Exhibit 10.7
AMENDED AND RESTATED COMBINATION AGREEMENT
AMONG
DUKE ENERGY CORPORATION,
3058368 NOVA SCOTIA COMPANY,
3946509 CANADA INC.
AND
WESTCOAST ENERGY INC.
AS OF
SEPTEMBER 20, 2001
TABLE OF CONTENTS
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ARTICLE 1 INTERPRETATION
1.1 Definitions..........................................................1
1.2 Interpretation Not Affected by Headings, etc.........................9
1.3 Rules of Construction................................................9
1.4 Date For Any Action.................................................10
1.5 Schedules...........................................................10
ARTICLE 2 THE ARRANGEMENT
2.1 Implementation Steps by Westcoast...................................10
2.2 Implementation Steps by Duke Energy Parties.........................11
2.3 Interim Order.......................................................11
2.4 Articles of Arrangement.............................................11
2.5 Westcoast Circular..................................................12
2.6 Securities Compliance...............................................12
2.7 Preparation of Filings..............................................13
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF WESTCOAST
3.1 Organization and Standing...........................................15
3.2 Capitalization......................................................15
3.3 Authority and No Conflicts..........................................17
3.4 Consents; Approvals.................................................18
3.5 No Defaults.........................................................19
3.6 Absence of Certain Changes or Events................................19
3.7 Employment Matters..................................................19
3.8 Reports; Financial Statements.......................................21
3.9 Contracts...........................................................22
3.10 Litigation..........................................................23
3.11 Environmental.......................................................23
3.12 Tax Matters.........................................................24
3.13 Pension and Employee Benefits.......................................26
3.14 Affiliates..........................................................29
3.15 Compliance with Laws; Permits.......................................29
3.16 Restrictions on Business Activities.................................30
3.17 Intellectual Property...............................................30
3.18 Insurance...........................................................31
3.19 Property............................................................31
3.20 Regulatory Proceedings..............................................32
3.21 Regulation as a Utility.............................................32
3.22 Futures Trading and Fixed Price Exposure............................32
3.23 Opinion of Financial Advisors.......................................33
3.24 Brokerage and Finders' Fees.........................................33
3.25 Westcoast Rights Plan...............................................33
3.26 Solvency of Westcoast...............................................33
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ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE DUKE ENERGY PARTIES
4.1 Organization and Standing...........................................34
4.2 Capitalization......................................................34
4.3 Authority and No Conflicts..........................................35
4.4 Consents; Approvals.................................................36
4.5 No Defaults.........................................................36
4.6 Absence of Certain Changes or Events................................37
4.7 Reports; Financial Statements.......................................37
4.8 Litigation..........................................................38
4.9 Environmental.......................................................38
4.10 Nuclear Operations..................................................39
4.11 Compliance with Laws; Permits.......................................39
4.12 Regulatory Proceedings..............................................40
4.13 Futures Trading and Fixed Price Exposure............................40
4.14 Brokerage and Finders' Fees.........................................40
ARTICLE 5 COVENANTS AND AGREEMENTS
5.1 Covenants of Westcoast..............................................40
5.2 Covenants of Duke Energy............................................47
5.3 Access to Information...............................................50
5.4 Indemnification.....................................................50
5.5 Covenants Regarding Non-Solicitation................................51
5.6 Right to Accept a Superior Proposal.................................52
5.7 Employee Benefits and Related Matters...............................53
5.8 Prohibition on Voluntary Liquidation................................54
5.9 Conversion of Westcoast Preferred Shares............................55
5.10 Closing Matters.....................................................55
ARTICLE 6 CONDITIONS
6.1 Mutual Conditions...................................................55
6.2 Additional Conditions to the Obligations of the Duke Energy Parties.56
6.3 Additional Conditions to the Obligations of Westcoast...............58
6.4 Satisfaction of Conditions..........................................59
ARTICLE 7 AMENDMENT AND TERMINATION
7.1 Amendment...........................................................59
7.2 Termination.........................................................60
7.3 Effect of Termination...............................................61
7.4 Effect of Termination Fee Payment...................................63
ARTICLE 8 GENERAL
8.1 Investigation.......................................................64
8.2 Notices.............................................................64
8.3 Assignment..........................................................65
8.4 Binding Effect......................................................65
8.5 Third-Party Beneficiaries...........................................65
8.6 Waiver and Modification.............................................65
8.7 No Personal Liability...............................................65
8.8 Further Assurances..................................................65
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8.9 Expenses............................................................66
8.10 Public Announcements................................................66
8.11 Governing Laws; Consent to Jurisdiction.............................66
8.12 Remedies............................................................66
8.13 Time of Essence.....................................................66
8.14 Entire Agreement....................................................67
8.15 Severability........................................................67
8.16 Counterparts........................................................67
Schedules:
A - Form of Affiliate's Letter
B - Appropriate Regulatory Approvals
C - Form of Arrangement Resolution
D - Form of Westcoast Rights Plan Waiver Resolution
E - Form of Plan of Arrangement
F - Form of Support Agreement
G - Form of Voting and Exchange Trust Agreement
AMENDED AND RESTATED COMBINATION AGREEMENT
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AMENDED AND RESTATED COMBINATION AGREEMENT
THIS AMENDED AND RESTATED COMBINATION AGREEMENT dated as of September 20,
2001 (this "Agreement"), is entered into by and among Duke Energy Corporation, a
North Carolina corporation ("Duke Energy"), 3058368 Nova Scotia Company, an
unlimited liability company existing under the Laws of the Province of Nova
Scotia and an indirect wholly-owned subsidiary of Duke Energy Corporation
("Callco"), 3946509 Canada Inc., a corporation existing under the Laws of Canada
and a wholly-owned subsidiary of Callco ("Exchangeco"), and Westcoast Energy
Inc., a corporation existing under the Laws of Canada ("Westcoast"). Duke
Energy, Callco and Exchangeco are collectively referred to herein as the "Duke
Energy Parties."
R E C I T A L S
The Board of Directors of Westcoast has determined that the business
combination to be effected by means of the Plan of Arrangement is advisable and
in the best interest of Westcoast and has approved the transactions contemplated
by this Agreement and determined to recommend approval of the Plan of
Arrangement and other transactions contemplated hereby to the Westcoast
Securityholders.
The Board of Directors of Duke Energy has determined that the business
combination to be effected by means of the Plan of Arrangement is advisable and
in the best interest of Duke Energy and has approved the transactions
contemplated by this Agreement.
In furtherance of such business combination, the Board of Directors of
Westcoast has agreed to submit the Plan of Arrangement and other transactions
contemplated hereby to the Westcoast Securityholders and the Supreme Court of
British Columbia for approval.
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE 1
INTERPRETATION
1.1 Definitions
In this Agreement, unless the context otherwise requires, the following
terms shall have the following meanings respectively:
"1933 Act" means the United States Securities Act of 1933, as amended;
"1935 Act" means the United States Public Utility Holding Company Act
of 1935, as amended;
"Acquisition Proposal" means any of the following (other than the
transactions contemplated by this Agreement or the Arrangement): (a) any
merger, amalgamation,
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arrangement, share exchange, take-over bid, tender offer,
recapitalization, consolidation or business combination directly or
indirectly involving Westcoast or any of its Material Subsidiaries (for
this purpose, each reference to 5% in the definition of Material
Subsidiary shall be deemed to be 10%), (b) any acquisition of assets
representing 20% or more of the book value (on a consolidated basis) of
the assets of Westcoast and its subsidiaries, taken as a whole (or any
lease, long-term supply agreement, exchange, mortgage, pledge or other
arrangement having a similar economic effect) in a single transaction or a
series of related transactions, (c) any acquisition of beneficial
ownership (as defined under Section 13(d) of the Exchange Act) of 20% or
more of the Westcoast Common Shares in a single transaction or a series of
related transactions, (d) any acquisition by Westcoast of any assets or
capital stock of another person (other than acquisitions of capital stock
or assets of any other person that are not, individually or in the
aggregate, material to Westcoast and its subsidiaries, taken as a whole),
or (e) any bona fide proposal to, or public announcement of an intention
to, do any of the foregoing;
"Affected Employees" has the meaning ascribed thereto in Section 5.7;
"affiliate" has the meaning ascribed thereto in the Securities Act,
unless otherwise expressly stated herein;
"Affiliate's Letter" means a letter, to be substantially in the form
and content of Schedule A annexed hereto;
"Agreement" has the meaning ascribed thereto in the Preamble;
"Appropriate Regulatory Approvals" means those sanctions, rulings,
consents, orders, exemptions, permits and other approvals (including the
lapse, without objection, of a prescribed time under a statute or
regulation that states that a transaction may be implemented if a
prescribed time lapses following the giving of notice without an objection
being made) of Governmental Entities, or self-regulatory organizations, as
set out in Schedule B annexed hereto;
"Arrangement" means an arrangement under Section 192 of the CBCA on the
terms and subject to the conditions set out in the Plan of Arrangement,
subject to any amendments or variations thereto made in accordance with
Section 7.1 hereof or Article 6 of the Plan of Arrangement, or made at the
direction of the Court in the Final Order;
"Arrangement Resolution" means the special resolution of the Westcoast
Securityholders, to be substantially in the form and content of Schedule C
annexed hereto;
"Articles of Arrangement" means the articles of arrangement of Westcoast
in respect of the Arrangement that are required by the CBCA to be sent to
the Director after the Final Order is made;
"Business Day" means any day on which commercial banks are generally open
for business in New York, New York and Vancouver, British Columbia other
than a Saturday, a Sunday or a day observed as a holiday in New York, New
York under the
AMENDED AND RESTATED COMBINATION AGREEMENT
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Laws of the State of New York or the federal Laws of the United States of
America or in Vancouver, British Columbia under the Laws of the Province
of British Columbia or the federal Laws of Canada;
"Callco" has the meaning ascribed thereto in the Preamble;
"CBCA" means the Canada Business Corporations Act as now in effect and as
it may be amended from time to time prior to the Effective Date;
"Circular" means the notice of the Westcoast Meeting and accompanying
management proxy circular, including all schedules and exhibits thereto,
to be sent to the Westcoast Securityholders in connection with the
Westcoast Meeting;
"Code" has the meaning ascribed thereto in Section 3.12(b);
"Confidentiality Agreement" means the confidentiality letter agreement
dated April 6, 2001 between Duke Energy and Westcoast;
"Court" means the Supreme Court of British Columbia;
"CRMC" has the meaning ascribed thereto in Section 3.22;
"date of this Agreement" means September 20, 2001.
