.
(d) No Fractional Securities. Notwithstanding any other provision of this
Agreement, the Company shall not issue any fractional share of Company Common
Stock upon the surrender for exchange of Certificates. In lieu of any such
fractional
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shares, any holder of WeCo Common Stock who would otherwise have been entitled
to a fractional share of Company Common Stock shall be entitled to receive a
cash payment in lieu of such fractional share in an amount equal to the product
of such fraction multiplied by the average of the last reported sales price,
regular way, per share of Puget Common Stock on the New York Stock Exchange
("NYSE") Composite Tape for the ten business days prior to and including the
last business day on which Puget Common Stock was traded on the NYSE, without
any interest thereon.
(e) Closing of Transfer Books. From and after the Effective Time, the
stock transfer books of Puget and WeCo (and, if pursuant to Section 1.1 hereof
the WeCo/WNG/Puget Merger is to be effected, WNG) shall be closed and no
transfer of any capital stock of Puget or WeCo (or, if pursuant to Section 1.1
hereof the WeCo/WNG/Puget Merger is to be effected, WNG) shall thereafter be
made. If, after the Effective Time, Certificates are presented to the Company
for registration of transfer, they shall be cancelled and exchanged for
certificates representing the appropriate Company Shares and Rights (if
applicable) as provided in Section 2.1 and Section 2.3(b).
(f) Termination of Duties of Exchange Agent. Any certificates
representing Company Shares deposited with the Exchange Agent pursuant to
Section 2.3(a) and not exchanged within one year after the Effective Time
pursuant to this Section 2.3 shall be returned by the Exchange Agent to the
Company, which shall thereafter act as Exchange Agent. All funds held by the
Exchange Agent for payment to the holders of unsurrendered Certificates and
unclaimed at the end of one year from the Effective Time shall be returned to
the Company, whereupon any holder of unsurrendered Certificates shall look as a
general unsecured creditor only to the Company for payment of any funds to which
any holder may be entitled, subject to applicable law. The Company shall not be
liable to any person for such shares or funds delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
ARTICLE III
THE CLOSING
SECTION 3 CLOSING
The closing (the "Closing") of the Merger shall take place at the offices
of Xxxxxxx Coie, 0000 Xxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxx 00000 at 10:00 a.m.,
local time, on the second business day immediately following the date on which
the last of the conditions set forth in Article VIII hereof is fulfilled or
waived, or at such other time and date and place as Puget and WeCo shall
mutually agree (the "Closing Date").
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF WECO AND WNG
WeCo and WNG jointly and severally represent and warrant to Puget as
follows:
SECTION 4.1 ORGANIZATION AND QUALIFICATION
Except as set forth in Section 4.1 of the WeCo Disclosure Schedule (as
defined in Section 7.6(i)), each of WeCo, WNG and the other WNG Subsidiaries (as
defined below) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization,
has all requisite power and authority, and, in the case of WNG, has been duly
authorized by all necessary approvals and orders of the Washington Utilities and
Transportation Commission (the "WUTC"), 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 to be so qualified
and in good standing would not, when taken together with all other such
failures, have a material adverse effect on the business, operations,
properties, assets, financial condition, results of operations or prospects of
WeCo, WNG and the other WNG Subsidiaries taken as a whole or on the consummation
of this Agreement (any such material adverse effect being hereinafter referred
to as a "WeCo Material Adverse Effect"). As used in this Agreement, (a) the term
"subsidiary" of a person shall mean any corporation or other entity (including
partnerships and other business associations) in which such person directly or
indirectly owns at least a majority of any class of the outstanding voting
securities or equity and (b) the term "WNG Subsidiaries" means WNG and all other
subsidiaries of WeCo.
SECTION 4.2 SUBSIDIARIES
Section 4.2 of the WeCo Disclosure Schedule sets forth a description as
of the date hereof of all WNG Subsidiaries and WeCo Joint Ventures (as defined
below), including the name of each such entity, the jurisdiction of its
incorporation, a brief description of the principal line or lines of business
conducted by each such entity and WeCo's interest therein. Except for WNG and as
set forth in Section 4.2 of the WeCo Disclosure Schedule, none of such entities
is a "public utility company," a "holding company," a "subsidiary company" or an
"affiliate" of any public utility company within the meaning of Section 2(a)(5),
2 (a)(7), 2(a)(8) or 2(a)(11) of the Public Utility Holding Company Act of 1935,
as amended (the "1935 Act"), respectively.
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Except as set forth in Section 4.2 of the WeCo Disclosure Schedule, all of the
issued and outstanding shares of capital stock of each WNG Subsidiary are
validly issued, fully paid, nonassessable and free of preemptive rights, are
owned directly or indirectly by WeCo free and clear of any liens, claims,
encumbrances, security interests, equities, charges and options of any nature
whatsoever, and there are no outstanding subscriptions, options, calls,
contracts, voting trusts, proxies or other commitments, understandings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement, obligating any such subsidiary to issue, deliver or sell, or cause to
be issued, delivered or sold, additional shares of its capital stock or
obligating it to grant, extend or enter into any such agreement or commitment.
As used in this Agreement, (a) the term "joint venture" of a person shall mean
any corporation or other entity (including partnerships and other business
associations) in which such person or one or more of its subsidiaries owns an
equity interest that is less than a majority of any class of the outstanding
voting securities or equity, other than equity interests held for passive
investment purposes which are less than 5% of any class of the outstanding
voting securities or equity of any such entity, and (b) the term "WeCo Joint
Venture" shall mean any joint venture of WeCo or a WNG Subsidiary.
SECTION 4.3 CAPITALIZATION
(a) WeCo. The authorized capital stock of WeCo consists of 50,000,000
shares of WeCo Common Stock, 200,000 shares of preferred stock, $100 par value
per share, and 800,000 shares of preferred stock, $25 par value per share (such
preferred stock being referred to herein in the aggregate as the "WeCo Preferred
Stock"). As of the close of business on October 16, 1995, 24,070,153 shares of
WeCo Common Stock were issued and outstanding, and no shares of WeCo Preferred
Stock were issued and outstanding. All of the issued and outstanding shares of
the capital stock of WeCo are, and any shares of WeCo Common Stock issued
pursuant to the WeCo Stock Option Agreement will be, validly issued, fully paid,
nonassessable and free of preemptive rights. Except as set forth in Section
4.3(a) of the WeCo Disclosure Schedule, as of the date hereof, there are no
outstanding subscriptions, options, stock appreciation rights, 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 WeCo
or any WNG Subsidiary to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of the capital stock of WeCo or obligating
WeCo or any WNG Subsidiary to grant, extend or enter into any such agreement or
commitment, other than under the WeCo Stock Option Agreement.
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(b) WNG. The authorized capital stock of WNG consists of 25,000,000
shares of WNG Common Stock, 1,000,000 shares of preferred stock, $100 par value
per share ("WNG $100 Preferred Stock"), and 4,000,000 shares of preferred stock,
$25 par value per share ("WNG $25 Preferred Stock"). As of the close of business
on October 16, 1995, (i) 10,982,119 shares of WNG Common Stock were issued and
outstanding, (ii) 3,600,000 shares of WNG $25 Preferred Stock were issued and
outstanding, consisting of 2,400,000 shares of WNG Series II Preferred Stock and
1,200,000 shares of WNG Series III Preferred Stock, and (iii) no shares of WNG
$100 Preferred Stock were issued and outstanding. All of the issued and
outstanding shares of the capital stock of WNG are validly issued, fully paid,
nonassessable and free of preemptive rights. Except as set forth in Section
4.3(b) of the WeCo Disclosure Schedule, as of the date hereof, there are no
outstanding subscriptions, options, stock appreciation rights, 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 WeCo
or any WNG Subsidiary to issue, deliver or sell, or cause to be issued,
delivered or sold, the capital stock of WNG or obligating WeCo or any WNG
Subsidiary to grant, extend or enter into any such agreement or commitment.
SECTION 4.4 AUTHORITY; NONCONTRAVENTION; STATUTORY APPROVALS; COMPLIANCE
(a) Authority. Each of WeCo and WNG has all requisite power and authority
to enter into this Agreement and the WeCo Stock Option Agreement, and, subject
to the applicable WeCo Shareholders' Approval (as defined in Section 4.13) (in
the case of this Agreement only) and the applicable WeCo Required Statutory
Approvals (as defined in Section 4.4(c)), to consummate the transactions
contemplated hereby and thereby. The execution and delivery of this Agreement
and the WeCo Stock Option Agreement, and the consummation by WeCo and WNG of the
transactions contemplated hereby and thereby, have been duly authorized by all
necessary corporate action on the part of WeCo and WNG, subject in the case of
this Agreement to obtaining the applicable WeCo Shareholders' Approval. Each of
this Agreement and the WeCo Stock Option Agreement has been duly and validly
executed and delivered by WeCo and WNG and, assuming the due authorization,
execution and delivery hereof and thereof by Puget, constitutes the valid and
binding obligation of each of WeCo and WNG enforceable against each of them in
accordance with its terms.
(b) Noncontravention. Except as set forth in Section 4.4(b) of the WeCo
Disclosure Schedule, the execution and delivery of this Agreement by WeCo and
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WNG and of the WeCo Stock Option Agreement by WeCo do not, and the consummation
of the transactions contemplated hereby and thereby will not, violate, conflict
with, or result in a breach of any provision of, or constitute a default (with
or without notice or lapse of time or both) under, or result in the termination
or modification of, or accelerate the performance required by, or result in a
right of termination, modification, cancellation or acceleration of any
obligation or the loss of a material benefit under, or result in the creation of
any lien, security interest, charge or encumbrance upon any of the properties or
assets (any such violation, conflict, breach, default, right of termination,
modification, cancellation or acceleration, loss or creation, a "Violation" with
respect to WeCo, any WNG Subsidiary or any WeCo Joint Venture; such term when
used in Article V having a correlative meaning with respect to Puget, any Puget
Subsidiary or any Puget Joint Venture) of WeCo or any WNG Subsidiary or WeCo
Joint Venture pursuant to any provisions of (i) the articles of incorporation,
bylaws or similar governing documents of WeCo or any WNG Subsidiary, (ii)
subject to obtaining the WeCo Required Statutory Approvals and the receipt of
the WeCo Shareholders' Approvals, 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 WeCo or any WNG
Subsidiary or WeCo Joint Venture or any of their respective properties or assets
or (iii) subject to obtaining the third-party consents or other approvals set
forth in Section 4.4(b) of the WeCo Disclosure Schedule (the "WeCo Required
Consents"), any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, concession, contract, lease or other instrument, obligation
or agreement of any kind to which WeCo or any WNG Subsidiary or any WeCo Joint
Venture is now a party or by which it or any of its properties or assets may be
bound or affected, excluding from the foregoing clauses (ii) and (iii) such
Violations that would not, in the aggregate, have a WeCo Material Adverse
Effect.
(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"), the
failure to obtain, make or give which would have, in the aggregate, a WeCo
Material Adverse Effect, is necessary for the execution and delivery of this
Agreement by WeCo and WNG or the WeCo Stock Option Agreement by WeCo or the
consummation by WeCo and WNG of the transactions contemplated hereby or thereby,
except as described in Section 4.4(c) of the WeCo Disclosure Schedule (the "WeCo
Required Statutory Approvals," it being understood that references in this
Agreement to "obtaining" such WeCo Required Statutory Approvals shall mean
making such declarations, filings or registrations; giving such notices;
obtaining such
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authorizations, consents or approvals; and having such waiting periods expire as
are necessary to avoid a violation of law).
(d) Compliance. Except as set forth in Section 4.4(d) or 4.11 of the WeCo
Disclosure Schedule or as disclosed in the WeCo SEC Reports (as defined in
Section 4.5) filed prior to the date hereof, neither WeCo nor any WNG Subsidiary
nor, to the knowledge of WeCo or WNG, any WeCo Joint Venture, is in violation of
or is 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 violations which in the aggregate do not and, insofar as reasonably can be
foreseen, will not have a WeCo Material Adverse Effect. Except as set forth in
Section 4.4(d) of the WeCo Disclosure Schedule or in Section 4.11 of the WeCo
Disclosure Schedule, WeCo and the WNG Subsidiaries and WeCo Joint Ventures have
all permits, licenses, franchises and other governmental authorizations,
consents and approvals necessary to conduct their businesses as currently
conducted in all material respects except for those which the failure to obtain
would not, in the aggregate, have a WeCo Material Adverse Effect. Except as set
forth in Section 4.4(d) of the WeCo Disclosure Schedule, neither WeCo nor any
WNG Subsidiary is in material breach or violation of or in material default in
the performance or observance of any term or provision of, and no event has
occurred which, with lapse of time or action by a third party, could result in a
material default under, (i) its articles of incorporation or bylaws 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 it is bound or to which any of its property is subject except in the case
of clause (ii) for violations and defaults which would not, in the aggregate,
have a WeCo Material Adverse Effect.
SECTION 4.5 REPORTS AND FINANCIAL STATEMENTS
Since January 1, 1990, the filings required to be made by WeCo and the
WNG Subsidiaries under the Securities Act of 1933, as amended (the "Securities
Act"), the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
applicable Washington laws and regulations, the Natural Gas Act or the 1935 Act
have been filed with the Securities and Exchange Commission (the "SEC"), the
WUTC or the Federal Energy Regulatory Commission (the "FERC"), as the case may
be, including all forms, statements, reports, agreements (oral or written) and
all documents, exhibits, amendments and supplements appertaining thereto, and
complied, as of their respective dates, in all material respects with all
applicable requirements of the appropriate act and the rules and regulations
thereunder. WeCo has made available to
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Puget a true and complete copy of each report, schedule, registration statement
and definitive proxy statement filed by WeCo or WNG with the SEC since January
1, 1991 ( the "WeCo SEC Reports"). As of their respective dates, the WeCo 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 financial statements and unaudited interim financial
statements of WeCo and WNG included in the WeCo SEC Reports (collectively, the
"WeCo 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 WeCo and WNG, as the case may be, as of the dates
thereof and the results of their 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
Articles of Incorporation and Bylaws of WeCo and WNG, as in effect on the date
hereof, have been delivered to Puget.
SECTION 4.6 ABSENCE OF CERTAIN CHANGES OR EVENTS
Except as disclosed in the WeCo SEC Reports filed prior to the date
hereof or as set forth in Section 4.6 of the WeCo Disclosure Schedule, from
September 30, 1994 through the date hereof, (a) each of WeCo, WNG and the other
WNG Subsidiaries has conducted its business only in the ordinary course of
business consistent with past practice and (b) there has not been, and no fact
or condition exists which would have or, insofar as reasonably can be foreseen,
could have, a WeCo Material Adverse Effect.
SECTION 4.7 LITIGATION
Except as disclosed in the WeCo SEC Reports filed prior to the date
hereof or as set forth in Section 4.7, 4.9 or 4.11 of the WeCo Disclosure
Schedule, (a) there are no material claims, suits, actions or proceedings,
pending or, to the knowledge of WeCo or WNG, threatened, nor are there, to the
knowledge of WeCo or WNG, any material investigations or reviews pending or
threatened against, relating to or affecting WeCo, any WNG Subsidiary or any
WeCo Benefit Plan, (b) there are no material judgments, decrees, injunctions,
rules or orders of any court, governmental department, commission, agency,
instrumentality or authority or any arbitrator applicable to WeCo or any WNG
Subsidiary, and (c) there have not been any material developments since June 30,
1995 with respect to such disclosed claims, suits, actions, proceedings,
investigations or reviews.
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SECTION 4.8 REGISTRATION STATEMENT AND PROXY STATEMENT
None of the information supplied or to be supplied by or on behalf of
WeCo or WNG for inclusion or incorporation by reference in (a) the registration
statement on Form S-4 to be filed with the SEC by the Company in connection with
the issuance of shares of Company Common Stock and Company Preferred Stock, if
applicable, 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
and information statement in definitive form relating to the meetings of the
shareholders of Puget, WeCo and WNG to be held in connection with the Merger and
the prospectus relating to the Company Common Stock and Company Preferred Stock,
if applicable, to be issued in the Merger (the "Joint Proxy
Statement/Prospectus") will, at the dates mailed to such shareholders and, as
the same may be amended or supplemented, at the times of such meetings, contain
any untrue statement of a material fact or omit to state any material fact
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, and 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 income, sales, use, ad valorem, transfer, gains, profits, excise, franchise,
property, gross receipt, capital stock, production, business and occupation,
disability, employment, payroll, license, estimated, stamp, custom duties,
severance, social security, unemployment, environmental or withholding taxes or
charges imposed by any Governmental Authority, and includes any interest, fines
and penalties (civil or criminal) on or additions to any such taxes and any
expenses incurred in connection with the determination, settlement or litigation
of any tax liability. "Tax Return," as used in this Agreement, means a report,
return or other information required to be supplied to a Governmental Authority
with respect to Taxes, including, where permitted or required, combined or
consolidated returns for any group of entities that includes WeCo or any of the
WNG Subsidiaries on the one hand, or Puget or any of its subsidiaries on the
other hand.
Except as set forth in Section 4.9 of the WeCo Disclosure Schedule:
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(a) Filing of Timely Tax Returns. WeCo and each of the WNG Subsidiaries
have filed all material Tax Returns required to be filed by each of them with
the appropriate Governmental Authority. All such Tax Returns were and are in all
material respects (and, as to Tax Returns not filed as of the date hereof, will
be) true, complete and correct and filed on a timely basis.
(b) Payment of Taxes; Reserves. WeCo and each of the WNG Subsidiaries
have, within the time and in the manner prescribed by law, paid (and until the
Closing Date will pay within the time and in the manner prescribed by law) all
Taxes that are currently due and payable except for those contested in good
faith and for which adequate reserves have been taken. WeCo and each of the WNG
Subsidiaries have established on their books and records reserves adequate to
pay all Taxes and reserves for deferred income taxes in accordance with GAAP.
(c) Tax Liens. There are no material Tax liens upon the assets of WeCo or
any of the WNG Subsidiaries except liens for Taxes not yet due.
(d) Withholding Taxes. WeCo and each of the WNG Subsidiaries have
complied (and until the Closing Date will comply) in all respects with the
provisions of the Code relating to the payment and withholding of Taxes,
including, without limitation, the withholding and reporting requirements under
Sections 1441 through 1464, 3401 through 3406, and 6041 through 6050P of the
Code, as well as similar provisions under any other laws, and have, within the
time and in the manner prescribed by law, withheld from employee wages and paid
over to the proper Governmental Authorities all amounts required.
(e) Extensions of Time for Filing Tax Returns. Neither WeCo nor any WNG
Subsidiary has requested any extension of time within which to file any Tax
Return, which Tax Return has not since been filed.
(f) Waivers of Statute of Limitations. Neither WeCo nor any WNG
Subsidiary has executed any outstanding waivers or comparable consents regarding
the application of the statute of limitations with respect to any Taxes or Tax
Returns.
(g) Expiration of Statute of Limitations. The statute of limitations for
the assessment of all Taxes has expired for all U.S. federal and state Tax
Returns of WeCo and each WNG Subsidiary or such Tax Returns have been examined
by the appropriate Governmental Authorities for all periods through the date
hereof. No deficiency for any material Taxes has been proposed, asserted or
assessed against WeCo or any of the WNG Subsidiaries by any Governmental
Authorities that has not been resolved and paid in full.
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(h) 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 WeCo or any of the WNG Subsidiaries.
(i) Powers of Attorney. No power of attorney currently in force has been
granted by WeCo or any of the WNG Subsidiaries concerning any Tax matter.
(j) Tax Rulings. Neither WeCo nor any WNG Subsidiary has received a Tax
Ruling (as defined below) or entered into a Closing Agreement (as defined below)
that would have a continuing adverse effect after the Closing Date. "Tax
Ruling," as used in this Agreement, shall mean a written ruling of a
Governmental Authority relating to Taxes. "Closing Agreement," as used in this
Agreement, shall mean a written and legally binding agreement with a
Governmental Authority relating to Taxes.
(k) Availability of Tax Returns. WeCo and the WNG Subsidiaries have made
available to Puget complete and accurate copies of (i) all Tax Returns, and any
amendments thereto, filed by WeCo or any of the WNG Subsidiaries, (ii) all audit
reports received from any Governmental Authority relating to any Tax Return
filed by WeCo or any of the WNG Subsidiaries and (iii) any Closing Agreements
entered into by WeCo or any of the WNG Subsidiaries with any Governmental
Authority.
(l) Tax Sharing Agreements. No agreements relating to allocating or
sharing of Taxes exist between or among WeCo and any of the WNG Subsidiaries.
(m) Section 341(f) of the Code. Neither WeCo nor any WNG Subsidiary has
filed (or will file prior to the Closing) a consent pursuant to Section 341(f)
of the Code or has agreed to have Section 341(f)(2) of the Code apply to any
disposition of a subsection (f) asset (as that term is defined in Section
341(f)(4) of the Code) owned by WeCo or any WNG Subsidiary.
(n) Section 168 of the Code. No property of WeCo or any WNG Subsidiary is
property that WeCo or any such subsidiary or any party to this transaction is or
will be required to treat as being owned by another person pursuant to the
provisions of Section 168(f)(8) of the Code (as in effect prior to its amendment
by the Tax Reform Act of 1986) or is "tax-exempt use property" within the
meaning of Section 168 of the Code.
(o) Section 481 of the Code. Neither WeCo nor any WNG Subsidiary is
required to include in income any adjustment pursuant to Section 481(a) of the
Code by reason of a voluntary change in accounting method initiated by WeCo or
any WNG Subsidiary, and to the best of the knowledge of WeCo or WNG, the
Internal
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Revenue Service (the "IRS") has not proposed any such adjustment or change in
accounting method.
(p) Sections 6661 and 6662 of the Code. All transactions that could give
rise to a material understatement of federal income tax (within the meaning of
Section 6661 of the Code for Tax Returns the due date for which (determined
without regard to extensions) is on or before December 31, 1989, and within the
meaning of Section 6662 of the Code for Tax Returns filed after December 31,
1989) have been adequately disclosed (or, with respect to Tax Returns filed
following the Closing will be adequately disclosed) on the Tax Returns of WeCo
and the WNG Subsidiaries in accordance with Section 6661(b)(2)(B) of the Code
for Tax Returns the due date for which (determined without regard to extensions)
is on or prior to December 31, 1989, and in accordance with Section
6662(d)(2)(B) of the Code for Tax Returns filed after December 31, 1989.
(q) Jurisdiction. No claim has been made by a governmental entity in any
jurisdiction where either WeCo or any WNG Subsidiary does not file any Tax
Returns that such non-filing entity is or may be subject to taxation by that
jurisdiction.
(r) U.S. Real Property Holding Company. Neither WeCo nor any WNG
Subsidiary has been a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Code during the applicable period specified
in Section 897(c)(1)(A)(2)(i) of the Code.
(s) Liability for Others. Neither WeCo nor any WNG Subsidiary has any
liability for Taxes of any person other than WeCo and any WNG Subsidiary (i)
under Treasury Regulation Section 1.1502-6 (or any similar provision of any
state, local or foreign law) as a transferee or successor, (ii) by contract or
(iii) otherwise.
SECTION 4.10 EMPLOYEE MATTERS; ERISA
(a) Benefit Plans. Section 4.10(a) of the WeCo Disclosure Schedule
contains a true and complete list of each material employee benefit plan, fund,
program, contract or arrangement covering employees, former employees or
directors of WeCo and each of the WNG Subsidiaries or any of their dependents or
beneficiaries, or providing benefits to such persons in respect of services
provided to any such entity, or with respect to which WeCo or any of the WNG
Subsidiaries has or could have any liability, including, but not limited to, any
material employee benefit plans within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and
specifically including, but not limited to, each material retirement, pension,
multi-employer, profit sharing, stock bonus, savings, thrift, bonus, cafeteria,
medical, health, hospitalization, dental, vision,
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welfare, life insurance, disability, accident insurance, group insurance,
tuition reimbursement, medical expense reimbursement, dependent care expense
reimbursement plan or program, executive or deferred compensation plan or
contract, stock purchase, stock option or stock appreciation rights plan or
arrangement, severance or change in control agreement or plan, and employment,
consulting or personal services contract with any officer, director or employee
(or any person who prior to entering into such contract was an officer, director
or employee) of WeCo or any of the WNG Subsidiaries (individually, a "WeCo
Benefit Plan," and collectively, the "WeCo Benefit Plans").
(b) Documents Made Available. Each of WeCo and WNG has made available to
Puget a true and correct copy of each collective bargaining agreement to which
WeCo or any of the WNG Subsidiaries is a party or under which WeCo or any of the
WNG Subsidiaries has obligations and, with respect to each WeCo Benefit Plan,
where applicable, true and correct copies of (i) such WeCo Benefit Plan, (ii)
the annual reports (Form 5500 series) filed with the Internal Revenue Service
(the "IRS") for the last three years with respect to such WeCo Benefit Plan (to
the extent required to be filed), (iii) the most recent summary plan description
(together with any applicable summaries of material modifications) and most
recent material employee manuals distributed with respect to such WeCo Benefit
Plan, (iv) each trust agreement (or group annuity contract), including all
amendments to each such document, related to such WeCo Benefit Plan, (v) the
most recent determination letter from the IRS with respect to the qualified
status of such WeCo Benefit Plan (provided such WeCo Benefit Plan is intended to
be qualified under Section 401(a) of the Code) and (v) the most recent actuarial
report or valuation, if any, for such WeCo Benefit Plan.
(c) Compliance. Except as set forth in Section 4.10(c) of the WeCo
Disclosure Schedule, with respect to each WeCo Benefit Plan, WeCo and each of
the WNG Subsidiaries have at all times been in compliance in all material
respects with, and each WeCo Benefit Plan has at all times been maintained and
operated in all material respects in compliance with, the terms of such WeCo
Benefit Plan and all applicable laws, rules and regulations governing such WeCo
Benefit Plan, including, but not limited to, ERISA and the Code.
(d) Qualified Plans. Except as set forth in Section 4.10(d) of the WeCo
Disclosure Schedule, each WeCo Benefit Plan that is intended to be "qualified",
within the meaning of Section 401(a) of the Code, has been determined to be so
qualified (and a determination letter to that effect has been issued) by the
IRS, and, to the best knowledge of WeCo or WNG, no circumstances exist that have
or are likely to adversely affect, or result in the revocation of, such
determination.
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(e) Welfare Plans. Except as set forth in Section 4.10(e) of the WeCo
Disclosure Schedule, none of the WeCo Benefit Plans that are "welfare plans,"
within the meaning of Section 3(1) of ERISA, provides or has any obligation to
provide benefits with respect to current or former employees of WeCo, any of the
WNG Subsidiaries or any other entity beyond their retirement or other
termination of service, including, without limitation, post-retirement (or
post-termination) medical, dental, life insurance, severance or any other
similar benefit, whether provided on an insured or self-insured basis, other
than benefits mandated by applicable law, including, but not limited to,
continuation coverage required to be provided under Section 4980B of the Code or
Part 6 of Title I of ERISA.
(f) Contributions. Except as set forth in Section 4.10(f) of the WeCo
Disclosure Schedule, all material contributions and other payments required to
have been made by WeCo or any of the WNG Subsidiaries (including any pre-tax or
post-tax contributions or payments by employees or their dependents) to any WeCo
Benefit Plan (or to any person pursuant to the terms thereof) have been so made
or the amount of any such payment or contribution obligation that is not yet due
has been properly reflected in the WeCo Financial Statements.
(g) Funded Status of Plans. Except as set forth in Section 4.10(g) of the
WeCo Disclosure Schedule, the fair market value, as of the date hereof, of the
assets held by each WeCo Benefit Plan that is subject to the requirements of
Section 412 of the Code, Part 3 of Title I of ERISA or Title IV of ERISA is not
materially less than the present value of the accumulated benefit obligations
(determined as of the date hereof) of the participants and beneficiaries under
such WeCo Benefit Plan, based on the actuarial methods, tables and assumptions
heretofore utilized by such WeCo Benefit Plan's actuary to determine such WeCo
Benefit Plan's funded status. None of the WeCo Benefit Plans that are subject to
Section 412 of the Code or Section 302 of ERISA has ever incurred an
"accumulated funding deficiency" (as defined in such Code and ERISA sections).
(h) Termination or Withdrawal Liability. Except as set forth in Section
4.10(h) of the WeCo Disclosure Schedule, the termination of, or withdrawal from,
any WeCo Benefit Plan that is subject to Section 412 of the Code, Section 302 of
ERISA or Title IV of ERISA by WeCo, any of the WNG Subsidiaries or any WeCo
ERISA Affiliate has not subjected, and will not subject, WeCo or any of the WNG
Subsidiaries to any material liability to any Governmental Authority,
corporation or other person or entity (including, but not limited to, such plan
or the Pension Benefit Guaranty Corporation (the "PBGC")) and has not resulted,
and will not result, in the imposition of a material lien under Title IV of
ERISA against the assets of WeCo or any of the WNG Subsidiaries. "WeCo ERISA
Affiliate" means any entity, whether or
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not incorporated, that is or has ever been considered as a single employer
together with WeCo or any of the WNG Subsidiaries under Section 414(b), (c), (m)
or (o) of the Code.
(i) Liabilities. Except as set forth in Section 4.10(i) of the WeCo
Disclosure Schedule, with respect to the WeCo Benefit Plans, individually and in
the aggregate, no event has occurred, and, to the best knowledge of WeCo or WNG,
there exists no condition or set of circumstances that could subject WeCo or any
of the WNG Subsidiaries, or any director, officer, or employee of WeCo or any of
the WNG Subsidiaries, to any material fine, penalty, tax or liability
(including, without limitation, any liability to any such plan or the PBGC),
whether pursuant to any agreement, instrument, indemnification obligation,
statute, regulation or rule of law, excluding liability for benefit claims and
funding obligations payable in the ordinary course and liability for premiums
due to the PBGC.
(j) Payments Resulting From Merger. Except as set forth in Section 7.11
or in Section 4.10(j) of the WeCo Disclosure Schedule, the consummation or
announcement of any transaction contemplated by this Agreement will not (either
alone or upon the occurrence of any additional or further acts or events) result
in any (i) material payment (whether of severance pay or otherwise) becoming due
from the Company, WeCo or any of the WNG Subsidiaries to any officer, employee,
former employee or director thereof or to the trustee under any "rabbi trust" or
similar arrangement, (ii) material benefit under any WeCo Benefit Plan being
established or becoming accelerated, vested or payable or (iii) payment of
"excess parachute payments" within the meaning of Section 280G of the Code under
any contract or arrangement to which WeCo or any WNG Subsidiary is a party.
(k) Other Binding Commitments. Except as set forth in Section 4.10(k) of
the WeCo Disclosure Schedule, neither WeCo nor any WNG Subsidiary has any
agreement, arrangement, commitment or obligation, whether formal or informal,
whether written or unwritten and whether legally binding or not, to create any
plan, fund, program, contract or arrangement not identified in Section 4.10(a)
of the WeCo Disclosure Schedule or to modify or amend any of the existing WeCo
Benefit Plans.
(l) Labor Agreements. Except as disclosed in the WeCo SEC Reports or as
set forth in Section 4.10(l) of the WeCo Disclosure Schedule, (i) neither WeCo
nor any WNG Subsidiary is a party to any collective bargaining agreement or
other labor agreement with any union or labor organization; (ii) to the best
knowledge of WeCo or WNG, there is no current union representation election or
controversy involving employees of WeCo or any of the WNG Subsidiaries, nor does
WeCo or WNG know of any activity or proceeding of any labor organization (or
representative thereof) or employee group (or representative thereof) to
organize any such employees; (iii) there
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is no material unfair labor practice charge or material grievance arising out of
a collective bargaining agreement or other material grievance procedure against
WeCo or any of the WNG Subsidiaries pending, or to the best knowledge of WeCo or
WNG, threatened; (iv) there is no material complaint, lawsuit or proceeding in
any forum by or on behalf of any present or former employee, any applicant for
employment or classes of the foregoing alleging breach of any express or implied
contract of employment, any law or regulation governing employment or the
termination thereof or other discriminatory, wrongful or tortious conduct in
connection with the employment relationship against WeCo or any of the WNG
Subsidiaries pending, or to the best knowledge of WeCo or WNG, threatened; (v)
there is no strike, dispute, slowdown, work stoppage or lockout pending, or to
the best knowledge of WeCo or WNG, threatened, against or involving WeCo or any
of the WNG Subsidiaries; (vi) WeCo and the WNG Subsidiaries are in compliance in
all material respects with all applicable laws respecting employment and
employment practices, terms and conditions of employment, wages, hours of work
and occupational safety and health; and (vii) there is no proceeding, claim,
suit, action or governmental investigation pending or, to the best knowledge of
WeCo or WNG, threatened, in respect of which any director, officer, employee or
agent of WeCo or any of the WNG Subsidiaries is or may be entitled to claim
indemnification from WeCo or any of the WNG Subsidiaries pursuant to their
respective articles of incorporation or bylaws or as provided in the
Indemnification Agreements listed on Section 4.10(l) of the WeCo Disclosure
Schedule.
SECTION 4.11 ENVIRONMENTAL PROTECTION
Except as set forth in Section 4.11 of the WeCo Disclosure Schedule:
(a) Compliance. Each of WeCo and each WNG Subsidiary is in compliance in
all material respects with all applicable Environmental Laws (as hereinafter
defined). Neither WeCo nor any WNG Subsidiary has received any written, or, to
the knowledge of appropriate officers of WeCo and WNG, upon diligent review,
oral communication from any person or Governmental Authority that alleges that
WeCo or any WNG Subsidiary is not in compliance in all material respects with
applicable Environmental Laws.
(b) Environmental Permits. Each of WeCo and each WNG Subsidiary has
obtained or has applied for all material environmental, health and safety
permits and authorizations (collectively, the "Environmental Permits") necessary
for the construction of their facilities or the conduct of their operations, and
all such permits are in good standing or, where applicable, a renewal
application has been timely filed and is pending agency approval, and WeCo and
the WNG Subsidiaries are in material compliance with all terms and conditions of
the Environmental Permits and are not
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required to make any material expenditure in order to obtain or renew any
Environmental Permit.
(c) Environmental Claims. There is no material Environmental Claim (as
hereinafter defined) pending (i) against WeCo or any of the WNG Subsidiaries or
WeCo Joint Ventures or (ii) to the best knowledge of appropriate officers of
WeCo and WNG, upon diligent review, (x) against any person or entity whose
liability for any Environmental Claim WeCo or any WNG Subsidiary or WeCo Joint
Venture has or may have retained or assumed either contractually or by operation
of law or (y) against any real or personal property or operations which WeCo or
any WNG Subsidiary or WeCo Joint Venture owns, leases or manages, in whole or in
part.
