SECURITIES OFFERED 4.0 million Income PRIDES ____________________________________ ISSUER Holdco ____________________________________ STATED AMOUNT $50.00 per Income PRIDES ____________________________________ AGGREGATE STATED AMOUNT $200.0 million...
EXHIBIT 10.4
HOLDCO CUMULATIVE PREFERRED FELINE PRIDES
SUMMARY TERM SHEET
____________________________________
SECURITIES OFFERED 4.0 million Income PRIDES
____________________________________
ISSUER Holdco
____________________________________
STATED AMOUNT $50.00 per Income PRIDES
____________________________________
AGGREGATE STATED AMOUNT $200.0 million
____________________________________
COMPONENTS OF FELINE PRIDES Each FELINE PRIDES offered hereby will
initially consist of a unit with a
Stated Amount of $50.00 (referred to as
an "Income PRIDES") comprised of (a) a
Purchase Contract under which the holder
will purchase from Holdco on the date
(the "Purchase Contract Settlement
Date") that is four years from the
closing of the acquisition by Holdco of
PGE (the "Closing Date"), for an amount
of cash equal to the Stated Amount, a
number of shares of Class B Common Stock
of Holdco equal to the Settlement Rate,
and (b) a Cumulative Preferred Share
(referred to as a Preferred Share)
having a stated liquidation amount equal
to $50.00.
With respect to the Income PRIDES, the
related Preferred Shares will be pledged
pursuant to a pledge agreement, to be
dated as of the Closing Date (the
"Pledge Agreement"), among the Purchase
Contract Agent, Holdco and __________,
as collateral agent for Holdco (together
with any successor thereto in such
capacity, the "Collateral Agent"), to
secure the holder's obligation to
purchase Class B Common Stock under the
related Purchase Contract.
The FELINE PRIDES will be issued under a
Purchase Contract Agreement, to be dated
as of the Closing Date (the "Purchase
Contract Agreement"), among Holdco, and
________________, as agent for the
holders of the FELINE PRIDES (together
with any successor thereto in such
capacity, the "Purchase Contract
Agent").
____________________________________
SUBSTITUTIONS OF PLEDGED SECURITIES:
GROWTH PRIDES On or prior to the fifth Business Day
immediately preceding the Purchase
Contract Settlement Date, a holder of
the Income PRIDES may substitute for the
related Preferred Shares zero-coupon
U.S. Treasury Securities (referred to as
the Treasury Securities) or, prior to
the filing of a registration statement
under the Securities Act of 1933 in
respect of the FELINE PRIDES (the
"Non-Registration Period") and so long
as an
HOLDCO CUMULATIVE PREFERRED FELINE PRIDES
TERM SHEET (CONT'D)
Enron Credit Condition shall not have
occurred and be continuing, zero-coupon
demand notes of, or fully and
unconditionally guaranteed as to
principal payments and other obligations
by, Enron ("Enron Notes") in an amount
per Income PRIDES equal to the Stated
Amount per Preferred Share. Each Growth
PRIDES will consist of a unit with a
Stated Amount of $50.00 comprised of (a)
a Purchase Contract under which the
holder will purchase from the Company
not later than the Purchase Contract
Settlement Date for an amount of cash
equal to the Stated Amount a number of
shares of Class B Common Stock of Holdco
equal to the Settlement Rate, and (b)
either (i) a 1/20 undivided beneficial
ownership interest in a Treasury
Security having a principal amount at
maturity equal to $1,000 or (ii) an
Enron Note having a principal amount
equal to $50.00 and in each case
maturing or being repayable on the
Business Day immediately preceding the
Purchase Contract Settlement Date.
If, at any time that Growth PRIDES are
secured by Enron Notes, an Enron Credit
Condition has occurred and is continuing
or the Non-Registration Period has
ended, Enron Corp. will be obligated to
substitute either Preferred Shares or
Treasury Securities, in each case, with
a liquidation amount or principal amount
at maturity equal to the aggregate
principal amount of the Enron Notes.
Enron Credit Condition means (i) Enron
Corp.'s senior unsecured debt shall be
rated below the rating listed below by
at least two of the three following
rating agencies:
a) S&P - BBB-;
b) Xxxxx'x - Baa3;
c) DCR (Fitch) - BBB-; or
(ii) a default has occurred and is
continuing under the Indenture, dated
as of November 1, 1985, as amended,
modified or supplemented, between
Environ Corp. and The Bank of New
York, as trustee.
____________________________________
RECREATING INCOME PRIDES On or prior to the fifth Business Day
immediately preceding the Purchase
Contract Settlement Date, a holder of
Growth PRIDES will have the right to
recreate Income PRIDES by resubstituting
Preferred Shares for the related
Treasury Securities or Enron Notes held
by the Collateral Agent. At such time,
the Collateral Agent would release the
related Treasury Securities or Enron
Notes to such holder. Such Preferred
Shares will be pledged with the
Collateral Agent to secure the holder's
obligation to purchase Class B Common
Stock under the related Purchase
Contracts.