"Director" means the Director appointed pursuant to Section 260 of the
CBCA;
"Dissent Rights" means the rights of dissent in respect of the Arrangement
described in Section 3.1 of the Plan of Arrangement;
"Duke Energy" has the meaning ascribed thereto in the Preamble;
"Duke Energy Common Shares" means the shares of common stock in the
capital of Duke Energy;
"Duke Energy Disclosure Letter" means that certain letter of disclosure
dated as of the date hereof and signed by an authorized officer of Duke
Energy and delivered by Duke Energy to Westcoast on or prior to the date
hereof;
"Duke Energy Documents" has the meaning ascribed thereto in Section
4.7(a);
"Duke Energy Environmental Permits" has the meaning ascribed thereto in
Section 4.9(b);
"Duke Energy Parties" has the meaning ascribed thereto in the Preamble;
"Duke Energy Permits" has the meaning ascribed thereto in Section 4.11(b);
"Duke Energy SEC Documents" has the meaning ascribed thereto in Section
4.7(a); and
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"Duke Energy Stock Plans" means Duke Energy's existing benefit or stock
purchase plans which provide for the issuance, grant or sale of Duke
Energy Common Shares or options to purchase Duke Energy Common Shares.
"Easements" has the meaning ascribed thereto in Section 3.19(b);
"Effective Date" means the date shown on the certificate of arrangement to
be issued by the Director under the CBCA giving effect to the Arrangement
provided that such date occurs on or prior to the date that is 365 days
following the date hereof, or such later date as may be mutually agreed
upon by the parties hereto;
"Effective Time" has the meaning ascribed thereto in the Plan of
Arrangement;
"Engage" has the meaning ascribed thereto in Section 3.22;
"Environmental Laws" means all applicable Laws, including applicable
common Law, relating to the protection of the environment (including,
without limitation, air, surface water, groundwater and soil) and public
health and safety;
"ERISA" has the meaning ascribed thereto in Section 3.13(a);
"Exchange Act" means the United States Securities Exchange Act of 1934, as
amended;
"Exchange Ratio" has the meaning ascribed thereto in the Plan of
Arrangement;
"Exchangeable Shares" means the non-voting exchangeable shares in the
capital of Exchangeco, having substantially the rights, privileges,
restrictions and conditions set out in Appendix 1 to the Plan of
Arrangement;
"Exchangeco" has the meaning ascribed thereto in the Preamble;
"Excluded Assets" means the assets identified as such in the Westcoast
Disclosure Letter, being assets that Westcoast is in the process of
disposing;
"Expense Fee" means a payment in the amount of $30 million;
"Final Order" means the final order of the Court approving the
Arrangement, as such order may be amended by the Court at any time prior
to the Effective Date, or, if appealed, then, unless such appeal is
withdrawn or denied, as affirmed;
"First Preferred Shares" means the first preferred shares in the capital
of Westcoast, including each series thereof designated and outstanding;
"Force Majeure" means (i) an act of God, act of war, civil disturbance or
other cause beyond such party's reasonable control and power to remedy or
(ii) a strike or other labor dispute, scarcity of supplies or utilities or
unavailability or disruption of transportation, which such party is not
capable of resolving by an investment or the payment of a commercially
reasonable amount of money;
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"Form S-3" has the meaning ascribed thereto in Section 2.6(b);
"Form S-8" has the meaning ascribed thereto in Section 2.6(c);
"governing documents" means, with respect to any person, the certificate
or articles of incorporation, by-laws, articles of organization, limited
liability company agreement, partnership agreement, formation agreement,
joint venture agreement, unanimous shareholder agreement or declaration or
other similar governing documents of such person;
"Governmental Entity" means any (a) multinational, federal, provincial,
territorial, state, regional, municipal, local or other government,
governmental or public department, central bank, court, tribunal, arbitral
body, commission, board, bureau or agency, domestic or foreign, (b)
subdivision, agent, commission, board, or authority of any of the
foregoing, or (c) quasi-governmental or private body exercising any
regulatory, expropriation or taxing authority under, or for the account
of, any of the foregoing;
"Hazardous Substance" means any pollutant, contaminant, waste of any
nature, petroleum, hazardous substance, hazardous material, toxic
substance, dangerous substance or dangerous good, as defined or identified
in or regulated by any Environmental Law;
"holders" means, when used with reference to the Westcoast Common Shares,
the holders of Westcoast Common Shares shown from time to time in the
register maintained by or on behalf of Westcoast in respect of the
Westcoast Common Shares and, when used with reference to the Exchangeable
Shares, the holders of Exchangeable Shares shown from time to time in the
register maintained by or on behalf of Exchangeco in respect of the
Exchangeable Shares;
"Intellectual Property Rights" has the meaning ascribed thereto in Section
3.17(a);
"Interim Order" means the interim order of the Court, as the same may be
amended, in respect of the Arrangement, as contemplated by Section 2.3;
"knowledge" means, with respect to either Duke Energy or Westcoast, the
knowledge of any officer of such party after reasonable inquiry; provided
that reasonable inquiry shall not require the inquiry of any third party
or any Partially Owned Entity;
"Laws" means all statutes, regulations, statutory rules, orders,
judgments, decrees and terms and conditions of any grant of approval,
permission, authority, permit or license of any court, Governmental
Entity, statutory body (including The Toronto Stock Exchange and The New
York Stock Exchange) or self-regulatory authority;
"Material Adverse Effect," when used in connection with Duke Energy or
Westcoast, means any change, effect, event or occurrence with respect to
its condition (financial or otherwise), properties, assets, liabilities,
obligations (whether absolute, accrued, conditional or otherwise),
businesses, operations or results of operations or those of its
subsidiaries, or in the case of Westcoast, its Partially Owned Entities,
that is, or would be
AMENDED AND RESTATED COMBINATION AGREEMENT
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reasonably expected to be, material and adverse to the current or future
business, operations, regulatory status, financial condition or results of
operations of Duke Energy or Westcoast, as the case may be, and its
subsidiaries taken as a whole; provided, however, that a Material Adverse
Effect shall not include with respect to any party, any change, effect,
event or occurrence with respect to its condition (financial or
otherwise), properties, assets, liabilities, obligations (whether
absolute, accrued, conditional or otherwise), businesses, operations or
results of operations of such party or any of its subsidiaries directly or
indirectly arising out of or attributable to any decrease in the market
price of Duke Energy Common Shares in the case of Duke Energy or Westcoast
Common Shares in the case of Westcoast (but in either case not any change
or effect underlying such decrease to the extent such change or effect
would otherwise constitute a Material Adverse Effect on such party);
"Material Subsidiary" means a subsidiary (i) the assets of which exceed 5%
of the total assets of the ultimate parent corporation on a consolidated
basis as at the end of the last completed fiscal year of the ultimate
parent corporation or (ii) of which the ultimate parent corporation's
direct or indirect equity interest in the income (before income taxes and
extraordinary items) exceeds 5% of such income of the ultimate parent
corporation on a consolidated basis during the last completed fiscal year
of the ultimate parent corporation;
"Net Engage Position" has the meaning ascribed thereto in Section 3.22;
"Nuclear Stations" has the meaning ascribed thereto in Section 4.10;
"Open Duke Energy Position" has the meaning ascribed thereto in Section
4.13;
"OSC" means the Ontario Securities Commission;
"Partially Owned Entity" means, with respect to a specified person, any
corporation, partnership, joint venture, limited liability company,
unlimited liability company, or other organization, incorporated or
unincorporated, which is not a subsidiary of such specified person but in
which such specified person, directly or indirectly, owns or controls 15%
or more of the outstanding securities or other interests ordinarily