(d) Releases. Neither WeCo nor WNG has knowledge of any material Releases
(as hereinafter defined) of any Hazardous Material (as hereinafter defined) that
would be reasonably likely to form the basis of any material Environmental Claim
against WeCo or any WNG Subsidiary or WeCo Joint Venture, or against any person
or entity whose liability for any Environmental Claim WeCo or any of the WNG
Subsidiaries or WeCo Joint Ventures has or may have retained or assumed either
contractually or by operation of law.
(e) Predecessors. Neither WeCo nor WNG has knowledge, with respect to any
predecessor of WeCo or any WNG Subsidiary or WeCo Joint Venture, of any material
Environmental Claim pending or threatened, or of any Release of Hazardous
Materials that would be reasonably likely to form the basis of any material
Environmental Claim.
(f) Disclosure. To the best knowledge of WeCo or WNG, WeCo and WNG have
disclosed to Puget all material facts which WeCo or WNG reasonably believes are
likely to form the basis of a material Environmental Claim arising from (i) the
cost of pollution control equipment currently required or known to be required
in the future, (ii) current remediation costs or remediation costs that insofar
as reasonably can be foreseen could be required in the future or (iii) any other
material environmental matter affecting WeCo or any of the WNG Subsidiaries.
(g) As used in this Agreement:
(i) "Environmental Claim" means any and all administrative,
regulatory or judicial actions, suits, demands, demand letters,
directives, claims, liens, 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 liability for enforcement,
investigatory costs, cleanup costs, governmental
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response costs, removal costs, remedial costs, natural resources damages,
property damages, personal injuries or penalties) arising out of, based
on or resulting from (A) the presence, or Release or threatened Release
into the environment, of any Hazardous Materials at any location, whether
or not owned, operated, leased or managed by WeCo or any WNG Subsidiary
or WeCo Joint Venture (for purposes of this Section 4.11), or by Puget or
any Puget Subsidiary or Puget Joint Venture (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 or protection of human health
or the environment (including, without limitation, ambient air, surface
water, groundwater, land surface or subsurface strata), including,
without limitation, laws and regulations relating to Releases or
threatened Releases of Hazardous Materials, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials.
(iii) "Hazardous Materials" means (A) any petroleum or petroleum
products, 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 Environmental Law in a
jurisdiction in which WeCo or any WNG Subsidiary or WeCo Joint Venture
operates (for purposes of this Section 4.11) or in which Puget or any
Puget Subsidiary or Puget Joint Venture operates (for purposes of Section
5.11).
(iv) "Releases" means any release, spill, emission, leakage,
injection, deposit, disposal, discharge, dispersal, leaching or migration
into the atmosphere, soil, surface water, groundwater or property.
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SECTION 4.12 REGULATION AS A UTILITY
WNG is regulated as a public utility in the state of Washington and in no
other state. Except as set forth in Section 4.12 of the WeCo Disclosure Schedule
or in the preceding sentence, neither WeCo nor any "subsidiary company" or
"affiliate" of WeCo or of WNG 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. As used in this Section 4.12 and in Section 5.12,
the terms "subsidiary company" and "affiliate" shall have the respective
meanings ascribed to them in the 1935 Act. WeCo is an exempt holding company
under Section 3(a) (1) of the 1935 Act. Schedule 4.12 of the WeCo Disclosure
Schedule sets forth each "affiliate" and each "subsidiary company" of WeCo which
may be deemed to be a "public utility company" or a "holding company" within the
meaning of the 1935 Act.
SECTION 4.13 VOTE REQUIRED
The approval of the Merger by (a) in the case of the WeCo/WNG/Puget
Merger, if applicable, (i) two-thirds of all votes entitled to be cast by all
holders of WeCo Common Stock (the "WeCo Common Shareholders' Approval"), (ii)
two-thirds of all votes entitled to be cast by WeCo as the sole holder of WNG
Common Stock (the "WNG Common Shareholder Approval") and (iii) two-thirds of all
votes entitled to be cast by all holders of WNG Series II Preferred Stock and
WNG Series III Preferred Stock, each voting separately as a class (collectively,
the "WNG Preferred Shareholders' Approval" and together with the WeCo Common
Shareholders' Approval and the WNG Common Shareholder Approval, collectively
referred to as the "WeCo Shareholders' Approval") and (b) in the case of the
WeCo/Puget Merger, if applicable, the WeCo Common Shareholders' Approval are the
only votes of the holders of any class or series of the capital stock of WeCo or
WNG required to approve this Agreement, the Merger and the other transactions
contemplated hereby. This Agreement and the transactions contemplated hereby,
including the Merger, have been approved by WeCo as the sole holder of WNG
Common Stock.
SECTION 4.14 ACCOUNTING MATTERS
Neither WeCo nor any of the WNG Subsidiaries nor, to WeCo's or WNG's best
knowledge, any of their affiliates have, through the date of this Agreement,
taken or agreed to take any action that would prevent the Company from
accounting for the business combination to be effected by the Merger as a
pooling of interests in accordance with GAAP and applicable SEC regulations. As
used in this Agreement, except where specifically otherwise defined, "affiliate"
means, 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
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correlative meanings, "controlled by" and "under common control with") shall
mean possession, directly or indirectly, of power to direct or cause the
direction of management or policies whether through ownership of securities or
partnership or other ownership interests, by contract or otherwise).
SECTION 4.15 APPLICABILITY OF CERTAIN WASHINGTON LAW
Assuming the representation and warranty of Puget made in Section 5.18 is
correct, neither the business combination provisions of Chapter 23B.19 of the
WBCA, the "interested shareholder" provisions of Section 23B.17.020 of the WBCA
or any similar provisions of the WBCA nor the Articles of Incorporation or
Bylaws of WeCo or WNG are applicable to the transactions contemplated by this
Agreement or the WeCo Stock Option Agreement.
SECTION 4.16 OPINION OF FINANCIAL ADVISOR
WeCo has received the opinion of Xxxxxxx, Xxxxx & Co., on the date
hereof, to the effect that, as of the date hereof, the Ratio is fair to the
holders of WeCo Common Stock.
SECTION 4.17 INSURANCE
Except as set forth in Section 4.17 of the WeCo Disclosure Schedule, each
of WeCo and each WNG Subsidiary is, and has been continuously since January 1,
1990, insured with financially responsible insurers in such amounts and against
such risks and losses as are customary for companies conducting the businesses
conducted by WeCo and the WNG Subsidiaries during such time period. Except as
set forth in Schedule 4.17 of the WeCo Disclosure Schedule, neither WeCo nor any
WNG Subsidiary has received any notice of cancellation or termination with
respect to any material insurance policy of WeCo or any of the WNG Subsidiaries.
All insurance policies of WeCo and each of the WNG Subsidiaries are valid and
enforceable policies in all material respects.
SECTION 4.18 OWNERSHIP OF PUGET COMMON STOCK
Except pursuant to the terms of the Puget Stock Option Agreement, WeCo
does not "beneficially own" (as such term is defined for purposes of Section
13(d) or the Exchange Act and in the Puget Rights Agreement) any shares of Puget
Common Stock.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PUGET
Puget represents and warrants to WeCo and WNG as follows:
SECTION 5.1 ORGANIZATION AND QUALIFICATION
Except as set forth in Section 5.1 of the Puget Disclosure Schedule (as
defined in Section 7.6(ii)), each of Puget and each Puget Subsidiary (as defined
below) is a corporation duly organized, validly existing and in good standing
under the laws of its jurisdiction of incorporation or organization, has all
requisite power and authority, and has been duly authorized by all necessary
approvals and orders of WUTC, 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 to be so qualified
and in good standing would not, when taken together with all other such
failures, have a material adverse effect on the business, operations,
properties, assets, financial condition, results of operations or prospects of
Puget and the Puget Subsidiaries taken as a whole or on the consummation of this
Agreement (any such material adverse effect being hereinafter referred to as a
"Puget Material Adverse Effect"). As used in this Agreement, the term "Puget
Subsidiaries" shall mean all subsidiaries of Puget.
SECTION 5.2 SUBSIDIARIES
Section 5.2 of the Puget Disclosure Schedule sets forth a description as
of the date hereof of all Puget Subsidiaries and Puget Joint Ventures (as
defined below), including the name of each such entity, the jurisdiction of its
incorporation, a brief description of the principal line or lines of business
conducted by each such entity and Puget's interest therein. Except as set forth
in Section 5.2 of the Puget Disclosure Schedule, none of such entities is a
"public utility company," a "holding company," a "subsidiary company" or an
"affiliate" of any public-utility company within the meaning of Section 2(a)(5),
2(a)(7), 2(a)(8) or 2(a)(11) of the 1935 Act, respectively. Except as set forth
in Section 5.2 of the Puget Disclosure Schedule, all of the issued and
outstanding shares of capital stock of each Puget Subsidiary are validly issued,
fully paid, nonassessable and free of preemptive rights, are owned directly or
indirectly by Puget free and clear of any liens, claims, encumbrances, security
interests, equities, charges and options of any nature whatsoever, and there are
no outstanding subscriptions, options, calls, contracts, voting trusts, proxies
or other
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commitments, understandings, restrictions, arrangements, rights or warrants,
including any right of conversion or exchange under any outstanding security,
instrument or other agreement, obligating any such subsidiary to issue, deliver
or sell, or cause to be issued, delivered or sold, additional shares of its
capital stock or obligating it to grant, extend or enter into any such agreement
or commitment. As used in this Agreement, the term "Puget Joint Ventures" shall
mean any joint venture of Puget or a Puget Subsidiary.
SECTION 5.3 CAPITALIZATION
The authorized capital stock of Puget consists of 80,000,000 shares of
Puget Common Stock, 3,000,000 shares of $100 preferred stock and 13,000,000
shares of $25 preferred stock (such shares of preferred stock being referred to
herein as the "Puget Preferred Stock") and 700,000 shares of preference stock,
par value $50 per share. As of the close of business on October 16, 1995, (i)
63,640,861 shares of Puget Common Stock were issued and outstanding, and (ii)
5,890,395 shares of Puget Preferred Stock were issued and outstanding,
consisting of 3,000,000 shares of nonredeemable 7.875% $25 Preferred Stock,
2,000,000 shares of nonredeemable Adjustable Rate $25 Series B Preferred Stock,
47,956 shares of redeemable 4.84% $100 Preferred Stock, 56,215 shares of 4.70%
$100 Preferred Stock, 36,224 shares of redeemable 8% $100 Preferred Stock, and
750,000 shares of redeemable 7.75% $100 Preferred Stock. All of the issued and
outstanding shares of the capital stock of Puget are, and any shares of Puget
Common Stock issued pursuant to the Puget Stock Option Agreement will be,
validly issued, fully paid, nonassessable and free of preemptive rights. Except
as set forth in Section 5.3 of the Puget Disclosure Schedule, as of the date
hereof, there are no outstanding subscriptions, options, stock appreciation
rights, 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 Puget or any Puget Subsidiary to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of the capital
stock of Puget or obligating Puget or any Puget Subsidiary to grant, extend or
enter into any such agreement or commitment, other than under the Puget Stock
Option Agreement and the Puget Rights Agreement.
SECTION 5.4 AUTHORITY; NONCONTRAVENTION; STATUTORY APPROVALS; COMPLIANCE
(a) Authority. Puget has all requisite power and authority to enter into
this Agreement and the Puget Stock Option Agreement and, subject to the
applicable Puget Shareholders' Approval (as defined in Section 5.13) (in the
case of this
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Agreement only) and the applicable Puget Required Statutory Approvals (as
defined in Section 5.4(c)), to consummate the transactions contemplated hereby
and thereby. The execution and delivery of this Agreement and the Puget Stock
Option Agreement, and the consummation by Puget of the transactions contemplated
hereby and thereby, have been duly authorized by all necessary corporate action
on the part of Puget, subject in the case of this Agreement to obtaining the
applicable Puget Shareholders' Approval. Each of this Agreement and the Puget
Stock Option Agreement has been duly and validly executed and delivered by Puget
and, assuming the due authorization, execution and delivery hereof and thereof
by WeCo and WNG, constitutes the valid and binding obligation of Puget
enforceable against it in accordance with its terms.
(b) Noncontravention. Except as set forth in Section 5.4(b) of the Puget
Disclosure Schedule, the execution and delivery of this Agreement and of the
Puget Stock Option Agreement by Puget do not, and the consummation of the
transactions contemplated hereby and thereby will not, violate, conflict with,
or result in a breach of any provision of, or constitute a default (with or
without notice or lapse of time or both) under, or result in any Violation by
Puget or any Puget Subsidiary or any Puget Joint Venture pursuant to any
provisions of (i) the articles of incorporation, bylaws or similar governing
documents of Puget or any Puget Subsidiary, (ii) subject to obtaining the Puget
Required Statutory Approvals and the receipt of the Puget Shareholders'
Approval, any statute, law, ordinance, rule, regulation, judgment, decree,
order, injunction, writ, permit or license of any Governmental Authority
applicable to Puget or any Puget Subsidiary or Puget Joint Venture, or any of
its respective properties or assets or (iii) subject to obtaining the
third-party consents or other approvals set forth in Section 5.4(b) of the Puget
Disclosure Schedule (the "Puget Required Consents"), any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, concession, contract,
lease or other instrument, obligation or agreement of any kind to which Puget or
any Puget Subsidiary or any Puget Joint Venture is now a party or by which it or
any of its properties or assets may be bound or affected, excluding from the
foregoing clauses (ii) and (iii) such Violations that would not, in the
aggregate, have a Puget Material Adverse Effect.
(c) Statutory Approvals. No declaration, filing or registration with, or
notice to or authorization, consent or approval of, any Governmental Authority
the failure to obtain, make or give which would have, in the aggregate, a Puget
Material Adverse Effect, is necessary for the execution and delivery of this
Agreement or the Puget Stock Option Agreement by Puget or the consummation by
Puget of the transactions contemplated hereby or thereby, except as described in
Section 5.4(c) of the Puget Disclosure Schedule (the "Puget Required Statutory
Approvals," it being understood that references in this Agreement to "obtaining"
such Puget Required Statutory Approvals shall mean making such declarations,
filings or registrations;
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giving such notices; obtaining such authorizations, consents or approvals; and
having such waiting periods expire as are necessary to avoid a violation of
law).
(d) Compliance. Except as set forth in Section 5.4(d) or 5.11 of the
Puget Disclosure Schedule or as disclosed in the Puget SEC Reports (as defined
in Section 5.5) filed prior to the date hereof, neither Puget nor any Puget
Subsidiary nor, to the knowledge of Puget, any Puget Joint Ventures, is in
violation of, or is 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 violations which in the aggregate do not and, insofar as
reasonably can be foreseen, will not have a Puget Material Adverse Effect.
Except as set forth in Section 5.4(d) of the Puget Disclosure Schedule or in
Section 5.11 of the Puget Disclosure Schedule, Puget and each of the Puget
Subsidiaries and Puget Joint Ventures have all permits, licenses, franchises and
other governmental authorizations, consents and approvals necessary to conduct
their businesses as currently conducted in all material respects except for
those which the failure to obtain would not, in the aggregate, have a Puget
Material Adverse Effect. Except as set forth in Section 5.4(d) of the Puget
Disclosure Schedule, neither Puget nor any Puget Subsidiary is in material
breach or violation of or in material default in the performance or observance
of any term or provision of, and no event has occurred which, with lapse of time
or action by a third party, could result in a material default under, (i) its
articles of incorporation or bylaws 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 it is bound or to which any
of its property is subject except in the case of clause (ii) for violations and
defaults which would not, in the aggregate, have a Puget Material Adverse
Effect.
SECTION 5.5 REPORTS AND FINANCIAL STATEMENTS
Since January 1, 1990, the filings required to be made by Puget and the
Puget Subsidiaries under the Securities Act, the Exchange Act, applicable
Washington laws and regulations, the Federal Power Act or the 1935 Act have been
filed with the SEC, the WUTC or the FERC, as the case may be, including all
forms, statements, reports, agreements (oral or written) and all documents,
exhibits, amendments and supplements appertaining thereto, and complied, as of
their respective dates, in all material respects with all applicable
requirements of the appropriate act and the rules and regulations thereunder.
Puget has made available to WeCo a true and complete copy of each report,
schedule, registration statement and definitive proxy statement filed by Puget
with the SEC since January 1, 1991 (the "Puget SEC Reports"). As of their
respective dates, the Puget SEC Reports did not contain any untrue statement of
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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 Puget included in the
Puget SEC Reports (the "Puget Financial Statements") have been prepared in
accordance with GAAP (except as may be indicated therein or in the notes thereto
and except with respect to unaudited statements as permitted by Form 10-Q of the
SEC) and fairly present the financial position of Puget as of the dates thereof
and the results of its operations and cash flows for the periods then ended,
subject, in the case of the unaudited interim financial statements, to normal
recurring audit adjustments. True, accurate and complete copies of the Restated
Articles of Incorporation and Bylaws of Puget as in effect on the date hereof
have been delivered to WeCo and WNG.
SECTION 5.6 ABSENCE OF CERTAIN CHANGES OR EVENTS
Except as disclosed in the Puget SEC Reports filed prior to the date
hereof or as set forth Section 5.6 of the Puget Disclosure Schedule, from
December 31, 1994 through the date hereof (a) each of Puget and each Puget
Subsidiary has conducted its business only in the ordinary course of business
consistent with past practice and (b) there has not been, and no fact or
condition exists which would have or, insofar as reasonably can be foreseen,
could have, a Puget Material Adverse Effect.
SECTION 5.7 LITIGATION
Except as disclosed in the Puget SEC Reports filed prior to the date
hereof or as set forth in Section 5.7, 5.9 or 5.11 of the Puget Disclosure
Schedule, (a) there are no material claims, suits, actions or proceedings,
pending or, to the knowledge of Puget, threatened, nor are there, to the
knowledge of Puget, any material investigations or reviews pending or threatened
against, relating to or affecting Puget, any Puget Subsidiary or any Puget
Benefit Plan and (b) there are no material judgments, decrees, injunctions,
rules or orders of any court, governmental department, commission, agency,
instrumentality or authority or any arbitrator applicable to Puget or any Puget
Subsidiary, and (c) there have not been any material developments since June 30,
1995 with respect to such disclosed claims, suits, actions, proceedings,
investigations or reviews.
SECTION 5.8 REGISTRATION STATEMENT AND PROXY STATEMENT
None of the information supplied or to be supplied by or on behalf of
Puget for inclusion or incorporation by reference in (a) 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
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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/Prospectus will, at the dates mailed to the shareholders of Puget,
WeCo and WNG and, as the same may be amended or supplemented, at the times of
the meetings of such shareholders to be held in connection with the 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, and 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 Puget Disclosure Schedule:
(a) Filing of Timely Tax Returns. Puget and each of the Puget
Subsidiaries have filed all material Tax Returns required to be filed by each of
them with the appropriate Governmental Authority. All such Tax Returns were and
are in all material respects (and, as to Tax Returns not filed as of the date
hereof, will be) true, complete and correct and filed on a timely basis.
(b) Payment of Taxes; Reserves. Puget and each of the Puget Subsidiaries
have, within the time and in the manner prescribed by law, paid (and until the
Closing Date will pay within the time and in the manner prescribed by law) all
Taxes that are currently due and payable except for those contested in good
faith and for which adequate reserves have been taken. Puget and each of the
Puget Subsidiaries have established on their books and records reserves adequate
to pay all Taxes and reserves for deferred income taxes in accordance with GAAP.
(c) Tax Liens. There are no material Tax liens upon the assets of Puget
or any of the Puget Subsidiaries except liens for Taxes not yet due.
(d) Withholding Taxes. Puget and each of the Puget Subsidiaries have
complied (and until the Closing Date will comply) in all respects with the
provisions of the Code relating to the payment and withholding of Taxes,
including, without limitation, the withholding and reporting requirements under
Sections 1441 through 1464, 3401 through 3406, and 6041 through 6050P of the
Code, as well as similar provisions under any other laws, and have, within the
time and in the manner prescribed by law, withheld from employee wages and paid
over to the proper Governmental Authorities all amounts required.
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(e) Extensions of Time for Filing Tax Returns. Neither Puget nor any
Puget Subsidiary has requested any extension of time within which to file any
Tax Return, which Tax Return has not since been filed.
(f) Waivers of Statute of Limitations. Neither Puget nor any Puget
Subsidiary has executed any outstanding waivers or comparable consents regarding
the application of the statute of limitations with respect to any Taxes or Tax
Returns.
(g) Expiration of Statute of Limitations. The statute of limitations for
the assessment of all Taxes has expired for all U.S. federal and state Tax
Returns of Puget and each Puget Subsidiary or such Tax Returns have been
examined by the appropriate Governmental Authorities for all periods through the
date hereof. No deficiency for any material Taxes has been proposed, asserted or
assessed against Puget or any of the Puget Subsidiaries by any Governmental
Authorities that has not been resolved and paid in full.
(h) 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 Puget or any of the Puget Subsidiaries.
(i) Powers of Attorney. No power of attorney currently in force has been
granted by Puget or any of the Puget Subsidiaries concerning any Tax matter.
(j) Tax Rulings. Neither Puget nor any Puget Subsidiary has received a
Tax Ruling or entered into a Closing Agreement that would have a continuing
adverse effect after the Closing Date.
(k) Availability of Tax Returns. Puget and the Puget Subsidiaries have
made available to WeCo complete and accurate copies of (i) all Tax Returns, and
any amendments thereto, filed by Puget or any of its the Puget Subsidiaries,
(ii) all audit reports received from any Governmental Authority relating to any
Tax Return filed by Puget or any of the Puget Subsidiaries and (iii) any Closing
Agreement entered into by Puget or any of the Puget Subsidiaries with any
Governmental Authority.
(l) Tax Sharing Agreements. No agreements relating to allocating or
sharing of Taxes exist between or among Puget and any of the Puget Subsidiaries.
(m) Section 341(f) of the Code. Neither Puget nor any Puget Subsidiary
has filed (or will file prior to the Closing) a consent pursuant to Section
341(f) of the Code or have agreed to have Section 341(f)(2) of the Code apply to
any disposition of a subsection (f) asset (as that term is defined in Section
341(f)(4) of the Code) owned by Puget or any Puget Subsidiary.
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(n) Section 168 of the Code. No property of Puget or any Puget Subsidiary
is property that Puget or any such subsidiary or any party to this transaction
is or will be required to treat as being owned by another person pursuant to the
provisions of Section 168(f)(8) of the Code (as in effect prior to its amendment
by the Tax Reform Act of 1986) or is "tax-exempt use property" within the
meaning of Section 168 of the Code.
(o) Section 481 of the Code. Neither Puget nor any Puget Subsidiary is
required to include in income any adjustment pursuant to Section 481(a) of the
Code by reason of a voluntary change in accounting method initiated by Puget or
any Puget Subsidiary, and to the best of the knowledge of Puget, the IRS has not
proposed any such adjustment or change in accounting method.
(p) Sections 6661 and 6662 of the Code. All transactions that could give
rise to a material understatement of federal income tax (within the meaning of
Section 6661 of the Code for Tax Returns the due date for which (determined
without regard to extensions) is on or before December 31, 1989, and within the
meaning of Section 6662 of the Code for Tax Returns filed after December 31,
1989) have been adequately disclosed (or, with respect to Tax Returns filed
following the Closing will be adequately disclosed) on the Tax Returns of Puget
and the Puget Subsidiaries in accordance with Section 6661(b)(2)(B) of the Code
for Tax Returns the due date for which (determined without regard to extensions)
is on or prior to December 31, 1989, and in accordance with Section
6662(d)(2)(B) of the Code for Tax Returns filed after December 31, 1989.
(q) Jurisdiction. No claim has been made by a governmental entity in any
jurisdiction where either Puget or any Puget Subsidiary does not file any Tax
Returns that such non-filing entity is or may be subject to taxation by that
jurisdiction.
(r) U.S. Real Property Holding Company. Neither Puget nor any Puget
Subsidiary has been a United States real property holding corporation within the
meaning of Section 897(c)(2) of the Code during the applicable period specified
in Section 897(c)(1)(A)(2)(i) of the Code.
(s) Liability for Others. Neither Puget nor any Subsidiary has any
liability for Taxes of any person other than Puget and the Puget Subsidiaries
(i) under Treasury Regulation Section 1.1502-6 (or any similar provision of any
state, local or foreign law) as a transferee or successor, (ii) by contract or
(iii) otherwise.
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SECTION 5.10 EMPLOYEE MATTERS; ERISA
(a) Benefit Plans. Section 5.10(a) of the Puget Disclosure Schedule
contains a true and complete list of each material employee benefit plan, fund,
program, contract or arrangement covering employees, former employees or
directors of Puget and each of the Puget Subsidiaries or any of their dependents
or beneficiaries, or providing benefits to such persons in respect of services
provided to any such entity, or with respect to which Puget or any Puget
Subsidiaries has or could have any liability, including, but not limited to, any
material employee benefit plans within the meaning of Section 3(3) of ERISA, and
specifically including, but not limited to, each material retirement, pension,
multi-employer, profit sharing, stock bonus, savings, thrift, bonus, cafeteria,
medical, health, hospitalization, dental, vision, welfare, life insurance,
disability, accident insurance, group insurance, tuition reimbursement, medical
expense reimbursement, dependent care expense reimbursement plan or program,
executive or deferred compensation plan or contract, stock purchase, stock
option or stock appreciation rights plan or arrangement, severance or change in
control agreement or plan, and employment, consulting or personal services
contract with any officer, director or employee (or any person who prior to
entering into such contract was an officer, director or employee) of Puget or
any of its subsidiaries (individually, a "Puget Benefit Plan", and collectively,
the "Puget Benefit Plans").
(b) Documents Made Available. Puget has made available to WeCo a true and
correct copy of each collective bargaining agreement to which Puget or any Puget
Subsidiary is a party or under which Puget or any Puget Subsidiary has
obligations and, with respect to each Puget Benefit Plan, where applicable, true
and correct copies of (i) such Puget Benefit Plan, (ii) the annual reports (Form
5500 series) filed with the IRS for the last three years with respect to such
Puget Benefit Plan (to the extent required to be filed), (iii) the summary plan
description (together with any applicable summaries of material modifications
and the most recent material employee manuals distributed with respect to such
Puget Benefit Plan, (iv) each trust agreement (or group annuity contract),
including all amendments to each such document, related to such Puget Benefit
Plan, (v) the most recent determination letter from the IRS with respect to the
qualified status of such Puget Benefit Plan (provided such Puget Benefit Plan is
intended to be qualified under Section 401(a) of the Code) and (v) the most
recent actuarial report or valuation, if any, for such Puget Benefit Plan.
(c) Compliance. Except as set forth in Section 5.10(c) of the Puget
Disclosure Schedule, with respect to each Puget Benefit Plan, Puget and each of
the Puget Subsidiaries have at all times been in compliance in all material
respects with, and each Puget Benefit Plan has at all times been maintained and
operated in all
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material respects in compliance with, the terms of such Puget Benefit Plan and
all applicable laws, rules and regulations governing such Puget Benefit Plan,
including, but not limited to, ERISA and the Code.
(d) Qualified Plans. Except as set forth in Section 5.10(d) of the Puget
Disclosure Schedule, each Puget Benefit Plan that is intended to be "qualified",
within the meaning of Section 401(a) of the Code, has been determined to be so
qualified (and a determination letter to that effect has been issued) by the
IRS, and, to the best knowledge of Puget, no circumstances exist that have or
are likely to adversely affect, or result in the revocation of, such
determination.
(e) Welfare Plans. Except as set forth in Section 5.10(e) of the Puget
Disclosure Schedule, none of the Puget Benefit Plans that are "welfare plans,"
within the meaning of Section 3(1) of ERISA, provides or has any obligation to
provide benefits with respect to current or former employees of Puget, any Puget
Subsidiary or any other entity beyond their retirement or other termination of
service, including, without limitation, post-retirement (or post-termination)
medical, dental, life insurance, severance or any other similar benefit, whether
provided on an insured or self-insured basis, other than benefits mandated by
applicable law, including, but not limited to, continuation coverage required to
be provided under Section 4980B of the Code or Part 6 of Title I of ERISA.
(f) Contributions. Except as set forth in Section 5.10(f) of the Puget
Disclosure Schedule, all material contributions and other payments required to
have been made by Puget or any of Puget Subsidiary (including any pre-tax or
post-tax contributions or payments by employees or their dependents) to any
Puget Benefit Plan (or to any person pursuant to the terms thereof) have been so
made or the amount of any such payment or contribution obligation that is not
yet due has been properly reflected in the Puget Financial Statements.
(g) Funded Status of Plans. Except as set forth in Section 5.10(g) of the
Puget Disclosure Schedule, the fair market value, as of the date hereof, of the
assets held by each Puget Benefit Plan that is subject to the requirements of
Section 412 of the Code, Part 3 of Title I of ERISA or Title IV of ERISA is not
materially less than the present value of the accumulated benefit obligations
(determined as of the date hereof) of the participants and beneficiaries under
such Puget Benefit Plan, based on the actuarial methods, tables and assumptions
heretofore utilized by such Puget Benefit Plan's actuary to determine such Puget
Benefit Plan's funded status. None of the Puget Benefit Plans that are subject
to Section 412 of the Code or Section 302 of ERISA has ever incurred an
"accumulated funding deficiency" (as defined in such Code and ERISA sections).
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(h) Termination or Withdrawal Liability. Except as set forth in Section
5.10(h) of the Puget Disclosure Schedule, the termination of, or withdrawal
from, any Puget Benefit Plan that is subject to Section 412 of the Code, Section
302 of ERISA or Title IV of ERISA by Puget, any Puget Subsidiary or any Puget
ERISA Affiliate has not subjected, and will not subject, Puget or any Puget
Subsidiary to any material liability to any governmental authority, corporation
or other person or entity (including, but not limited to, such plan or the PBGC)
and has not resulted, and will not result, in the imposition of a material lien
under Title IV of ERISA against the assets of Puget or any Puget Subsidiary.
"Puget ERISA Affiliate" means any entity, whether or not incorporated, that is
or has ever been considered as a single employer together with Puget or any of
the Puget Subsidiaries under Section 414(b), (c), (m) or (o) of the Code.
(i) Liabilities. Except as set forth in Section 5.10(i) of the Puget
Disclosure Schedule, with respect to the Puget Benefit Plans, individually and
in the aggregate, no event has occurred, and, to the best knowledge of Puget,
there exists no condition or set of circumstances that could subject Puget or
any of the Puget Subsidiaries, or any director, officer, or employee of Puget or
any of the Puget Subsidiaries, to any material fine, penalty, tax or liability
(including, without limitation, any liability to any such plan or the PBGC),
whether pursuant to any agreement, instrument, indemnification obligation,
statute, regulation or rule of law, excluding liability for benefit claims and
funding obligations payable in the ordinary course and liability for premiums
due to the PBGC.
(j) Payments Resulting From Merger. Except as set forth in Section 7.11
or in Section 5.10(j) of the Puget Disclosure Schedule, the consummation or
announcement of any transaction contemplated by this Agreement will not (either
alone or upon the occurrence of any additional or further acts or events) result
in any (i) material payment (whether of severance pay or otherwise) becoming due
from the Company or Puget or any of the Puget Subsidiaries to any officer,
employee, former employee or director thereof or to the trustee under any "rabbi
trust" or similar arrangement, (ii) material benefit under any Puget Benefit
Plan being established or becoming accelerated, vested or payable or (iii)
payment of "excess parachute payments" within the meaning of Section 280G of the
Code under any contract or arrangement to which Puget or any Puget Subisidary is
a party.
(k) Other Binding Commitments. Except as set forth in Section 5.10(k) of
the Puget Disclosure Schedule, neither Puget nor any Puget Subsidiary has any
agreement, arrangement, commitment or obligation, whether formal or informal,
whether written or unwritten and whether legally binding or not, to create any
plan,
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fund, program, contract or arrangement not identified in Section 5.10(a) of the
Puget Disclosure Schedule or to modify or amend any of the existing Puget
Benefit Plans.
(l) Labor Agreements. Except as disclosed in the Puget SEC Reports or as
set forth in Section 5.10(l) of the Puget Disclosure Schedule, (i) neither Puget
nor any Puget Subsidiary is a party to any collective bargaining agreement or
other labor agreement with any union or labor organization; (ii) to the best
knowledge of Puget, there is no current union representation election or
controversy involving employees of Puget or any of the Puget Subsidiaries, nor
does Puget know of any activity or proceeding of any labor organization (or
representative thereof) or employee group (or representative thereof) to
organize any such employees; (iii) there is no material unfair labor practice
charge or material grievance arising out of a collective bargaining agreement or
other material grievance procedure against Puget or any of the Puget
Subsidiaries pending, or to the best knowledge of Puget, threatened; (iv) there
is no material complaint, lawsuit or proceeding in any forum by or on behalf of
any present or former employee, any applicant for employment or classes of the
foregoing alleging breach of any express or implied contract of employment, any
law or regulation governing employment or the termination thereof or other
discriminatory, wrongful or tortious conduct in connection with the employment
relationship against Puget or any of the Puget Subsidiaries pending, or to the
best knowledge of Puget, threatened; (v) there is no strike, dispute, slowdown,
work stoppage or lockout pending, or to the best knowledge of Puget, threatened,
against or involving Puget or any of the Puget Subsidiaries; (vi) Puget and the
Puget Subsidiaries are in compliance in all material respects with all
applicable laws respecting employment and employment practices, terms and
conditions of employment, wages, hours of work and occupational safety and
health; and (vii) there is no proceeding, claim, suit, action or governmental
investigation pending or, to the best knowledge of Puget, threatened, in respect
of which any director, officer, employee or agent of Puget or any of the Puget
Subsidiaries is or may be entitled to claim indemnification from Puget or any of
the Puget Subsidiaries pursuant to its articles of incorporation or bylaws or as
provided in the Indemnification Agreements listed on Section 5.10(l) of the
Puget Disclosure Schedule.
SECTION 5.11 ENVIRONMENTAL PROTECTION
Except as set forth in Section 5.11 of the Puget Disclosure Schedule:
(a) Compliance. Each of Puget and each Puget Subsidiary is in compliance
in all material respects with all applicable Environmental Laws. Neither Puget
nor any Puget Subsidiary has received any written, or, to the knowledge of
appropriate officers of Puget upon diligent review, oral communication from any
person or
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Governmental Authority, that alleges that Puget or any Puget Subsidiary is not
in compliance in all material respects with applicable Environmental Laws.