2
HOLDCO CUMULATIVE PREFERRED FELINE PRIDES
TERM SHEET (CONT'D)
____________________________________
CURRENT PAYMENTS A holder of Income PRIDES or separate
Preferred Shares will be entitled to
receive aggregate cash dividends payable
quarterly in arrears, consisting of
dividends on the Preferred Shares
payable by Holdco on February 15, May
15, August 15, and November 15, based on
an amount per Income PRIDES equal to
6.0% per annum of the aggregate stated
liquidation amount of the Preferred
Shares held by such holder, either
separately or as a component of Income
PRIDES, (equal to $3.00 per Income
PRIDES) for the eight consecutive
quarters following the Closing Date and
9.0% per annum of the aggregate stated
liquidation amount of such Preferred
Shares (equal to $4.50 per Income
PRIDES) for the next eight consecutive
quarters until the Purchase Contract
Settlement Date, if, when and as
authorized and declared by the Board of
Directors. Thereafter, the dividend rate
on the Preferred Shares shall be reset
on the Purchase Contract Settlement Date
in connection with the remarketing
thereof. A holder of Growth PRIDES will
not be entitled to receive any cash
distributions.
Dividends on the Preferred Shares shall
be cumulative whether or not Holdco has
earnings, whether or not there are funds
legally available for the payment of
such dividends and whether or not such
dividends are declared. Any dividends
that have been deferred will accrue
yield at the rates set forth in the
preceding paragraph.
In the event that dividends on the
Preferred Shares are not declared,
Holdco will not declare or pay any
dividend on any capital stock of Holdco
nor purchase, acquire, redeem or make a
liquidation payment with respect to any
such capital stock until all accumulated
and unpaid dividends on the Preferred
Shares have been paid. To the extent
that there are any accumulated and
unpaid dividends on the Preferred Shares
on the liquidation date for such shares,
Holdco will on such liquidation date pay
to the holder of the Preferred Shares,
in lieu of a cash payment, a number of
shares of Class B Common Stock equal to
the accumulated amount of such payment
payable to the holder divided by an
average trading price of Holdco common
shares at that time.
____________________________________
REMARKETING OF PLEDGED PREFERRED
SHARES Pursuant to a remarketing agreement
dated as of the Closing Date, among
Holdco, the Purchase Contract Agent and
a nationally recognized investment
banking firm chosen by Holdco (the
"Remarketing Agent"), and subject to the
terms of a Supplemental Remarketing
Agreement to be dated as of the third
Business Day immediately preceding the
Purchase
3
HOLDCO CUMULATIVE PREFERRED FELINE PRIDES
TERM SHEET (CONT'D)
Contract Settlement Date among such
parties, the pledged Preferred Shares of
such Income PRIDES holders who have
failed to notify the related Purchase
Contract Agent on or prior to the fifth
Business Day immediately preceding the
Purchase Contract Settlement Date of
their intention to settle the related
Purchase Contracts with cash will be
remarketed on the third Business Day
immediately preceding the Purchase
Contract Settlement Date. The
Remarketing Agent will use its
reasonable efforts to remarket such
Preferred Shares on such date for
settlement on the Purchase Contract
Settlement Date at a price of
approximately 100.25% (the dividend
reset rate being the rate intended to
result in sales at such price) of the
aggregate stated liquidation amount of
such Preferred Shares, plus accumulated
and unpaid dividends, if any, thereon.
The portion of the proceeds from such
remarketing equal to the aggregate
stated liquidation amount of such
pledged Preferred Shares will be
automatically applied to satisfy in full
such Income PRIDES holders' obligations
to purchase Class B Common Stock under
the related Purchase Contracts. In
addition, after deducting as the
Remarketing Fee an amount not exceeding
25 basis points (.25%) of the aggregate
stated liquidation amount of the
remarketed Preferred Shares from any
amount of such proceeds in excess of the
aggregate stated liquidation amount of
the remarketed Preferred Shares plus any
accumulated and unpaid dividends, the
Remarketing Agent will remit the
remaining portion of the proceeds, if
any, for the benefit of such holder.
Income PRIDES holders whose pledged
Preferred Shares are so remarketed will
not otherwise be responsible for any
Remarketing Fee in connection therewith.