entitled to vote in the election of the board of directors or other
governing body thereof (or if there are no such voting securities or
interests, 15% or more of the equity interest in such entity); provided
that Maritimes & Northeast Pipeline and P.T. Puncakjaya Power are not
Partially Owned Entities;
"person" includes any individual, firm, partnership, joint venture,
venture capital fund, limited liability company, unlimited liability
company, association, trust, trustee, executor, administrator, legal
personal representative, estate, group, body corporate, corporation,
unincorporated association or organization, Governmental Entity, syndicate
or other entity, whether or not having legal status;
"Plan of Arrangement" means the plan of arrangement substantially in the
form and content of Schedule E annexed hereto and any amendments or
variations thereto made in
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accordance with Section 7.1 hereof or Article 6 of the Plan of Arrangement
or made at the direction of the Court in the Final Order;
"Pre-Effective Date Period" shall mean the period from and including the
date hereof to and including the Effective Time on the Effective Date;
"Rate Change" has the meaning ascribed thereto in Section 5.1(a)(ix);
"Replacement Options" has the meaning ascribed thereto in the Plan of
Arrangement;
"Representatives" has the meaning ascribed thereto in Section 5.3(a);
"SEC" means the United States Securities and Exchange Commission;
"Second Preferred Shares" means the second preferred shares in the capital
of Westcoast;
"Securities Act" means the Securities Act (Ontario) and the rules,
regulations and policies made thereunder, as now in effect and as they may
be amended from time to time prior to the Effective Date;
"subsidiary" means with respect to a specified person, (a) any
corporation, partnership, joint venture, limited liability company,
unlimited liability company or other organization, incorporated or
unincorporated, which is a subsidiary as defined in the Securities Act of
such specified person or (b) a partnership of which such specified person
or another of its subsidiaries is a general partner or owns beneficially
more than 50% of the ownership interests;
"Superior Proposal" means any bona fide written proposal by a third party,
directly or indirectly, to acquire assets representing more than 50% of
the book value (on a consolidated basis) of Westcoast's total assets or
more than 50% of the Westcoast Common Shares, whether by way of merger,
amalgamation, arrangement, share exchange, take-over bid,
recapitalization, sale of assets or otherwise, and that in the good faith
determination of the Board of Directors of Westcoast (based upon advice
from its financial advisors and outside legal counsel) (a) is reasonably
capable of being completed without undue delay, taking into account all
legal, financial, regulatory and other aspects of such proposal and the
party making such proposal, and (b) would, if consummated in accordance
with its terms, result in a transaction more favourable to Westcoast's
Securityholders from a financial point of view than the transaction
contemplated by this Agreement (including any adjustment to the terms and
conditions proposed by Duke Energy as contemplated by Section 5.6(b));
"Support Agreement" means an agreement to be made between Westcoast, Duke
Energy, Callco and Exchangeco substantially in the form and content of
Schedule F annexed hereto, with such changes thereto as the parties
hereto, acting reasonably, may agree;
"Tax" and "Taxes" have the respective meanings ascribed thereto in Section
3.12(c);
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"Tax Returns" means all returns, declarations, reports, information
returns and statements filed or required to be filed with any taxing
authority relating to Taxes;
"Termination Fee" means a fee equal to $120 million;
"Trustee" means the trustee to be chosen by Duke Energy and Westcoast,
acting reasonably, to act as trustee under the Voting and Exchange Trust
Agreement, being a corporation organized and existing under the Laws of
the State of New York or Delaware and authorized to carry on the business
of a trust company, and any successor trustee appointed under the Voting
and Exchange Trust Agreement;
"UEI Conversion Notice" has the meaning ascribed thereto in Section
5.9(b);
"Voting and Exchange Trust Agreement" means an agreement to be made
between Duke Energy, Exchangeco and the Trustee in connection with the
Plan of Arrangement substantially in the form and content of Schedule G
annexed hereto, with such changes thereto as the parties hereto, acting
reasonably, may agree;
"Westcoast" has the meaning ascribed thereto in the Preamble;
"Westcoast Common Shares" means the issued and outstanding common shares
in the capital of Westcoast, including the associated rights under the
Westcoast Rights Plan;
"Westcoast Disclosure Letter" means that certain letter of disclosure
dated as of the date hereof and signed by an authorized officer of
Westcoast and delivered by Westcoast to Duke Energy on or prior to the
date hereof;
"Westcoast Dividend Reinvestment Plan" means the plan of Westcoast
existing on the date hereof pursuant to which holders of Westcoast Common
Shares may elect to receive dividends in equivalent value of Westcoast
Common Shares in lieu of cash and may make purchases of Westcoast Common
Shares;
"Westcoast Documents" has the meaning ascribed thereto in Section 3.8(a);
"Westcoast Employee Share Purchase Plans" means the share purchase plans
for Westcoast employees in Canada (whether registered or unregistered) and
the share purchase plans, if any, for Westcoast employees in the United
States, in each case, as amended;
"Westcoast Environmental Permits" has the meaning ascribed thereto in
Section 3.11(b);
"Westcoast Meeting" means the special meeting of Westcoast
Securityholders, including any adjournment, adjournments, postponement or
postponements thereof, to be called and held in accordance with the
Interim Order to consider the Arrangement and the Westcoast Rights Plan
Waiver Resolution;
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"Westcoast Options" means the Westcoast Common Share purchase options
granted under the Westcoast Stock Option Plans;
"Westcoast Permits" has the meaning ascribed thereto in Section 3.15(b);
"Westcoast Pipeline Assets" has the meaning ascribed thereto in Section
3.19(a);
"Westcoast Plans" has the meaning ascribed thereto in Section 3.13(a);
"Westcoast Rights Plan" means the shareholder rights plan of Westcoast
established pursuant to the Shareholders Rights Plan Agreement dated as of
April 26, 2000 between Westcoast and Computershare Trust Company of Canada
(previously called Montreal Trust Company of Canada);
"Westcoast Rights Plan Waiver Resolution" means the ordinary resolution of
the holders of Westcoast Common Shares to be substantially in the form and
content of Schedule D annexed hereto;
"Westcoast SEC Reports" has the meaning ascribed thereto in Section
3.8(a);
"Westcoast Securityholders" means the holders of Westcoast Common Shares
and the holders of Westcoast Options, collectively;
"Westcoast SRA Reports" has the meaning ascribed thereto in Section
3.8(a);
"Westcoast Stock Option Plans" means Westcoast's Long-Term Incentive Share
Option Plan 1989, as amended effective April 26, 2000 and Westcoast's 1999
Key Employee Plan;
1.2 Interpretation Not Affected by Headings, etc.
The division of this Agreement into articles, sections and other portions
and the insertion of headings are for convenience of reference only and shall
not affect the construction or interpretation hereof. Unless otherwise
indicated, all references to an "Article" or "Section" followed by a number or a
letter refer to the specified Article or Section of this Agreement. The terms
"this Agreement," "hereof," "herein" and "hereunder" and similar expressions
refer to this Agreement (including the Schedules hereto) and not to any
particular Article, Section or other portion hereof.
1.3 Rules of Construction
Unless otherwise specifically indicated or the context otherwise requires,
(a) all references to "dollars" or "$" mean United States dollars, (b) words
importing the singular shall include the plural and vice versa and words
importing any gender shall include all genders, and (c) "include," "includes"
and "including" shall be deemed to be followed by the words "without
limitation."
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1.4 Date For Any Action
In the event that any date on which any action is required to be taken
hereunder by any of the parties hereto is not a Business Day, such action shall
be required to be taken on the next succeeding day that is a Business Day.