(b) Environmental Permits. Each of Puget and each Puget Subsidiary has
obtained or has applied for all material Environmental Permits necessary for the
construction of their facilities or the conduct of their operations, and all
such permits are in good standing or, where applicable, a renewal application
has been timely filed and is pending agency approval, and Puget and the Puget
Subsidiaries are in material compliance with all terms and conditions of the
Environmental Permits and are not required to make any material expenditure in
order to obtain or renew any Environmental Permit.
(c) Environmental Claims. There is no material Environmental Claim
pending (i) against Puget or any of the Puget Subsidiaries or Puget Joint
Ventures or (ii) to the best knowledge of appropriate officers of Puget, upon
diligent review, (x) against any person or entity whose liability for any
Environmental Claim Puget or any Puget Subsidiary or Puget Joint Venture has or
may have retained or assumed either contractually or by operation of law or (y)
against any real or personal property or operations which Puget or any Puget
Subsidiary or Puget Joint Venture owns, leases or manages, in whole or in part.
(d) Releases. Puget has no knowledge of any material Releases of any
Hazardous Material that would be reasonably likely to form the basis of any
material Environmental Claim against Puget or any of the Puget Subsidiaries or
Puget Joint Ventures, or against any person or entity whose liability for any
Environmental Claim Puget or any Puget Subsidiary or Puget Joint Venture has or
may have retained or assumed either contractually or by operation of law.
(e) Predecessors. Puget has no knowledge, with respect to any predecessor
of Puget or any of the Puget Subsidiaries or Puget Joint Ventures, of any
material Environmental Claim pending or threatened, or of any Release of
Hazardous Materials that would be reasonably likely to form the basis of any
material Environmental Claim.
(f) Disclosure. To the best knowledge of Puget, Puget has disclosed to
WeCo all material facts which Puget reasonably believes is likely to form the
basis of a material Environmental Claim arising from (i) the cost of pollution
control equipment currently required or known to be required in the future, (ii)
current remediation costs or remediation costs that insofar as reasonably can be
foreseen could be required in the future or (iii) any other material
environmental matter affecting Puget or the Puget Subsidiaries.
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SECTION 5.12 REGULATION AS A UTILITY
Puget is regulated as a public utility in the state of Washington and in
no other state. Except as set forth in Section 5.12 of the Puget Disclosure
Schedule hereof, neither Puget nor any "subsidiary company" or "affiliate" of
Puget 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. Section 5.12 of the Puget Disclosure Schedule sets forth each
"affiliate" and each "subsidiary company" of Puget which may be deemed to be a
"public utility company" or a "holding company" within the meaning of the 1935
Act.
SECTION 5.13 VOTE REQUIRED
The approval of the plan of Merger by two-thirds of all votes entitled to
be cast by all holders of Puget Common Stock and the approval of the increase in
the number of shares authorized for issuance under the Puget 1995 Incentive
Compensation Plan from 500,000 shares to 1,200,000 shares by a majority of the
votes cast at a Puget meeting of its shareholders at which a quorum is present
(collectively, the "Puget Shareholders' Approval") are the only votes of the
holders of any class or series of the capital stock of Puget required to approve
this Agreement, the Merger and the other transactions contemplated hereby.
SECTION 5.14 ACCOUNTING MATTERS
Neither Puget nor, to Puget's best knowledge, any of its affiliates,
have, through the date of this Agreement, taken or agreed to take any action
that would prevent the Company from accounting for the business combination to
be effected by the Merger as a pooling of interests in accordance with GAAP and
applicable SEC regulations.
SECTION 5.15 APPLICABILITY OF CERTAIN WASHINGTON LAW
Assuming the representation and warranty of WeCo and WNG made in Section
4.18 is correct, neither the business combination provisions of Chapter 23B.19
of the WBCA, the "interested shareholder" provisions of Section 23B.17.020 of
the WBCA or any similar provisions of the WBCA nor the Articles of Incorporation
or Bylaws of Puget are applicable to the transactions contemplated by this
Agreement or the Puget Stock Option Agreement.
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SECTION 5.16 OPINION OF FINANCIAL ADVISOR
Puget has received the opinion of Xxxxxx Xxxxxxx & Co. Incorporated, on
the date hereof, to the effect that, as of the date hereof, the Ratio is fair
from a financial point of view to the holders of Puget Common Stock.
SECTION 5.17 INSURANCE
Except as set forth in Section 5.17 of the Puget Disclosure Schedule,
each of Puget and each Puget Subsidiary is, and has been continuously since
January 1, 1990, insured with financially responsible insurers in such amounts
and against such risks and losses as are customary for companies conducting the
businesses conducted by Puget and the Puget Subsidiaries during such time
period. Except as set forth in Schedule 5.17 of the Puget Disclosure Schedule,
neither Puget nor any Puget Subsidiary has received any notice of cancellation
or termination with respect to any material insurance policy of Puget or the
Puget Subsidiaries. All insurance policies of Puget and each of the Puget
Subsidiaries are valid and enforceable policies in all material respects.
SECTION 5.18 OWNERSHIP OF WECO COMMON STOCK
Except pursuant to the terms of the WeCo Stock Option Agreement, Puget
does not "beneficially own" (as such term is defined for purposes of Section
13(d) of the Exchange Act) any shares of WeCo Common Stock.
SECTION 5.19 PUGET RIGHTS AGREEMENT
Prior hereto, Puget has delivered to WeCo a true and complete copy of the
Puget Rights Agreement in effect on the date hereof (which has been amended
prior to the date hereof to provide that the execution, delivery and performance
of the WeCo Stock Option Agreement and the Puget Stock Option Agreement will not
result in WeCo becoming an "Acquiring Person" thereunder), and assuming the
accuracy of the representation contained in Section 4.18, the consummation of
the Merger or any of the other transactions contemplated by this Agreement will
not result in the triggering of any right (including, without limitation, a
"flip-in" or "flip-over" or similar event commonly described in rights
agreements) or entitlement of Puget shareholders under the Puget Rights
Agreement or any similar agreement to which Puget or any of its affiliates is a
party.
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ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
After the date hereof and prior to the Effective Time or earlier
termination of this Agreement, Puget, WeCo and WNG each agrees as to itself and
each of the WNG Subsidiaries and the Puget Subsidiaries, as the case may be,
except as expressly contemplated or permitted in this Agreement, the WeCo Stock
Option Agreement or the Puget Stock Option Agreement, or to the extent the other
parties hereto shall otherwise consent in writing:
SECTION 6.1 ORDINARY COURSE OF BUSINESS
Each party hereto 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 workforce needs and ongoing programs currently in
force, keep available the services of their present officers and employees.
Except as set forth in Section 6.1 of the WeCo Disclosure Schedule or the Puget
Disclosure Schedule, no party shall, nor shall any party permit any of its
subsidiaries to, enter into a new line of business, or make any change in the
line of business it engages in as of the date hereof involving any material
investment of assets or resources or any material exposure to liability or loss,
in the case of WeCo, to WeCo and the WNG Subsidiaries taken as a whole, and in
the case of Puget, to Puget and the Puget Subsidiaries taken as a whole.
SECTION 6.2 DIVIDENDS
Neither WeCo nor Puget shall, nor shall WeCo or Puget permit any of its
subsidiaries (including, in the case of WeCo, WNG) to (i) declare or pay any
dividends on or make other distributions in respect of any of their capital
stock other than to such party or its wholly owned subsidiaries and other than
dividends required to be paid on any series of WNG Preferred Stock or Puget
Preferred Stock in accordance with the respective terms thereof, regular
dividends on WeCo Common Stock with usual record and payment dates not in excess
of an annual rate of $1.00 per share and regular dividends on Puget Common Stock
with usual record and payment dates not in excess of an annual rate of $1.84 per
share; (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 its capital stock; or (iii) redeem,
repurchase or otherwise acquire any shares of their capital
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stock, other than redemptions, repurchases and other acquisitions of shares of
capital stock (A) required by, or made in anticipation of sinking fund payments
or redemptions required by, the respective terms of any series of WNG Preferred
Stock or Puget Preferred Stock, (B) in connection with refunding of WNG
Preferred Stock or Puget Preferred Stock with preferred stock or debt at a lower
after-tax cost of funds, (C) in connection with intercompany purchases of
capital stock, (D) the redemption, if required, of the Rights pursuant to the
terms of the Puget Rights Agreement or (E) in connection with the administration
of employee benefit plans in effect on the date hereof in the ordinary course of
the operation of such plans. The last record date of each of Puget and WeCo on
or prior to the Effective Time which relates to a regular quarterly dividend on
Puget Common Stock or WeCo Common Stock, as the case may be, shall be agreed to
by the parties in advance and shall be the same date and shall be prior to the
Effective Time.
SECTION 6.3 ISSUANCE OF SECURITIES
Except as set forth in Section 6.3 of the WeCo Disclosure Schedule or the
Puget Disclosure Schedule, no party shall, nor shall any party 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 pursuant to the WeCo Stock Option Agreement
or the Puget Stock Option Agreement as the case may be, other than intercompany
issuances of capital stock, and other than issuances, in the case of WeCo and
the WNG Subsidiaries (i) in connection with refunding of WNG Preferred Stock
with preferred stock or debt at a lower after-tax cost of funds and (ii) of
shares of WeCo Common Stock issued pursuant to WeCo's Dividend Reinvestment and
Stock Purchase Plan, Employee Stock Purchase Plan, Performance Share Plan, Stock
Option Plan and Directors' Stock Bonus Plan, in each case consistent in kind and
amount with past practice and in the ordinary course of business under such
plans substantially in accordance with their present terms; and in the case of
Puget (i) in connection with refunding of Puget Preferred Stock with preferred
stock or debt at a lower cost of funds, (ii) of shares of Puget Common Stock
issued pursuant to Puget's Dividend Reinvestment and Stock Purchase Plan, 1995
Long-Term Incentive Compensation Plan and Employee Investment Plan, in each case
in the ordinary course of business under such plans substantially in accordance
with their present terms; and (iii) of capital stock under the Puget Rights
Agreement if required by the terms thereof. 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
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otherwise fully cooperate with each other in the preparation of any registration
statement under the Securities Act and other documents necessary in connection
with issuance of securities as contemplated by this Section 6.3, subject to
obtaining customary indemnities.
SECTION 6.4 CHARTER DOCUMENTS
Except as set forth in Section 6.4 of the WeCo Disclosure Schedule or the
Puget Disclosure Schedule, no party shall amend or propose to amend its
respective articles of incorporation or by-laws, except as contemplated herein.
SECTION 6.5 NO ACQUISITIONS
Except as set forth in Section 6.5 of the WeCo Disclosure Schedule or the
Puget Disclosure Schedule, other than (i) acquisitions by WeCo and the WNG
Subsidiaries not in excess of $10 million in the aggregate and (ii) acquisitions
by Puget and the Puget Subsidiaries not in excess of $25 million in the
aggregate, no party shall, nor shall any party 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, a substantial equity interest
in or a substantial portion of the assets of, any business or any corporation,
partnership, association or other business organization or division thereof or
otherwise acquire or agree to acquire a material amount of assets, other than in
the ordinary course of business consistent with past practice.
SECTION 6.6 CAPITAL EXPENDITURES
Except as set forth in Section 6.6 of the WeCo Disclosure Schedule or the
Puget Disclosure Schedule, and except as required by law, no party shall, nor
shall any party permit any of its subsidiaries to, make or obligate itself to
make capital expenditures (including, without limitation, the purchase of sulfur
dioxide emission allowances as provided in the Clean Air Act Amendments of 1990)
in excess of 120% of the respective aggregate amounts provided in Section 6.6 of
the WeCo Disclosure Schedule or the Puget Disclosure Schedule for capital
expenditures.
SECTION 6.7 NO DISPOSITIONS
Except as set forth in Section 6.7 of the WeCo Disclosure Schedule or the
Puget Disclosure Schedule, other than (i) dispositions by WeCo and the WNG
Subsidiaries of less than $15 million, individually or in the aggregate, and
(ii) dispositions by Puget and the Puget Subsidiaries of less than $50 million
individually or in the aggregate, no party shall, nor shall any party permit any
of its
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subsidiaries to, sell, lease, license, encumber or otherwise dispose of,
any of its assets, other than encumbrances or dispositions in the ordinary
course of business consistent with past practice. In no event shall any party
make any disposition that would result in a violation of Section 6.12.
SECTION 6.8 INDEBTEDNESS
Except as set forth in Section 6.8 of the WeCo Disclosure Schedule or the
Puget Disclosure Schedule, no party shall, nor shall any party 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 the financial condition of
another person or enter into any other arrangement having the economic effect of
any of the foregoing other than (i) short-term indebtedness in the ordinary
course of business consistent with past practice (such as the issuance of
commercial paper or the use of existing credit facilities); (ii) long-term
indebtedness not aggregating more than $75 million in the case of WeCo and the
WNG Subsidiaries, or $150 million in the case of Puget and the Puget
Subsidiaries; (iii) in connection with the refunding of WNG Preferred Stock or
Puget Preferred Stock as permitted in Section 6.2 and (iv) in connection with
the refunding of existing indebtedness at a lower after-tax cost of funds.
SECTION 6.9 COMPENSATION; BENEFITS
Except (a) as set forth in Section 6.9 of the WeCo Disclosure Schedule or
the Puget Disclosure Schedule or Section 7.10 or Section 7.11, (b) as
contemplated by this Agreement, (c) as may be required by applicable law, (d) as
may be required to obtain an IRS determination that a plan is "qualified" under
Section 401(a) of the Code or (e) as may be required under existing WeCo Benefit
Plans or Puget Benefit Plans, no party shall, nor shall any party permit any of
its subsidiaries to, (i) enter into, adopt or amend (except as may be required
by applicable law), or increase the amount or accelerate the payment or vesting
of any benefit or amount payable under, any employee benefit plan or other
contract, agreement, commitment, arrangement, plan or policy maintained by,
contributed to or entered into by such party or any of its subsidiaries, or
increase, or enter into any contract, agreement, commitment or arrangement to
increase in any manner, the compensation or fringe benefits, or otherwise to
extend, expand or enhance the engagement, employment or any related rights, of
any director, officer or other employee of such party or any of its
subsidiaries, except for normal increases, grants or actions in the ordinary
course of business that, in the aggregate, do not result in a material increase
in benefits or compensation expense to such party or any of its subsidiaries, or
(ii) enter into or
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amend any employment contract or special pay arrangement with respect to
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.
SECTION 6.10 1935 ACT; FEDERAL POWER ACT
No party shall, nor shall any party permit any of its subsidiaries to,
except as required or contemplated by this Agreement, the WeCo Stock Option
Agreement or the Puget Stock Option Agreement, engage in any activities which
would cause a change in its status, or that of its subsidiaries, under the 1935
Act, or that would require the approval of the SEC under Section 9(a)(2) of the
1935 Act or of the FERC under the Federal Power Act for any of the transactions
contemplated by this Agreement, the WeCo Stock Option Agreement or the Puget
Stock Option Agreement.
SECTION 6.11 ACCOUNTING
No party shall, nor shall any party permit any of its subsidiaries to,
make any changes in their accounting methods, except as set forth in Section
6.11 of the WeCo Disclosure Schedule or the Puget Disclosure Schedule or as
required by law, rule, regulation or GAAP.
SECTION 6.12 POOLING
No party shall, nor shall any party permit any of its subsidiaries to,
take any action which would, or would be reasonably likely to, prevent the
Company from accounting for the business combination to be effected by the
Merger as a pooling of interests in accordance with GAAP and applicable SEC
regulations, and each party hereto shall use all reasonable efforts to achieve
such result (including taking such actions as may be necessary to cure any facts
or circumstances that could prevent such transactions from qualifying for
pooling-of-interests accounting treatment).
SECTION 6.13 TAX-FREE STATUS
No party shall, nor shall any party permit any of its subsidiaries to,
take any action which would, or would be reasonably likely to, adversely affect
the status of the Merger as a tax-free transaction (except as to cash received
(i) upon the exercise of dissenters' rights or (ii) for fractional shares) under
Section 368(a) of the Code, and each party hereto shall use all reasonable
efforts to achieve such result.
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SECTION 6.14 AFFILIATE TRANSACTIONS
Except as set forth in Section 6.14 of the WeCo Disclosure Schedule or
the Puget Disclosure Schedule, no party shall, nor shall any party permit any of
its subsidiaries to, enter into any agreement or arrangement with any other
person which, directly or indirectly, controls or is under common control with
or is controlled by such party, or any of its respective subsidiaries on terms
to such party or its subsidiaries materially less favorable than could be
reasonably expected to have been obtained with an unaffiliated third party on an
arm's-length basis, other than transfers of assets or liabilities between or
among (i) WeCo and any of the wholly-owned WNG Subsidiaries or (ii) Puget and
any of the wholly-owned Puget Subsidiaries.
SECTION 6.15 COOPERATION, NOTIFICATION
Each party shall, and shall cause its subsidiaries to, (i) confer on a
regular and frequent basis with one or more representatives of the other party
to discuss, subject to applicable law, material operational matters and the
general status of its ongoing operations; (ii) promptly notify the other party
of any significant changes in its business, operations, properties, assets,
financial condition, results of operations or prospects; (iii) advise the other
party of any change or event which has or would cause any representation or
warranty of such party made in or pursuant to this Agreement, the WeCo Stock
Option Agreement or the Puget Stock Option Agreement to be incorrect or any such
covenant or agreement of such party to be breached, or which has had or, to the
knowledge of such party, insofar as reasonably can be foreseen, could result in,
a WeCo Material Adverse Effect or a Puget Material Adverse Effect, as the case
may be; and (iv) promptly provide the other party with copies of all filings
made by such party or any of its subsidiaries with any state or federal court,
administrative agency, commission or other Governmental Authority in connection
with this Agreement and the transactions contemplated hereby.
SECTION 6.16 RATE MATTERS
Each party shall, and shall cause its subsidiaries to, discuss with the
other party any changes in its or its subsidiaries' rates or charges (other than
automatic cost pass-through adjustments), standards of service or accounting
from those in effect on the date of this Agreement and consult with the other
party prior to making any filing (or any amendment thereto), or effecting any
agreement, commitment, arrangement or consent with governmental regulators,
whether written or oral, formal or informal, with respect thereto, and no party
will make any filing to change its or its subsidiaries' rates on file with any
Governmental Authority that would have a material adverse effect on the
prospects of the Company following the Merger.
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SECTION 6.17 THIRD-PARTY CONSENTS
Each party shall, and shall cause its respective subsidiaries to, use all
commercially reasonable efforts to obtain all WeCo Required Consents or Puget
Required Consents, as the case may be. Each party shall promptly notify the
other party of any failure or prospective failure to obtain any such consents
and, if requested by the other party, shall provide to the other party copies of
all WeCo Required Consents or Puget Required Consents, as the case may be,
obtained by such party.
SECTION 6.18 NO BREACH, ETC.
No party shall, nor shall any party permit any of its subsidiaries to,
willfully take any action that would or insofar as reasonably can be foreseen,
could result in a material breach of any provision of this Agreement, the WeCo
Stock Option Agreement or the Puget Stock Option Agreement, or in any of the
representations and warranties set forth in this Agreement, the WeCo Stock
Option Agreement or the Puget Stock Option Agreement, as the case may be, being
untrue on and as of the Closing Date.
SECTION 6.19 TAX MATTERS
Except as set forth in Section 6.19 of the WeCo Disclosure Schedule or
the Puget Disclosure Schedule, no party shall make or rescind any material
express or deemed election relating to Taxes, settle or compromise any material
claim, action, suit, litigation, proceeding, arbitration, investigation, audit
or controversy relating to Taxes to the extent any such settlement or compromise
requires (or is reasonably likely to require, over a period of not more than
three years from the date of such settlement or compromise) payment by such
party of additional Taxes in an aggregate amount in excess of $3 million, or
change any of its methods of reporting income or deductions for federal income
tax purposes from those employed in the preparation of its federal income tax
return for the taxable year ending December 31, 1994, in the case of Puget, and
the taxable year ending September 30, 1994, in the case of WeCo, except as may
be required by applicable law, to the extent such changes of method require
payment by such party of additional Taxes in an aggregate amount in excess of $3
million.
SECTION 6.20 DISCHARGE OF LIABILITIES
No party shall pay, discharge or satisfy any material claims, liabilities
or obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the ordinary
course of business
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consistent with past practice (which includes the payment of final and
unappealable judgments) or in accordance with their terms, of liabilities
reflected or reserved against in, or contemplated by, the most recent
consolidated financial statements (or the notes thereto) of such party included
in such party's reports filed with the SEC, or incurred in the ordinary course
of business consistent with past practice.
SECTION 6.21 INSURANCE
Each party 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 and gas utility industry and employing methods of generating electric
power and fuel sources similar to those methods employed and fuels used by such
party or its subsidiaries or as set forth in Section 4.17 of the WeCo Disclosure
Schedule or Section 5.17 of the Puget Disclosure Schedule.
SECTION 6.22 PERMITS
Each party shall, and shall cause its subsidiaries to, use reasonable
efforts to maintain in effect all existing material governmental permits
pursuant to which such party or its subsidiaries operate.
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 access to (i) 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 the SEC, the Department of Justice, the Federal Trade Commission, the
WUTC, or any other federal or state regulatory agency or commission and (ii) 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
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this Agreement or for any other reason related to the transactions contemplated
by this Agreement. All documents and information furnished pursuant to this
Section 7.1 shall be subject to the Confidentiality Agreement, dated August 1,
1995, between WeCo and Puget (the "Confidentiality Agreement").
SECTION 7.2 JOINT PROXY STATEMENT AND REGISTRATION STATEMENT
(a) Preparation and Filing. As promptly as reasonably practicable after
the date hereof, the parties will prepare and file with the SEC the Joint Proxy
Statement/Prospectus and the Registration Statement. The parties will take such
actions as may be reasonably required to cause the Registration Statement to be
declared effective under the Securities Act as promptly as practicable after
such filing and to cause the shares of Company Common Stock and Company
Preferred 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 general service of process in any jurisdiction where it 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 Registration Statement or the Joint Proxy Statement/Prospectus. The
Registration Statement and the Joint Proxy Statement/Prospectus will comply as
to form in all material respects with the Securities Act and the rules and
regulations thereunder. The parties shall take such action as may be reasonably
required to cause the shares of Company Common Stock and associated Rights and
Company Preferred Stock, if applicable, issuable in the Merger to be approved
for listing on the NYSE upon official notice of issuance.
(b) Letter of Puget Accountants. Puget shall use its best efforts to
cause to be delivered to Puget, WeCo and WNG a letter of Coopers & Xxxxxxx
L.L.P., dated a date within two business days before the effective date of the
Registration Statement, and addressed to Puget, WeCo and WNG, in form and
substance reasonably satisfactory to Puget, WeCo and WNG and customary in scope
and substance for "cold comfort" letters delivered by independent public
accountants in connection with registration statements similar to the
Registration Statement and proxy statements similar to the Joint Proxy
Statement/Prospectus.
(c) Letter of WeCo's Accountants. WeCo shall use best efforts to cause to
be delivered to Puget and WeCo a letter of Xxxxxx Xxxxxxxx LLP, dated a date
within two business days before the effective date of the Registration
Statement, and addressed to Puget and WeCo, in form and substance satisfactory
to Puget and WeCo and customary in scope and substance for "cold comfort"
letters delivered by independent public accountants in connection with
registration statements similar to
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the Registration Statement and proxy statements similar to the Joint Proxy
Statement/Prospectus.
(d) Fairness Opinions. It shall be a condition to the mailing of the
Joint Proxy Statement/Prospectus to the shareholders of Puget, WeCo and WNG that
(i) Puget shall have received an opinion from Xxxxxx Xxxxxxx & Co. Incorporated,
dated the date of the Joint Proxy Statement/Prospectus, to the effect that, as
of the date thereof, the Ratio is fair from a financial point of view to the
holders of Puget Common Stock and (ii) WeCo shall have received an opinion from
Xxxxxxx, Sachs & Co., dated the date of the Joint Proxy Statement/Prospectus, to
the effect that, as of the date thereof, the Ratio is fair to the holders of
WeCo Common Stock.
SECTION 7.3 REGULATORY MATTERS
(a) HSR Filings. As promptly as reasonably practicable after the date
hereof, each party hereto shall file or cause to be filed with the Federal Trade
Commission and the Department of Justice any notifications required to be filed
under the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), and the rules and regulations promulgated thereunder with respect to
the transactions contemplated hereby, and will respond promptly to any requests
for additional information made by either of such agencies.
(b) Other Regulatory Approvals. Each party hereto shall cooperate and use
its best efforts to promptly prepare and file all necessary documentation, to
effect all necessary applications, notices, petitions, filings and other
documents, and use all commercially reasonable efforts to obtain all necessary
permits, consents, approvals and authorizations of all Governmental Authorities
necessary or advisable to consummate the transactions contemplated by this
Agreement, including, without limitation, the Puget Required Statutory Approvals
and the WeCo Required Statutory Approvals. Puget shall have the right to review
and approve in advance all the information relating to Puget, on the one hand,
and WeCo and WNG shall have the right to review and approve in advance all the
information relating to WeCo and WNG, on the other hand, in either case, which
appear in any filing made with the WUTC in connection with the transactions
contemplated by this Agreement or the Merger; it being understood that the
parties shall jointly, and on an equal basis, coordinate the overall development
of the positions taken and the regulatory action requested (the "Regulatory
Plan") in such filings. Puget, WeCo and WNG agree that they will consult with
each other with respect to the obtaining of all such necessary permits,
consents, approvals and authorizations of Governmental Authorities. Efforts to
obtain any necessary approvals from the Governmental Authorities in addition to
the WUTC shall be at the joint direction of Puget and WeCo, it being understood
that
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all positions taken in the filings with such Governmental Authorities shall be
consistent with the Regulatory Plan.
SECTION 7.4 SHAREHOLDER APPROVAL
(a) Approval of WeCo and WNG Shareholders. Subject to the provisions of
Sections 7.4(c) and (d), each of WeCo and WNG shall, as promptly as reasonably
practicable after the date hereof, (i) take all steps necessary to duly call,
give notice of, convene and hold a special meeting of its respective
shareholders (collectively the "WeCo Special Meetings") for the purpose of
securing the WeCo Shareholders' Approvals, (ii) distribute to its shareholders
the Joint Proxy Statement/Prospectus in accordance with applicable federal and
state law and with its articles of incorporation and bylaws, (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 Puget with respect to each of the
foregoing matters.
(b) Approval of Puget Shareholders. Puget shall, as promptly as
reasonably practicable after the date hereof (i) take all steps reasonably
necessary to duly call, give notice of, convene and hold a special meeting of
its shareholders (the "Puget Special Meeting") for the purpose of securing the
Puget Shareholders' Approval, (ii) distribute to its shareholders the Joint
Proxy Statement/Prospectus in accordance with applicable federal and state law
and its Restated Articles of Incorporation and Bylaws, (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 WeCo with respect to each of the foregoing
matters.
(c) Meeting Date. The Puget Special Meeting and the WeCo Special Meetings
shall be held on the same day unless otherwise agreed by Puget, WeCo and WNG.
(d) Fairness Opinions Not Withdrawn. It shall be a condition to the
obligation of WeCo and WNG to hold the WeCo Special Meetings that the opinion of
Xxxxxxx, Xxxxx & Co. referred to in Section 7.2(d) shall not have been
withdrawn, and it shall be a condition to the obligation of Puget to hold the
Puget Special Meeting that the opinion of Xxxxxx Xxxxxxx & Co. Incorporated
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
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under one of the parties' directors and officers liability insurance policies,
from and after the Effective Time, the Company shall, to the fullest extent
permitted by applicable law, indemnify, defend and hold harmless each person who
is now, or has been at any time prior to the date hereof, or who becomes prior
to the Effective Time, a director, officer or employee of the parties hereto or
any subsidiary thereof (each an "Indemnified Party" and, collectively, the
"Indemnified Parties") against all losses, expenses (including reasonable
attorneys' 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 (i) based on, or arising out of the fact that such person is or was a
director, officer or employee of such party or a subsidiary of such party or
(ii) based on, arising out of or pertaining 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 Company
shall pay the reasonable fees and expenses of counsel selected by the
Indemnified Parties, which counsel shall be reasonably satisfactory to the
Company, promptly after statements therefor are received and otherwise advance
to such Indemnified Party upon request reimbursement of documented expenses
reasonably incurred, in either case to the extent not prohibited by the WBCA and
upon receipt of any affirmation and undertaking required by the WBCA, (ii) the
Company will cooperate in the defense of any such matter and (iii) any
determination required to be made with respect to whether an Indemnified Party's
conduct complies with the standards set forth under Washington law and the
Company's Restated Articles of Incorporation or Bylaws shall be made by
independent counsel mutually acceptable to the Company and the Indemnified
Party; provided, however, that the Company shall not be liable for any
settlement effected without its written consent (which consent shall not be
unreasonably withheld). 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
any two or more Indemnified Parties.
(b) Insurance. For a period of six years after the Effective Time, the
Company shall cause to be maintained in effect the policies of directors' and
officers' liability insurance maintained by WeCo and WNG for the benefit of
those persons who are covered by such policies at the Effective Time (or the
Company may substitute therefor policies of at least the same coverage with
respect to matters occurring prior to the Effective Time), to the extent that
such liability insurance can be maintained annually at a cost to the Company not
greater than 200 percent of the premium for the current WeCo and WNG directors'
and officers' liability insurance;
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provided that if such insurance cannot be so maintained or obtained at such
cost, the Company shall maintain or obtain as much of such insurance as can be
so maintained or obtained at a cost equal to 200 percent of the current annual
premiums of WeCo and WNG for such insurance.
(c) Successors. In the event the Company or any of its successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then and in either such case, proper provision shall be made so
that the successors and assigns of the Company shall assume the obligations set
forth in this Section 7.5.
(d) Survival of Indemnification. To the fullest extent permitted by law,
from and after the Effective Time, all rights to indemnification now existing in
favor of the employees, agents, directors or officers of Puget, WeCo and their
respective subsidiaries with respect to their activities as such prior to the
Effective Time, as provided in their respective Articles of Incorporation or
Bylaws, 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 DISCLOSURE SCHEDULES
On the date of this Agreement, (i) WeCo and WNG have delivered to Puget a
schedule (the "WeCo Disclosure Schedule"), accompanied by a certificate signed
by the chief financial officer of WeCo stating that the WeCo Disclosure Schedule
is being delivered pursuant to this Section 7.6(i), and (ii) Puget has delivered
to WeCo a schedule (the "Puget Disclosure Schedule"), accompanied by a
certificate signed by the chief financial officer of Puget stating that the
Puget Disclosure Schedule is being delivered pursuant to this Section 7.6(ii).
The WeCo Disclosure Schedule and the Puget Disclosure Schedule are collectively
referred to herein as the "Disclosure Schedules." The Disclosure Schedules, when
so delivered, shall be deemed to constitute an integral part of this Agreement
and to modify or otherwise affect the respective representations, warranties,
covenants or agreements of the parties hereto contained herein to the extent
that such representations, warranties, covenants or agreements expressly refer
to the Disclosure Schedules. Anything to the contrary contained herein or in the
Disclosure Schedules notwithstanding, any and all
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statements, representations, warranties or disclosures set forth in the
Disclosure Schedules shall be deemed to have been made on and as of the date of
this Agreement.
SECTION 7.7 PUBLIC ANNOUNCEMENTS
Subject to each party's disclosure obligations imposed by law or any
applicable national securities exchange, Puget, WeCo and WNG 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
parties (which consent shall not be unreasonably withheld).
SECTION 7.8 RULE 145 AFFILIATES
WeCo shall identify in a letter to Puget all persons who will be, at the
Closing Date, "affiliates" of WeCo, as such term is used in Rule 145 under the
Securities Act. WeCo shall use all reasonable efforts to cause its affiliates to
deliver to the Company on or prior to the Closing Date a written agreement
substantially in the form attached as Exhibit 7.8 (each, an "Affiliate
Agreement"). If any affiliate refuses to provide such a written agreement, the
Company shall, in lieu of receipt of such written agreement, be entitled to
place appropriate legends on the certificates evidencing the Company Common
Stock to be received by such affiliate pursuant to the terms of this Agreement,
and to issue appropriate stock transfer instructions to the transfer agent for
Company Common Stock, to the effect that the shares of Company Common Stock
received or to be received by such affiliate pursuant to the terms of this
Agreement may only be sold, transferred or otherwise conveyed, and the holder
thereof may only reduce his interest in or risks relating to such shares of
Company Common Stock, pursuant to an effective registration statement under the
Securities Act, in compliance with Rule 145, as amended from time to time, or in
a transaction which, in the opinion of legal counsel satisfactory to the
Company, is exempt from the registration requirements of the Securities Act. The
foregoing restrictions on the transferability of Company Common Stock shall
apply to all purported sales, transfers and other conveyances of the shares of
Company Common Stock received or to be received by such affiliate pursuant to
this Agreement and to all purported reductions in the interest in or risks
relating to such shares of Company Common Stock, whether or not such affiliate
has exchanged the certificates previously evidencing such affiliates' shares of
WeCo Common Stock for certificates evidencing the shares of Company Common Stock
into which such shares were converted. The Joint Proxy Statement/Prospectus and
the Registration Statement shall disclose the foregoing in a reasonably
prominent manner.
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SECTION 7.9 EMPLOYEE AGREEMENTS AND WORK-FORCE MATTERS
(a) Certain Employee Agreements. Subject to Section 7.10 and Section
7.16, the Company and its subsidiaries shall honor, without modification, all
contracts, agreements, collective bargaining agreements and commitments of the
parties prior to the date hereof which apply to any current or former employee
or current or former director of the parties hereto; provided, however, that
this undertaking is not intended to prevent the Company from enforcing such
contracts, agreements, collective bargaining agreements and commitments in
accordance with their terms, including, without limitation, any right to amend,
modify, suspend, revoke or terminate any such contract, agreement, collective
bargaining agreement or commitment.