If, despite using its reasonable
efforts, the Remarketing Agent cannot
remarket the related pledged Preferred
Shares of such holders of Income PRIDES
at a price not less than 100% of the
aggregate stated liquidation amount of
such Preferred Shares plus accumulated
and unpaid dividends, if any (resulting
in a "Failed Remarketing"), then Holdco
will exercise its rights as a secured
party to dispose of the Preferred Shares
in accordance with applicable law to
satisfy in full such holder's obligation
to purchase Class B Common Stock under
the related Purchase Contracts;
provided, that if Holdco exercises such
rights as a secured party with respect
to such Preferred Shares, any
accumulated and unpaid dividends on such
Preferred Shares will be paid on the
Purchase Contract Settlement Date in
cash or shares of Holdco Class B Common
Stock by Holdco to the holder of record
of such Preferred Shares. Holdco will
cause a notice of such Failed
Remarketing to be published on the
second Business Day immediately
preceding the Purchase Contract
Settlement Date. It is currently
anticipated that Xxxxxxx Lynch, Pierce,
Xxxxxx & Xxxxx Incorporated will be the
Remarketing Agent.
___________________________________
OPTIONAL REMARKETING OF SEPARATE
PREFERRED SHARES On or prior to the fifth Business Day
preceding the Purchase Contract
Settlement Date, holders of separate
Preferred Shares which are not
components of Income PRIDES may elect to
have their Preferred Shares
4
HOLDCO CUMULATIVE PREFERRED FELINE PRIDES
TERM SHEET (CONT'D)
remarketed by delivering their Preferred
Shares to the Collateral Agent along
with a notice of such election. Holders
will have a right to withdraw such
election on or prior to the fifth
Business Day prior to the Purchase
Contract Settlement Date. The holders
will receive proceeds from the
remarketing equal to (i) the liquidation
amount of their Preferred Shares, plus
(ii) any accrued and unpaid dividends
through the Purchase Contract Settlement
Date, plus (iii) any proceeds in excess
of the remarketing fee (determined as
described above under "Remarketing of
Pledged Preferred Shares"). If the
remarketing results in a Failed
Remarketing, the remarketing agent will
promptly return such Preferred Shares to
the Collateral Agent to release to such
holders.
___________________________________
PUT OPTION Holders of separate Preferred Shares
will have the right in the event the
remarketing has been determined to be a
Failed Remarketing to put their
Preferred Shares to Holdco on the date
that is one month after the Purchase
Contract Settlement Date in exchange for
cash, or Enron Notes with a principal
amount, equal to the Stated Amount plus
any accumulated but unpaid dividends.
___________________________________
SETTLEMENT OF PURCHASE CONTRACTS The Purchase Contract Settlement Date
will be the fourth year anniversary of
the Closing Date. On the Business Day
immediately preceding the Purchase
Contract Settlement Date, unless a
holder of Income PRIDES or Growth PRIDES
(i) has settled the related Purchase
Contracts through the early delivery of
cash to the Purchase Contract Agent,
(ii) in the case of Income PRIDES, has
settled the related Purchase Contracts
with cash on the Business Day prior to
the Purchase Contract Settlement Date
pursuant to prior notification to the
Purchase Contract Agent, or (iii) in the
case of Income PRIDES, has had the
Preferred Shares related to such
holder's Purchase Contracts remarketed
in the manner described herein in
connection with settling such Purchase
Contracts (and there has not been a
Failed Remarketing), (A) in the case of
Income PRIDES, Holdco will exercise its
rights as a secured party to dispose of
the related Preferred Shares, in
accordance with applicable law, and (A)
in the case of Growth PRIDES (1) the
amount of the related Treasury
Securities, when paid at maturity, will
automatically be applied pursuant to the
exercise of such rights by Xxxxxx, or
(2) Holdco will exercise such rights to
obtain possession of the Enron Notes, in
each case, to satisfy in full such
Holder's obligation to purchase Class B
Common Stock under the related Purchase
Contracts.
In the event that a holder of either
Income PRIDES or Growth PRIDES effects
the early settlement of the related
Purchase Contracts through the delivery
of cash or, in the case of an Income
PRIDES, settles such Purchase Contracts
with cash on the Business Day
immediately
5
HOLDCO CUMULATIVE PREFERRED FELINE PRIDES
TERM SHEET (CONT'D)
preceding the Purchase Contract
Settlement Date, the related Preferred
Shares, Treasury Securities or Enron
Notes, as the case may be, will be
released to such holder as described
herein.
The settlement rate for early settlement
(other than early settlement resulting
from a change of control) shall be
[x.xxxx] shares of Class B Common Stock
computed by dividing the Stated Amount
by the Threshold Appreciation Price.
____________________________________
SETTLEMENT RATE The number of shares of Class B Common
Stock issuable upon settlement of each
Purchase Contract on the Purchase
Contract Settlement Date (the
"Settlement Rate") will equal:
(i) If the Settlement Price is equal to
or less than the Reference Price, then
each holder of a Purchase Contract will
receive [x.xxxx] shares of Class B
Common Stock, which is equal to the
Stated Amount divided by the Reference
Price.