1.5 Schedules
The following Schedules are annexed to this Agreement and are hereby
incorporated by reference into this Agreement and form part hereof:
Schedule A -- Form of Affiliate's Letter
Schedule B -- Appropriate Regulatory Approvals
Schedule C -- Form of Arrangement Resolution
Schedule D -- Form of Westcoast Rights Plan Waiver Resolution
Schedule E -- Form of Plan of Arrangement
Schedule F -- Form of Support Agreement
Schedule G -- Form of Voting and Exchange Trust Agreement
ARTICLE 2
THE ARRANGEMENT
2.1 Implementation Steps by Westcoast
Westcoast covenants in favour of the Duke Energy Parties that Westcoast
shall:
(a) as soon as reasonably practicable, apply in a manner acceptable to
the Duke Energy Parties, acting reasonably, under Section 192 of the
CBCA for an order approving the Arrangement and for the Interim
Order, and thereafter proceed with and diligently seek the Interim
Order;
(b) lawfully convene and hold the Westcoast Meeting for the purpose of
considering the Arrangement Resolution and the Westcoast Rights Plan
Waiver Resolution (and for no other purpose unless agreed to by Duke
Energy) as soon as reasonably practicable and use its reasonable
efforts to convene and hold the Westcoast Meeting on or before
December 15, 2001, subject to adjournments or postponements which
may be required pursuant to Section 5.6(a);
(c) subject to obtaining the approvals as are required by the Interim
Order, proceed with and diligently pursue the application to the
Court for the Final Order; and
(d) subject to obtaining the Final Order and the satisfaction or waiver
of the other conditions herein contained in favour of each party,
send to the Director, for endorsement and filing by the Director,
the Articles of Arrangement and such other documents as may be
required in connection therewith under the CBCA to give effect to
the Arrangement.
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2.2 Implementation Steps by Duke Energy Parties
The Duke Energy Parties covenant in favour of Westcoast that, on or prior
to the Effective Date and subject to the satisfaction or waiver of the
conditions herein contained in favour of each such party:
(a) Duke Energy, Callco and Exchangeco shall execute and deliver the
Support Agreement;
(b) Duke Energy and Exchangeco shall execute and deliver the Voting and
Exchange Trust Agreement; and
(c) Duke Energy shall issue to the Trustee such number of Duke Energy
Common Shares as required by the Voting and Exchange Trust
Agreement.
2.3 Interim Order
The notice of motion for the application referred to in Section 2.1(a)
shall request that the Interim Order provide, among other things:
(a) for the class of persons to whom notice is to be provided in respect
of the Arrangement and the Westcoast Meeting and for the manner in
which such notice is to be provided;
(b) that the requisite approval for the Arrangement Resolution shall be
66 2/3% of the votes cast on the Arrangement Resolution by Westcoast
Securityholders, voting together as a single class, present in
person or by proxy at the Westcoast Meeting (such that each holder
of Westcoast Common Shares is entitled to one vote for each
Westcoast Common Share held and each holder of Westcoast Options is
entitled to one vote for each Westcoast Common Share such holder of
Westcoast Options would have received on a valid exercise of
Westcoast Options);
(c) that, in all other respects, the terms, restrictions and conditions
of the governing documents of Westcoast, including quorum
requirements and all other matters, shall apply in respect of the
Westcoast Meeting; and
(d) for the grant of the Dissent Rights.
2.4 Articles of Arrangement
The Articles of Arrangement shall, together with such other matters as are
necessary to effect the Arrangement, implement the Plan of Arrangement, as a
result of which, among other things, each holder of Westcoast Common Shares will
be entitled to receive (a) a fraction of an Exchangeable Share per Westcoast
Common Share equal to the Exchange Ratio, (b) a fraction of a Duke Energy Common
Share per Westcoast Common Share equal to the Exchange Ratio, (c) Cdn$43.80 in
cash, without interest, per Westcoast Common Share, or (d) a combination
thereof, at the option of the holder, subject, in each case to proration in a
manner as may be determined by Duke Energy to provide that approximately 50% of
the aggregate consideration to
AMENDED AND RESTATED COMBINATION AGREEMENT
11
be received by holders of Westcoast Common Shares will consist of cash and
approximately 50% will consist of Exchangeable Shares and Duke Energy Common
Stock.
2.5 Westcoast Circular
As promptly as reasonably practicable, Westcoast shall prepare the
Circular together with any other documents required by the Securities Act, the
CBCA or other applicable Laws in connection with the approval of the Arrangement
by the Westcoast Securityholders and Westcoast shall give Duke Energy timely
opportunity to review and comment on all such documentation and all such
documentation shall be reasonably satisfactory to Duke Energy before it is filed
or distributed to Westcoast Securityholders; provided, that Duke Energy will
provide Westcoast with its comments and any proposed additions and deletions
within five Business Days after each receipt of a draft Circular from Westcoast.
If Duke Energy shall have advised Westcoast in writing of matters required
pursuant to Section 5.2(b)(ii) prior to the Westcoast Meeting, Westcoast shall
disclose such matters in the Circular (including by amendment or supplement to
the Circular if the Circular shall have been previously filed or distributed)
and such disclosure shall be reasonably satisfactory to Duke Energy before it is
filed or distributed to Westcoast Securityholders. As promptly as practicable
after obtaining the Interim Order, Westcoast shall cause the Circular and other
documentation required in connection with the Westcoast Meeting to be sent to
each Westcoast Securityholder and filed as required by the Interim Order and
applicable Laws, and Westcoast will use its reasonable efforts to cause the
Circular to be sent to each Westcoast Securityholder and filed as required by
the Interim Order and applicable Laws on or before November 15, 2001.
2.6 Securities Compliance
(a) Duke Energy and Westcoast shall use reasonable best efforts to
obtain all orders required from the applicable Canadian Governmental
Entities to permit the issuance and first resale of (i) the
Exchangeable Shares and Duke Energy Common Shares issuable pursuant
to the Arrangement, (ii) the Duke Energy Common Shares issuable upon
exchange of the Exchangeable Shares from time to time, and (iii) the
Duke Energy Common Shares issuable from time to time upon the
exercise of the Replacement Options, in each case without
qualification with, or approval of, or the filing of any prospectus
or similar document, or the taking of any proceeding with, or the
obtaining of any further order, ruling or consent from, any Canadian
Governmental Entity under any Canadian federal, provincial or
territorial securities or other Laws or pursuant to the rules and
regulations of any Governmental Entity administering such Laws, or
the fulfillment of any other legal requirement in any such
jurisdiction (other than, with respect to such first resales, any
restrictions on transfer by reason of, among other things, a holder
being a "control person" for purposes of Canadian federal,
provincial or territorial securities Laws).
(b) Duke Energy shall file a registration statement on Form S-3 (or
other applicable form) (the "Form S-3") in order to register under
the 1933 Act the Duke Energy Common Shares issuable from time to
time after the Effective Time upon exchange of the Exchangeable
Shares and shall use its reasonable best efforts to cause the Form
S-3 to become effective and to maintain the effectiveness of such
registration until the
AMENDED AND RESTATED COMBINATION AGREEMENT
12
date on which no Exchangeable Shares remain outstanding (other than
those Exchangeable Shares held by Duke Energy or any of its
affiliates).
(c) As promptly as practicable after the Effective Date, Duke Energy
shall file a registration statement on Form S-8 (or other applicable
form) (the "Form S-8") in order to register under the 1933 Act those
Duke Energy Common Shares issuable from time to time after the
Effective Time upon the exercise of the Replacement Options.
(d) Duke Energy and Westcoast shall take all such steps as may be
required to cause the transactions contemplated by this Article 2
and any other dispositions of Westcoast equity securities or
acquisitions of Duke Energy equity securities (including, in each
case derivative securities) in connection with this Agreement or the
transactions contemplated hereby by any individual who is a director
or officer of Westcoast, to be exempt under Rule 16b-3 promulgated
under the Exchange Act.
2.7 Preparation of Filings
(a) Duke Energy and Westcoast shall cooperate in:
(i) the preparation of any application for the orders and the
preparation of any required registration statements and any
other documents reasonably deemed by Duke Energy or Westcoast
to be necessary to discharge their respective obligations
under United States and Canadian federal, provincial,
territorial or state securities Laws in connection with the
Arrangement and the other transactions contemplated hereby;
(ii) the taking of all such action as may be required under any
applicable United States and Canadian federal, provincial,
territorial or state securities Laws (including "blue sky
laws") in connection with the issuance of the Exchangeable
Shares and the Duke Energy Common Shares in connection with
the Arrangement or the exercise of the Replacement Options;
provided, however, that with respect to the United States
"blue sky" and Canadian provincial qualifications neither Duke
Energy nor Westcoast shall be required to register or qualify
as a foreign corporation or to take any action that would
subject it to service of process in any jurisdiction where
such entity is not now so subject, except as to matters and
transactions arising solely from the offer and sale of the
Exchangeable Shares and the Duke Energy Common Shares; and
(iii) the taking of all such action as may be required under the
CBCA in connection with the transactions contemplated by this
Agreement and the Plan of Arrangement.