(b) Work-Force Matters. Subject to applicable collective bargaining
agreements, for a period of two years following the Effective Time any
reductions in work-force in respect of employees of the Company shall be made on
a fair and equitable basis, in light of the circumstances and the objectives to
be achieved, giving consideration to previous work history, job experience, and
qualifications, without regard to whether employment was with Puget or the Puget
Subsidiaries or WeCo or the WNG Subsidiaries, and any employee whose employment
is terminated or whose job is eliminated by the Company or any of its
subsidiaries during such period shall be entitled to participate on a fair and
equitable basis in the job opportunity and employment placement programs offered
by the Company or any of its subsidiaries. No provision of this Section 7.9
shall be deemed to constitute an employment contract between the Company and any
individual, or a waiver of the Company's right to discharge any employee at any
time with or without cause, and no individual shall have any contractual rights
as a third-party beneficiary of this Section 7.9 or of Section 7.10 or Section
7.11.
SECTION 7.10 EMPLOYEE BENEFIT PLANS
(a) Maintenance of WeCo and Puget Benefit Plans. Each of the WeCo Benefit
Plans and Puget Benefit Plans, other than such plans specifically provided for
in Section 7.10(b) or Section 7.11, in effect at the date of this Agreement (or
as amended in accordance with this Agreement), shall be maintained in effect
with respect to the employees or former employees of WeCo and any of the WNG
Subsidiaries, on the one hand, and of Puget and any of the Puget Subsidiaries,
on the other hand, respectively, who are covered by any such benefit plan
immediately prior to the Closing Date (the "Affiliated Employees") until the
Company otherwise determines on or after the Effective Time; provided, however,
that nothing herein contained, other than the provisions of Section 6.9 hereof,
shall limit any reserved
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right contained in any such WeCo Benefit Plan or Puget Benefit Plan to amend,
modify, suspend, revoke or terminate any such plan; provided, further, however,
that for a period of not less than one year following the Effective Time, the
Company or its subsidiaries shall provide to nonbargaining unit Affiliated
Employees benefits, other than those provided under the plans referred to in
Section 7.10(b) and Section 7.11, that are no less favorable in the aggregate
than those provided immediately prior to the Closing Date under the WeCo Benefit
Plans or the Puget Benefit Plans, as the case may be. Without limiting the
foregoing, each nonbargaining unit participant of any such WeCo Benefit Plan or
Puget Benefit Plan shall receive credit for purposes of eligibility to
participate, vesting, benefit accrual and eligibility to receive benefits under
any benefit plan of the Company or any of its subsidiaries or affiliates (other
than those plans referred to in Section 7.10(b) and Section 7.11) for which such
individual is otherwise eligible for service credited for the corresponding
purpose under such WeCo Benefit Plan or Puget Benefit Plan, as the case may be;
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. Any
person hired by the Company or any of its subsidiaries on or after the Closing
Date who was not employed by any party hereto or its subsidiaries immediately
prior to the Closing Date shall be eligible to participate in such benefit plans
maintained, or contributed to, by the subsidiary, division or operation by which
such person is employed, provided that such person meets the eligibility
requirements of the applicable plan. The rights of bargaining unit Affiliated
Employees shall be determined under the terms of the applicable bargaining
agreement.
(b) Adoption of Company Replacement Plans. The parties hereto intend that
ongoing benefit programs will not result in a materially larger cost to the
Company than to Puget and WeCo. Accordingly, they agree that with respect to
nonbargaining unit employees the following actions are intended to be taken with
respect to the employee benefit programs set forth in this Section 7.10(b).
However, final action regarding such plans will be subject to the discretion of
the Company's Board of Directors. Any references in the subsections below to
employees and plans shall be deemed to be in reference to only nonbargaining
unit employees and plans (or nonbargaining unit portions of any plans). With
respect to bargaining unit employees and plans (or portions of any plans), the
Company shall act in accordance with the applicable collective bargaining
agreement but shall make reasonable efforts to insure similar treatment to the
extent permitted by such agreement.
(i) Defined Benefit Plans. Effective as of the day immediately
preceding the Effective Time all individuals who are participating in the
qualified defined benefit plan maintained by WeCo, WNG or any of the WNG
Subsidiaries (the "WeCo Pension Plan") shall cease accruing benefits
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thereunder. WeCo or WNG will take all steps necessary, including the
preparation of a plan amendment and the distribution of notices to
employees on a timely basis, to effectuate this cessation of benefit
accruals. Effective as of the Effective Time, but subject to the
qualification requirements of Section 401(a) of the Code, the defined
benefit pension plan maintained by Puget (the "Puget Pension Plan") shall
be amended by the Board of Directors of the Company to reflect the
following:
(A) All individuals who were actively participating under the
WeCo Pension Plan immediately prior to the Effective Time shall commence
participation under the Puget Pension Plan effective as of the Effective
Time. Each other eligible employee of the Company shall commence
participation in the Puget Pension Plan upon satisfaction of the
eligibility and participation requirements set forth thereunder. For
purposes of the immediately preceding sentence, and for purposes of
determining an individual's vested interest in the Puget Pension Plan,
service with WeCo or any of the WNG Subsidiaries will be considered as
service performed for the Company.
(B) Each individual who was an active participant in the WeCo
Pension Plan immediately prior to the Effective Time shall, for purposes
of determining the amount of such individual's accrued benefit under the
Puget Pension Plan on and after the Effective Time, be granted
past-service credit equal to the number of years of service credited to
such individual under the WeCo Pension Plan for benefit accrual purposes.
However, each such individual's accrued benefit under the Puget Pension
Plan shall be offset by such individual's accrued benefit under the WeCo
Pension Plan (the "Offset"); provided, however, that in no event shall
such individual's Offset exceed such individual's accrued benefit under
the Puget Pension Plan attributable to such individual's past service
credit, determined as of the Effective Time. The accrued benefit of each
individual who has a vested interest in the WeCo Pension Plan, but who
does not become an employee of the Company or any of the Puget
Subsidiaries, shall be determined pursuant to the terms of the WeCo
Pension Plan as in effect immediately prior to the Effective Time.
The WeCo Pension Plan shall be merged into the Puget Pension Plan pursuant to
the provisions of Section 414(l) of the Code effective as of the Effective Time.
To accommodate such merger, the Puget Pension Plan will be amended, if
necessary, to prevent any benefit cutback as described in Section 411(d)(6) of
the Code. The parties hereto agree to cooperate in the preparation of all
materials necessary to effect the merger of such plans, and the requisite
transfer of assets and liabilities, on a timely basis.
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(ii) 401(k) Plans. Effective as of the day immediately preceding the
Effective Time the cash-or-deferred profit sharing plans maintained by
WeCo, WNG or any of the WNG Subsidiaries for nonbargaining unit employees
(the "WeCo 401(k) Plan") shall be amended to provide that no additional
employer or employee contributions shall be made thereto for periods
beginning on or after the Effective Time. Effective as of the Effective
Time, the 401(k) plan maintained by Puget (the "Company 401(k) Plan")
shall provide that each individual who, immediately prior to the
Effective Time, was a participant in the WeCo 401(k) Plan shall become
eligible to participate in the Company 401(k) Plan as of the Effective
Time. Each other employee of the Company shall begin participation in the
Company 40l(k) Plan upon satisfaction of the eligibility and
participation requirements set forth thereunder. For purposes of the
immediately preceding sentence, and for purposes of determining an
individual's vested interest in the Company 401(k) Plan, service with
WeCo or any of the WNG Subsidiaries will be considered as service
performed for the Company. As soon as practicable after the Effective
Time, the assets and liabilities contained under the WeCo 401(k) Plan
shall be transferred to the Company 401(k) Plan in transactions
satisfying the requirements of Sections 414(l) and 411(d)(6) of the Code.
(iii) Stock Plans. The WeCo Employee Stock Purchase Plan, Incentive
Stock Option Plan, Performance Share Plan and Directors' Stock Bonus Plan
shall be replaced by the Puget 1995 Incentive Compensation Plan (the
"Company Stock Plan") providing for the grant of such stock awards based
upon the Company Common Stock as the Board of Directors may determine.
The Company shall seek shareholder approval at the Puget Special Meeting
to increase the number of shares issuable under the Company Stock Plan
from 500,000 shares to 1,200,000 shares. Affiliated Employees of WeCo and
any of the WNG Subsidiaries shall receive, for a period of not less than
one year following the Effective Time, awards under the Company Stock
Plan that are no less favorable in the aggregate than the equity-based
awards provided to other employees of the Company in comparable
positions.
(iv) Health and Medical Plans. All employees of WeCo or any of the
WNG Subsidiaries who become employees of the Company as of the Effective
Time, and who are within the class of individuals eligible to participate
therein, shall become eligible to participate in Puget's existing health
and medical benefits plans (the "Company Health and Medical Plan") as of
the Effective Time and will not be subject to any restrictions on
preexisting conditions. As of the Effective Time, such individuals also
shall be entitled to make new benefit elections subject to the terms and
conditions of the Company Health
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and Medical Plan, the related cafeteria plan, and the requirements of
Section 125 of the Code and the regulations promulgated thereunder.
Individuals who retire from WeCo or any of the WNG Subsidiaries prior to
the Effective Time shall be entitled to receive such retiree health and
medical benefits, if any, as they are entitled to receive under, and such
benefits shall be subject to, the terms of the applicable WeCo Benefit
Plan as in effect from time to time; provided, however, that nothing
contained herein shall prevent the Company from amending or terminating
any such WeCo Benefit Plan to the extent that WeCo or any of the WNG
Subsidiaries could have amended or terminated such WeCo Benefit Plan.
(v) Cafeteria Plans. All individuals who participated in the
cafeteria plan maintained by WeCo or any of the WNG Subsidiaries (the
"WeCo Cafeteria Plan") immediately prior to the Effective Time shall be
eligible to participate in Puget's flexible benefits unreimbursed medical
expense and dependent care expense plans (the "Company Cafeteria Plan")
effective as of the Effective Time and, to the extent applicable, will be
credited with their unreimbursed medical expense and dependent care
expense account balances under the WeCo Cafeteria Plan determined
immediately prior to the Effective Time. All other employees of the
Company shall become eligible to participate in the Company Cafeteria
Plan pursuant to the eligibility and participation requirements of such
plan.
(vi) Other Executive Compensation Programs. After the Effective Time,
the Company will maintain all nonqualified executive compensation plans
(other than those described in Section 7.10(b)(iii) or Section 7.11),
including, but not limited to, deferred compensation plans, directors'
plans, SERPs, etc. (the "Executive Compensation Programs") currently
sponsored by WeCo or any of the WNG Subsidiaries solely for the purposes
of providing for the continuing payment of benefits being paid thereunder
or the maintenance of benefits accrued thereunder prior to the Effective
Time; provided, however, that the Company shall provide to participants
of the Executive Compensation Programs, for a period of not less than one
year following the Effective Time, benefits that are no less favorable in
the aggregate than those provided under the Executive Compensation
Programs.
(c) Modification by Mutual Agreement. During the period following the
signing of this Agreement and preceding the Effective Time (the "Interim
Period"), a consultant that is acceptable to both Puget and WeCo shall be
retained to study the Puget Benefit Plans and WeCo Benefit Plans and provide a
recommendation with respect to the treatment of the Puget Benefit Plans and the
WeCo Benefit Plans
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following the Effective Time. Puget and WeCo shall share such consultant's fees
for such project equally. Puget and WeCo agree to reasonably cooperate in good
faith with such consultant and with one another to facilitate such study. During
the Interim Period, whether as a result of such study or otherwise, Puget and
WeCo may mutually agree that one or more of the Puget Benefit Plans and/or the
WeCo Benefit Plans will be treated differently than as provided in Section
7.10(a), Section 7.10(b) or Section 7.11(a) following the Effective Time. Any
such agreement shall be in writing and shall be deemed to be a part of this
Agreement.
Nothing contained in this Section 7.10 or Section 7.11 shall be deemed to
give any former, current or future employee or director of Puget, any Puget
Subsidiary, WeCo or any WNG Subsidiary, or any beneficiary of any such employee
or director, any right, contractual or otherwise, to any particular benefit,
whether before or after the Effective Time so as to limit the ability of the
parties to make any agreement or amendment of the kind referred to in this
Section 7.10(c).
SECTION 7.11 INCENTIVE, STOCK AND OTHER PLANS
(a) Amendment of WeCo Stock Plans. Effective as of the Effective Time,
WeCo shall take any action necessary under the WeCo Performance Share Plan,
Employee Stock Purchase Plan, Stock Option Plan, Dividend Reinvestment Plan,
Directors' Stock Bonus Plan and any other employer benefit plan under which WeCo
Common Stock may be issued (the "WeCo Stock Plans") and each underlying
agreement implementing awards or grants under the WeCo Stock Plans to provide
that (i) each outstanding option to purchase shares of WeCo Common Stock (each,
a "WeCo Stock Option"), along with any tandem stock appreciation right, shall
constitute an option to acquire shares of Company Common Stock, on the same
terms and conditions as were applicable under such WeCo Stock Option, based on
the same number of shares of the Company Common Stock as the holder of such WeCo
Stock Option would have been entitled to receive pursuant to the Merger in
accordance with Article II had such holder exercised such option in full
immediately prior to the Effective Time; provided, that the number of shares,
the option price and the terms and conditions of exercise of such option shall
be determined in a manner that preserves both (A) the aggregate gain (or loss)
on the WeCo Stock Option immediately prior to the Effective Time and (B) the
ratio of the exercise price per share subject to the WeCo Stock Option to the
fair market value (determined immediately prior to the Effective Time) per share
subject to such option; and provided, further, that in the case of any option to
which Section 421 of the Code applies by reason of its qualification under any
of Sections 422-424 of the Code, the option price, the number of shares
purchasable pursuant to such option and the term and conditions of exercise of
such option shall be determined in order to comply with
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Section 424(a) of the Code and (ii) each other outstanding award under the WeCo
Stock Plan ("WeCo Stock Awards") shall constitute an award based upon the same
number of shares of Company Common Stock as the holder of such WeCo Stock Award
would have been entitled to receive pursuant to the Merger in accordance with
Article II had such holder been the absolute owner, immediately before the
Effective Time, of the shares of WeCo Common Stock on which such WeCo Stock
Award is based, and otherwise on the same terms and conditions as governed such
WeCo Stock Award immediately before the Effective Time. At the Effective Time,
the Company shall assume each stock award agreement relating to the WeCo Stock
Plans, each as amended as previously provided. As soon as practicable after the
Effective Time, the Company shall deliver to the holders of WeCo Stock Options
and WeCo Stock Awards appropriate notices setting forth such holders' rights
pursuant to the Company Stock Plan and each underlying stock award agreement,
each as assumed by the Company.
(b) Company Action. With respect to the Company Stock Plan which will
replace the WeCo Stock Plans, the Company shall take all corporate action
necessary or appropriate to (i) obtain shareholder approval with respect to such
plan to the extent such approval is required for purposes of the Code or other
applicable law, or to the extent the Company deems it desirable, to enable such
plan to comply with Rule 16b-3 promulgated under the Exchange Act, (ii) reserve
for issuance under such plan or otherwise provide a sufficient number of shares
of Company Common Stock for delivery upon payment of benefits, grants of awards
or exercise of options under such plan and (iii) as soon as practicable after
the Effective Time, file registration statements on Form S-3 or Form S-8, as the
case may be (or any successor or other appropriate forms), with respect to the
shares of Company Common Stock subject to such plan to the extent such
registration statement is required under applicable law, and the Company shall
use its best efforts to maintain the effectiveness of such registration
statements (and maintain the current status of the prospectuses contained
therein or related thereto) for so long as such benefits and grants remain
payable and such options remain outstanding.
(c) Dividend Reinvestment Plans. The Dividend Reinvestment and Stock
Purchase Plan of WeCo shall terminate as of the Effective Time, and Puget and
WeCo shall send notices of termination to participants in the plan prior to the
Effective Time.
SECTION 7.12 INDEBTEDNESS
(a) Execution of Supplemental Indenture. If pursuant to Section 1.1
hereof the WeCo/WNG/Puget Merger is effected, at the Effective Time, the Company
shall execute, and promptly cause to be recorded, a supplemental indenture to
the Indenture of First Mortgage dated as of April 1, 1957 between WNG and Xxxxxx
Trust and
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Savings Bank (as supplemented and modified from time to time, the "WNG
Indenture") in accordance with Section 14.01(4) of the WNG Indenture and shall
take all necessary action to comply with Section 14.07 of the WNG Indenture.
(b) No Second Liens on WNG Property. Neither Puget nor the Company shall
execute any supplemental indenture to the First and Refunding Mortgage dated as
of June 2, 1924 between Puget and Old Colony Trust Company of Boston (as
supplemented and modified from time to time, the "Puget Indenture") subjecting
to the lien of the Puget Indenture (i) all or any part of the trust estate of
WNG subject to the lien of the WNG Indenture immediately prior to the Effective
Time or (ii) all or any part of the substitutions, replacements, additions,
betterments, developments, extensions and enlargements thereafter acquired to,
of or upon such turst estate.
(c) No Second Liens on Puget Property. Neither WeCo, WNG nor the Company
shall execute any supplemental indenture to the WNG Indenture subjecting to the
lien of the WNG Indenture (i) all or any part of the trust estate of Puget
subject to the lien of the Puget Indenture immediately prior to the Effective
Time or (ii) all or any part of the substitutions, replacements, additions,
betterments, developments, extensions and enlargements thereafter acquired to,
of or upon such trust estate.
SECTION 7.13 NO SOLICITATIONS
No party hereto shall, and each such party shall cause its subsidiaries
not to, permit any of its Representatives to, and shall use its best efforts to
cause such persons not to, directly or indirectly, initiate, solicit or
encourage, or take any action to facilitate the making of any offer or proposal
which constitutes or is reasonably likely to lead to any Takeover Proposal (as
defined below), or, in the event of any unsolicited Takeover Proposal, engage in
negotiations or provide any confidential information or data to any person
relating to any Takeover Proposal. Notwithstanding the foregoing, in the event
of an unsolicited Takeover Proposal, unless the WeCo Shareholder Approval and
the Puget Shareholder Approval shall have both been obtained, WeCo or Puget may,
to the extent that its Board of Directors is advised in a written, reasoned
opinion of outside counsel that such action is required by its fiduciary duties
under law, participate in discussions or negotiations with and furnish
information to any person in connection with an unsolicited Takeover Proposal
made by such person. Each party hereto shall notify the other party orally and
in writing of any such inquiries, offers or proposals (including, without
limitation, the terms and conditions of any such proposal and the identity of
the person making it), within 24 hours of the receipt thereof, shall keep the
other party informed of the status and details of any such inquiry and shall
give the other party five days' advance notice of any agreement to be entered
into with or any information to be supplied to any person making such inquiry,
offer or proposal. Each party hereto shall immediately cease
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and cause to be terminated all existing discussions and negotiations, if any,
with any parties conducted heretofore with respect to any Takeover Proposal. As
used in this Section 7.13, "Takeover Proposal" shall mean any tender or exchange
offer, proposal for a merger, consolidation or other business combination
involving any party to this Agreement or any of its material subsidiaries, or
any proposal or offer (in each case, whether or not in writing and whether or
not delivered to the stockholders of a party generally) to acquire in any
manner, directly or indirectly, a substantial equity interest in, or a
substantial portion of the assets of any party to this Agreement or any of its
material subsidiaries, other than pursuant to the transactions contemplated by
this Agreement. Nothing contained herein shall prohibit a party from taking and
disclosing to its shareholders a position contemplated by Rule 14e-2(a) under
the Exchange Act with respect to a Takeover Proposal by means of a tender offer.
SECTION 7.14 COMPANY BOARD OF DIRECTORS
Puget's and WeCo's Boards of Directors will take such action as may be
necessary to cause the number of directors comprising the full Board of
Directors of the Company at the Effective Time to be not more than 15 persons,
two-thirds of whom shall be designated by Puget prior to the Effective Time and
one-third of whom shall be designated by WeCo prior to the Effective Time. Puget
shall include among its designees Xxxxxxx X. Xxxxxxxxx and Xxxxxxx X. Xxxxxx,
and WeCo shall include among its designees Xxxxxxx X. Xxxxxxx. The initial
designation of such directors among the three classes of the Board of Directors
of the Company shall be agreed among the parties, the designees of each party to
be divided as equally as is feasible among such classes; provided, however, that
if, prior to the Effective Time, any of such designees shall decline or be
unable to serve, the party which designated such person shall designate another
person to serve in such person's stead. Unless the parties otherwise agree at
the Effective Time, at least one Board member designated by WeCo shall be named
to each committee of the Board of Directors of the Company.
SECTION 7.15 COMPANY OFFICERS
(a) Xxxxxxx X. Xxxxxxxxx shall serve as Chairman and Chief Executive
Officer of the Company in accordance with the terms of his employment contract
referred to in Section 7.16.
(b) Xxxxxxx X. Xxxxxxx shall serve as President and Chief Operating
Officer of the Company in accordance with the terms of his employment contract
referred to in Section 7.16.
(c) Xxxxxxx X. Xxxxxx shall serve as Vice Chairman of the Company.
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(d) Xxxxx X. Xxxxxxxxx shall serve as Chief Financial Officer of the
Company.
SECTION 7.16 EMPLOYMENT CONTRACTS
The Company shall, as of the Effective Time, enter into employment
contracts with Messrs. Sonstelie and Xxxxxxx in the forms set forth in Exhibits
7.16.1 and 7.16.2, respectively.
SECTION 7.17 TRANSITION MANAGEMENT
As promptly as practicable after the date hereof, the parties shall
create a special transition management task force (the "Task Force") which shall
be headed by Xxxxxxx X. Xxxxxxxxx or an individual designated by him and Xxxxxxx
X. Xxxxxxx or an individual designated by him. The Task Force shall examine the
manner in which to best organize and manage the business of the Company after
the Effective Time. From time to time, the Task Force shall report its finding
to the Board of Directors of each of WeCo and Puget. After the date hereof and
prior to the Effective Time, Xx. Xxxxxxx shall attend meetings of Puget's Board
of Directors and Sonstelie shall attend meetings of WeCo's Board of Directors as
they deem appropriate in consultation with each other. In connection with their
responsibilities as co-heads of the Task Force, Messrs. Xxxxxxx and Xx.
Xxxxxxxxx shall together recommend to the Board of Directors of the Company
candidates to serve as the officers of the Company who are not otherwise
designated by this Agreement. Such officers shall be appointed by the Board of
Directors of the Company in accordance with its Bylaws.
SECTION 7.18 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 Statement/Prospectus, and the
Registration Statement as well as the filing fee relating thereto, shall be
shared equally by Puget and WeCo.
SECTION 7.19 FURTHER ASSURANCES
Subject to the terms and conditions herein provided, each of the parties
hereto agrees to use its commercially reasonable efforts, taking into account
the circumstances and giving due weight to the materiality of the matter
involved or the action required, to take, or cause to be taken, all action, and
to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the Merger and
the transactions contemplated by
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this Agreement. Each party will, and will cause its subsidiaries to, execute
such further documents and instruments and take such further actions as may
reasonably be requested by any other party in order to consummate the Merger in
accordance with the terms hereof. The parties expressly acknowledge and agree
that, although it is their current intention to effect a business combination
among themselves in the form contemplated by this Agreement, it may be
preferable to effectuate such a business combination by means of an alternative
structure in light of the conditions set forth in Section 8.1(f), Section 8.2(f)
and Section 8.3(f). Accordingly, if the only conditions to the parties'
obligations to consummate the Mergers which are not satisfied or waived are
receipt of any one or more of the WeCo Required Consents or the WeCo Required
Statutory Approvals or the Puget Required Consents or the Puget Required
Statutory Approvals, and the adoption of an alternative structure (that
otherwise substantially preserves for WeCo, WNG and Puget the economic benefits
of the Merger) would result in such conditions being satisfied or waived, then
the parties shall use their respective best efforts to effect a business
combination among themselves by means of a mutually agreed upon structure other
than the Merger that so preserves such benefits; provided that, prior to closing
any such restructured transactions, all material third party and Governmental
Authority declarations, filings, registrations, notices, authorizations,
consents or approvals necessary for the effectuation of such alternative
business combination shall have been obtained and all other conditions to the
parties' obligations to consummate the Merger, as applied to such alternative
business combination, shall have been satisfied or waived.
ARTICLE VIII
CONDITIONS
SECTION 8.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS 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:
(a) Shareholder Approvals. The WeCo Common Shareholders' Approval and the
Puget 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.
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(c) Registration Statement. The Registration Statement shall have become
effective in accordance with the provisions of the Securities Act, and no stop
order suspending such effectiveness shall have been issued and remain in effect.
(d) Listing of Shares. The shares of Company Common Stock and Company
Preferred Stock, if applicable, issuable in the Merger pursuant to Article II
shall have been approved for listing on the NYSE upon official notice of
issuance.
(e) Pooling. Each of Puget and WeCo shall have received a letter of its
independent public accountants, dated the Closing Date, in form and substance
reasonably satisfactory to WeCo and Puget, as the case may be, stating that the
Merger will qualify as a pooling of interests transaction under GAAP and
applicable SEC regulations.
(f) Statutory Approvals. The Puget Required Statutory Approvals and the
WeCo Required Statutory Approvals (other than such Puget Required Statutory
Approvals and WeCo Required Statutory Approvals that relate to the issuance of
Puget Common Stock or WeCo Common Stock pursuant to the Puget Stock Option
Agreement or the WeCo Stock Option Agreement and do not relate to the Merger)
shall have been obtained at or prior to the Effective Time; such approvals shall
have become Final Orders (as hereinafter defined); and such Final Orders shall
not, individually or in the aggregate, impose terms or conditions which would
have, or would be reasonably likely to have, a material adverse effect on the
business, operations, properties, assets, financial condition, results of
operations or prospects of the Company and its prospective subsidiaries taken as
a whole. 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.
SECTION 8.2 CONDITIONS TO OBLIGATIONS OF WECO AND WNG TO EFFECT THE MERGER
The obligation of WeCo and WNG 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 WeCo and WNG in writing pursuant to
Section 9.5:
(a) Performance of Obligations of Puget. Puget will have performed in all
material respects its agreements and covenants contained in or contemplated by
this Agreement and the Puget Stock Option Agreement required to be performed by
it at or prior to the Effective Time.
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(b) Representations and Warranties. The representations and warranties of
Puget set forth in this Agreement and the Puget Stock Option Agreement shall be
true and correct as of the date hereof and as of the Closing Date, as if made on
and as of the Closing Date (except to the extent such representations and
warranties speak only as of any other date, which need only be true and correct
as of such other date), except in each such case for such failures of
representation and warranties to be true and correct (without regard to any
materiality qualifications contained therein) which, individually or in the
aggregate, have not had and would not be reasonably likely to result in a Puget
Material Adverse Effect.
(c) Closing Certificates. WeCo and WNG shall have received a certificate
signed by the chief financial officer of Puget, 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) Puget Material Adverse Effect. No Puget Material Adverse Effect shall
have occurred and there shall exist no fact or circumstance which is reasonably
likely to have a Puget Material Adverse Effect.
(e) Tax Ruling or Opinion. WeCo and WNG shall have received (i) a private
letter ruling from the IRS providing certain assurances regarding the federal
income tax consequences of the Merger satisfactory in form and substance to WeCo
and WNG or (ii) if all the conditions set forth in Sections 8.1 and 8.2 other
than Section 8.2(e)(i) shall have been satisfied, an opinion of counsel to WeCo
and WNG, in form and substance satisfactory to WeCo and WNG, dated the Closing
Date, to the effect that the Merger will be a reorganization under Section
368(a) of the Code.
(f) Puget Required Consents. The Puget Required Consents, the failure of
which to obtain would be reasonably likely to have a Puget Material Adverse
Effect, shall have been obtained.
(g) Trigger of Puget Rights. No event has occurred that would result in
the triggering of any right or entitlement of Puget shareholders under the Puget
Rights Agreement, including a "flip-in" or "flip-over" or similar event commonly
described in such rights plans, has occurred or will occur as a result of
consummation of the Merger, which would have or be reasonably likely to result
in a Puget Material Adverse Effect or materially change the number of
outstanding equity securities of Puget or the Company, and the Rights shall not
have become nonredeemable by any action of the Puget Board of Directors.
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SECTION 8.3 CONDITIONS TO OBLIGATIONS OF PUGET TO EFFECT THE MERGER
The obligations of Puget to effect the Merger shall be further subject to
the satisfaction, prior to the Closing Date, of the following conditions, except
as may be waived by Puget in writing pursuant to Section 9.5:
(a) Performance of Obligations of WeCo and WNG. Each of WeCo and WNG will
have performed in all material respects its agreements and covenants contained
in or contemplated by this Agreement and the WeCo Stock Option Agreement
required to be performed at or prior to the Effective Time.
(b) Representations and Warranties. The representations and warranties of
each of WeCo and WNG set forth in this Agreement and the WeCo Stock Option
Agreement shall be true and correct as of the date hereof and as of the Closing
Date as if made on and as of the Closing Date (except to the extent such
representations and warranties speak only as of any other date, which need only
be true and correct as of such other date), except in each such case for such
failures of representations and warranties to be true and correct (without
regard to any materiality qualifications contained therein) which, individually
or in the aggregate, have not had and would not be reasonably likely to result
in a WeCo Material Adverse Effect.
(c) Closing Certificates. Puget shall have received certificates signed
by the chief financial officer of each of WeCo and WNG, 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) WeCo Material Adverse Effect. No WeCo Material Adverse Effect shall
have occurred, and there shall exist no fact or circumstance which is reasonably
likely to have a WeCo Material Adverse Effect.
(e) Tax Ruling or Opinion. Puget shall have received (i) a private letter
ruling from the IRS providing certain assurances regarding the federal income
tax consequences of the Merger satisfactory in form and substance to Puget or
(ii) if all the conditions set forth in Sections 8.1 and 8.3 other than Section
8.3(e)(i) shall have been satisfied, an opinion of counsel to Puget, in form and
substance satisfactory to Puget, dated the Closing Date, to the effect that the
Merger will be treated as a reorganization under Section 368(a) of the Code.
(f) WeCo Required Consents. The WeCo Required Consents, the failure of
which to obtain would be reasonably likely to have a WeCo Material Adverse
Effect, shall have been obtained.
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(g) Affiliate Agreements. The Company shall have received Affiliate
Agreements, duly executed by each "affiliate" of WeCo substantially in the form
of Exhibit 7.8, as provided in Section 7.8.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
SECTION 9.1 TERMINATION
This Agreement may be terminated at any time prior to the Closing Date,
whether before or after approval by the shareholders of the respective parties
hereto contemplated by this Agreement:
(a) by mutual written consent of the Boards of Directors of Puget and
WeCo;
(b) by any party hereto, by written notice to the other parties, if the
Effective Time shall not have occurred on or before December 31, 1996 (the
"Initial Termination Date"); provided, that if on the Initial Termination Date
the conditions to the Closing set forth in Sections 8.1(f), 8.2(f) or 8.3(f)
shall not have been fulfilled but all other conditions to the Closing shall be
fulfilled or shall then be capable of being fulfilled and the approvals required
by Section 8.1(f), 8.2(f) or 8.3(f) are being pursued with diligence, then the
Initial Termination Date shall be extended to March 31, 1997; provided, however,
that the right to terminate the Agreement under this Section 9.1(b) shall not be
available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date.
(c) by any party hereto, by written notice to the other parties, if the
Puget Shareholders' Approval shall not have been obtained at a duly held Puget
Special Meeting, including any adjournments thereof, or the WeCo Common
Shareholders' Approvals shall not have been obtained at a duly held WeCo Special
Meeting, including any adjournments thereof;
(d) by any party hereto, if any state or federal law, order, rule or
regulation is adopted or issued, which has the effect, as supported by the
written opinion of outside counsel for such party, of prohibiting the Merger, or
by any party hereto, if any court of competent jurisdiction in the United States
or any State shall have issued an order, judgment or decree permanently
restraining, enjoining or otherwise prohibiting the Merger, and such order,
judgment or decree shall have become final and nonappealable;
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(e) by WeCo, upon two days' prior notice to Puget, if, as a result of a
tender offer by a party other than Puget or any of its affiliates or any written
offer or proposal with respect to a merger, sale of a material portion of its
assets or other business combination (each, a "Business Combination") by a party
other than Puget or any of its affiliates, the Board of Directors of WeCo
determines in good faith that the fiduciary obligations of such directors under
applicable law require that such tender offer or other written offer or proposal
be accepted; provided, however, that (i) the Board of Directors of WeCo shall
have been advised in writing by outside counsel that notwithstanding a binding
commitment to consummate an agreement of the nature of this Agreement entered
into in the proper exercise of their applicable fiduciary duties, and
notwithstanding all concessions which may be offered by Puget in negotiations
entered into pursuant to clause (ii) below, such fiduciary duties would also
require the directors to reconsider such commitment as a result of such tender
offer or other written offer or proposal; and (ii) prior to any such
termination, WeCo shall, and shall cause its respective financial and legal
advisors to, negotiate with Puget to make such adjustments in the terms and
conditions of this Agreement as would enable WeCo and WNG to proceed with the
transactions contemplated herein; provided further, that Puget and WeCo
acknowledge and affirm that, notwithstanding anything in this Section 9.1(e) to
the contrary, Puget and WeCo intend this Agreement to be an exclusive agreement
and, accordingly, nothing in this Agreement is intended to constitute a
solicitation of an offer or proposal for a Business Combination, it being
acknowledged and agreed that any such offer or proposal would interfere with the
strategic advantages and benefits that Puget and WeCo expect to derive from the
Merger and other transactions contemplated hereby;
(f) by Puget, upon two days' prior notice to WeCo, if, as a result of a
tender offer by a party other than WeCo or any of its affiliates or any written
offer or proposal with respect to a Business Combination by a party other than
WeCo or any of its affiliates, the Board of Directors of Puget determines in
good faith that the fiduciary obligations of such directors under applicable law
require that such tender offer or other written offer or proposal be accepted;
provided, however, that (i) the Board of Directors of Puget shall have been
advised in writing by outside counsel that notwithstanding a binding commitment
to consummate an agreement of the nature of this Agreement entered into in the
proper exercise of their applicable fiduciary duties and notwithstanding all
concessions which may be offered by WeCo in negotiations entered into pursuant
to clause (ii) below, such fiduciary duties would also require the directors to
reconsider such commitment as a result of such tender offer or other written
offer or proposal; and (ii) prior to any such termination, Puget shall, and
shall cause its respective financial and legal advisors to, negotiate with WeCo
to make such adjustments in the terms and conditions of this Agreement as would
enable Puget to proceed with the transactions contemplated herein; provided
further, that Puget and
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WeCo acknowledge and affirm that, notwithstanding anything in this Section
9.1(f) to the contrary, Puget and WeCo intend this Agreement to be an exclusive
agreement and, accordingly, nothing in this Agreement is intended to constitute
a solicitation of an offer or proposal for a Business Combination, it being
acknowledged and agreed that any such offer or proposal would interfere with the
strategic advantages and benefits that Puget and WeCo expect to derive from the
Merger and other transactions contemplated hereby;
(g) by WeCo, by written notice to Puget, if (i) there shall have been any
breaches of the representations and warranties of Puget made herein as of the
date hereof which breaches, individually or in the aggregate, have had, would or
would be reasonably likely to result in a Puget Material Adverse Effect, and
such breaches shall not have been remedied within 20 days after receipt by Puget
of notice in writing from WeCo, specifying the nature of such breaches and
requesting that they be remedied, (ii) Puget shall have failed to perform and
comply with in all material respects its agreements and covenants hereunder, and
such failure to perform or comply shall not have been remedied within 20 days
after receipt by Puget of notice in writing from WeCo, specifying the nature of
such failure and requesting that it be remedied; or (iii) the Board of Directors
of Puget or any committee thereof (A) shall withdraw or modify in any manner
materially adverse to WeCo its approval or recommendation of this Agreement or
the Merger, (B) shall fail to reaffirm such approval or recommendation upon
WeCo's request, (C) shall approve or recommend any acquisition of Puget or a
material portion of its assets or any tender offer for shares of capital stock
of Puget, in each case, by a party other than WeCo or any of its affiliates or
(D) shall resolve to take any of the actions specified in clause (A), (B) or
(C); or
(h) by Puget, by written notice to WeCo, if (i) there shall have been any
breaches of the representations and warranties of WeCo or WNG made herein as of
the date hereof which breaches, individually or in the aggregate, have had,
would or would be reasonably likely to result in a WeCo Material Adverse Effect,
and such breaches shall not have been remedied within 20 days after receipt by
WeCo of notice in writing from Puget, specifying the nature of such breaches and
requesting that they be remedied, (ii) WeCo or WNG shall have failed to perform
and comply with in all material respects its agreements and covenants hereunder,
and such failure to perform or comply shall not have been remedied within 20
days after receipt by WeCo of notice in writing from Puget, specifying the
nature of such failure and requesting that it be remedied; or (iii) the Board of
Directors of WeCo (A) shall withdraw or modify in any manner materially adverse
to Puget its approval or recommendation of this Agreement or the Merger, (B)
shall fail to reaffirm such approval or recommendation upon Puget's request, (C)
shall approve or recommend any acquisition of WeCo or WNG or a material portion
of their assets or any tender offer for shares of capital
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stock of WeCo, in each case by a party other than Puget or any of its affiliates
or (D) shall resolve to take any of the actions specified in clause (A), (B) or
(C).