(ii) If the Settlement Price is greater
than the Reference Price but less than
the Threshold Appreciation Price, then
each holder of a Purchase Contract will
receive a number of shares of Class B
Common Stock equal to the Stated Amount
divided by the Settlement Price.
(iii) If the Settlement Price is equal
to or greater than the Threshold
Appreciation Price, then each holder of
a Purchase Contract will receive
[x.xxxx] shares of Class B Common Stock,
which is equal to the Stated Amount
divided by the Threshold Appreciation
Price.
Definitions:
------------
"Announcement Date" means the date on
-----------------
which NW Natural, Enron and PGE enter
into a definitive purchase and sale
agreement
"Announcement Price" means the average
------------------
closing price of NW Natural stock during
the twenty trading day period ending on
the third trading day immediately
preceding the Announcement Date
"Ceiling Price" means 110% of the
-------------
Announcement Price
6
HOLDCO CUMULATIVE PREFERRED FELINE PRIDES
TERM SHEET (CONT'D)
"Closing Date" means the date of closing
------------
of Holdco's acquisition of PGE as
contemplated under the definitive
purchase and sale agreement
"Closing Price" means the average
-------------
closing price of NW Natural stock during
the twenty trading day period
immediately preceding the Closing Date
"Floor Price" means 90% of the
-----------
Announcement Price
"Purchase Contract Settlement Date"
---------------------------------
means the date that is four years from
the Closing Date
"Reference Price" means:
---------------
(i) if the Closing Price is
equal to or greater than the Ceiling
Price, the Ceiling Price;
(ii) if the Closing Price is
greater than the Floor Price but less
than the Ceiling Price, the Closing
Price; or
(iii) if the Closing Price is n
less than or equal to the Floor Price,
the Floor Price.
"Settlement Price" means the average
----------------
closing price for Common Stock of Holdco
during the twenty trading day period
ending three days prior to the Purchase
Contract Settlement Date.
"Threshold Appreciation Price" means the
----------------------------
Reference Price multiplied by 1.15.
____________________________________
REDEMPTION OF PREFERRED SHARES The Preferred Shares are subject to
mandatory redemption on a date that is
twelve months following the Purchase
Contract Settlement Date (the
"Redemption Date") at a price of $50.00
per Preferred Share, plus accumulated
and unpaid dividends to the Redemption
Date. The redemption price for the
Preferred Shares may be paid, at
Holdco's option, in cash or, if Xxxxxx
has obtained possession of any pledged
Enron Notes, by delivery of such Enron
Notes to the holders of the Preferred
Shares. Except as set forth in this
section and as set forth under Change of
Control, the Preferred Shares are not
redeemable by Xxxxxx.
____________________________________
CHANGE OF CONTROL If during the Non-Registration Period
(a) a Change of Control shall have
occurred, (b) Enron, its affiliates or
Designated Transferees (as defined in
the Securityholder's Agreement) shall be
the sole beneficial owners of the Income
Prides and (c) no Growth Prides shall be
outstanding (or all Growth Prides shall
have recreated into Income Prides),
Enron may, by notice to Holdco, cause
(i) the Purchase Contract Settlement
Date and the
7
HOLDCO CUMULATIVE PREFERRED FELINE PRIDES
TERM SHEET (CONT'D)
remarketing of the Preferred Shares to
be accelerated and (ii) the Preferred
Shares to be mandatorily redeemed on a
date that is three months following the
accelerated Purchase Contract Settlement
Date. The Settlement Rate on such
accelerated Purchase Contract Settlement
Date shall be determined as set forth
above under "Settlement Rate" except
that all references to the Purchase
Contract Settlement Rate shall be deemed
to be references to such accelerated
Purchase Contract Settlement Date.
____________________________________
DILUTION PROVISIONS Standard anti-dilution provisions on
Settlement Rate, including without
limitation, adjustments for
extraordinary dividends or stock
dividends; subdivisions, combinations
and reclassifications; issuance to all
holders of Holdco common stock of
rights, options or warrants entitling
the owners of securities to subscribe
for shares of common stock at less than
the fair market value.
____________________________________
RANKING OF PREFERRED SHARES The Preferred Share shall rank pari
passu with all other preferred stock of
Holdco and senior to all other
outstanding capital stock of Holdco.
____________________________________
TAX CHARACTERIZATION The parties acknowledge (but in no way
represent, warrant, covenant or
guaranty) that the Preferred Stock
component of the Feline Prides will be
treated as equity for all state and
federal income tax purposes and further
agree that they shall not take any
position inconsistent with such intent.
8