(b) Each of Duke Energy and Westcoast shall promptly furnish to the
other all information concerning it and its security holders as may
be required for the effectuation of the actions described in
Sections 2.5 and 2.6 and the foregoing provisions of this Section
2.7, and each covenants that no information furnished by it (to its
knowledge in the case of information concerning its shareholders) in
AMENDED AND RESTATED COMBINATION AGREEMENT
13
connection with such actions or otherwise in connection with the
consummation of the Arrangement and the other transactions
contemplated by this Agreement will contain any misrepresentation
(as defined in the Securities Act) or any untrue statement of a
material fact or omit to state a material fact required to be stated
in any such document or necessary in order to make any information
so furnished for use in any such document not misleading in the
light of the circumstances in which it is furnished.
(c) Each of Duke Energy and Westcoast shall promptly notify the other if
at any time before or after the Effective Time it becomes aware that
the Circular or an application for an order or a registration
statement described in Section 2.6 contains any misrepresentation
(as defined in the Securities Act) or any untrue statement of a
material fact or omits to state a material fact required to be
stated therein or necessary to make the statements contained therein
not misleading in light of the circumstances in which they are made,
or that otherwise requires an amendment or supplement to the
Circular or such application or registration statement. In any such
event, Duke Energy and Westcoast shall cooperate in the preparation
of a supplement or amendment to the Circular or such other document,
as required and as the case may be, and, if required, shall cause
the same to be distributed to the Westcoast Securityholders or filed
with the relevant securities regulatory authorities.
(d) Westcoast shall ensure that the Circular complies with all
applicable Laws and, without limiting the generality of the
foregoing, that the Circular does not contain any misrepresentation
(as defined in the Securities Act) or 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 contained therein not
misleading in light of the circumstances in which they are made
(other than with respect to any information relating to and provided
by the Duke Energy Parties). Without limiting the generality of the
foregoing, Westcoast shall ensure that the Circular complies with
OSC Rule 54-501 and provides Westcoast Securityholders with
information in sufficient detail to permit them to form a reasoned
judgment concerning the matters to be placed before them at the
Westcoast Meeting.
(e) Duke Energy shall ensure that the Form S-3 and Form S-8 comply with
all applicable Laws and, without limiting the generality of the
foregoing, that such documents do 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 contained therein
not misleading in light of the circumstances in which they are made
(other than with respect to any information relating to and provided
by Westcoast).
ARTICLE 3
REPRESENTATIONS AND WARRANTIES of Westcoast
Westcoast represents and warrants to the Duke Energy Parties as follows in
each case except as set forth in the Westcoast Disclosure Letter (each of which
exceptions shall specifically identify the relevant section hereof to which it
relates):
AMENDED AND RESTATED COMBINATION AGREEMENT
14
3.1 Organization and Standing
(a) Each of Westcoast and its subsidiaries has been duly organized or
formed and is validly existing under the Laws of its jurisdiction of
organization or formation with full corporate or legal power and
authority to own, lease and operate its properties and to conduct
its businesses as currently owned and conducted except where,
individually or in the aggregate, the failure of a subsidiary other
than a Material Subsidiary to be so organized, formed or existing or
to have such power or authority would not have a Material Adverse
Effect on Westcoast. Each of Westcoast and its subsidiaries is duly
qualified to do business in each jurisdiction in which the nature of
the business conducted by it or the ownership or leasing of its
properties requires it to so qualify, except where, individually or
in the aggregate, the failure to be so qualified would not have a
Material Adverse Effect on Westcoast.
(b) Section 3.1 of the Westcoast Disclosure Letter sets forth, as of the
date hereof, a true and complete list of each of Westcoast's
subsidiaries and Partially Owned Entities, together with (i) the
nature of the legal organization of such person, (ii) the
jurisdiction of organization or formation of such person, (iii) the
name of each Westcoast related person that owns beneficially or of
record any equity or similar interest in such person, and (iv) the
percentage interest owned by Westcoast or any of its subsidiaries in
such person. Neither Westcoast nor any of its subsidiaries is
subject to any obligation in excess of $10 million to provide funds
to or make any investment in (in the form of a loan, capital
contribution or otherwise) any subsidiary, Partially Owned Entity or
other person other than Westcoast or a wholly owned subsidiary of
Westcoast.
(c) Westcoast has heretofore made available to Duke Energy complete and
correct copies of its governing documents as well as the governing
documents of each of its subsidiaries and Partially Owned Entities,
in each case as in effect on the date hereof.
3.2 Capitalization
(a) The authorized capital of Westcoast consists of (i) an unlimited
number of First Preferred Shares and Second Preferred Shares, each
issuable in series, and (ii) an unlimited number of Westcoast Common
Shares and there were 4,588,687 First Preferred Shares, Series 2,
8,000,000 First Preferred Shares, Series 5, 5,000,000 First
Preferred Shares, Series 6, 6,000,000 First Preferred Shares, Series
7, 6,000,000 First Preferred Shares, Series 8, and 5,000,000 First
Preferred Shares, Series 9, issued and outstanding and no Second
Preferred Shares issued and outstanding as of September 15, 2001. As
of September 15, 2001, there were 123,400,430 Westcoast Common
Shares issued and outstanding and no Westcoast Common Shares held in
its treasury or by any subsidiary of Westcoast. As of August 31,
2001, there were outstanding Westcoast Options permitting the
holders thereof to purchase 5,092,893 Westcoast Common Shares in the
aggregate. As of August 31, 2001, there were 1,984,469 Westcoast
Common Shares reserved for issuance under the Westcoast Stock Option
Plans. As of July 31, 2001, there were 5,900,587 Westcoast Common
Shares reserved for issuance under the Westcoast Dividend
Reinvestment Plan. From
AMENDED AND RESTATED COMBINATION AGREEMENT
15
September 15, 2001 to the date hereof, no First Preferred Shares,
Second Preferred Shares or Westcoast Common Shares have been issued
by Westcoast or purchased by Westcoast or any of its subsidiaries;
from July 31, 2001 to the date hereof, no First Preferred Shares,
Second Preferred Shares or Westcoast Common Shares have been
reserved by Westcoast; and from August 31, 2001 to the date hereof
no Westcoast Options have been granted.
(b) All of the Westcoast Common Shares and First Preferred Shares have
been duly authorized and are validly issued and fully paid and
non-assessable, were not issued in violation of pre-emptive or
similar rights or any other agreement or understanding binding upon
Westcoast and were issued in compliance with the CBCA, all
applicable securities Laws and the governing documents of Westcoast.
All of the outstanding shares and other ownership interests of the
subsidiaries, the Partially Owned Entities of Westcoast, Maritimes &
Northeast Pipeline and P.T. Puncakjaya Power which are held,
directly or indirectly, by Westcoast have been (to the knowledge of
Westcoast in the case of Partially Owned Entities, Maritimes &
Northeast Pipeline and P.T. Puncakjaya Power) duly authorized and
are validly issued, fully paid and non-assessable, were not issued
in violation of pre-emptive or similar rights and all such shares
and other ownership interests are owned directly or indirectly by
Westcoast, free and clear of all liens, claims or encumbrances,
except for restrictions on transfers contained in governing
documents and except where, individually or in the aggregate, the
failure of the shares or ownership interest in a subsidiary other
than a Material Subsidiary to be so authorized or issued or owned
free and clear would not have a Material Adverse Effect on
Westcoast.