SECTION 9.2 EFFECT OF TERMINATION
In the event of termination of this Agreement by either Puget or WeCo and
WNG pursuant to Section 9.1, there shall be no liability on the part of either
Puget or WeCo and WNG or their respective officers or directors hereunder except
as provided in Section 9.3, and except that (i) Section 7.18, Section 9.3,
Section 10.2, Section 10.8 and the agreement contained in the last sentence of
Section 7.1 shall survive any such termination and (ii) no such termination
shall relieve any party from liability by reason of any willful breach of any
representation, warranty or covenant contained in this Agreement.
SECTION 9.3 TERMINATION FEE; EXPENSES
(a) Expenses Payable Upon Certain Breaches. If this Agreement is
terminated at such time that this Agreement is terminable pursuant to one (but
not both) of (x) Section 9.1(g)(i) or (ii) or (y) Section 9.1(h)(i) or (ii),
then the breaching party shall promptly (but not later than five business days
after receipt of notice from the non-breaching party) pay to the non-breaching
party an amount in cash equal to all documented out-of-pocket expenses and fees
incurred by the non-breaching party (including, without limitation, fees and
expenses payable to all legal, accounting, financial, public relations and other
professional advisors arising out of, in connection with or related to the
Merger or the transactions contemplated by this Agreement) not to exceed $7
million in the aggregate; provided, however, that if this Agreement is
terminated by a party as a result of a willful breach by the other party, (i)
the non-breaching party may pursue any remedies available to it at law or in
equity and shall, in addition to its out-of-pocket expenses (which shall be paid
as specified above and shall not be limited to $7 million), be entitled to
retain such additional amounts as such non-breaching party may be entitled to
receive at law or in equity and (ii) if (x) at the time of the breaching party's
willful breach of this Agreement, there shall have been a third party tender
offer for shares of, or a third party offer or proposal with respect to a
Business Combination involving, such party or any of its affiliates which at the
time of such termination shall not have been rejected by such party and its
board of directors and withdrawn by the third party, and (y) within two and
one-half years of such termination by the non-breaching party, the breaching
party or an affiliate thereof becomes a subsidiary of such offeror or a
subsidiary of an affiliate of such offeror or accepts a written offer to
consummate or consummates a Business Combination with such offeror or an
affiliate thereof, then such breaching party (jointly and severally with its
affiliates), upon the signing of a definitive agreement
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relating to such a Business Combination, or, if no such agreement is signed then
at the closing (and as a condition to the closing) of such breaching party
becoming such a subsidiary or of such Business Combination, will pay to the
non-breaching party an additional fee equal to $15 million in cash; provided
that in no event shall the additional termination fee provided for in Section
9.3(b) be payable if the additional fee referred to in this Section 9.3(a)(ii)
has been paid.
(b) Termination Fee in Certain Other Events. If (i) this Agreement (x) is
terminated by any party pursuant to Section 9.1(e), or Section 9.1(f) or Section
9.1(g)(iii) or Section 9.1(h)(iii), (y) is terminated following a failure of the
shareholders of any one of the parties to grant the necessary approvals
described in Sections 4.13(a)(i), 4.13(b) and 5.13 ("Shareholder Disapproval"),
or (z) is terminated as a result of such party's material breach of Section 7.4
and (ii) at the time of such termination or, in the case of any termination
following a Shareholder Disapproval, prior to the meeting of such party's
shareholders at which such Shareholder Disapproval occurred, there shall have
been a third-party tender offer for shares of, or a third-party offer or
proposal with respect to a Business Combination involving such party (WeCo and
WNG being considered a single party for purposes of this Section 9.3(b)), then
the party which is the subject of the tender offer or offer or proposal with
respect to a Business Combination (the "Target Party") shall promptly (but not
later than five business days after receipt of notice from the other party) pay
to the other party, an amount in cash equal to all documented out-of-pocket fees
and expenses incurred by the non-breaching party (including, without limitation,
fees and expenses payable to all Representatives arising out of, in connection
with or related to the Merger or the transactions contemplated by this
Agreement). In addition, if within two and one-half years after any such
termination the party which was the subject of the tender offer or offer or
proposal with respect to a Business Combination or an affiliate thereof becomes
a subsidiary of such offeror or a subsidiary of an affiliate of such offeror or
accepts a written offer to consummate or consummates a Business Combination with
such offeror or an affiliate thereof, then such Target Party (jointly and
severally with its affiliates), upon the signing of a definitive agreement
relating to such a Business Combination or, if no such agreement is signed then
at the closing (and as a condition to the closing) of such Target Party becoming
such a subsidiary or of such Business Combination, will pay to the terminating
party hereunder an additional fee equal to $15 million in cash.
(c) Expenses. The parties agree that the agreements contained in this
Section 9.3 are an integral part of the transactions contemplated by the
Agreement and constitute liquidated damages and not a penalty. If one party
fails to promptly pay to the other any fees due hereunder, the defaulting party
shall pay the costs and expenses (including legal fees and expenses) in
connection with any action, including the filing
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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.
(d) Limitation of Termination Fees. Notwithstanding anything herein to
the contrary, the aggregate amount payable to WeCo and its affiliates pursuant
to Section 9.3(a), Section 9.3(b) and the terms of the Puget Stock Option
Agreement shall not exceed $20 million, and the aggregate amount payable to
Puget and its affiliates pursuant to Section 9.3(a), Section 9.3(b) and the
terms of the WeCo Stock Option Agreement shall not exceed $20 million (including
in each case reimbursement for fees and expenses payable pursuant to this
Section 9.3). For purposes of this Section 9.3(d), the amount payable pursuant
to the terms of the Puget Stock Option Agreement or the WeCo Stock Option
Agreement, as the case may be, shall be the amount paid pursuant to Section
7(a)(i) and 7(a)(ii) thereof.
SECTION 9.4 AMENDMENT
This Agreement may be amended by parties hereto pursuant to action of
their respective Boards of Directors, at any time before or after approval
hereof by the shareholders of Puget, WeCo and WNG and prior to the Effective
Time, but after such approvals, no such amendment shall (a) alter or change the
amount or kind of shares, rights or any of the proceedings of the exchange
and/or conversion under Article II, (b) alter or change any of the terms and
conditions of this Agreement if any of the alterations or changes, alone or in
the aggregate, would materially adversely affect the rights of holders of Puget
Common Stock, Puget Preferred Stock, WeCo Common Stock or WNG Preferred Stock,
or (c) alter or change any term of the Articles of Incorporation of the Company,
except for alterations or changes that could otherwise be adopted by the Board
of Directors of the Company, without the further approval of such shareholders,
as applicable. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
SECTION 9.5 WAIVER
At any time prior to the Effective Time, the parties hereto may (a)
extend the time for the performance of any of the obligations or other acts of
the other parties hereto, (b) waive any inaccuracies in the representations and
warranties contained herein or in any document delivered pursuant hereto, and
(c) waive compliance with any of the agreements or conditions contained herein,
to the extent permitted by applicable law. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid if set forth in an
instrument in writing signed by a duly authorized officer of such party.
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ARTICLE X
GENERAL PROVISIONS
SECTION 10.1 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS
All representations, warranties, covenants and agreements in this
Agreement shall not survive the Merger, except the covenants and agreements
contained in this Article X and in Article II, the last sentence of Section 7.1,
Section 7.5, Section 7.9, Section 7.10, Section 7.11, Section 7.12, Section
7.14, Section 7.15, Section 7.16, Section 7.17 and Section 7.18, each of which
shall survive in accordance with its terms.
SECTION 10.2 BROKERS
Puget represents and warrants that, except for Xxxxxx Xxxxxxx & Co.
Incorporated, whose fees have been disclosed to WeCo 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
Puget. WeCo and WNG represent and warrant that, except for Xxxxxxx, Sachs & Co.,
whose fees have been disclosed to Puget 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 WeCo or WNG.
SECTION 10.3 NOTICES
All notices and other communications hereunder shall be in writing and
shall be deemed given if (i) delivered personally, (ii) sent by overnight
courier service (receipt confirmed in writing), (iii) delivered by facsimile
transmission (with receipt confirmed), or (iv) five days after being mailed by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
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(a) If to Puget, to:
Puget Sound Power & Light Company
X.X. Xxx 00000
Xxxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Xxxxxxx Coie
0000 Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. XxXxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
and a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
(b) If to WeCo and/or WNG, to:
Washington Energy Company
000 Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
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with a copy to:
Xxxxxx & Xxxxx/Xxxxxxx Xxxxxxxx
0000 Xxxxxx Xxxxxx
Xxxxx Xxxxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
and a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
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, the WeCo Stock Option Agreement and the Puget Stock
Option Agreement; (b) shall not be assigned by operation of law or otherwise and
(c) shall be governed by and construed in accordance with the laws of the state
of Washington applicable to contracts executed in and to be fully performed in
such state, without giving effect to its conflicts of law, rules or principles.
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."
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SECTION 10.6 COUNTERPARTS; EFFECT
This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original, but all of which shall constitute one and the
same agreement.
SECTION 10.7 PARTIES IN INTEREST
This Agreement shall be binding upon and inure solely to the benefit of
each party hereto, and, except for rights of Indemnified Parties as set forth in
Section 7.5, nothing in this Agreement, express or implied, is intended to
confer upon any person any rights or remedies of any nature whatsoever under or
by reason of this Agreement. Notwithstanding the foregoing and any other
provision of this Agreement, and in addition to any other required action of the
Board of Directors of the Company (a) a majority of the WeCo Directors (or their
successors) serving on the Board of Directors of the Company who are designated
by WeCo pursuant to Section 7.14 shall be entitled during the three-year period
commencing at the Effective Time (the "Three-Year Period") to enforce the
provisions of Section 7.9, Section 7.10, Section 7.11, and Section 7.15 on
behalf of the WeCo officers, directors and employees, as the case may be, and
(b) a majority of the Puget directors (or their successors) serving on the Board
of Directors of the Company who are designated by Puget pursuant to Section 7.14
shall be entitled during the Three-Year Period to enforce the provisions of
Sections 7.9, Section 7.10, Section 7.11, and Section 7.15 on behalf of the
Puget officers, directors and employees, as the case may be. Such directors'
rights and remedies under the preceding sentence are cumulative and are in
addition to any other rights and remedies they may have at law or in equity, but
in no event shall this Section 10.7 be deemed to impose any additional duties on
any such directors. The Company shall pay, at the time they are incurred, all
reasonable costs, fees and expenses of such directors incurred in connection
with the assertion of any rights on behalf of the persons set forth above
pursuant to this Section 10.7.
SECTION 10.8 REMEDIES
The parties agree that irreparable damage would result if 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 Washington
or in Washington state court, this being in addition to any other remedy to
which the parties are entitled at law or in equity.
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IN WITNESS WHEREOF, Puget, WeCo and WNG have caused this Agreement to be
signed by their respective officers thereunto duly authorized as of the date
first written above.
PUGET SOUND POWER & LIGHT COMPANY
By: /s/ Xxxxxxx X. Xxxxxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title: President and Chief Executive
Officer
WASHINGTON ENERGY COMPANY
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chairman, Chief Executive Officer
and President
WASHINGTON NATURAL GAS COMPANY
By: /s/ Xxxxxxx X. Xxxxxxx
----------------------------------------
Name: Xxxxxxx X. Xxxxxxx
Title: Chairman, Chief Executive Officer
and President
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EXHIBIT 1.3
ARTICLES OF AMENDMENT
OF
PUGET SOUND POWER & LIGHT COMPANY
The following Articles of Amendment are executed by the undersigned, a
Washington corporation:
1. Name. The name of the corporation is Puget Sound Power & Light Company.
2. Text of Amendments. Effective upon filing of these Articles of Amendment
with the Secretary of State of Washington, the Articles of Incorporation of the
corporation are amended as follows:
a. Article I is amended to read as follows:
The name of this Corporation is .
----------------
b. Article V is amended to read as follows:
The total authorized shares of this Corporation shall consist of One
Hundred Twenty-Five Million (125,000,000) shares of Common Stock, stated value
$10 per share, Three Million (3,000,000) shares of Preferred Stock having a par
value of One Hundred Dollars per share, Thirteen Million (13,000,000) shares of
Preferred Stock having a par value of Twenty-Five Dollars per share and Seven
Hundred Thousand (700,000) shares of Preference Stock having a par value of
Fifty Dollars per share.
3. Exchange, Reclassification or Cancellation. The amendments do not
provide for any exchange, reclassification or cancellation of issued shares.
4. Date of Adoption. The date of the adoption of the amendment to Article V
by the shareholders of the corporation is 1996.
-------------
5. Shareholder Approval. The amendment to Article I does not require
shareholder approval, as provided in RCW 23B.10.020. The amendment to Article V
was duly approved by the shareholders of the corporation in accordance with the
provisions of RCW 23B.10.030 and RCW 23B.10.040.
These Articles of Amendment are executed by said corporation by its duly
authorized officer.
89
___________________________ COMPANY
STATEMENT OF RELATIVE RIGHTS AND PREFERENCES FOR
THE SERIES II CUMULATIVE PREFERRED STOCK
($25 PAR VALUE)
--------------------------------------
Pursuant to Section 23B.06.020 of the Washington Business Corporation
Act, ____________________ (the "Company"), a Washington corporation, hereby
states that at a meeting of the Board of Directors of the Company duly convened
and held on ______________, 1996, the following resolution was duly adopted:
RESOLVED - That pursuant to the authority expressly vested in
it by the Company's Articles of Incorporation (the "Articles") and
subject to the preferences, limitations, relative rights and other
terms and provisions set forth in the Articles, the Board of Directors
of the Company hereby establishes an additional series of the Company's
$25 par value Preferred Stock, sets forth the designation of the
series, and fixes and determines the relative rights and preferences
thereof, including the rate of dividends, the price, terms and
conditions of redemption and the amount payable upon shares in event of
voluntary or involuntary liquidation, as follows:
1. Designation. The shares of such series shall be designated
"7.45% Preferred Stock, Series II ($25 par value)" (the "Series II
Preferred Stock" herein) and the number of shares constituting such
series shall be 2,400,000.
2. Dividends. The holders of the Series II Preferred Stock
shall be entitled to annual preferential dividends, in accordance with
the provisions of Article VI, Section 3 of the Articles, at a rate of
7.45% per annum of the par value per share. Dividends shall be
cumulative and shall commence to accrue from the date of the last
dividend payment on the Washington Natural Gas Company 7.45% Series II
Preferred Stock which was converted into the right to receive the
Series II Preferred Stock pursuant to the Agreement and Plan of Merger
by and among the Company, Washington Energy Company and Washington
Natural Gas Company dated as of October 18, 1995. The first dividend
date shall be
90
____________, and dividends shall be payable each April 1, July 1,
October 1 and January 1 thereafter.
3. Redemption. The Series II Preferred Stock will not be
subject to redemption prior to November 1, 2003. At any time on or
after November 1, 2003, the Series II Preferred Stock may be redeemed,
at the election of the Company, in the manner provided in Article VI,
Section 5 of the Articles, as a whole or from time to time in part, at
par value per share; in each case together with accrued and unpaid
dividends thereon to the date designated for redemption (sometimes in
the Articles called the "optional redemption date"). Prior notice of
any redemption pursuant to this paragraph 3 shall be given by
first-class mail, postage prepaid, by the Company in the manner
provided in Article VI, Section 5 of the Articles. All redemptions
shall be pro rata, as nearly as possible, among the holders of Series
II Preferred Stock then outstanding, according to the number of shares
held by each.
4. Further Issuances. All shares of Series II Preferred Stock
redeemed, purchased or otherwise acquired and retired by the Company
shall be cancelled and shall not be reissued; and, so long as any
shares of the Series II Preferred Stock are outstanding, the Company
shall not issue any of its authorized and unissued shares as additional
shares of Series II Preferred Stock.
5. Liquidation Preferences. In the event of any liquidation,
dissolution or winding up of the Company, whether voluntary or
involuntary, the holders of the Series II Preferred Stock shall be
entitled to receive, for each share thereof, the sum of $25 together
with accrued and unpaid dividends, before any distribution of the
assets shall be made to the holders of the Preference Stock, the Common
Stock or stock of any other class ranking junior as to assets in
liquidation to the Series II Preferred Stock; but the holders of the
Series II Preferred Stock shall be entitled to no further participation
in such distribution.
6. Sinking Fund. The Series II Preferred Stock shall not be
entitled to the benefits of a sinking fund.
7. Conversion. The shares of the Series II Preferred Stock
shall not be convertible into shares of stock of the Company of any
other class, into any shares of $25 par value Preferred Stock of the
Company of any other series or into any other type of securities.
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IN WITNESS WHEREOF, the Company has caused this instrument to be
executed in duplicate in its name and on its behalf by its duly authorized
officers and its corporate seal to be affixed hereto, this day of
, 1996. -----------
--------
-----------------------------
By
---------------------------
By
---------------------------
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___________________________ COMPANY
STATEMENT OF RELATIVE RIGHTS AND PREFERENCES FOR
THE SERIES III CUMULATIVE PREFERRED STOCK
($25 PAR VALUE)
--------------------------------------------
Pursuant to Section 23B.06.020 of the Washington Business Corporation
Act, ____________________ (the "Company"), a Washington corporation, hereby
states that at a meeting of the Board of Directors of the Company duly convened
and held on ______________, 1996, the following resolution was duly adopted:
RESOLVED - That pursuant to the authority expressly vested in
it by the Company's Articles of Incorporation (the "Articles") and
subject to the preferences, limitations, relative rights and other
terms and provisions set forth in the Articles, the Board of Directors
of the Company hereby establishes an additional series of the Company's
$25 par value Preferred Stock, sets forth the designation of the
series, and fixes and determines the relative rights and preferences
thereof, including the rate of dividends, the price, terms and
conditions of redemption and the amount payable upon shares in event of
voluntary or involuntary liquidation, as follows:
1. Designation. The shares of such series shall be designated
"8.50% Preferred Stock, Series III ($25 par value)" (the "Series III
Preferred Stock" herein) and the number of shares constituting such
series shall be 1,200,000.
2. Dividends. The holders of the Series III Preferred Stock
shall be entitled to annual preferential dividends, in accordance with
the provisions of Article VI, Section 3 of the Articles, at a rate of
8.50% per annum of the par value per share. Dividends shall be
cumulative and shall commence to accrue from the date of the last
dividend payment on the Washington Natural Gas Company 8.50% Series III
Preferred Stock which was converted into the right to receive the
Series III Preferred Stock pursuant to the Agreement and Plan of Merger
by and among the Company, Washington Energy Company and Washington
Natural Gas Company dated as of October 18, 1995. The first dividend
date shall be
93
____________, and dividends shall be payable each April 1, July 1,
October 1 and January 1 thereafter.
3. Redemption. The Series III Preferred Stock will not be
subject to redemption prior to September 1, 1999. At any time on or
after September 1, 1999, the Series III Preferred Stock may be
redeemed, at the election of the Company, in the manner provided in
Article VI, Section 5 of the Articles, as a whole or from time to time
in part, at par value per share; in each case together with accrued and
unpaid dividends thereon to the date designated for redemption
(sometimes in the Articles called the "optional redemption price").
Prior notice of any redemption pursuant to this paragraph 3 shall be
given by first-class mail, postage prepaid, by the Company in the
manner provided in Article VI, Section 5 of the Articles. All
redemptions shall be pro rata, as nearly as possible, among the holders
of Series III Preferred Stock then outstanding, according to the number
of shares held by each.
4. Further Issuances. All shares of Series III Preferred Stock
redeemed, purchased or otherwise acquired and retired by the Company
shall be cancelled and shall not be reissued; and, so long as any
shares of the Series III Preferred Stock are outstanding, the Company
shall not issue any of its authorized and unissued shares as additional
shares of Series III Preferred Stock.
5. Liquidation Preferences. In the event of any liquidation,
dissolution or winding up of the Company, whether voluntary or
involuntary, the holders of the Series III Preferred Stock shall be
entitled to receive, for each share thereof, the sum of $25 together
with accrued and unpaid dividends, before any distribution of the
assets shall be made to the holders of the Preference Stock, the Common
Stock or stock of any other class ranking junior as to assets in
liquidation to the Series III Preferred Stock; but the holders of the
Series III Preferred Stock shall be entitled to no further
participation in such distribution.
6. Sinking Fund. The Series III Preferred Stock shall not be
entitled to the benefits of a sinking fund.
7. Conversion. The shares of the Series III Preferred Stock
shall not be convertible into shares of stock of the Company of any
other class, into any shares of $25 par value Preferred Stock of the
Company of any other series or into any other type of securities.
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IN WITNESS WHEREOF, the Company has caused this instrument to be
executed in duplicate in its name and on its behalf by its duly authorized
officers and its corporate seal to be affixed hereto, this day of
, 1996. -----------
--------
-----------------------
By
---------------------------------
By
---------------------------------
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95
EXHIBIT 7.8
[DATE]
Puget Sound Power & Light Company
X.X. Xxx 00000
Xxxxxxxx, XX 00000-0000
Attn: Xxxxxxx X. Xxxxxx
Dear Sirs:
I have been advised that I may be considered an "affiliate" of
Washington Energy Company ("WeCo"). Pursuant to the Agreement and Plan of Merger
by and among WeCo, Washington Natural Gas Company and Puget Sound Power & Light
Company ("Puget") dated as of October 18, 1995 (the "Merger Agreement"), I may
receive shares of common stock of Puget ("Puget Shares") in exchange for the
shares of common stock of WeCo owned by me at the effective date of the merger
provided for in the Merger Agreement (the "Merger").
I represent and warrant to, and agree with, Puget that:
A. I have been advised that the offering, sale and
delivery of the Puget Shares to me pursuant to the Merger have
been registered under the Securities Act of 1933, as amended
(the "Securities Act") on a Registration Statement on Form
S-4. I have also been advised, and agree, however, that since
I may be considered an "affiliate" of WeCo at the time the
Merger Agreement is submitted for a vote of the shareholders
of WeCo, any public offering or sale by me of any of the Puget
Shares will, under current law, require either (i) the further
registration under the Securities Act of the Puget Shares to
be offered and sold, (ii) compliance with Rule 145 promulgated
by the Securities and Exchange Commission (the "Commission")
under the Securities Act, or (iii) the availability of another
exemption from such registration under the Securities Act.
B. I have read this letter agreement and the Merger
Agreement and have discussed their requirements and other
applicable limitations upon my ability to sell, pledge,
transfer or
96
[DATE]
Page 2
otherwise dispose of the Puget Shares, to the extent I felt
necessary, with my counsel or counsel for WeCo.
C. I understand that, except as otherwise agreed by
Puget in writing, Puget is under no obligation to register the
sale, transfer or other disposition of the Puget Shares by me
or on my behalf under the Securities Act or to take any other
action necessary in order to make compliance with an exemption
from such registration available.
D. I will not make any sale, transfer or other
disposition of Puget Shares in violation of the Securities Act
or the rules and regulations promulgated by the commission
thereunder.
I further represent and covenant with Puget that I will not sell,
pledge, transfer or otherwise dispose of or in any other way reduce my risk
relative to any Puget Shares received by me in the Merger (within the meaning of
the Commission's Codification of Financial Reporting Policies Section 201.01
(reprinted in 7 Fed. Sec. L. Rep. (CCH) Paragraph 72,951), until such time as
financial results (including combined sales and net income) covering at least 30
days of post-merger operations have been published by Puget in a Form 10-K,
10-Q, 8-K or any other public filing or announcement which includes the combined
post-merger results of operations of Puget and WeCo, except for transfers and
other dispositions, that, taking into account the actions of other affiliates of
WeCo, will not prevent Puget from accounting for the Merger as a pooling of
interests.
This letter constitutes the complete understanding between Puget and me
concerning the subject matter hereof. Any notice required to be sent to any
party hereunder shall be sent by registered or certified mail, return receipt
requested, using the addresses set forth herein or such other address as shall
be furnished in writing by the parties. This letter shall be governed by, and
construed and interpreted in accordance with, the laws of the State of
Washington.
97
[DATE]
Page 3
Very truly yours,
ACCEPTED:
PUGET SOUND POWER & LIGHT COMPANY
By:
------------------------------------
98
EXHIBIT 7.16.1
EMPLOYMENT AGREEMENT
Between
PUGET SOUND POWER & LIGHT COMPANY
And
XXXXXXX X. XXXXXXXXX
October 18, 1995
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into
as of the 18th day of October, 1995 (the "Effective Date"), between PUGET SOUND
POWER & LIGHT COMPANY, a Washington corporation (the "Company"), and XXXXXXX X.
XXXXXXXXX (the "Employee"). The term "Parties" refers to the Company and the
Employee.
RECITALS
A. Employee is currently serving as President and Chief Executive
Officer of the Company;
B. Pursuant to an Agreement and Plan of Merger, dated as of
October 18, 1995, by and among the Company, Washington Energy Company ("WECO")
and Washington Natural Gas Company ("WNG") (the "Merger Agreement"), WECO and
WNG have agreed to merge with and into the Company;
C. The Company wishes to continue to employ the Employee as its
Chief Executive Officer, and the Employee wishes to accept such employment;
D. The Parties have reached agreement on the terms and conditions
of such employment, and believe that it is in their mutual best interests to
enter into a written agreement that specifies those terms and conditions;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and for other good and valuable consideration, the
Parties agree as follows:
99
1. EMPLOYMENT
The Company hereby agrees to employ Employee and to perform the
obligations of the Company under this Agreement. Employee hereby accepts
employment by the Company and agrees to perform the obligations of Employee
under this Agreement.
2. TERM
This Agreement shall commence on the date hereof and shall terminate
on the fourth anniversary of the consummation of the Merger pursuant to the
Merger Agreement (the "Term"), subject to earlier termination as provided in
Section 10 (Termination Prior to the End of the Term).
3. DUTIES
From the date hereof to the consummation of the Merger pursuant to the
Merger Agreement, Employee shall serve as President and Chief Executive Officer
of the Company. Effective as of the consummation of the Merger, Employee shall
serve as the Chairman and Chief Executive Officer of the Company. Employee
shall faithfully and diligently perform such duties and exercise such powers
as:
(i) Are set forth in the description of duties of the
President and Chief Executive Officer, or the Chairman and Chief Executive
Officer, as applicable, in the Bylaws of the Company (which may be amended by
the Company from time to time);
(ii) Are customarily expected of the Chairman and Chief
Executive Officer of business organizations which are similar to the Company;
and
(iii) May from time to time be properly assigned to him by
the Board of Directors of the Company. At the request of the Board of
Directors of the Company, Employee also shall serve as an officer or as a
member of the Board of Directors of any of the Company's subsidiaries and
affiliates, without additional compensation.
4. EXTENT OF SERVICES
Employee shall devote his full working time, attention and skill to
the duties and responsibilities set forth in Section 3 ("Duties"). Employee
may participate in other businesses as an outside director or investor,
provided that:
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100
(i) Employee shall not actively participate in the
operation or management of such businesses; and
(ii) Employee shall not, without the prior approval of the
Board of Directors of the Company, make or maintain any investment in any
entity with which the Company has a commercial relationship of any kind,
including that of lessor, partner, investor, vendor, supplier, consultant or
otherwise, or an entity which is in direct competition with the Company.
5. SALARY
In consideration for the performance of Employee's obligations under
the Agreement, the Company shall pay Employee an annual salary of $400,000,
which salary shall be subject to prospective adjustment from time to time by
the Board of Directors of the Company (the "Board of Directors"), in its sole
discretion, but shall not be reduced during the term of this Agreement.
Employee's salary shall be paid in installments in accordance with the
Company's payroll policy for other employees.
6. INCENTIVE COMPENSATION
The Employee shall participate in the Company's annual and long-term
incentive compensation programs which may include a pay-at-risk plan,
stock-based awards, stock options, stock appreciation rights, and other forms
of compensation. Employee is familiar with the Company's incentive programs,
and acknowledges that any benefits that may be granted to Employee under the
incentive programs are subject to the approval of the Board of Directors or the
Compensation Committee appointed by the Board of Directors, in the exercise of
its sole discretion.
7. VACATION AND OTHER BENEFITS
Employee shall be entitled to paid time off in accordance with Company
policies. Employee shall be entitled to participate in the Company's
Retirement Plan, the Investment Plan, the Deferred Compensation Plan for Key
Employees, and the Supplemental Retirement Plan for Officers, in accordance
with their terms, each of which may be amended from time to time. The Company
shall provide Employee with medical, life and disability insurance benefits for
Employee with terms and provisions substantially as favorable to Employee, as
of the Effective Date, as those provided to other executive employees of the
Company at that date. The Company may prospectively amend, eliminate or add to
the insurance and benefit programs at any time, in its sole discretion.
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101
8. CLUB DUES
The Company shall pay on behalf of Employee monthly dues and other
charges in connection with membership in clubs, so as to permit Employee to
conduct Company business and represent the Company in the business community.
9. EXPENSES
The Company shall, upon receipt of adequate supporting documentation,
reimburse Employee for reasonable expenses incurred by Employee in promoting
the business of the Company, subject to the Company's expense reimbursement
policies, which may be amended from time to time.
10. TERMINATION PRIOR TO THE END OF THE TERM
10.1 The Company may terminate this Agreement for cause prior to
the end of the Term. The term "for cause" shall mean a termination based on a
determination by the Board of Directors that Employee has: committed an act of
dishonesty related to his employment; obtained any benefit of money or other
property in connection with his employment to which he was not entitled;
refused to comply with a lawful directive of the Board of Directors; or engaged
in any willful misconduct with respect to his duties or other obligations under
this Agreement. The Company shall not terminate this Agreement for cause
unless a determination has been made by majority vote of the Board of Directors
at a lawfully called meeting at which Employee shall be entitled to be told of
the reasons for the termination and given an opportunity to personally respond
to the reasons provided by the Board of Directors. In the event of termination
of this Agreement by the Company for cause, Employee shall be paid all
compensation and benefits earned through the date of termination, the Company
shall not be obligated to provide any further compensation or benefits to him
under the Agreement, and the Parties' obligations to each other under this
Agreement shall cease, with the exception of the Company's obligations under
Section 12 (Indemnification) and Employee's obligations under Section 13
(Confidentiality) and Section 14 (Noncompetition).
10.2 The Company may, at its option and at any time, terminate this
Agreement prior to the end of the term, without cause. In the event that the
Company exercises this right, Employee shall be entitled to receive: all
compensation and benefits earned through the date of termination; and a
continuation of his salary for the balance of the term of this Agreement, at
the level in effect as of the date of termination. In that event, the Parties'
obligations to each other under this Agreement shall cease, with the exception
of the Company's obligations under Section 00
-0-
000
(Xxxxxx in Control) and Section 12 (Indemnification) and the Employee's
obligations under Section 13 (Confidentiality) and Section 14 (Noncompetition).
10.3 This Agreement shall terminate in the event Employee dies, or
is unable to perform his duties as a result of a physical or mental disability
at any time during the term of this Agreement. In the event of a termination
under this subsection, Employee or his estate shall be paid all compensation
and benefits earned through the date of such termination, including pro-rated
payments under incentive compensation programs described in Section 6, and
shall be entitled to receive benefits under any salary continuation plan that
the Company may have in effect as of the date of such termination, the Company
shall have no further obligations to provide compensation or benefits to him or
his estate under this Agreement, and the Parties' obligations to each other
under this Agreement shall cease, with the exception of the Company's
obligations under Section 12 (Indemnification) and the Employee's obligations,
if he is still living, under Section 13 (Confidentiality) and Section 14
(Noncompetition). For purposes of this Agreement, Employee shall be deemed to
be disabled when each of the following conditions are met:
(i) The Employee shall become physically or mentally
incapable (excluding infrequent and temporary absences due to ordinary
illnesses) of properly performing the services required of him by this
Agreement;
(ii) Employee's physical or mental incapacity shall exist
or shall be reasonably expected to exist for more than 90 days in the aggregate
during any period of 12 consecutive calendar months; and
(iii) Such physical or mental incapacity is independently
diagnosed by a qualified medical practitioner.