(c) Except as described in Section 3.2(a) above, as of the date hereof,
there are no outstanding options, warrants, subscriptions, puts,
calls or other rights, agreements, arrangements or commitments
(pre-emptive, contingent or otherwise) obligating Westcoast or any
of its subsidiaries to offer, issue, sell, redeem, repurchase,
otherwise acquire or transfer, pledge or encumber any capital stock
of Westcoast, any of its subsidiaries, Partially Owned Entities,
Maritimes & Northeast Pipeline or P.T. Puncakjaya Power nor are
there outstanding any securities or obligations of any kind of
Westcoast or any of its subsidiaries which are convertible into or
exerciseable or exchangeable for any capital stock of Westcoast, any
of its subsidiaries or any other person and neither Westcoast nor
any of its subsidiaries or, to the knowledge of Westcoast, any of
its Partially Owned Entities has any obligation of any kind to issue
any additional securities or to pay for or repurchase any
securities. There are not outstanding as of the date hereof any
stock appreciation rights, phantom equity or similar rights,
agreements, arrangements or commitments based upon the book value,
income or any other attribute of Westcoast or any of its
subsidiaries. There are no outstanding bonds, debentures or other
evidences of indebtedness of Westcoast or any of its subsidiaries
having the right to vote (or that are exchangeable or convertible
for or exercisable into securities having the right to vote) with
the holders of the Westcoast Common Shares on any matter. As of the
date hereof, there are no stockholder agreements, proxies, voting
trusts, rights to require registration under securities Laws or
other arrangements or commitments to which Westcoast or any of its
subsidiaries is a party or bound with respect to the voting,
disposition or
AMENDED AND RESTATED COMBINATION AGREEMENT
16
registration of any outstanding securities of Westcoast, any of its
subsidiaries or any of its Partially Owned Entities.
(d) Since June 30, 2001, except for issuances of Westcoast Common Shares
pursuant to Westcoast Options granted prior to the date hereof,
pursuant to the Westcoast Dividend Reinvestment Plan and upon
conversion of First Preferred Shares pursuant to their terms, there
have been no Westcoast capital stock, voting securities or
securities convertible or exchangeable therefor issued or purchased
for cancellation.
3.3 Authority and No Conflicts
(a) Westcoast has all requisite corporate power and authority to enter
into this Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby, subject to the
approval of Westcoast's Securityholders and the Court as provided in
this Agreement with respect to the Plan of Arrangement. The
execution and delivery of this Agreement by Westcoast and the
consummation by Westcoast of the transactions contemplated by this
Agreement have been duly and validly authorized by all necessary
corporate action and no other corporate proceedings on the part of
Westcoast are necessary to authorize this Agreement or to consummate
the transactions contemplated hereby other than, with respect to the
Westcoast Rights Plan Waiver Resolution, approval of the holders of
Westcoast Common Shares and with respect to the completion of the
Arrangement, the approval of the Westcoast Securityholders and the
Court and the filing of such corporate documents under the CBCA as
are provided for in this Agreement.
(b) This Agreement has been duly executed and delivered by Westcoast and
constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its terms, except as the same may be
limited by bankruptcy, insolvency and other applicable Laws
affecting creditors' rights generally, and by general principles of
equity.
(c) The Board of Directors of Westcoast at a meeting duly called and
held has determined by the unanimous approval of all directors
voting (A) that this Agreement and the transactions contemplated
hereby, including the Arrangement and the Westcoast Rights Plan
Waiver Resolution, are fair to the Westcoast Securityholders and are
in the best interests of Westcoast and (B) to recommend that the
Westcoast Securityholders vote in favour of the Arrangement and the
Westcoast Rights Plan Waiver Resolution.
(d) Neither the execution and delivery of this Agreement by Westcoast
nor the performance by it of its obligations hereunder and the
completion of the transactions contemplated hereby, will:
(i) conflict with, or violate any provision of, the governing
documents of Westcoast or any of its subsidiaries or Partially
Owned Entities;
(ii) subject to the consents, approvals, orders, authorizations,
registrations, declarations or filings referred to in Section
3.4 being made or obtained, violate or
AMENDED AND RESTATED COMBINATION AGREEMENT
17
breach any Laws applicable to Westcoast, any of its
subsidiaries or, to the knowledge of Westcoast, any of its
Partially Owned Entities;
(iii) subject to the consents, approvals, orders, authorizations,
registrations, declarations or filings referred to in Section
3.4 being made or obtained, violate or conflict with or result
in the breach of, or constitute a default (or an event that
with the giving of notice, the passage of time, or both would
constitute a default) under, or entitle any party (with the
giving of notice, the passage of time or both) to terminate,
accelerate, modify or call any obligations or rights under any
credit agreement, note, bond, mortgage, indenture, deed of
trust, contract, agreement, lease, license, franchise, permit,
concession, easement or other instrument to which Westcoast or
any of its subsidiaries or, to the knowledge of Westcoast, any
of its Partially Owned Entities is a party or by which
Westcoast or any of its subsidiaries or, to the knowledge of
Westcoast, any of its Partially Owned Entities or its or their
property is bound or subject; or
(iv) result in the imposition of any encumbrance, charge or lien
upon or require the sale or give any person the right to
acquire any of Westcoast's assets or the assets of any of its
subsidiaries or, to the knowledge of Westcoast, any of its
Partially Owned Entities, or restrict, hinder, impair or limit
the ability of Westcoast, or any of its subsidiaries or, to
the knowledge of Westcoast, any of its Partially Owned
Entities to carry on the business of Westcoast, any of its
subsidiaries or any of its Partially Owned Entities as and
where it is now being carried on;
except in the case of clauses (ii) through (iv) for any of the foregoing
that would not, individually or in the aggregate, have a Material Adverse
Effect on Westcoast or materially impair the ability of Westcoast to
perform its obligations hereunder or prevent or materially delay the
consummation of any of the transactions contemplated hereby.
3.4 Consents; Approvals
No consent, approval, order or authorization of, or registration,
declaration or filing with, any third party or Governmental Entity is required
by or with respect to Westcoast, any of its subsidiaries or, to the knowledge of
Westcoast, any of its Partially Owned Entities in connection with the execution
and delivery of this Agreement by Westcoast, the performance of its obligations
hereunder or the consummation by Westcoast of the transactions contemplated
hereby other than (a) any approvals required by the Interim Order, (b) the Final
Order, (c) the approval of the Arrangement by the Westcoast Securityholders, (d)
such registrations and other actions required under federal, state, provincial,
and territorial securities Laws as are contemplated by this Agreement, (e) any
filings with the Director under the CBCA, (f) the Appropriate Regulatory
Approvals relating to Westcoast and to the extent required, the New York Public
Services Commission, and (g) any other consents, approvals, orders,
authorizations, registrations, declarations or filings which, if not obtained or
made, would not, individually or in the aggregate, have a Material Adverse
Effect on Westcoast or prevent or materially delay the consummation of any of
the transactions contemplated hereby or materially impair Westcoast's ability to
perform its obligations hereunder.
AMENDED AND RESTATED COMBINATION AGREEMENT
18
3.5 No Defaults
None of Westcoast or any of its Material Subsidiaries or, to the knowledge
of Westcoast, any of its Partially Owned Entities or any other party thereto, is
in default under or violation of, and there has been no event, condition or
occurrence which, after notice or lapse of time or both, would constitute such a
default or violation of, or permit the termination of, any term, condition or
provision of (a) their respective governing documents, (b) any credit agreement,
note, bond, mortgage, indenture, contract, agreement, lease, license, franchise,
permit, concession, easement or other instrument to which Westcoast or any of
its subsidiaries or, to the knowledge of Westcoast, any of its Partially Owned
Entities, is a party or by which Westcoast, any of its subsidiaries or, to the
knowledge of Westcoast, any of its Partially Owned Entities, or any of its or
their property is bound or subject, except, in the case of clause (b), defaults,
violations and terminations which, individually or in the aggregate, would not
have a Material Adverse Effect on Westcoast.
3.6 Absence of Certain Changes or Events
(a) Except as disclosed in the Westcoast SRA Reports or Westcoast SEC
Reports filed prior to the date hereof, since December 31, 2000,
Westcoast, its subsidiaries and, to the knowledge of Westcoast, its
Partially Owned Entities, have conducted their respective businesses
only in the ordinary course in a manner consistent with past
practice and there has been no Material Adverse Effect with respect
to Westcoast or any event, occurrence or development which would be
reasonably expected to have a Material Adverse Effect on Westcoast
or which materially and adversely affects the ability of Westcoast
to consummate the transactions contemplated hereby.
(b) Except as disclosed in the Westcoast SRA Reports or Westcoast SEC
Reports filed prior to the date hereof, since December 31, 2000,
none of Westcoast or any of its subsidiaries, or, to the knowledge
of Westcoast, its Partially Owned Entities, has engaged in any
conduct that is proscribed during the Pre-Effective Date Period by
Section 5.1.
3.7 Employment Matters
(a) Except as set forth in the management proxy circular prepared in
connection with the Annual Meeting of Westcoast held on April 25,
2001 or Section 3.7 of the Westcoast Disclosure Letter, neither
Westcoast nor any of its subsidiaries is a party to any written or
oral policy, agreement, obligation or understanding providing for
severance or termination payments to, or any employment agreement
with, any former or current director, officer or employee other than
any agreement which applies to only one individual and which does
not provide for payment to such individual in excess of $150,000 in
any one calendar year and other than as required by applicable Law
for employees without agreements as to notice or severance or
pursuant to collective bargaining agreements.
AMENDED AND RESTATED COMBINATION AGREEMENT
19
(b) Neither Westcoast nor any of its subsidiaries is a party to any
consulting contract, written or oral, providing for compensation of
any individual in excess of $350,000 per calendar year.
(c) Neither Westcoast nor any of its subsidiaries has agreed to
recognize any union or other collective bargaining representative,
nor has any union or other collective bargaining representative been
certified as the exclusive bargaining representative of any of
Westcoast's or any of its subsidiaries' employees. No labor union or
representative of the employees of Westcoast or any of its
subsidiaries claims to be seeking to represent employees of
Westcoast or any of its subsidiaries other than those that are
parties to executed collective bargaining agreements identified in
Section 3.7 of the Westcoast Disclosure Letter. To the knowledge of
Westcoast, no union organizational campaign or representation
petitions are currently pending with respect to any of the employees
of Westcoast or any of its subsidiaries or Partially Owned Entities.
Neither Westcoast nor any of its subsidiaries is a party to, or
bound by, any collective bargaining agreement or any other labor
contract applicable to any employees of Westcoast or its
subsidiaries. All collective bargaining agreements to which
Westcoast is a party have been duly ratified and there are no
written or oral agreements which modify the terms of any such
collective bargaining agreement. No collective bargaining agreements
or other labor contracts relating to employees of Westcoast or its
subsidiaries are being negotiated. To the knowledge of Westcoast,
neither Westcoast nor any of its subsidiaries have breached any of
their obligations under any collective bargaining agreements that
would have a Material Adverse Effect on Westcoast. There is no labor
strike or labor dispute, slowdown, lockout or stoppage actually
pending or threatened against or affecting Westcoast or its
subsidiaries, individually or in the aggregate, that would be
reasonably expected to have a Material Adverse Effect on Westcoast,
and Westcoast and its subsidiaries have not experienced any labor
strikes or labor disputes, slowdowns, lockouts or stoppages since
December 31, 1998, that had a Material Adverse Effect on Westcoast.
To the knowledge of Westcoast, no union or collective bargaining
representative has applied to have Westcoast or any of its
subsidiaries declared a related or successor employer pursuant to
applicable labor Laws.
(d) All employees and former employees of Westcoast and its subsidiaries
have been, or will have been on or before the Effective Date, paid
or amounts in respect thereof shall have been accrued for wages,
salaries, commissions, bonuses, vacation pay, severance and
termination pay, sick pay, and other compensation for all services
performed by them or that was accrued by them up to the Effective
Date, in accordance with the obligations of Westcoast and its
subsidiaries under any employment or labor practices and policies or
any collective bargaining agreement or individual agreement to which
Westcoast or its subsidiaries is a party, or by which Westcoast or
its subsidiaries may be bound, except for, in the case of severance
and termination pay, statutory and common law requirements for
payment in lieu of reasonable notice of termination.
(e) There are no current, pending or, to the knowledge of Westcoast,
threatened proceedings before any board or tribunal or claims with
respect to employment and
AMENDED AND RESTATED COMBINATION AGREEMENT
20
labor Laws, including, but not limited to, employment and labor
standards, unfair labor practices, employment discrimination,
occupational health and safety, employment equity, pay equity,
workers' compensation, human rights and labor relations, other than
such proceedings and claims which, individually or in the aggregate,
would not have a Material Adverse Effect on Westcoast. Westcoast and
its subsidiaries are not subject to any settlement agreement,
conciliation agreement, letter of commitment, deficiency letter or
consent decree with any present or former employee or applicant for
employment, labor union or other employee representative, or any
Government Entity or arbitrator relating to claims of unfair labor
practices, employment discrimination, or other claims with respect
to employment and labor practices and policies that would have a
Material Adverse Effect on Westcoast, and no Government Entity or
arbitrator has issued a judgment, order, decree, injunction,
decision, award or finding with respect to the employment and labor
practices or policies of Westcoast or its subsidiaries which
currently has or would be reasonably expected to have a Material
Adverse Effect on Westcoast. There are no outstanding assessments,
penalties, fines, liens, charges, surcharges, or other amounts due
and owing pursuant to any workplace safety and insurance legislation
by Westcoast or any of its subsidiaries and they have not been
reassessed in any material respect under such legislation during the
past three years and, to the knowledge of Westcoast, no audit is
currently being performed pursuant to any applicable workplace
safety and insurance legislation. There are no claims or, to the
knowledge of Westcoast, potential claims which may materially and
adversely affect accident cost experience.
3.8 Reports; Financial Statements
(a) Since January 1, 1998, Westcoast and its subsidiaries have timely
filed all forms, reports, schedules, statements and other documents
required to be filed with (i) Canadian securities regulatory
authorities (collectively the "Westcoast SRA Reports"), (ii) the SEC
under the Exchange Act or the 1933 Act (collectively the "Westcoast
SEC Reports"), (iii) any other applicable state, provincial or
territorial securities authority, and (iv) any other Governmental
Entity, except in each case where the failure to file any such
forms, reports, schedules, statements or other documents would not
have a Material Adverse Effect on Westcoast (all such forms,
reports, schedules, statements and other documents are collectively
referred to as the "Westcoast Documents"). The Westcoast Documents
at the time filed (x) did not contain any misrepresentation (as
defined in the Securities Act), (y) did not contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements contained therein not misleading in light of the
circumstances under which they were made and (z) complied in all
material respects with the requirements of applicable Laws
(including, with respect to the Westcoast SEC Reports, the 1933 Act,
the Exchange Act and the rules and regulations thereunder).
Westcoast has not filed any confidential material change report with
the OSC or any other securities authority or regulator or any stock
exchange or other self-regulatory authority that at the date hereof
remains confidential.
AMENDED AND RESTATED COMBINATION AGREEMENT
21
(b) The consolidated financial statements (including, in each case, any
related notes thereto) contained in any Westcoast SRA Reports or
Westcoast SEC Reports (i) have been prepared in accordance with
Canadian generally accepted accounting principles applied on a
consistent basis during the periods involved (subject, in the case
of unaudited financial statements, to the absence of notes in the
case of Westcoast SRA Reports filed prior to the implementation of
OSC Rule 51-501), (ii) complied in all material respects with the
requirements of applicable securities Laws, and (iii) fairly
present, in all material respects, the consolidated financial
position, results of operations and cash flows of Westcoast and its
subsidiaries as of the respective dates thereof and for the
respective periods covered thereby, subject, in the case of
unaudited financial statements, to normal, recurring audit
adjustments none of which will be material.
(c) From January 1, 1998 to the date of this Agreement, there has been
no change by Westcoast or its subsidiaries in their accounting
policies, methods, practices or principles that are material to
Westcoast's consolidated financial statements, except as described
in the notes thereto with respect to periods ending prior to the
date hereof.
3.9 Contracts
Section 3.9 of the Westcoast Disclosure Letter lists (without specifically
identifying the subsection of this Section 3.9 to which they relate) as of the
date hereof all written or oral contracts, agreements, guarantees, leases and
executory commitments other than Westcoast Plans to which Westcoast or any of
its subsidiaries is a party and which fall within any of the following
categories: (a) contracts not entered into in the ordinary course of Westcoast's
and its subsidiaries' business other than those that are not material to the
business of Westcoast and its subsidiaries, (b) contracts containing covenants
purporting to limit the freedom of Westcoast or any of its subsidiaries to
compete in any line of business in any geographic area or to hire any individual
or group of individuals, (c) contracts which after the Effective Time would have
the effect of limiting the freedom of Duke Energy or its subsidiaries (other
than Westcoast and its subsidiaries) to compete in any line of business in any
geographic area or to hire any individual or group of individuals, (d) purchase
contracts involving in excess of $25 million per year which restrict or limit
the purchasing relationships of Westcoast or its subsidiaries, (e) contracts
relating to any outstanding commitment for capital expenditures in excess of
$100 million other than capital expenditures included in the 2001 capital
expenditures budget that was previously approved by the Board of Directors of
Westcoast and which was provided to Duke Energy or which were reported to the
Board of Directors of Westcoast in the Second Quarter 2001 Outlook previously
provided to Duke Energy, (f) contracts with any labor organization or union, (g)
except as reflected in the Westcoast financial statements included in the
Westcoast SRA Reports for the period ended June 30, 2001, indentures, mortgages,
liens, promissory notes, loan agreements, guarantees or other arrangements
relating to the borrowing of money by Westcoast or its subsidiaries in excess of
$100 million, (h) contracts providing for "earn-outs", "savings guarantees",
"performance guarantees", or other contingent payments by Westcoast or any of
its subsidiaries involving more than $100 million per year or $250 million over
the term of the contract, (i) confidentiality or standstill agreements with any
person (the effectiveness of which extends beyond the date that is six months
following the date hereof) that restrict Westcoast or
AMENDED AND RESTATED COMBINATION AGREEMENT
22
any of its subsidiaries in the use of any information or the taking of any
actions by Westcoast or its subsidiaries entered into in connection with the
consideration by Westcoast or any of its subsidiaries of any acquisition of
equity interests or assets, (j) contracts containing provisions triggered by a
change of control of Westcoast or other similar provisions, (k) contracts in
favour of directors or officers that provide rights to indemnification and (l)
contracts that are material to Westcoast and its subsidiaries taken as a whole
other than those that are covered by (a) through (k) of this Section 3.9 or
filed in the Westcoast SRA Reports or Westcoast SEC Reports filed prior to the
date hereof. All such contracts and all other contracts that are individually
material to the business or operations of Westcoast and its subsidiaries are
valid and binding obligations of Westcoast or such subsidiaries that are parties
thereto and, to the knowledge of Westcoast, the valid and binding obligation of
each other party thereto except such contracts which if not so valid and binding
would not, individually or in the aggregate, have a Material Adverse Effect on
Westcoast.