11. CHANGE IN CONTROL
11.1 The provisions of this Section shall survive the expiration of
the term of this Agreement, but shall not be effective in the event of a
termination of this Agreement prior to the end of the term for cause, in
accordance with subsection 10.1, or as a result of the death or incapacity of
Employee in accordance with subsection 10.3. The provisions of this Section
shall remain in effect for a period of three years (the "Extended Benefit
Period") following the date either the Company or Employee provides written
notice to the other of its/his intent to terminate the provisions of this
Section ("Notice of Termination of Extended Benefits"). A Notice of
Termination of Extended Benefits may be given during the term of this
Agreement, or thereafter, but the Extended Benefit Period may not end prior to
the end of the term
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of this Agreement. Notwithstanding any other provision of this Section, the
Extended Benefit Period shall terminate when Employee reaches the Normal
Retirement Date as that term is defined in the Company's Retirement Plan (the
"Normal Retirement Date").
11.2 The Board of Directors, in the exercise of its responsibility
to serve the best interests of the shareholders of the Company, may at any time
consider a merger or acquisition proposal that could result in a Change of
Control of the Company. In order to avoid any adverse affect on Employee's
performance under this Agreement that might be caused by uncertainties
concerning his tenure and treatment by the Company in the event of such a
Change in Control, the Company has agreed to provide certain benefits to
Employee in certain circumstances involving a Change of Control of the Company
in accordance with the provisions of this Section. For purposes of this
Agreement, a Change in Control shall mean the occurrence of any one of the
following actions or events:
(i) The acquisition of any person (which, for purposes of
this Agreement, shall include a natural person, corporation, partnership,
association, joint stock company, trust fund or organized group of persons) of
the power, directly or indirectly, to exercise a controlling influence over the
management or policies of the Company (either alone or pursuant to an
arrangement or understanding with one or more other persons), whether through
the ownership of voting securities through one or more intermediary persons, by
contract or otherwise; or
(ii) The acquisition by a person (whether alone or
pursuant to an arrangement or understanding with one or more other persons) of
the ownership or power to vote 25% or more of the outstanding voting securities
of the Company; or
(iii) During a period of six years after the acquisition by
any person, directly or indirectly, of the ownership or power to vote 10% or
more of the outstanding voting securities of the Company, the ceasing of the
individuals who prior to such acquisition were directors of the Company (the
"Prior Directors") to constitute a majority of the Board of Directors, unless
the nomination of each new director was approved by a vote of a majority of the
Prior Directors.
11.3 In the event of a Change in Control during the term of this
Agreement, or a Change in Control following the expiration of the term, but
during the Extended Benefit Period, which in either event is followed by a
Material Adverse Change in the terms of Employee's employment, as that term is
defined in Section 11.4, which results in the termination, by Employee or the
Company, of Employee's employment
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by the Company, shall entitle Employee to receive the benefits described in
Subsection 11.5.
11.4 For purposes of this Section, any of the following shall
constitute a Material Adverse Change in the terms of Employee's employment:
(i) A material change in Employee's Duties, without
Employee's express consent;
(ii) A reduction in Employee's base salary in effect prior
to the Change in Control, unless such reduction is applied to all officers of
the Company, does not exceed the average percentage reduction in base salary
for all officers of the Company and is not greater than a reduction of 25%;
(iii) Failure by the Company to increase Employee's base
salary each year following a Change in Control, by an amount which equals at
least one-half of the average percentage increase in base salary for all
officers of the Company and its subsidiaries or a parent or successor of the
Company during the prior two full calendar years;
(iv) Failure by the Company to maintain any employee
benefits to which Employee is entitled prior to the Change in Control at a
level equal to or greater than those in effect prior to the Change in Control,
through the continuation of the same or substantially similar programs and
policies or the taking of any action by the Company that would adversely affect
Employee's participation in or materially reduce Employee's benefits under any
such plans, programs or policies, or deprive Employee of any fringe benefits
enjoyed by Employee prior to the Change in Control, unless such a reduction in
benefits is nondiscriminatory as to Employee and is applied generally to all
officers and management employees of the Company, its subsidiaries and
affiliates and any parent or successor of the Company.
(v) The failure by the Company to provide Employee with
the number of paid vacation days to which Employee would be entitled as a
salaried employee of the Company, its subsidiaries or affiliates or any parent
or successor of the Company on a nondiscriminatory basis;
(vi) The requirement by the Company that Employee relocate
his residence or office anywhere outside of the Seattle/Bellevue metropolitan
area, except for required travel on the Company's business to the extent
consistent with Employee's duties;
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(vii) Any purported termination of employment by the
Company other than for cause as defined in Section 10.1, or death or disability
as defined in Section 10.3, or prior to the Employee's Normal Retirement Date.
11.5 In the event of a termination of Employee's employment as
described in Subsection 11.4, the Company shall provide to Employee the
following benefits for the balance of the Extended Benefit Period:
(i) Employee's full base salary earned through the
termination date, plus payment for all accrued vacation and any deferred
compensation to which Employee is entitled for the fiscal year most recently
ended prior to Employee's termination, and Employee's pro rata share of any
compensation under any Company plan which has accrued through the date of
termination, regardless of whether such amounts are vested or are payable in
the year of termination; plus
(ii) Within 30 days following the date of termination, an
amount equal to the sum of Employee's annual base salary at the rate in effect
as of the date of termination, plus the amount of any additional compensation
awarded to Employee for the year most recently ended, including any sums
awarded under an annual wage accumulation plan, multiplied by number of years
(prorated for any partial years) remaining between the date of termination and
the end of the Extended Benefit Period. The Company's obligation to pay this
amount shall not be affected by any alternative employment that Employee may
obtain.
(iii) The Company shall maintain in full force and effect
for the remaining term of the Extended Benefit Period all employee benefit
plans, programs and policies, including any life or health insurance plans in
which Employee was entitled to participate immediately prior to termination,
provided that Employee is qualified to participate under the general terms and
provisions of such plans, programs and policies. In the event that Employee's
participation in any such plan, program or policy is not possible under its
terms and conditions, the Company shall at its option either arrange for
Employee to receive benefits substantially similar to those which Employee
would have been entitled to receive under each plan, program or policy, or pay
to employee an amount equal to the premiums that the Company would pay on
Employee's behalf for participation in such plan, program or policy. At the
end of the period of coverage, Employee will have the option to receive an
assignment at no cost, and with no apportionment of prepaid premiums, any
assignable insurance policies owned by the Company and relating to Employee,
and to take advantage of any conversion privileges pertinent to the benefits
available under Company policies.
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(iv) In addition to the regular payment of benefits to
which Employee is entitled under the retirement plans or programs in effect on
the date of Employee's termination, which shall not be affected by such
termination, the Company shall pay to Employee in cash at the Normal Retirement
Date, an amount equal to the actuarial equivalent of the additional retirement
compensation to which Employee would have been entitled under the terms of such
retirement plans or programs (without regard to vesting) had Employee continued
in the employ of the Company during the balance of the Extended Benefit Period
at Employee's base salary rate as of the date of termination, provided that
payment shall not extend beyond Employee's Normal Retirement Date. For
purposes of this calculation, the actuarial equivalent shall be determined by
assuming survival to age 80.
(v) Employee shall waive all rights to receive shares of
common stock of the Company issuable upon exercise of options ("Options"), if
any, granted to employee under the Company's long-range incentive compensation
plans. In return for that waiver, Employee shall be entitled to receive,
within 30 days following the date of termination, a payment equal to the
difference between the exercise price of all options held by Employee, whether
or not then fully exercisable, and the higher of (1) the average of the high
and low sale prices of the Company's stock on the New York Stock Exchange in
each of the twenty business days preceding the date of termination or (2) the
highest price per share actually paid for any of the Company Shares in
connection with any Change in Control of the Company.
(vi) Notwithstanding any other provisions of this
Agreement, if any severance benefits under Section 11 of this Agreement,
together with any other Parachute Payments (as defined under Internal Revenue
Code Section 280(G)(b)(2)) made by the Company to Employee, if any, are
characterized as Excess Parachute Payments (as defined in Internal Revenue
Code, Section 280(G)(b)(1)), then the Company shall pay to Employee, in
addition to the payments to be received under this Section, an amount equal to
the excise taxes imposed by Section 4999 of the Code on Employee's Excess
Parachute Payments, plus an amount equal to the federal and, if applicable,
state income taxes which will be payable to Employee as a result of this
additional payment.
12. INDEMNIFICATION
The Company shall defend, indemnify and hold Employee harmless from
any and all liabilities, obligations, claims or expenses which arise in
connection with or as a result of Employee's service as an officer or employee
(or director if Employee is elected and serves as a director) of the Company
and/or any of its affiliates and subsidiaries to the fullest extent allowed by
law; provided, that the Company shall not
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be obligated to defend, indemnify or hold Employee harmless from any
liabilities, obligations, claims or expenses which result from Employee having
committed an act of dishonesty, obtained any benefit of money or other property
to which he was not entitled, refused to comply with a lawful directive of the
Board of Directors, or engaged in any willful misconduct with respect to his
duties or other obligations under this Agreement.
13. CONFIDENTIALITY
Employee shall not, during the term of this Agreement or thereafter,
use for his own purposes or disclose to any other person or entity any
confidential information concerning the Company, its affiliates or
subsidiaries, or any of their business operations, except as may be consistent
with his duties hereunder or as may be required by order of a court of
competent jurisdiction. Confidential information shall include, without
limitation, any information, formula, pattern, compilation, program, device,
method, technique or process that derives independent economic value, actual or
potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons or entities.
14. NONCOMPETITION
14.1 During the term of his employment with the Company, Employee
shall comply with his fiduciary obligations as an officer of the Company, and
shall comply with the restrictions contained in Section 4.
14.2 During the term of his employment with the Company and for a
period of two years thereafter, Employee shall not, without the prior written
consent of the Company which shall not be unreasonably withheld, participate in
or perform services, whether directly or indirectly, as a director, officer,
employee, owner, partner, agent, consultant, lessor, creditor or otherwise, for
any person, or entity engaged in the same or similar business as the Company or
any of the Company's affiliates or subsidiaries is engaged in at any time
during the term of this Agreement and that provides products or services of the
type provided by the Company or any of its affiliates or subsidiaries to any
person or entity located in the states of Washington, Oregon or Idaho that was
a customer of the Company while Employee was employed by the Company.
14.3 During the term of his employment with the Company and for a
period of two years thereafter, Employee shall not, directly or indirectly:
solicit for employment any employee of the Company; attempt to persuade or
entice any employee of the Company to terminate his or her employment; or
persuade or attempt
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to persuade, any person or company to terminate, cancel, rescind or revoke its
business or contractual relationships with the Company.
14.4 Employee agrees that damages for breach of the covenants
contained in this Section would be difficult to determine and therefore agrees
that these provisions may be enforced by temporary or permanent injunction.
The right to such injunctive relief shall be in addition to and not in place of
any other remedies to which the Company may be entitled. Employee agrees that
any profits made or benefits obtained by Employee in violation of his
obligations under this Section shall be held by Employee in constructive trust
for, and shall be promptly paid to, the Company.
14.5 Employee agrees that the provisions of this Section are
reasonable. However, if any court of competent jurisdiction determines that
any provision within this Section is unreasonable in any respect, the Parties
intend that this Section should be enforced to the fullest extent allowed by
such court.
15. ARBITRATION
Any dispute between the Parties hereto with respect to any of the
matters set forth herein shall be submitted to binding arbitration in King
County, state of Washington. Either Party may commence the arbitration by
delivery of a written notice to the other, describing the issue in dispute and
its position with regard to the issue. If the Parties are unable to agree on
an arbitrator within 30 days following delivery of such notice, the arbitrator
shall be selected by a Judge of the Superior Court of the State of Washington
for King County upon three days' notice. Discovery shall be allowed in
connection with any such arbitration to the same extent permitted by the
Washington Rules of Civil Procedure but either Party may petition the
arbitrator to limit the scope of such discovery, in which event the arbitrator
shall determine the extent of discovery allowable in connection with the
dispute in question. Except as otherwise provided herein, the arbitration
shall be conducted in accordance with the rules of the American Arbitration
Association then in effect for expedited proceedings. The award of the
arbitrator shall be final and binding, and judgment upon an award may be
entered in any court of competent jurisdiction. The arbitrator shall hold a
hearing, at which the Parties may present evidence and argument, within 30 days
of his or her appointment, and shall issue an award within 15 days of the close
of the hearing. In any such arbitration, the prevailing Party shall be
entitled to recover its costs, including without limitation reasonable
attorneys' fees, and the nonprevai1ing Party shall pay all costs of
arbitration, but if neither Party is determined to be the prevailing Party,
each Party shall bear its own costs and attorneys' fees and one-half of the
costs of arbitration. Nothing contained in this Section shall prevent either
Party from seeking a temporary restraining order,
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preliminary injunction or similar injunctive relief from a court of competent
jurisdiction to enforce the provisions of this Agreement. In the event that
either Party institutes an action in court for such relief or to compel
arbitration to, or enforce an award of arbitration, the prevailing Party shall
be entitled to recover its costs, including without limitation reasonable
attorneys' fees.
16. NOTICES
All notices or other communications required or permitted by this
Agreement shall be in writing and shall be sufficiently given if sent by
certified mail, postage prepaid, addressed as follows:
If to Employee, to:
Xxxxxxx X. Xxxxxxxxx
X.X. Xxx 00000
Xxxxxxxx, Xxxxxxxxxx 00000-0000
Facsimile: (000) 000-0000
If to Company:
Puget Sound Power & Light Company
X.X. Xxx 00000
Xxxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Corporate Secretary
Facsimile: (000) 000-0000
Any such notice or communication shall be deemed to have been given as
of the date mailed. Any address may be changed by giving written notice of
such change in the manner provided herein for giving notice.
17. WAIVER OF BREACH
The waiver by a Party of a breach of any provision of this Agreement
shall not operate or be construed as a waiver of any subsequent breach.
18. ASSIGNMENT
This Agreement is for personal services. Neither Party may assign its
rights or delegate its duties hereunder without the prior written consent of
the other Party.
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19. ENTIRE AGREEMENT
This Agreement contains the entire understanding of the Parties with
regard to the subject matter of this Agreement and may only be changed by
written agreement signed by both Parties. Any and all prior discussions,
negotiations, commitments and understandings related thereto are merged herein.
20. BINDING EFFECT
This Agreement shall be binding upon and inure to the benefit of the
respective Parties, and their legal representatives, successors, permitted
assigns and heirs.
21. LAW
This Agreement shall be governed by, construed and enforced in
accordance with the laws of the state of Washington, without giving effect to
principles and provisions thereof relating to conflict or choice of laws and
irrespective of the fact that any one of the Parties is now or may become a
resident of a different state.
22. VALIDITY
In case any term of this Agreement shall be invalid, illegal or
unenforceable, in whole or in part, the validity of any of the other terms of
this Agreement shall not in any way be affected thereby.
"Company"
PUGET SOUND POWER & LIGHT COMPANY
By
-------------------------------
"Employee"
---------------------------------
Xxxxxxx X. Xxxxxxxxx
-00-
000
XXXXXXX 7.16.2
EMPLOYMENT AGREEMENT
Between
PUGET SOUND POWER & LIGHT COMPANY
And
XXXXXXX X. XXXXXXX
October 18, 1995
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into
as of the 18th day of October, 1995 between PUGET SOUND POWER & LIGHT COMPANY,
a Washington corporation (the "Company") and XXXXXXX X. XXXXXXX ("Employee").
The term "Parties" refers to the Company and the Employee.
RECITALS
A. Employee is currently serving as Chairman, President and Chief
Executive Officer of Washington Energy Company ("WECO") and Washington Natural
Gas Company ("WNG") pursuant to the terms of an Employment Agreement dated
January 15, 1994 (the "WECO Employment Agreement");
B. Pursuant to an Agreement and Plan of Merger, dated as of
October 18, 1995, by and among the Company, WECO and WNG (the "Merger
Agreement"), WECO and WNG have agreed to merge with and into the Company;
C. Effective upon the consummation of the Merger pursuant to the
terms of the Merger Agreement (the "Effective Date"), the Company wishes to
employ the Employee as its President and Chief Operating Officer, and the
Employee wishes to accept such employment;
D. The Parties have reached agreement on the terms and conditions
of such employment, and believe that it is in their mutual best interests to
enter into a written agreement that specifies those terms and conditions and
that amends the terms of the WECO Employment Agreement;
E. The Parties agree that upon the Effective Date, a Change of
Control of WECO and a Material Adverse Change in the terms of Employee's
employment will
112
have occurred under the terms of the WECO Employment Agreement. This Agreement
is intended to preserve for the Employee benefits substantially equivalent to
those provided in the WECO Employment Agreement upon a Change of Control and a
Material Adverse Change, in the event that prior to the expiration of the Term
the Employee terminates his employment with the Company for any reason or the
Company terminates the employment of the Employee without cause.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, and for other good and valuable consideration, the
Parties agree as follows:
1. EMPLOYMENT
The Company hereby agrees to employ Employee on the Effective Date and
to perform the obligations of the Company under this Agreement. Employee
hereby accepts employment by the Company on the Effective Date and agrees to
perform the obligations of Employee under this Agreement.
2. TERM
The employment of Employee by the Company under this Agreement shall
commence on the Effective Date and shall terminate on the fourth anniversary of
the Effective Date (the "Term") subject to earlier termination as provided in
Section 13 (Termination Prior to the End of the Term). For all periods prior
to, but not including, the Effective Date, the WECO Employment Agreement shall
remain in full force and effect. As of the Effective Date, the WECO Employment
Agreement shall terminate and be of no force and effect. If the Effective Date
does not occur because the Merger Agreement is terminated, then at the time of
such termination this Agreement shall be deemed cancelled and of no force and
effect and the WECO Employment Agreement shall remain in full force and effect.
3. DUTIES
From and after the Effective Date, Employee shall serve as the
President and Chief Operating Officer of the Company , and shall faithfully and
diligently perform such duties and exercise such powers as:
(i) May be set forth in the description of duties of the
President and Chief Operating Officer in the Bylaws of the Company (which may
be amended by the Company from time to time);
(ii) Are customarily expected of the President and Chief
Operating Officer of business organizations which are similar to the Company;
and
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(iii) May from time to time be properly assigned to him by
the Board of Directors or the Chief Executive Officer of the Company. At the
request of the Board of Directors of the Company, Employee also shall serve as
an officer or as a member of the Board of Directors of any of the Company's
subsidiaries and affiliates, without additional compensation.
4. EXTENT OF SERVICES
Employee shall devote his full working time, attention and skill to
the duties and responsibilities set forth in Section 3 ("Duties"). Employee
may participate in other businesses as an outside director or investor,
provided that:
(i) Employee shall not actively participate in the
operation or management of such businesses; and
(ii) Employee shall not, without the prior approval of the
Board of Directors of the Company, make or maintain any investment in any
entity with which the Company has a commercial relationship of any kind,
including that of lessor, partner, investor, vendor, supplier, consultant or
otherwise, or an entity which is in direct competition with the Company.
5. SALARY
In consideration for the performance of Employee's obligations under
the Agreement, the Company shall pay Employee an initial salary of Three
Hundred Fifty Thousand Dollars ($350,000) per year, which salary shall be
subject to prospective adjustment from time to time by the Board of Directors
of the Company (the "Board of Directors"), in its sole discretion, but shall
not be reduced during the term of this Agreement. Employee's salary shall be
paid in installments in accordance with the Company's payroll policy for other
employees.
6. INCENTIVE COMPENSATION
The Employee shall participate in the Company's annual and long-term
incentive compensation programs which may include a pay-at-risk plan,
stock-based awards, stock options, stock appreciation rights, and other forms
of compensation. Employee is familiar with the Company's incentive programs,
and acknowledges that any benefits that may be granted to Employee under the
incentive programs are subject to the approval of the Board of Directors or the
Compensation Committee appointed by the Board of Directors, in the exercise of
its sole discretion.
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7. STOCK OPTIONS
As provided in the Merger Agreement, on the Effective Date each
outstanding option held by Employee to purchase shares of WECO common stock,
together with any tandem stock appreciation right (each, a "WECO stock
Option"), shall become an option to purchase shares of the Company's common
stock, and a tandem stock appreciation right, on the same terms and condition
as were applicable under such WECO Stock Option, based on the number of shares
of the Company's common stock which the Employee would have been entitled to
receive pursuant to the Merger has the Employee exercised the WECO Stock Option
in full immediately prior to the Effective Date, provided, that the number of
shares, the option price and the terms and conditions of exercise of such
option shall be determined in a manner that preserves both (a) the aggregate
gain (or loss) on the WECO Stock Option immediately prior to the Effective Date
and (b) the ratio of the exercise price per share to the fair market value
(determined immediately prior to the Effective Date) per share subject to such
option.
8. VACATION AND OTHER BENEFITS
Employee shall be entitled to five weeks of paid vacation each year,
in addition to the holidays observed by the Company for its employees in
general. Vacation or holiday time that is not taken shall not be carried into
the next calendar year. Employee shall be entitled to participate in the
Company's Retirement Plan, the Investment Plan, the Deferred Compensation Plan
for Key Employees, and the Supplemental Retirement Plan for Officers, in
accordance with their terms, each of which may be amended from time to time.
The Company, as successor to WNG, hereby assumes WNG's obligations to the
Employee under the Executive Retirement Compensation Agreement between WNG and
the Employee, dated as of January 15, 1994 (the "WNG Retirement Agreement"), a
true copy of which is attached as Attachment B to the WECO Employment
Agreement. The Company agrees to be bound by the terms of the WNG Retirement
Agreement; provided, that the WNG Retirement Agreement shall be deemed an
individual contract providing supplemental pension benefits, for purposes of
the offsets to benefits under Section 3.1(c) of the Company's Supplemental
Retirement Plan for Officers. The Company shall provide Employee with medical,
life and disability insurance benefits for Employee with terms and provisions
substantially as favorable to Employee, as of the Effective Date, as those
provided to other executive employees of the Company at that date. The Company
may prospectively amend, eliminate or add to the insurance and benefit programs
at any time, in its sole discretion.
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115
9. AUTOMOBILE
The Company shall provide Employee with the use of an automobile to
conduct Company business. The Company shall pay all expenses incurred in
purchasing or leasing the automobile, and shall in addition either pay or
reimburse Employee for all reasonable expenses incurred for maintenance,
service and fuel costs for the automobile on the same basis as for other
executive employees of the Company. Employee shall maintain adequate records
to reflect any personal use of the automobile.
10. CLUB DUES
The Company shall pay on behalf of Employee monthly dues and other
charges in connection with membership in clubs, so as to permit Employee to
conduct Company business and represent the Company in the business community.
11. HOUSING LOAN
The Parties acknowledge that the WECO Employment Agreement provided
for a secured, interest-free housing loan for $1,000,000 to the Employee, which
loan has been made. The Employee agrees to repay such loan on the terms
provided in the promissory note previously executed by Employee in favor of
WECO, which note is substantially in the form attached as Exhibit C to the WECO
Employment Agreement.
12. EXPENSES
The Company shall, upon receipt of adequate supporting documentation,
reimburse Employee for reasonable expenses incurred by Employee in promoting
the business of the Company, subject to the Company's expense reimbursement
policies, which may be amended from time to time.
13. TERMINATION PRIOR TO THE END OF THE TERM
13.1 The Company may terminate this Agreement for cause prior to
the end of the Term. The term "for cause" shall mean a termination based on a
determination by the Board of Directors that Employee has: committed an act of
dishonesty related to his employment; obtained any benefit of money or other
property in connection with his employment to which he was not entitled;
refused to comply with a lawful directive of the Board of Directors; or engaged
in any willful misconduct with respect to his duties or other obligations under
this Agreement. The Company shall not terminate this Agreement for cause
unless a determination has been made by majority vote of the Board of Directors
at a lawfully called meeting at which Employee shall be entitled to be told of
the reasons for the termination and given an opportunity to personally respond
to the reasons provided by the Board of Directors. In the event of termination
of this Agreement by the Company for cause, Employee shall
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be entitled to be told of the reasons for the termination and given an
opportunity to personally respond to the reasons provided by the Board of
Directors. In the event of termination of this Agreement by the Company for
cause, Employees shall be paid all compensation and benefits earned through
the date of termination, the Company shall not be obligated to provide any
further compensation or benefits to him under the Agreement, and the Parties'
obligations to each other under this Agreement shall cease, with the exception
of the Company's obligations under Section 15 (Indemnification) and Employee's
obligations under Section 16 (Confidentiality) and Section 17 (Noncompetition).
13.2 The Company may, at its option and at any time, terminate this
Agreement prior to the end of the Term, without cause. In the event that the
Company exercises this right, or in the event that the Employee terminates his
employment with the Company for any reason prior to the end of the Term,
Employee shall be entitled to receive the benefits described in Section 14
hereof. In that event, the Parties' obligations to each other under this
Agreement shall cease, with the exception of the Company's obligations under
Section 14 (Payments on Certain Terminations) and Section 15 (Indemnification)
and the Employee's obligations under Section 16 (Confidentiality) and Section
17 (Noncompetition).
13.3 This Agreement shall terminate in the event Employee dies, or
is unable to perform his duties as a result of a physical or mental disability
at any time during the term of this Agreement. In the event of a termination
under this subsection, Employee or his estate shall be entitled to receive the
benefits described in Section 14 hereof, the Company shall have no further
obligations to provide compensation or benefits to him or his estate under this
Agreement, and the Parties' obligations to each other under this Agreement
shall cease, with the exception of the Company's obligations under Section 14
(Payments on Certain Terminations), Section 15 (Indemnification) and the
Employee's obligations, if he is still living, under Section 16
(Confidentiality) and Section 17 (Noncompetition). For purposes of this
Agreement, Employee shall be deemed to be disabled when each of the following
conditions are met:
(i) The Employee shall become physically or mentally
incapable (excluding infrequent and temporary absences due to ordinary
illnesses) of properly performing the services required of him by this
Agreement;
(ii) Employee's physical or mental incapacity shall exist
or shall be reasonably expected to exist for more than 90 days in the aggregate
during any period of 12 consecutive calendar months; and
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(iii) Such physical or mental incapacity is independently
diagnosed by a qualified medical practitioner.
14. PAYMENTS ON CERTAIN TERMINATIONS
In the event of a termination of Employee's employment as described in
Subsection 13.2, the Company shall provide to Employee the following benefits
for the balance of the Extended Benefit Period. For purposes of this Section,
the term "Extended Benefit Period" means a three-year period commencing on the
date of written notice of intent to terminate; provided, however, that the
Extended Benefit Period shall terminate in any event when the Employee reaches
age 65 (Normal Retirement Date).
(a) Employee's full base salary earned through the
termination date, plus payment for all accrued vacation and any deferred
compensation to which Employee is entitled for the fiscal year most recently
ended prior to Employee's termination, and Employee's pro rata share of any
compensation under any Company plan which has accrued through the date of
termination, regardless of whether such amounts are vested or are payable in
the year of termination; plus
(b) Within 30 days following the date of termination, an
amount equal to the sum of Employee's annual base salary at the rate in effect
as of the date of termination, plus the amount of any additional compensation
awarded to Employee for the year most recently ended, including any sums
awarded under an annual wage accumulation plan, multiplied by number of years
(prorated for any partial years) remaining between the date of termination and
the end of the Extended Benefit Period. The Company's obligation to pay this
amount shall not be affected by any alternative employment that Employee may
obtain.
(c) The Company shall maintain in full force and effect
for the remaining term of the Extended Benefit Period all employee benefit
plans, programs and policies, including any life or health insurance plans in
which Employee was entitled to participate immediately prior to termination,
provided that Employee is qualified to participate under the general terms and
provisions of such plans, programs and policies. In the event that Employee's
participation in any such plan, program or policy is not possible under its
terms and conditions, the Company shall at its option either arrange for
Employee to receive benefits substantially similar to those which Employee
would have been entitled to receive under each plan, program or policy, or pay
to employee an amount equal to the premiums that the Company would pay on
Employee's behalf for participation in such plan, program or policy. At the
end of the period of coverage, Employee will have the option to receive an
assignment at no cost, and with no apportionment of prepaid premiums, any
assignable insurance
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policies owned by the Company and relating to Employee, and to take advantage of
any conversion privileges pertinent to the benefits available under Company
policies.
(d) In addition to the regular payment of benefits to
which Employee is entitled under the retirement plans or programs in effect on
the date of Employee's termination, which shall not be affected by such
termination and which for this purpose includes the WNG Retirement Agreement,
the Company shall pay to Employee in cash at the Normal Retirement Date, an
amount equal to the actuarial equivalent of the additional retirement
compensation to which Employee would have been entitled under the terms of such
retirement plans or programs (without regard to vesting) had Employee continued
in the employ of the Company during the balance of the Extended Benefit Period
at Employee's base salary rate as of the date of termination, provided that
payment shall not extend beyond Employee's Normal Retirement Date. For
purposes of this calculation, the actuarial equivalent shall be determined by
assuming survival to age 80.
(e) Employee shall waive all rights to receive shares of
common stock of the Company ("Company Shares") issuable upon exercise of
options ("Options"), if any, granted to employee under the Company's stock
option plans. In return for that waiver, Employee shall be entitled to
receive, within 30 days following the date of termination, a payment equal to
the difference between the exercise price of all options held by Employee,
whether or not then fully exercisable, and the average of the high and low sale
prices of the Company's common stock on the New York Stock Exchange on the date
of termination.
(f) Notwithstanding any other provisions of this
Agreement, if any severance benefits under Section 14 of this Agreement,
together with any other Parachute Payments (as defined under Internal Revenue
Code Section 280(G)(b)(2)) made by the Company to Employee, if any, are
characterized as Excess Parachute Payments (as defined in Internal Revenue
Code, Section 280(G)(b)(1)), then the Company shall pay to Employee, in
addition to the payments to be received under this Section, an amount equal to
the excise taxes imposed by Section 4999 of the Code on Employee's Excess
Parachute Payments, plus an amount equal to the federal and, if applicable,
state income taxes which will be payable to Employee as a result of this
additional payment.
15. INDEMNIFICATION
The Company shall defend, indemnify and hold Employee harmless from
any and all liabilities, obligations, claims or expenses which arise in
connection with or as a result of Employee's service as an officer or employee
(or director if Employee is elected and serves as a director) of the Company
and/or any of its affiliates and
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subsidiaries to the fullest extent allowed by law; provided, that the Company
shall not be obligated to defend, indemnify or hold Employee harmless from any
liabilities, obligations, claims or expenses which result from Employee having
committed an act of dishonesty, obtained any benefit of money or other property
to which he was not entitled, refused to comply with a lawful directive of the
Board of Directors, or engaged in any willful misconduct with respect to his
duties or other obligations under this Agreement.
16. CONFIDENTIALITY
Employee shall not, during the term of this Agreement or thereafter,
use for his own purposes or disclose to any other person or entity any
confidential information concerning the Company, its affiliates or
subsidiaries, or any of their business operations, except as may be consistent
with his duties hereunder or as may be required by order of a court of
competent jurisdiction. Confidential information shall include, without
limitation, any information, formula, pattern, compilation, program, device,
method, technique or process that derives independent economic value, actual or
potential, from not being generally known to, and not being readily
ascertainable by proper means by, other persons or entities.
17. NONCOMPETITION
17.1 During the term of his employment with the Company, Employee
shall comply with his fiduciary obligations as an officer of the Company, and
shall comply with the restrictions contained in Section 4.
17.2 During the term of his employment with the Company and for a
period of two years thereafter, Employee shall not, without the written consent
of the Company (which consent shall not be unreasonably withheld), participate
in or perform services, whether directly or indirectly, as a director, officer,
employee, owner, partner, agent, consultant, lessor, creditor or otherwise, for
any person, or entity engaged in the same or similar business as the Company or
any of the Company's affiliates or subsidiaries is engaged in at any time
during the term of this Agreement and that provides products or services of the
type provided by the Company or any of its affiliates or subsidiaries to any
person or entity located in the states of Washington, Oregon or Idaho that was
a customer of the Company while Employee was employed by the Company.
17.3 During the term of his employment with the Company and for a
period of two years thereafter, Employee shall not, directly or indirectly:
solicit for employment any employee of the Company; attempt to persuade or
entice any employee of the Company to terminate his or her employment; or
persuade or attempt
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to persuade, any person or company to terminate, cancel, rescind or revoke its
business or contractual relationships with the Company.
17.4 Employee agrees that damages for breach of the covenants
contained in this Section would be difficult to determine and therefore agrees
that these provisions may be enforced by temporary or permanent injunction.
The right to such injunctive relief shall be in addition to and not in place of
any other remedies to which the Company may be entitled. Employee agrees that
any profits made or benefits obtained by Employee in violation of his
obligations under this Section shall be held by Employee in constructive trust
for, and shall be promptly paid to, the Company.
17.5 Employee agrees that the provisions of this Section are
reasonable. However, if any court of competent jurisdiction determines that
any provision within this Section is unreasonable in any respect, the Parties
intend that this Section should be enforced to the fullest extent allowed by
such court.
18. ARBITRATION
Any dispute between the Parties hereto with respect to any of the
matters set forth herein shall be submitted to binding arbitration in city of
Seattle, state of Washington. Either Party may commence the arbitration by
delivery of a written notice to the other, describing the issue in dispute and
its position with regard to the issue. If the Parties are unable to agree on
an arbitrator within 30 days following delivery of such notice, the arbitrator
shall be selected by a Judge of the Superior Court of the State of Washington
for King County upon three days' notice. Discovery shall be allowed in
connection with any such arbitration to the same extent permitted by the
Washington Rules of Civil Procedure but either Party may petition the
arbitrator to limit the scope of such discovery, in which event the arbitrator
shall determine the extent of discovery allowable in connection with the
dispute in question. Except as otherwise provided herein, the arbitration
shall be conducted in accordance with the rules of the American Arbitration
Association then in effect for expedited proceedings. The award of the
arbitrator shall be final and binding, and judgment upon an award may be
entered in any court of competent jurisdiction. The arbitrator shall hold a
hearing, at which the Parties may present evidence and argument, within 30 days
of his or her appointment, and shall issue an award within 15 days of the close
of the hearing. In any such arbitration, the prevailing Party shall be
entitled to recover its costs, including without limitation reasonable
attorneys' fees, and the nonprevai1ing Party shall pay all costs of
arbitration, but if neither Party is determined to be the prevailing Party,
each Party shall bear its own costs and attorneys' fees and one-half of the
costs of arbitration. Nothing contained in this Section shall prevent either
Party from seeking a temporary restraining order, preliminary injunction or
similar injunctive relief from a court of competent
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jurisdiction to enforce the provisions of this Agreement. In the event that
either Party institutes an action in court for such relief or to compel
arbitration to, or enforce an award of arbitration, the prevailing Party shall
be entitled to recover its costs, including without limitation reasonable
attorneys' fees.
19. NOTICES
All notices or other communications required or permitted by this
Agreement shall be in writing and shall be sufficiently given if sent by
certified mail, postage prepaid, addressed as follows:
If to Employee, to:
Xxxxxxx X. Xxxxxxx
000 Xxxxxx Xxxxxx
X.X. Xxx 0000
Xxxxxxx, XX 00000
Facsimile: (000) 000-0000
If to Company:
Puget Sound Power & Light Company
X.X. Xxx 00000
Xxxxxxxx, Xxxxxxxxxx 00000-0000
Attention: Corporate Secretary
Facsimile: (000) 000-0000
Any such notice or communication shall be deemed to have been given as
of the date mailed. Any address may be changed by giving written notice of
such change in the manner provided herein for giving notice.
20. WAIVER OF BREACH
The waiver by a Party of a breach of any provision of this Agreement
shall not operate or be construed as a waiver of any subsequent breach.
21. ASSIGNMENT
This Agreement is for personal services. Neither Party may assign its
rights or delegate its duties hereunder without the prior written consent of
the other Party.
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22. ENTIRE AGREEMENT
This Agreement contains the entire understanding of the Parties with
regard to the subject matter of this Agreement and may only be changed by
written agreement signed by both Parties. Any and all prior discussions,
negotiations, commitments and understandings related thereto are merged herein.
23. BINDING EFFECT
This Agreement shall be binding upon and inure to the benefit of the
respective Parties, and their legal representatives, successors, permitted
assigns and heirs.
24. LAW
This Agreement shall be governed by, construed and enforced in
accordance with the laws of the state of Washington, without giving effect to
principles and provisions thereof relating to conflict or choice of laws and
irrespective of the fact that any one of the Parties is now or may become a
resident of a different state.
25. VALIDITY
In case any term of this Agreement shall be invalid, illegal or
unenforceable, in whole or in part, the validity of any of the other terms of
this Agreement shall not in any way be affected thereby.
"Company"
PUGET SOUND POWER & LIGHT COMPANY
By
-------------------------------
Its Chief Executive Officer
"Employee"
---------------------------------
Xxxxxxx X. Xxxxxxx
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EXHIBIT A
PUGET SOUND POWER & LIGHT COMPANY
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of October 18, 1995 by and among
Washington Energy Company, a Washington corporation ("WeCo"), and Puget Sound
Power & Light Company, a Washington corporation ("Puget" or the "Company").
WHEREAS, concurrently with the execution and delivery of this
Agreement, (i) WeCo, the Company and Washington Natural Gas Company, a
Washington corporation ("WNG"), are entering into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), which provides,
among other things, on the terms and subject to the conditions thereof, for the
merger of WeCo and WNG (or, in certain circumstances described therein, only
WeCo) with and into the Company (the "Merger"), and (ii) the Company and WeCo
are entering into a stock option agreement dated as of the date hereof whereby
WeCo grants to the Company an option with respect to certain shares of WeCo's
common stock on the terms and subject to the conditions set forth therein (the
"WeCo Stock Option Agreement"); and
WHEREAS, as a condition to WeCo's willingness to enter into the Merger
Agreement and the WeCo Stock Option Agreement, WeCo has requested that the
Company agree, and the Company has so agreed, to grant to WeCo an option with
respect to certain shares of the Common Stock, stated value $10 per share, of
the Company, together with the Rights under the Puget Rights Agreement (as
defined in the Merger Agreement) associated therewith (such Common Stock and
the associated Rights being collectively referred to herein as "Company Common
Stock"), on the terms and subject to the conditions set forth herein.
NOW, THEREFORE, to induce WeCo to enter into the Merger Agreement and
the WeCo Stock Option Agreement, and in consideration of the mutual covenants
and agreements set forth herein and in the Merger Agreement and the WeCo Stock
Option Agreement, the parties hereto agree as follows:
1. GRANT OF OPTION
The Company hereby grants WeCo an irrevocable option (the "Company
Option") to purchase up to 12,664,531 shares, subject to adjustment as provided
in Section 11 (such shares being referred to herein as the "Company Shares") of
Company Common Stock (being 19.9% of the number of shares of Company
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Common Stock outstanding on the date hereof) in the manner set forth below at a
price (the "Exercise Price") per Company Share of $23.25 (which is equal to the
Fair Market Value (as defined below) of a Company Share on the date hereof)
payable, at WeCo's option, (a) in cash or (b) subject to the receipt of the
approvals of any Governmental Authority required for the Company to acquire the
WeCo Shares (as defined below) from WeCo, which approvals the Company and WeCo
shall use all commercially reasonable efforts to obtain, in shares of common
stock, par value $5.00 per share, of WeCo ("WeCo Shares") in either case in
accordance with Section 4 hereof. Notwithstanding the foregoing, in no event
shall the number of Company Shares for which the Company Option is exercisable
exceed 19.9% of the number of issued and outstanding shares of Company Common
Stock. As used herein, the "Fair Market Value" of any share shall be the average
of the daily closing sales price for such share on the New York Stock Exchange
(the "NYSE") during the 10 NYSE trading days prior to the fifth NYSE trading day
preceding the date such Fair Market Value is to be determined. Capitalized terms
used herein but not defined herein shall have the meanings set forth in the
Merger Agreement.
2. EXERCISE OF OPTION
The Company Option may be exercised by WeCo, in whole or in part, at
any time or from time to time after the Merger Agreement becomes terminable by
WeCo under circumstances which could entitle WeCo to termination fees under
either Section 9.3(a) of the Merger Agreement (provided that the events
specified in Section 9.3(a)(ii)(x) of the Merger Agreement shall have occurred,
although the events specified in Section 9.3(a)(ii)(y) thereof need not have
occurred) or Section 9.3(b) of the Merger Agreement (regardless of whether the
Merger Agreement is actually terminated or whether there occurs a closing of
any Business Combination involving a Target Party or a closing by which a
Target Party becomes a subsidiary), any such event by which the Merger
Agreement becomes so terminable by WeCo being referred to herein as a "Trigger
Event." The Company shall notify WeCo promptly in writing of the occurrence of
any Trigger Event, it being understood that the giving of such notice by the
Company shall not be a condition to the right of WeCo to exercise the Company
Option. In the event WeCo wishes to exercise the Company Option, WeCo shall
deliver to the Company a written notice (an "Exercise Notice") specifying the
total number of Company Shares it wishes to purchase. Each closing of a
purchase of Company Shares (a "Closing") shall occur at a place, on a date and
at a time designated by WeCo in an Exercise Notice delivered at least two
business days prior to the date of the Closing. The Company Option shall
terminate upon the earlier of: (i) the Effective Time; (ii) the termination of
the Merger Agreement pursuant to Section 9.1 thereof (other than upon or during
the continuance of a Trigger Event); or (iii) 180 days folloWeCo any
termination of the Merger Agreement upon or during the
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continuance of a Trigger Event (or if, at the expiration of such 180-day period
the Company Option cannot be exercised by reason of any applicable judgment,
decree, order, law or regulation, 10 business days after such impediment to
exercise shall have been removed or shall have become final and not subject to
appeal, but in no event under this clause (iii) later than December 31, 1996;
provided that such date shall be extened to March 31, 1997 if the date after
which either party may terminate the Merger Agreement pursuant to Section 9.1(b)
of the Merger Agreement has been extended to March 31, 1997). Notwithstanding
the foregoing, the Company Option may not be exercised if WeCo is in material
breach of any of its material representations or warranties, or in material
breach of any of its covenants or agreements, contained in this Agreement, the
WeCo Stock Option Agreement or in the Merger Agreement. Upon the giving by WeCo
to the Company of the Exercise Notice and the tender of the applicable aggregate
Exercise Price, WeCo shall be deemed to be the holder of record of the Company
Shares issuable upon such exercise, notwithstanding that the stock transfer
books of the Company shall then be closed or that certificates representing such
Company Shares shall not then be actually delivered to WeCo.
3. CONDITIONS TO CLOSING
The obligation of the Company to issue the Company Shares to WeCo
hereunder is subject to the conditions (the condition described in clause (ii)
below may be waived by the Company in its sole discretion) that (i) all waiting
periods, if any, under the HSR Act, applicable to the issuance of the Company
Shares hereunder shall have expired or have been terminated; (ii) any WeCo
Shares which are issued in payment of the Exercise Price, shall have been
approved for listing on the NYSE upon official notice of issuance; (iii) all
consents, approvals, orders or authorizations of, or registrations,
declarations or filings with, any federal, state or local administrative agency
or commission or other federal, state or local Governmental Authority, if any,
required in connection with the issuance of the Company Shares hereunder shall
have been obtained or made, as the case may be; and (iv) no preliminary or
permanent injunction or other order by any court of competent jurisdiction
prohibiting or otherwise restraining such issuance shall be in effect.
4. CLOSING
At any Closing, (a) the Company will deliver to WeCo or its designee a
single certificate in definitive form representing the number of the Company
Shares designated by WeCo in its Exercise Notice, such certificate to be
registered in the name of WeCo and to bear the legend set forth in Section 12,
and (b) WeCo will deliver to the Company the aggregate price for the Company
Shares so designated and
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being purchased by (i) wire transfer of immediately available funds or certified
check or bank check or (ii) subject to the condition in Section l(b), a
certificate or certificates representing the number of WeCo Shares being issued
by WeCoin consideration thereof, as the case may be. For the purposes of this
Agreement, the number of WeCo Shares to be delivered to the Company shall be
equal to the quotient obtained by dividing (i) the product of (x) the number of
Company Shares with respect to which the Company Option is being exercised and
(y) the Exercise Price by (ii) the Fair Market Value of the WeCo Shares on the
date immediately preceding the date the Exercise Notice is delivered to the
Company. The Company shall pay all expenses, and any and all United States
federal, state and local taxes and other charges that may be payable in
connection with the preparation, issuance and delivery of stock certificates
under this Section 4 in the name of WeCo or such of its designees as shall have
obtained requisite regulatory approvals.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to WeCo that (a) the Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Washington and has the corporate power and authority to
enter into this Agreement and, subject to obtaining the applicable approval of
shareholders of the Company for the repurchase of Company Shares pursuant to
Section 7(a) below under circumstances where the provisions of Section
23B.06.400 of the WBCA would be applicable (the "Buyback Approval") and subject
to any regulatory approvals referred to herein, (b) the execution and delivery
of this Agreement by the Company and the consummation by the Company of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or any of
the transactions contemplated hereby (other than any required Buyback
Approval), (c) such corporate action (including the approval of the Board of
Directors of the Company) is intended to render inapplicable to this Agreement
and the Merger Agreement, and to the transactions contemplated hereby and
thereby, the provisions of the WBCA referred to in Section 5.15 of the Merger
Agreement, (d) this Agreement has been duly executed and delivered by the
Company, constitutes a valid and binding obligation of the Company and,
assuming this Agreement constitutes a valid and binding obligation of WeCo, is
enforceable against the Company in accordance with its terms, (e) the Company
has taken all necessary corporate action to authorize and reserve for issuance
and to permit it to issue, upon exercise of the Company Option, and at all
times from the date hereof through the expiration of the Company Option will
have reserved, [12,664,531] authorized and unissued Company Shares, such amount
being subject to adjustment as provided in Section 11, all of which, upon their
issuance and delivery in accordance
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with the terms of this Agreement, will be validly issued, fully paid and
nonassessable, (f) upon delivery of the Company Shares to WeCo upon the exercise
of the Company Option, WeCo will acquire the Company Shares free and clear of
all claims, liens, charges, encumbrances and security interests of any nature
whatsoever, (g) except as described in Section 5.4(b) of the Merger Agreement,
the execution and delivery of this Agreement by the Company does not, and the
consummation by the Company of the transactions contemplated hereby will not,
violate, conflict with, or result in a breach of any provision of, or constitute
a default (with or without notice or lapse of time, or both) under, or result in
the termination of, or accelerate the performance required by, or result in a
right of termination, cancellation, or acceleration of any obligation or the
loss of a material benefit under, or the creation of a lien, pledge, security
interest or other encumbrance on assets (any such conflict, violation, default,
right of termination, cancellation or acceleration, loss or creation, a
"Violation") of the Company or any of its subsidiaries, pursuant to, (A) any
provision of the Restated Articles of Incorporation or Bylaws of the Company,
(B) any provisions of any loan or credit agreement, note, mortgage, indenture,
lease, Company benefit plan or other agreement, obligation, instrument, permit,
concession, franchise, license or (C) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or its properties or
assets, which Violation, in the case of each of clauses (B) and (C), could
reasonably be expected to have a material adverse effect on the Company and its
subsidiaries taken as a whole, (h) except as described in Section 5.4(c) of the
Merger Agreement or Section 1(b) or Section 3 hereof, the execution and delivery
of this Agreement by the Company does not, and the performance of this Agreement
by the Company will not, require any consent, approval, authorization or permit
of, or filing with or notification to, any Governmental Authority, (i) none of
the Company, any of its affiliates or anyone acting on its or their behalf has
issued, sold or offered any security of the Company to any person under
circumstances that would cause the issuance and sale of the Company Shares, as
contemplated by this Agreement, to be subject to the registration requirements
of the Securities Act as in effect on the date hereof and, assuming the
representations of WeCo contained in Section 6(h) are true and correct, the
issuance, sale and delivery of the Company Shares hereunder would be exempt from
the registration and prospectus delivery requirements of the Securities Act, as
in effect on the date hereof (and the Company shall not take any action which
would cause the issuance, sale and delivery of the Company Shares hereunder not
to be exempt from such requirements), (j) any WeCo Shares acquired pursuant to
this Agreement will be acquired for the Company's own account, for investment
purposes only and will not be acquired by the Company with a view to the public
distribution thereof in violation of any applicable provision of the Securities
Act and (k) the delivery of Company Shares to WeCo pursuant hereto will not
result in WeCo becoming an "Acquiring Person" for purposes of the Puget Rights
Agreement or otherwise result in the
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triggering of any right (including, without limitation, a "flip-in" or
"flip-over" or similar event commonly described in rights agreements) or
entitlement of the Company s shareholders under the Puget Rights Agreement or
any similar agreement to which the Company or any of its affiliates is a party.
6. REPRESENTATIONS AND WARRANTIES OF WECO
WeCo represents and warrants to the Company that (a) WeCo is a
corporation duly organized, validly existing and in good standing under the
laws of the state of Washington and has the corporate power and authority to
enter into this Agreement and to carry out its obligations hereunder, (b) the
execution and delivery of this Agreement by WeCo and the consummation by WeCo
of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of WeCo and no other corporate
proceedings on the part of WeCo are necessary to authorize this Agreement or
any of the transactions contemplated hereby, (c) this Agreement has been duly
executed and delivered by WeCo and constitutes a valid and binding obligation
of WeCo, and, assuming this Agreement constitutes a valid and binding
obligation of the Company, is enforceable against WeCo in accordance with its
terms, (d) prior to any delivery of WeCo Shares in consideration of the
purchase of Company Shares pursuant hereto, WeCo will have taken all necessary
corporate action to authorize for issuance and to permit it to issue such WeCo
Shares, all of which, upon their issuance and delivery in accordance with the
terms of this Agreement, will be validly issued, fully paid and nonassessable,
and to render inapplicable to the receipt by the Company of the WeCo Shares the
provisions of the WBCA referred to in Section 4.15 of the Merger Agreement, (e)
upon any delivery of such WeCo Shares to the Company in consideration of the
purchase of Company Shares pursuant hereto, the Company will acquire the WeCo
Shares free and clear of all claims, liens, charges, encumbrances and security
interests of any nature whatsoever, (f) except as described in Section 4.4(b)
of the Merger Agreement, the execution and delivery of this Agreement by WeCo
does not, and the consummation by WeCo of the transactions contemplated hereby
will not, violate, conflict with, or result in the breach of any provision of,
or constitute a default (with or without notice or lapse of time, or both)
under, or result in any Violation by WeCo or any of its subsidiaries, pursuant
to (A) any provision of the Restated Articles of Incorporation or Bylaws of
WeCo, (B) any provisions of any loan or credit agreement, note, mortgage,
indenture, lease, WeCo benefit plan or other agreement, obligation, instrument,
permit, concession, franchise or license or (C) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to WeCo or its
properties or assets, which Violation, in the case of each of clauses (B) and
or (C), would have a material adverse effect on WeCo and its subsidiaries taken
as a whole, (g) except as described in Section 4.4(c) of the Merger Agreement
or Section 1(b) or Section 3
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hereof, the execution and delivery of this Agreement by WeCo does not, and the
consummation by WeCo of the transactions contemplated hereby will not, require
any consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority and (h) any Company Shares acquired
upon exercise of the Company Option will be acquired for WeCo's own account, for
investment purposes only and will not be, and the Company Option is not being,
acquired by WeCo with a view to the public distribution thereof in violation of
any applicable provision of the Securities Act.
7. CERTAIN REPURCHASES
(a) WECO PUT. At the request of WeCo by written notice at any
time during which the Company Option is exercisable pursuant to Section 2 (the
"Repurchase Period"), the Company (or any successor entity thereof) shall
repurchase from WeCo all or any portion of the Company Option, at the price set
forth in subparagraph (i) below, or, at the request of WeCo by written notice
at any time prior to December 31, 1996 (provided that such date shall be
extended to March 31, 1997 if the date after which either party may terminate
the Merger Agreement pursuant to Section 9.1(b) of the Merger Agreement has
been extended to March 31, 1997), the Company (or any successor entity thereof)
shall repurchase from WeCo all or any portion of the Company Shares purchased
by WeCo pursuant to the Company Option, at the price set forth in subparagraph
(ii) below:
(i) the difference between (x) the "Market/Offer Price"
for shares of Company Common Stock as of the date WeCo gives notice of
its intent to exercise its rights under this Section 7 (defined as the
higher of (A) the price per share offered as of such date pursuant to
any tender or exchange offer or other offer with respect to a Business
Combination which was made prior to such date and not terminated or
withdrawn as of such date (the "Offer Price") and (B) the Fair Market
Value of Company Common Stock as of such date (the "Market Price"))
and (y) the Exercise Price, multiplied by the number of Company Shares
purchasable pursuant to the Company Option (or portion thereof with
respect to which WeCo is exercising its rights under this Section 7),
but only if the Market/Offer Price is greater than the Exercise Price;
(ii) the product of (x) the sum of (A) the Exercise Price
paid by WeCo per Company Share acquired pursuant to the Company Option
and (B) the difference between the Market/Offer Price and the Exercise
Price, but only if the Market/Offer Price is greater than the Exercise
Price, and (y) the number of Company Shares so to be repurchased
pursuant to this Section 7. For purposes of this clause (ii), the
Offer Price shall be the highest price per share offered
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pursuant to a tender or exchange offer or other Business Combination
offer during the Repurchase Period prior to the delivery by WeCo of a
notice of repurchase.
(b) REDELIVERY OF WECO SHARES. If WeCo elected to purchase
Company Shares pursuant to the exercise of the Company Option by the issuance
and delivery of WeCo Shares, then the Company shall, if so requested by WeCo ,
in fulfillment of its obligation pursuant to clause (A) of Section 7(a)(ii)(x)
(that is, with respect to the Exercise Price only and without limitation to its
obligation to pay additional consideration under clause (B) of Section
7(a)(ii)(x)), redeliver the certificate for such WeCo Shares to WeCo, free and
clear of all liens, claims, damages, charges and encumbrances of any kind or
nature whatsoever; provided, however, that if less than all of the Company
Shares purchased by WeCo pursuant to the Company Option are to be repurchased
pursuant to this Section 7, then WeCo shall issue to the Company a new
certificate representing those WeCo Shares which are not due to be redelivered
to WeCo pursuant to this Section 7 as they constituted payment of the Exercise
Price for the Company Shares not being repurchased.
(c) PAYMENT AND REDELIVERY OF COMPANY OPTION OR SHARES. If WeCo
exercises its rights under this Section 7, the Company shall, within 10
business days thereafter, pay the required amount to WeCo in immediately
available funds and WeCo shall surrender to the Company the Company Option or
the certificates evidencing the Company Shares purchased by WeCo pursuant
thereto, and WeCo shall warrant that it owns the Company Option or such shares
and that the Company Option or such shares are then free and clear of all
liens, claims, damages, charges and encumbrances of any kind or nature
whatsoever.
(d) WECO CALL. If WeCo has elected to purchase Company Shares
pursuant to the exercise of the Company Option by the issuance and delivery of
WeCo Shares, notwithstanding that WeCo may no longer hold any such Company
Shares or that WeCo elects not to exercise its other rights under this Section
7, WeCo may require, at any time or from time to time prior to December 31,
1996 (provided that such date shall be extended to March 31, 1997 if the date
after which either party may terminate the Merger Agreement pursuant to Section
9.1(b) of the Merger Agreement has been extended to March 31, 1997), the
Company to sell to WeCo any such WeCo Shares at the price attributed to such
WeCo Shares pursuant to Section 4 plus interest at the rate of 6.5% per annum
on such amount from the date of the Closing relating to the exchange of such
WeCo Shares pursuant to Section 4 to the closing date under this Section 7(d)
less any dividends on such WeCo Shares paid during such period or declared and
payable to stockholders of record on a date during such period.
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(e) REPURCHASE PRICE REDUCED AT WECO'S OPTION. If the repurchase
price specified in Section 7(a) would subject the purchase of the Company
Option or the Company Shares purchased by WeCo pursuant to the Company Option
to a vote of the shareholders of the Company pursuant to the provisions of
Section 23B.06.400 of the WBCA, then WeCo may, at its election, reduce the
repurchase price to an amount which would permit such repurchase without the
necessity for such a shareholder vote.
8. VOTING OF SHARES
FolloWeCo the date hereof and prior to the fifth anniversary of the
date hereof (the "Expiration Date"), each party shall vote any shares of
capital stock of the other party acquired by such party pursuant to this
Agreement, including any WeCo Shares issued pursuant to Section l(b)
("Restricted Shares") or otherwise beneficially owned (within the meaning of
Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) by such party on each matter submitted to a vote of
shareholders of such other party for and against such matter in the same
proportion as the vote of all other shareholders of such other party are voted
(whether by proxy or otherwise) for and against such matter.
9. RESTRICTIONS ON TRANSFER
(a) RESTRICTIONS ON TRANSFER. Prior to the Expiration Date,
neither party shall, directly or indirectly, by operation of law or otherwise,
sell, assign, pledge, or otherwise dispose of or transfer any Restricted Shares
beneficially owned by such party, other than (i) pursuant to Section 7, or (ii)
in accordance with Section 9(b) or Section 10.
(b) PERMITTED SALES. FolloWeCo the termination of the Merger
Agreement, a party shall be permitted to sell any Restricted Shares
beneficially owned by it if such sale is made pursuant to a tender or exchange
offer that has been approved or recommended, or otherwise determined to be fair
to and in the best interests of the shareholders of the other party, by a
majority of the members of the Board of Directors of such other party which
majority shall include a majority of directors who were directors prior to the
announcement of such tender or exchange offer.
10. REGISTRATION RIGHTS
FolloWeCo the termination of the Merger Agreement, each party hereto
(a "Designated Holder") may by written notice (the "Registration Notice") to
the other party (the "Registrant") request the Registrant to register under the
Securities Act all or any part of the Restricted Shares beneficially owned by
such Designated Holder
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(the "Registrable Securities") pursuant to a bona fide firm commitment
underwritten public offering in which the Designated Holder and the underwriters
shall effect as wide a distribution of such Registrable Securities as is
reasonably practicable and shall use their best efforts to prevent any person
(including any Group (as used in Rule 13d-5 under the Exchange Act)) and its
affiliates from purchasing through such offering Restricted Shares representing
more than 1% of the outstanding shares of common stock of the Registrant on a
fully diluted basis (a "Permitted Offering"). The Registration Notice shall
include a certificate executed by the Designated Holder and its proposed
managing underwriter, which underwriter shall be an investment banking firm of
nationally recognized standing (the "Manager"), stating that (i) they have a
good faith intention to commence promptly a Permitted Offering and (ii) the
Manager in good faith believes that, based on the then prevailing market
conditions, it will be able to sell the Registrable Securities at a per share
price equal to at least 80% of the then Fair Market Value of such shares. The
Registrant (and/or any person designated by the Registrant) shall thereupon have
the option, exercisable by written notice delivered to the Designated Holder
within 10 business days after the receipt of the Registration Notice,
irrevocably to agree to purchase all or any part of the Registrable Securities
proposed to be so sold for cash at a price (the "Option Price") equal to the
product of (i) the number of Registrable Securities to be so purchased by the
Registrant and (ii) the then Fair Market Value of such shares. Any such purchase
of Registrable Securities by the Registrant (or its designee) hereunder shall
take place at a closing to be held at the principal executive offices of the
Registrant or at the offices of its counsel at any reasonable date and time
designated by the Registrant and/or such designee in such notice within 20
business days after delivery of such notice. Any payment for the shares to be
purchased shall be made by delivery at the time of such closing of the Option
Price in immediately available funds.
If the Registrant does not elect to exercise its option pursuant to
this Section 10 with respect to all Registrable Securities, it shall use its
best efforts to effect, as promptly as practicable, the registration under the
Securities Act of the unpurchased Registrable Securities proposed to be so
sold; provided, however, that (i) neither party shall be entitled to more than
an aggregate of two effective registration statements hereunder and (ii) the
Registrant will not be required to file any such registration statement during
any period of time (not to exceed 40 days after such request in the case of
clause (A) below or 90 days in the case of clauses (B) and (C) below) when (A)
the Registrant is in possession of material non-public information which it
reasonably believes would be detrimental to be disclosed at such time and, in
the opinion of counsel to the Registrant, such information would have to be
disclosed if a registration statement were filed at that time; (B) the
Registrant is required under the Securities Act to include audited financial
statements for any period in such registration statement and such financial
statements are not yet available for inclusion
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in such registration statement; or (C) the Registrant determines, in its
reasonable judgment, that such registration would interfere with any financing,
acquisition or other material transaction involving the Registrant or any of its
affiliates. The Registrant shall use its reasonable best efforts to cause any
Registrable Securities registered pursuant to this Section 10 to be qualified
for sale under the securities or Blue Sky laws of such jurisdictions as the
Designated Holder may reasonably request and shall continue such registration or
qualification in effect in such jurisdiction; provided, however, that the
Registrant shall not be required to qualify to do business in, or consent to
general service of process in, any jurisdiction by reason of this provision.
The registration rights set forth in this Section 10 are subject to
the condition that the Designated Holder shall provide the Registrant with such
information with respect to such holder's Registrable Securities, the plans for
the distribution thereof, and such other information with respect to such
holder as, in the reasonable judgment of counsel for the Registrant, is
necessary to enable the Registrant to include in such registration statement
all material facts required to be disclosed with respect to a registration
thereunder.
A registration effected under this Section 10 shall be effected at the
Registrant's expense, except for underwriting discounts and commissions and the
fees and the expenses of counsel to the Designated Holder, and the Registrant
shall provide to the underwriters such documentation (including certificates,
opinions of counsel and "comfort" letters from auditors) as are customary in
connection with underwritten public offerings as such underwriters may
reasonably require. In connection with any such registration, the parties
agree to (i) indemnify each other and the underwriters in the customary manner,
(ii) enter into an underwriting agreement in form and substance customary for
transactions of such type with the Manager and the other underwriters
participating in such offering, and (iii) take all further actions which shall
be reasonably necessary to effect such registration and sale (including, if the
Manager deems it necessary, participating in road-show presentations).
The Registrant shall be entitled to include (at its expense)
additional shares of its common stock in a registration effected pursuant to
this Section 10 only if and to the extent the Manager determines that such
inclusion will not adversely affect the prospects for success of such offering.
11. ADJUSTMENT UPON CHANGES IN CAPITALIZATION
Without limitation to any restriction on the Company contained in this
Agreement or in the Merger Agreement, in the event of any change in Company
Common Stock by reason of stock dividends, splitups, mergers (other than the
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Merger), recapitalizations, combinations, exchange of shares or the like, the
type and number of shares or securities subject to the Company Option, and the
purchase price per share provided in Section 1, shall be adjusted appropriately
to restore to WeCo its rights hereunder, including the right to purchase from
the Company (or its successors) shares of Company Common Stock representing
19.9% of the outstanding Company Common Stock for the aggregate Exercise Price
calculated as of the date of this Agreement as provided in Section 1.
12. RESTRICTIVE LEGENDS
Each certificate representing shares of Company Common Stock issued to
WeCo hereunder, and WeCo Shares, if any, delivered to the Company at a Closing,
shall include a legend in substantially the folloWeCo form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE
REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN A STOCK OPTION
AGREEMENT DATED AS OF OCTOBER 18, 1995, A COPY OF WHICH MAY BE
OBTAINED FROM THE ISSUER UPON REQUEST.
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act in the above legend shall be removed by
delivery of substitute certificate(s) without such reference if WeCo or the
Company, as the case may be, shall have delivered to the other party a copy of
a letter from the staff of the Securities and Exchange Commission, or an
opinion of counsel, in form and substance satisfactory to the other party, to
the effect that such legend is not required for purposes of the Securities Act;
(ii) the reference to the provisions to this Agreement in the above legend
shall be removed by delivery of substitute certificate(s) without such
reference if the shares have been sold or transferred in compliance with the
provisions of this Agreement and under circumstances that do not require the
retention of such reference; and (iii) the legend shall be removed in its
entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend as may
be required by law. Certificates representing shares sold in a registered
public offering pursuant to Section 10 shall not be required to bear the legend
set forth in this Section 12.
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13. BINDING EFFECT; NO ASSIGNMENT; NO THIRD PARTY BENEFICIARIES
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. Except
as expressly provided for in this Agreement, neither this Agreement nor the
rights or the obligations of either party hereto are assignable, except by
operation of law, or with the written consent of the other party. Nothing
contained in this Agreement, express or implied, is intended to confer upon any
person other than the parties hereto and their respective permitted assigns any
rights or remedies of any nature whatsoever by reason of this Agreement. Any
Restricted Shares sold by a party in compliance with the provisions of Section
10 shall, upon consummation of such sale, be free of the restrictions imposed
with respect to such shares by this Agreement, unless and until such party
shall repurchase or otherwise become the beneficial owner of such shares, and
any transferee of such shares shall not be entitled to the registration rights
of such party.
14. SPECIFIC PERFORMANCE
The parties recognize and agree that if for any reason any of the
provisions of this Agreement are not performed in accordance with their
specific terms or are otherwise breached, immediate and irreparable harm or
injury would be caused for which money damages would not be an adequate remedy.
Accordingly, each party agrees that, in addition to other remedies, the other
party shall be entitled to an injunction restraining any violation or
threatened violation of the provisions of this Agreement. In the event that
any action should be brought in equity to enforce the provisions of the
Agreement, neither party will allege, and each party hereby waives the defense,
that there is adequate remedy at law.
15. ENTIRE AGREEMENT
This Agreement, the WeCo Stock Option Agreement, the Confidentiality
Agreement and the Merger Agreement (including the exhibits and schedules
thereto) constitute the entire agreement among the parties with respect to the
subject matter hereof and thereof and supersede all other prior agreements and
understandings, both written and oral, among the parties or any of them with
respect to the subject matter hereof and thereof.
16. FURTHER ASSURANCES
Each party will execute and deliver all such further documents and
instruments and take all such further action as may be necessary in order to
consummate the transactions contemplated hereby.
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17. VALIDITY
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of the other provisions of this
Agreement, which shall remain in full force and effect. In the event any court
or other competent authority holds any provisions of this Agreement to be null,
void or unenforceable, the parties hereto shall negotiate in good faith the
execution and delivery of an amendment to this Agreement in order, as nearly as
possible, to effectuate, to the extent permitted by law, the intent of the
parties hereto with respect to such provision and the economic effects thereof.
If for any reason any such court or regulatory agency determines that WeCo is
not permitted to acquire, or the Company is not permitted to repurchase
pursuant to Section 7, the full number of shares of Company Common Stock
provided in Section 1 hereof (as the same may be adjusted), it is the express
intention of the Company to allow WeCo to acquire or to require the Company to
repurchase such lesser number of shares as may be permissible, without any
amendment or modification hereof. Each party agrees that, should any court or
other competent authority hold any provision of this Agreement or part hereof
to be null, void or unenforceable, or order any party to take any action
inconsistent herewith, or not take any action required herein, the other party
shall not be entitled to specific performance of such provision or part hereof
or to any other remedy, including but not limited to money damages, for breach
hereof or of any other provision of this Agreement or part hereof as the result
of such holding or order.
18. NOTICES
All notices and other communications hereunder shall be in writing and
shall be deemed given if (i) delivered personally, (ii) sent by reputable
overnight courier service, (iii) telecopied (which is confirmed), or (iv) five
days after being mailed by registered or certified mail (return receipt
requested) to the parties at the folloWeCo addresses (or at such other address
for a party as shall be specified by like notice):
A. If to WeCo, to:
Washington Energy Company
000 Xxxxxx Xxxxxx
Xxxxxxx, XX 00000]
Attention: Xxxxx X. Xxxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
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Xxxxxx & Xxxxx/Xxxxxxx Xxxxxxxx
0000 Xxxxxx Xxxxxx
Xxxxx Xxxxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
and a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
B. If to the Company, to:
Puget Sound Power & Light Company
X.X. Xxx 00000
Xxxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Xxxxxxx Coie
0000 Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. XxXxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
and a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx
000 Xxxxx Xxxxxx
-00-
000
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
19. GOVERNING LAW; CHOICE OF FORUM
This Agreement shall be governed by and construed in accordance with
the laws of the state of Washington applicable to agreements made and to be
performed entirely within such State and without regard to its choice of law
principles. Each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any federal court located in the state of Washington
or any Washington 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 or defeat 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 court sitting
in the state of Washington or a Washington state court.
20. INTERPRETATION
When a reference is made in this Agreement to a Section such reference
shall be to a Section of this Agreement unless otherwise indicated. Whenever
the words "include," "includes" and "including" are used in this Agreement,
they shall be deemed to be followed by the words "without limitation." The
descriptive headings herein are inserted for convenience of reference only and
are not intended to be part of or to affect the meaning or interpretation of
this Agreement.
21. COUNTERPARTS
This Agreement may be executed in two counterparts, each of which
shall be deemed to be an original, but both of which, taken together, shall
constitute one and the same instrument.
22. EXPENSES
Except as otherwise expressly provided herein or in the Merger
Agreement, all costs and expenses incurred in connection with the transactions
contemplated by this Agreement shall be paid by the party incurring such
expenses.
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23. AMENDMENTS; WAIVER
This Agreement may be amended by the parties hereto and the terms and
conditions hereof may be waived only by an instrument in writing signed on
behalf of each of the parties hereto, or, in the case of a waiver, by an
instrument signed on behalf of the party waiving compliance.
24. EXTENSION OF TIME PERIODS
The time periods for exercise of certain rights under Sections 2, 6
and 7 shall be extended (i) to the extent necessary to obtain all regulatory
approvals for the exercise of such rights, and for the expiration of all
statutory waiting periods; and (ii) to the extent necessary to avoid any
liability under Section 16(b) of the Exchange Act by reason of such exercise.
25. REPLACEMENT OF COMPANY OPTION
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Agreement, and (in the
case of loss, theft or destruction) of reasonably satisfactory indemnification,
and upon surrender and cancellation of this Agreement, if mutilated, the
Company will execute and deliver a new Agreement of like tenor and date.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective duly authorized officers as of the date first
above written.
WASHINGTON ENERGY COMPANY
By:
----------------------
Name:
Title:
PUGET SOUND POWER &
LIGHTCOMPANY
By:
----------------------
Name:
Title:
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EXHIBIT B
WASHINGTON ENERGY COMPANY
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of October 18, 1995 by and among
Puget Sound Power & Light Company , a Washington corporation ("Puget"), and
Washington Energy Company, a Washington corporation ("WeCo" or the "Company").
WHEREAS, concurrently with the execution and delivery of this
Agreement: (i) Puget, the Company and Washington Natural Gas Company, a
Washington corporation ("WNG"), are entering into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), which provides,
among other things, on the terms and subject to the conditions thereof, for the
merger of the Company and WNG (or, in certain circumstances described therein,
only the Company) with and into Puget (the "Merger"), and (ii) Puget and the
Company are entering into a stock option agreement dated as of the date hereof
whereby Puget grants to the Company an option with respect to certain shares of
Common Stock, stated value $10 per share, of Puget, together with the Rights
under the Puget Rights Agreement (as defined in the Merger Agreement)
associated therewith (such Common Stock and the associated Rights being
collectively referred to herein as "Puget Shares"), on the terms and subject to
the conditions set forth therein (the "Puget Stock Option Agreement"); and
WHEREAS, as a condition to Puget's willingness to enter into the
Merger Agreement and the Puget Stock Option Agreement, Puget has requested that
the Company agree, and the Company has so agreed, to grant to Puget an option
with respect to certain shares of Common Stock, par value $5 per share, of the
Company ("Company Common Stock"), on the terms and subject to the conditions
set forth herein.
NOW, THEREFORE, to induce Puget to enter into the Merger Agreement and
the Puget Stock Option Agreement, and in consideration of the mutual covenants
and agreements set forth herein and in the Merger Agreement and the Puget Stock
Option Agreement, the parties hereto agree as follows:
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1. GRANT OF OPTION
The Company hereby grants Puget an irrevocable option (the "Company
Option") to purchase up to 4,789,960 shares, subject to adjustment as provided
in Section 11 (such shares being referred to herein as the "Company Shares") of
Company Common Stock (being 19.9% of the number of shares of Company Common
Stock outstanding on the date hereof) in the manner set forth below at a price
(the "Exercise Price") per Company Share of $20.00 (which is equal to the
product of (x) the Fair Market Value (as defined below) of a Puget Share on the
date hereof and (y) the Ratio set forth in Section 2.1(b) of the Merger
Agreement) payable, at Puget's option, (a) in cash or (b) subject to the
receipt of the approvals of any Governmental Authority required for the Company
to acquire the Puget Shares from Puget and for Puget to issue the Puget Shares
to WeCo, which approvals the Company and Puget shall use all commercially
reasonable efforts to obtain, in Puget Shares, in either case in accordance
with Section 4 hereof. Notwithstanding the foregoing, in no event shall the
number of Company Shares for which the Company Option is exercisable exceed
19.9% of the number of issued and outstanding shares of Company Common Stock.
As used herein, the "Fair Market Value" of any share shall be the average of
the daily closing sales price for such share on the New York Stock Exchange
(the "NYSE") during the 10 NYSE trading days prior to the fifth NYSE trading
day preceding the date such Fair Market Value is to be determined. Capitalized
terms used herein but not defined herein shall have the meanings set forth in
the Merger Agreement.
2. EXERCISE OF OPTION
The Company Option may be exercised by Puget, in whole or in part, at
any time or from time to time after the Merger Agreement becomes terminable by
Puget under circumstances which could entitle Puget to termination fees under
either Section 9.3(a) of the Merger Agreement (provided that the events
specified in Section 9.3(a)(ii)(x) of the Merger Agreement shall have occurred,
although the events specified in Section 9.3(a)(ii)(y) need not have occurred)
or Section 9.3(b) of the Merger Agreement (regardless of whether the Merger
Agreement is actually terminated or whether there occurs a closing of any
Business Combination involving a Target Party or a closing by which a Target
Party becomes a subsidiary), any such event by which the Merger Agreement
becomes so terminable by Puget being referred to herein as a "Trigger Event."
The Company shall notify Puget promptly in writing of the occurrence of any
Trigger Event, it being understood that the giving of such notice by the
Company shall not be a condition to the right of Puget to exercise the Company
Option. In the event Puget wishes to exercise the Company Option, Puget shall
deliver to the Company a written notice (an "Exercise Notice") specifying the
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total number of Company Shares it wishes to purchase. Each closing of a
purchase of Company Shares (a "Closing") shall occur at a place, on a date and
at a time designated by Puget in an Exercise Notice delivered at least two
business days prior to the date of the Closing. The Company Option shall
terminate upon the earlier of: (i) the Effective Time; (ii) the termination of
the Merger Agreement pursuant to Section 9.1 thereof (other than upon or during
the continuance of a Trigger Event); or (iii) 180 days following any termination
of the Merger Agreement upon or during the continuance of a Trigger Event (or
if, at the expiration of such 180-day period, the Company Option cannot be
exercised by reason of any applicable judgment, decree, order, law or
regulation, 10 business days after such impediment to exercise shall have been
removed or shall have become final and not subject to appeal, but in no event
under this clause (iii) later than December 31, 1996; provided that such date
shall be extended to March 31, 1997 if the date after which either party may
terminate the Merger Agreement pursuant to Section 9.1(b) of the Merger
Agreement has been extended to March 31, 1997. Notwithstanding the foregoing,
the Company Option may not be exercised if Puget is in material breach of any of
its material representations or warranties, or in material breach of any of its
covenants or agreements, contained in this Agreement, the Puget Stock Option
Agreement or the Merger Agreement. Upon the giving by Puget to the Company of
the Exercise Notice and the tender of the applicable aggregate Exercise Price,
Puget shall be deemed to be the holder of record of the Company Shares issuable
upon such exercise, notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing such Company Shares shall
not then be actually delivered to Puget.
3. CONDITIONS TO CLOSING
The obligation of the Company to issue the Company Shares to Puget
hereunder is subject to the conditions (the condition described in clause (ii)
below may be waived by the Company in its sole discretion) that (i) all waiting
periods, if any, under the HSR Act, applicable to the issuance of the Company
Shares hereunder shall have expired or have been terminated; (ii) any Puget
Shares which are issued in payment of the Exercise Price, shall have been
approved for listing on the NYSE upon official notice of issuance; (iii) all
consents, approvals, orders or authorizations of, or registrations,
declarations or filings with, any federal, state or local administrative agency
or commission or other federal, state or local Governmental Authority, if any,
required in connection with the issuance of the Company Shares hereunder shall
have been obtained or made, as the case may be; and (iv) no preliminary or
permanent injunction or other order by any court of competent jurisdiction
prohibiting or otherwise restraining such issuance shall be in effect.
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4. CLOSING
At any Closing, (a) the Company will deliver to Puget or its designee
a single certificate in definitive form representing the number of the Company
Shares designated by Puget in its Exercise Notice, such certificate to be
registered in the name of Puget and to bear the legend set forth in Section 12
and (b) Puget will deliver to the Company the aggregate price for Company
Shares so designated and being purchased by (i) wire transfer of immediately
available funds or certified check or bank check or (ii) subject to the
condition in Section 1(b), a certificate or certificates representing the
number of Puget Shares being issued by Puget in consideration thereof, as the
case may be. For the purposes of this Agreement, the number of Puget Shares to
be delivered to the Company shall be equal to the quotient obtained by dividing
(i) the product of (x) the number of Company Shares with respect to which the
Company Option is being exercised and (y) the Exercise Price by (ii) the Fair
Market Value of the Puget Shares on the date immediately preceding the date the
Exercise Notice is delivered to the Company. The Company shall pay all
expenses, and any and all United States federal, state and local taxes and
other charges that may be payable in connection with the preparation, issuance
and delivery of stock certificates under this Section 4 in the name of Puget or
such of its designees as shall have obtained requisite regulatory approvals.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Puget that (a) the Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Washington and has the corporate power and authority to
enter into this Agreement and, subject to obtaining the applicable approval of
shareholders of the Company for the repurchase of Company Shares pursuant to
Section 7(a) below under circumstances where the provisions of Section
23B.06.400 of the WBCA would be applicable (the "Buyback Approval") and subject
to any regulatory approvals referred to herein, to carry out its obligations
hereunder, (b) the execution and delivery of this Agreement by the Company and
the consummation by the Company of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of the
Company and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or any of the transactions contemplated
hereby (other than any required Buyback Approval), (c) such corporate action
(including the approval of the Board of Directors of the Company) is intended
to render inapplicable to this Agreement and the Merger Agreement, and to the
transactions contemplated hereby and thereby, the provisions of the WBCA
referred to in Section 4.15 of the Merger Agreement, (d) this Agreement has
been duly executed and delivered by the Company, constitutes a valid and
binding obligation of the Company and, assuming this Agreement constitutes a
valid and binding
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obligation of Puget, is enforceable against the Company in accordance with its
terms, (e) the Company has taken all necessary corporate action to authorize
and reserve for issuance and to permit it to issue, upon exercise of the
Company Option, and at all times from the date hereof through the expiration of
the Company Option will have reserved, ____________ authorized and unissued
Company Shares, such amount being subject to adjustment as provided in Section
11, all of which, upon their issuance and delivery in accordance with the terms
of this Agreement, will be validly issued, fully paid and nonassessable, (f)
upon delivery of the Company Shares to Puget upon the exercise of the Company
Option, Puget will acquire the Company Shares free and clear of all claims,
liens, charges, encumbrances and security interests of any nature whatsoever,
(g) except as described in Section 4.4(b) of the Merger Agreement, the
execution and delivery of this Agreement by the Company does not, and the
consummation by the Company of the transactions contemplated hereby will not,
violate, conflict with, or result in a breach of any provision of, or
constitute a default (with or without notice or lapse of time, or both) under,
or result in the termination of, or accelerate the performance required by, or
result in a right of termination, cancellation, or acceleration of any
obligation or the loss of a material benefit under, or the creation of a lien,
pledge, security interest or other encumbrance on assets (any such conflict,
violation, default, right of termination, cancellation or acceleration, loss or
creation, a "Violation") of the Company or any of its subsidiaries, pursuant to
(A) any provision of the Restated Articles of Incorporation or Bylaws of the
Company, (B) any provisions of any loan or credit agreement, note, mortgage,
indenture, lease, Company benefit plan or other agreement, obligation,
instrument, permit, concession, franchise, license or (C) any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the Company
or its properties or assets, which Violation, in the case of each of clauses
(B) and (C), could reasonably be expected to have a material adverse effect on
the Company and its subsidiaries taken as a whole, (h) except as described in
Section 4.4(c) of the Merger Agreement or Section 1(b) or Section 3 hereof, the
execution and delivery of this Agreement by the Company does not, and the
performance of this Agreement by the Company will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Authority, (i) none of the Company, any of its affiliates or
anyone acting on its or their behalf has issued, sold or offered any security
of the Company to any person under circumstances that would cause the issuance
and sale of the Company Shares, as contemplated by this Agreement, to be
subject to the registration requirements of the Securities Act as in effect on
the date hereof and, assuming the representations of Puget contained in Section
6(h) are true and correct, the issuance, sale and delivery of the Company
Shares hereunder would be exempt from the registration and prospectus delivery
requirements of the Securities Act, as in effect on the date hereof (and the
Company shall not take any action which would
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cause the issuance, sale and delivery of the Company Shares hereunder not to be
exempt from such requirements), and (j) any Puget Shares acquired pursuant to
this Agreement will be acquired for the Company's own account, for investment
purposes only and will not be acquired by the Company with a view to the public
distribution thereof in violation of any applicable provision of the Securities
Act.
6. REPRESENTATIONS AND WARRANTIES OF PUGET
Puget represents and warrants to the Company that (a) Puget is a
corporation duly organized, validly existing and in good standing under the
laws of the state of Washington and has the corporate power and authority to
enter into this Agreement and to carry out its obligations hereunder, (b) the
execution and delivery of this Agreement by Puget and the consummation by Puget
of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Puget and no other corporate
proceedings on the part of Puget are necessary to authorize this Agreement or
any of the transactions contemplated hereby, (c) this Agreement has been duly
executed and delivered by Puget and constitutes a valid and binding obligation
of Puget, and, assuming this Agreement constitutes a valid and binding
obligation of the Company, is enforceable against Puget in accordance with its
terms, (d) prior to any delivery of Puget Shares in consideration of the
purchase of Company Shares pursuant hereto, Puget will have taken all necessary
corporate action to authorize for issuance and to permit it to issue such Puget
Shares, all of which, upon their issuance and delivery in accordance with the
terms of this Agreement, will be validly issued, fully paid and nonassessable,
and to render inapplicable to the receipt by the Company of the Puget Shares
the provisions of the WBCA referred to in Section 5.15 of the Merger Agreement,
(e) upon any delivery of such Puget Shares to the Company in consideration of
the purchase of Company Shares pursuant hereto, the Company will acquire the
Puget Shares free and clear of all claims, liens, charges, encumbrances and
security interests of any nature whatsoever, (f) except as described in Section
5.4(b) of the Merger Agreement, the execution and delivery of this Agreement by
Puget does not, and the consummation by Puget of the transactions contemplated
hereby will not, violate, conflict with, or result in the breach of any
provision of, or constitute a default (with or without notice or lapse of time,
or both) under, or result in any Violation by Puget or any of its subsidiaries,
pursuant to (A) any provision of the Restated Articles of Incorporation or
Bylaws of Puget, (B) any provisions of any loan or credit agreement, note,
mortgage, indenture, lease, Puget benefit plan or other agreement, obligation,
instrument, permit, concession, franchise or license or (C) any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Puget
or its properties or assets, which Violation, in the case of each of clauses
(B) and or (C), would have a material adverse effect on Puget and its
subsidiaries taken as a whole, (g) except as described in Section 5.4(c) of the
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Merger Agreement or Section 1(b) or Section 3 hereof, the execution and
delivery of this Agreement by Puget does not, and the consummation by Puget of
the transactions contemplated hereby will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Authority, (h) any Company Shares acquired upon exercise of the Company Option
will be acquired for Puget's own account, for investment purposes only and will
not be, and the Company Option is not being, acquired by Puget with a view to
the public distribution thereof in violation of any applicable provision of the
Securities Act and (i) the delivery of Puget Shares to the Company in
consideration of the purchase of Company Shares pursuant hereto will not result
in the Company becoming an "Acquiring Person" for purposes of the Puget Rights
Agreement or otherwise result in the triggering of any right (including,
without limitation, a "flip-in" or "flip-over" or similar event commonly
described in rights agreements) or entitlement of Puget shareholders under the
Puget Rights Agreement or any similar agreement to which Puget or any of its
affiliates is a party.
7. CERTAIN REPURCHASES
(a) Puget Put. At the request of Puget by written notice at any
time during which the Company Option is exercisable pursuant to Section 2 (the
"Repurchase Period"), the Company (or any successor entity thereof) shall
repurchase from Puget all or any portion of the Company Option, at the price
set forth in subparagraph (i) below, or, at the request of Puget by written
notice at any time prior to December 31, 1996 (provided that such date shall be
extended to March 31, 1997 if the date after which either party may terminate
the Merger Agreement pursuant to Section 9.1(b) of the Merger Agreement has
been extended to March 31, 1997), the Company (or any successor entity thereof)
shall repurchase from Puget all or any portion of the Company Shares purchased
by Puget pursuant to the Company Option, at the price set forth in subparagraph
(ii) below:
(i) the difference between (x) the "Market/Offer Price"
for shares of Company Common Stock as of the date Puget gives notice
of its intent to exercise its rights under this Section 7 (defined as
the higher of (A) the price per share offered as of such date pursuant
to any tender or exchange offer or other offer with respect to a
Business Combination which was made prior to such date and not
terminated or withdrawn as of such date (the "Offer Price") and (B)
the Fair Market Value of Company Common Stock as of such date (the
"Market Price")) and (y) the Exercise Price, multiplied by the number
of Company Shares purchasable pursuant to the Company Option (or
portion thereof with respect to which Puget is exercising its rights
under this Section 7), but only if the Market/Offer Price is greater
than the Exercise Price;
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(ii) the product of (x) the sum of (A) the Exercise Price
paid by Puget per Company Share acquired pursuant to the Company
Option and (B) the difference between the Market/Offer Price and the
Exercise Price, but only if the Market/Offer Price is greater than the
Exercise Price, and (y) the number of Company Shares so to be
repurchased pursuant to this Section 7. For purposes of this clause
(ii), the Offer Price shall be the highest price per share offered
pursuant to a tender or exchange offer or other Business Combination
offer during the Repurchase Period prior to the delivery by Puget of a
notice of repurchase.
(b) Redelivery of Puget Shares. If Puget elected to purchase
Company Shares pursuant to the exercise of the Company Option by the issuance
and delivery of Puget Shares, then the Company shall, if so requested by Puget,
in fulfillment of its obligation pursuant to clause (A) of Section 7(a)(ii)(x)
(that is, with respect to the Exercise Price only and without limitation to its
obligation to pay additional consideration under clause (B) of Section
7(a)(ii)(x)), redeliver the certificate for such Puget Shares to Puget, free
and clear of all liens, claims, damages, charges and encumbrances of any kind
or nature whatsoever; provided, however, that if less than all of the Company
Shares purchased by Puget pursuant to the Company Option are to be repurchased
pursuant to this Section 7, then Puget shall issue to the Company a new
certificate representing those Puget Shares which are not due to be redelivered
to Puget pursuant to this Section 7 as they constituted payment of the Exercise
Price for the Company Shares not being repurchased.
(c) Payment and Redelivery of Company Option or Shares. If Puget
exercises its rights under this Section 7, the Company shall, within 10
business days thereafter, pay the required amount to Puget in immediately
available funds and Puget shall surrender to the Company the Company Option or
the certificates evidencing the Company Shares purchased by Puget pursuant
thereto, and Puget shall warrant that it owns the Company Option or such shares
and that the Company Option or such shares are then free and clear of all
liens, claims, damages, charges and encumbrances of any kind or nature
whatsoever.
(d) Puget Call. If Puget has elected to purchase Company Shares
pursuant to the exercise of the Company Option by the issuance and delivery of
Puget Shares, notwithstanding that Puget may no longer hold any such Company
Shares or that Puget elects not to exercise its other rights under this Section
7, Puget may require, at any time or from time to time prior to December 31,
1996 (provided that such date shall be extended to March 31, 1997 if the date
after which either party may terminate the Merger Agreement pursuant to Section
9.l(b) of the Merger Agreement has been extended to [March 31, 1997]), the
Company to sell to Puget any such Puget Shares at
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the price attributed to such Puget Shares pursuant to Section 4 plus interest
at the rate of 6.5% per annum on such amount, from the date of the Closing
relating to the exchange of such Puget Shares pursuant to Section 4 to the
closing date under this Section 7(d) less any dividends on such Puget Shares
paid during such period or declared and payable to stockholders of record on a
date during such period.
(e) Repurchase Price Reduced at Puget's Option. If the repurchase
price specified in Section 7(a) would subject the repurchase of the Company
Option or the Company Shares purchased by Puget pursuant to the Company Option
to a vote of the shareholders of the Company pursuant to the provisions of
Section 23B.06.400 of the WBCA, then Puget may, at its election, reduce the
repurchase price to an amount which would permit such repurchase without the
necessity for such a shareholder vote.
8. VOTING OF SHARES
Following the date hereof and prior to the fifth anniversary of the
date hereof (the "Expiration Date"), each party shall vote any shares of
capital stock of the other party acquired by such party pursuant to this
Agreement, including any Puget Shares issued pursuant to Section l(b)
("Restricted Shares") or otherwise beneficially owned (within the meaning of
Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) by such party on each matter submitted to a vote of
shareholders of such other party for and against such matter in the same
proportion as the vote of all other shareholders of such other party are voted
(whether by proxy or otherwise) for and against such matter.
9. RESTRICTIONS ON TRANSFER
(a) Restrictions on Transfer. Prior to the Expiration Date,
neither party shall, directly or indirectly, by operation of law or otherwise,
sell, assign, pledge, or otherwise dispose of or transfer any Restricted Shares
beneficially owned by such party, other than (i) pursuant to Section 7 or (ii)
in accordance with Section 9(b) or Section 10.
(b) Permitted Sales. Following the termination of the Merger
Agreement, a party shall be permitted to sell any Restricted Shares
beneficially owned by it if such sale is made pursuant to a tender or exchange
offer that has been approved or recommended, or otherwise determined to be fair
to and in the best interests of the shareholders of the other party, by a
majority of the members of the Board of Directors of such other party which
majority shall include a majority of directors who were directors prior to the
announcement of such tender or exchange offer.
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10. REGISTRATION RIGHTS
Following the termination of the Merger Agreement, each party hereto
(a "Designated Holder") may by written notice (the "Registration Notice") to
the other party (the "Registrant") request the Registrant to register under the
Securities Act all or any part of the Restricted Shares beneficially owned by
such Designated Holder (the "Registrable Securities") pursuant to a bona fide
firm commitment underwritten public offering in which the Designated Holder and
the underwriters shall effect as wide a distribution of such Registrable
Securities as is reasonably practicable and shall use their best efforts to
prevent any person (including any Group (as used in Rule 13d-5 under the
Exchange Act)) and its affiliates from purchasing through such offering
Restricted Shares representing more than 1% of the outstanding shares of common
stock of the Registrant on a fully diluted basis (a "Permitted Offering"). The
Registration Notice shall include a certificate executed by the Designated
Holder and its proposed managing underwriter, which underwriter shall be an
investment banking firm of nationally recognized standing (the "Manager"),
stating that (i) they have a good-faith intention to commence promptly a
Permitted Offering and (ii) the Manager in good faith believes that, based on
the then prevailing market conditions, it will be able to sell the Registrable
Securities at a per share price equal to at least 80% of the then Fair Market
Value of such shares. The Registrant (and/or any person designated by the
Registrant) shall thereupon have the option, exercisable by written notice
delivered to the Designated Holder within 10 business days after the receipt of
the Registration Notice, irrevocably to agree to purchase all or any part of
the Registrable Securities proposed to be so sold for cash at a price (the
"Option Price") equal to the product of (i) the number of Registrable
Securities to be so purchased by the Registrant and (ii) the then Fair Market
Value of such shares. Any such purchase of Registrable Securities by the
Registrant (or its designee) hereunder shall take place at a closing to be held
at the principal executive offices of the Registrant or at the offices of its
counsel at any reasonable date and time designated by the Registrant and/or
such designee in such notice within 20 business days after delivery of such
notice. Any payment for the shares to be purchased shall be made by delivery
at the time of such closing of the Option Price in immediately available funds.
If the Registrant does not elect to exercise its option pursuant to
this Section 10 with respect to all Registrable Securities, it shall use its
best efforts to effect, as promptly as practicable, the registration under the
Securities Act of the unpurchased Registrable Securities proposed to be so
sold; provided, however, that (i) neither party shall be entitled to more than
an aggregate of two effective registration statements hereunder and (ii) the
Registrant will not be required to file any such registration statement during
any period of time (not to exceed 40 days after such request in the case of
clause (A) below or 90 days in the case of clauses (B) and (C) below) when
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(A) the Registrant is in possession of material nonpublic information which it
reasonably believes would be detrimental to be disclosed at such time and, in
the opinion of counsel to the Registrant, such information would have to be
disclosed if a registration statement were filed at that time; (B) the
Registrant is required under the Securities Act to include audited financial
statements for any period in such registration statement and such financial
statements are not yet available for inclusion in such registration statement;
or (C) the Registrant determines, in its reasonable judgment, that such
registration would interfere with any financing, acquisition or other material
transaction involving the Registrant or any of its affiliates. The Registrant
shall use its reasonable best efforts to cause any Registrable Securities
registered pursuant to this Section 10 to be qualified for sale under the
securities or Blue Sky laws of such jurisdictions as the Designated Holder may
reasonably request and shall continue such registration or qualification in
effect in such jurisdiction; provided, however, that the Registrant shall not
be required to qualify to do business in, or consent to general service of
process in, any jurisdiction by reason of this provision.
The registration rights set forth in this Section 10 are subject to
the condition that the Designated Holder shall provide the Registrant with such
information with respect to such holder's Registrable Securities, the plans for
the distribution thereof, and such other information with respect to such
holder as, in the reasonable judgment of counsel for the Registrant, is
necessary to enable the Registrant to include in such registration statement
all material facts required to be disclosed with respect to a registration
thereunder.
A registration effected under this Section 10 shall be effected at the
Registrant's expense, except for underwriting discounts and commissions and the
fees and the expenses of counsel to the Designated Holder, and the Registrant
shall provide to the underwriters such documentation (including certificates,
opinions of counsel and "comfort" letters from auditors) as are customary in
connection with underwritten public offerings as such underwriters may
reasonably require. In connection with any such registration, the parties
agree to (i) indemnify each other and the underwriters in the customary manner,
(ii) enter into an underwriting agreement in form and substance customary for
transactions of such type with the Manager and the other underwriters
participating in such offering, and (iii) take all further actions which shall
be reasonably necessary to effect such registration and sale (including, if the
Manager deems it necessary, participating in road-show presentations).
The Registrant shall be entitled to include (at its expense)
additional shares of its common stock in a registration effected pursuant to
this Section 10 only if and to
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the extent the Manager determines that such inclusion will not adversely affect
the prospects for success of such offering.
11. ADJUSTMENT UPON CHANGES IN CAPITALIZATION
Without limitation to any restriction on the Company contained in this
Agreement or in the Merger Agreement, in the event of any change in Company
Common Stock by reason of stock dividends, splitups, mergers (other than the
Merger), recapitalizations, combinations, exchange of shares or the like, the
type and number of shares or securities subject to the Company Option, and the
purchase price per share provided in Section 1, shall be adjusted appropriately
to restore to Puget its rights hereunder, including the right to purchase from
the Company (or its successors) shares of Company Common Stock representing
19.9% of the outstanding Company Common Stock for the aggregate Exercise Price
calculated as of the date of this Agreement as provided in Section 1.
12. RESTRICTIVE LEGENDS
Each certificate representing shares of Company Common Stock issued to
Puget hereunder, and Puget Shares, if any, delivered to the Company at a
Closing, shall include a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE
REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN A STOCK OPTION
AGREEMENT DATED AS OF OCTOBER 18, 1995, A COPY OF WHICH MAY BE
OBTAINED FROM THE ISSUER UPON REQUEST.
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if Puget or the Company, as
the case may be, shall have delivered to the other party a copy of a letter
from the staff of the Securities and Exchange Commission, or an opinion of
counsel, in form and substance satisfactory to the other party, to the effect
that such legend is not required for purposes of the Securities Act; (ii) the
reference to the provisions to this Agreement in the above legend shall be
removed by delivery of substitute certificate(s) without such reference if the
shares have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of such
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reference; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both satisfied. In
addition, such certificates shall bear any other legend as may be required by
law. Certificates representing shares sold in a registered public offering
pursuant to Section 10 shall not be required to bear the legend set forth in
this Section 12.
13. BINDING EFFECT; NO ASSIGNMENT; NO THIRD-PARTY BENEFICIARIES
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. Except
as expressly provided for in this Agreement, neither this Agreement nor the
rights or the obligations of either party hereto are assignable, except by
operation of law, or with the written consent of the other party. Nothing
contained in this Agreement, express or implied, is intended to confer upon any
person other than the parties hereto and their respective permitted assigns any
rights or remedies of any nature whatsoever by reason of this Agreement. Any
Restricted Shares sold by a party in compliance with the provisions of Section
10 shall, upon consummation of such sale, be free of the restrictions imposed
with respect to such shares by this Agreement, unless and until such party
shall repurchase or otherwise become the beneficial owner of such shares, and
any transferee of such shares shall not be entitled to the registration rights
of such party.
14. SPECIFIC PERFORMANCE
The parties recognize and agree that if for any reason any of the
provisions of this Agreement are not performed in accordance with their
specific terms or are otherwise breached, immediate and irreparable harm or
injury would be caused for which money damages would not be an adequate remedy.
Accordingly, each party agrees that, in addition to other remedies, the other
party shall be entitled to an injunction restraining any violation or
threatened violation of the provisions of this Agreement. In the event that
any action should be brought in equity to enforce the provisions of the
Agreement, neither party will allege, and each party hereby waives the defense,
that there is adequate remedy at law.
15. ENTIRE AGREEMENT
This Agreement, the Puget Stock Option Agreement, the Confidentiality
Agreement and the Merger Agreement (including the exhibits and schedules
thereto) constitute the entire agreement among the parties with respect to the
subject matter hereof and thereof and supersede all other prior agreements and
understandings, both written and oral, among the parties or any of them with
respect to the subject matter hereof and thereof.
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16. FURTHER ASSURANCES
Each party will execute and deliver all such further documents and
instruments and take all such further action as may be necessary in order to
consummate the transactions contemplated hereby.
17. VALIDITY
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of the other provisions of this
Agreement, which shall remain in full force and effect. In the event any court
or other competent authority holds any provisions of this Agreement to be null,
void or unenforceable, the parties hereto shall negotiate in good faith the
execution and delivery of an amendment to this Agreement in order, as nearly as
possible, to effectuate, to the extent permitted by law, the intent of the
parties hereto with respect to such provision and the economic effects thereof.
If for any reason any such court or regulatory agency determines that Puget is
not permitted to acquire, or the Company is not permitted to repurchase
pursuant to Section 7, the full number of shares of Company Common Stock
provided in Section 1 hereof (as the same may be adjusted), it is the express
intention of the Company to allow Puget to acquire or to require the Company to
repurchase such lesser number of shares as may be permissible, without any
amendment or modification hereof. Each party agrees that, should any court or
other competent authority hold any provision of this Agreement or part hereof
to be null, void or unenforceable, or order any party to take any action
inconsistent herewith, or not take any action required herein, the other party
shall not be entitled to specific performance of such provision or part hereof
or to any other remedy, including, but not limited to, money damages, for
breach hereof or of any other provision of this Agreement or part hereof as the
result of such holding or order.
18. NOTICES
All notices and other communications hereunder shall be in writing and
shall be deemed given if (i) delivered personally, (ii) sent by reputable
overnight courier service, (iii) telecopied (which is confirmed), or (iv) five
days after being mailed by registered or certified mail (return-receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
A. If to Puget, to:
Puget Sound Power & Light Company
X.X. Xxx 00000
Xxxxxxxx, XX 00000-0000
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Attention: Xxxxxxx X. Xxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Xxxxxxx Coie
0000 Xxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. XxXxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
and a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx X. Xxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
B. If to the Company, to:
Washington Energy Company
000 Xxxxxx Xxxxxx
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxx/Xxxxxxx Xxxxxxxx
0000 Xxxxxx Xxxxxx
Xxxxx Xxxxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
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Attention: Xxxxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
and a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
19. GOVERNING LAW; CHOICE OF FORUM
This Agreement shall be governed by and construed in accordance with
the laws of the state of Washington applicable to agreements made and to be
performed entirely within such State and without regard to its choice of law
principles. Each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any federal court located in the state of Washington
or any Washington 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 or defeat 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 court sitting
in the state of Washington or a Washington state court.
20. INTERPRETATION
When a reference is made in this Agreement to a Section such reference
shall be to a Section of this Agreement unless otherwise indicated. Whenever
the words "include," "includes" and "including" are used in this Agreement,
they shall be deemed to be followed by the words "without limitation." The
descriptive headings herein are inserted for convenience of reference only and
are not intended to be part of or to affect the meaning or interpretation of
this Agreement.
21. COUNTERPARTS
This Agreement may be executed in two counterparts, each of which
shall be deemed to be an original, but both of which, taken together, shall
constitute one and the same instrument.
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22. EXPENSES
Except as otherwise expressly provided herein or in the Merger
Agreement, all costs and expenses incurred in connection with the transactions
contemplated by this Agreement shall be paid by the party incurring such
expenses.
23. AMENDMENTS; WAIVER
This Agreement may be amended by the parties hereto and the terms and
conditions hereof may be waived only by an instrument in writing signed on
behalf of each of the parties hereto, or, in the case of a waiver, by an
instrument signed on behalf of the party waiving compliance.
24. EXTENSION OF TIME PERIODS
The time periods for exercise of certain rights under Sections 2, 6
and 7 shall be extended (i) to the extent necessary to obtain all regulatory
approvals for the exercise of such rights, and for the expiration of all
statutory waiting periods; and (ii) to the extent necessary to avoid any
liability under Section 16(b) of the Exchange Act by reason of such exercise.
25. REPLACEMENT OF COMPANY OPTION
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Agreement, and (in the
case of loss, theft or destruction) of reasonably satisfactory indemnification,
and upon surrender and cancellation of this Agreement, if mutilated, the
Company will execute and deliver a new Agreement of like tenor and date.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective duly authorized officers as of the date first
above written.
PUGET SOUND POWER & LIGHT COMPANY
By:
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Name:
Title:
WASHINGTON ENERGY COMPANY
By:
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Name:
Title:
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