3.10 Litigation
There are no claims, actions, proceedings or investigations pending or, to
the knowledge of Westcoast, threatened against Westcoast or any of its
subsidiaries or Partially Owned Entities before any Governmental Entity (and
Westcoast, its subsidiaries and, to the knowledge of Westcoast, its Partially
Owned Entities, have no knowledge of any facts that are likely to give rise to
any such claim, action, proceeding or investigation) that would be reasonably
expected to have a Material Adverse Effect on Westcoast, or prevent or
materially delay consummation of the transactions contemplated by this
Agreement. Neither Westcoast nor any of its subsidiaries, nor their respective
assets and properties, is subject to any outstanding judgment, order, writ,
injunction or decree that has had or would be reasonably expected to have a
Material Adverse Effect on Westcoast or that would prevent or materially delay
consummation of the transactions contemplated by this Agreement.
3.11 Environmental
Except for any matters which individually or in the aggregate are not
reasonably likely to result in an expenditure or liability in excess of $20
million:
(a) all operations of Westcoast and its subsidiaries and, to the
knowledge of Westcoast, any of its Partially Owned Entities have
been conducted, and are now, in compliance with all Environmental
Laws;
(b) Westcoast and its subsidiaries and, to the knowledge of Westcoast,
its Partially Owned Entities are in possession of, and in compliance
with, all permits, authorizations, certificates, registrations,
approvals and consents necessary under Environmental Laws to own,
lease and operate their properties and to conduct their respective
businesses as they are now being conducted or as proposed to be
conducted (collectively the "Westcoast Environmental Permits"); and
(c) neither Westcoast nor any of its subsidiaries or, to the knowledge
of Westcoast, any of its Partially Owned Entities is subject to:
AMENDED AND RESTATED COMBINATION AGREEMENT
23
(i) any Environmental Laws that require any work, repairs,
construction, change in business practices or operations, or
expenditures, including capital expenditures for facility
upgrades, environmental investigation and remediation
expenditures, or any other such expenditures;
(ii) any written demand or written notice alleging breach of or
with respect to liability under any Environmental Laws
applicable to Westcoast, any subsidiary of Westcoast or any of
its Partially Owned Entities, including any regulations
respecting the use, storage, treatment, transportation or
disposition (including disposal or arranging for disposal) of
Hazardous Substances;
(iii) any written demand or written notice with respect to
liability, by contract or operation of Environmental Laws
applicable to Westcoast or any current or former subsidiary of
Westcoast or any of its Partially Owned Entities or any of
their respective predecessor entities, divisions or any
formerly owned, leased or operated properties or assets of the
foregoing, including liability with respect to the presence,
release, threatened release or discharge of Hazardous
Substances; or
(iv) any changes in the terms or conditions of any Westcoast
Environmental Permits or any renewal (other than renewals in
the ordinary course on the expiry of permits), modification,
revocation, reissuance, alteration or amendment of such
Westcoast Environmental Permits that are required in
connection with the execution or delivery of this Agreement,
the consummation of the transactions contemplated hereby or
the continuation of business of Westcoast or any subsidiaries
of Westcoast or, to the knowledge of Westcoast, any of its
Partially Owned Entities following such consummation.
3.12 Tax Matters
(a) Westcoast and each of its subsidiaries have timely filed, or caused
to be filed, all material Tax Returns required to be filed by them
(all of which returns were correct and complete in all material
respects), have timely paid, or caused to be paid, Taxes shown to be
due and payable thereon, and have satisfied in full in all respects
all Tax withholding, deposit and remittance requirements imposed on
or with respect to any of Westcoast and its subsidiaries, and
Westcoast's most recently published financial statements contain an
adequate provision in accordance with Canadian generally accepted
accounting principles for all material amounts of Taxes payable in
respect of each period covered by such financial statements and all
prior periods to the extent such Taxes have not been paid, whether
or not due and whether or not shown as being due on any Tax Returns.
Westcoast and each of its subsidiaries have made adequate provision
in accordance with Canadian generally accepted accounting principles
in their books and records for any amount of Taxes material to
Westcoast on a consolidated basis and accruing in respect of any
accounting period ending subsequent to the period covered by such
financial statements.
(b) Neither Westcoast nor any subsidiary of Westcoast has received any
written notification that any issue involving an amount of Taxes
material to Westcoast on a
AMENDED AND RESTATED COMBINATION AGREEMENT
24
consolidated basis has been raised (and is currently pending) by the
Canada Customs and Revenue Agency, the United States Internal
Revenue Service or any other taxing authority, including, without
limitation, any sales tax authority, in connection with any of the
Tax Returns filed or required to be filed, and no waivers of
statutes of limitations or objections to any assessments or
reassessments involving an amount of Taxes material to Westcoast on
a consolidated basis have been given, filed or requested with
respect to Westcoast or any subsidiary of Westcoast. All liability
of Westcoast and its subsidiaries for Canadian federal and
provincial income and capital taxes has been assessed by the Canada
Customs and Revenue Agency and, where applicable, Canadian
provincial tax authorities for all fiscal years up to and including
the fiscal year ended December 31, 1999. Neither Westcoast nor any
of its subsidiaries has received any notice from any taxing
authority to the effect that any Tax Return is being examined, and
Westcoast has no knowledge of any Tax audit or issue that would be
reasonably expected to have a Material Adverse Effect on Westcoast.
There are no proposed (but unassessed) additional Taxes applicable
to Westcoast or any of its subsidiaries or, to the knowledge of
Westcoast, any of its Partially Owned Entities, involving an amount
of Taxes material to Westcoast on a consolidated basis and none has
been asserted against Westcoast or any of its subsidiaries or, to
the knowledge of Westcoast, any of its Partially Owned Entities.
There are no Tax liens on any assets of Westcoast or any of its
subsidiaries except for Taxes not yet due and payable and those
which would not be reasonably expected to result in a Material
Adverse Effect on Westcoast. Neither Westcoast nor any of its
subsidiaries has received a refund of any Taxes to which it was not
entitled. Neither Westcoast nor any of its subsidiaries (i) has made
an election to be treated as a "consenting corporation" under
Section 341(f) of the United States Internal Revenue Code of 1986
(the "Code") or (ii) is a party to any Tax sharing or other similar
agreement or arrangement or any Tax indemnification agreement of any
nature with any other person (other than in agreements with
Westcoast or any of its subsidiaries) pursuant to which Westcoast or
any of its subsidiaries has or could have any material liabilities
in respect of Taxes. Westcoast has not made an election under
Section 897(i) of the Code to be treated as a domestic corporation
for purposes of Sections 897, 1445 and 6039C of the Code.
(c) "Tax" and "Taxes" means, with respect to any person, all income
taxes (including any tax on or based upon net income, gross income,
income as specially defined, earnings, profits or selected items of
income, earnings or profits) and all capital taxes, gross receipts
taxes, environmental taxes, sales taxes, use taxes, ad valorem
taxes, value added taxes, transfer taxes, franchise taxes, license
taxes, withholding taxes, payroll taxes, employment taxes, pension
plan premiums, excise, severance, social security premiums, workers'
compensation premiums, unemployment insurance or compensation
premiums, stamp taxes, occupation taxes, premium taxes, property
taxes, windfall profits taxes, alternative or add-on minimum taxes,
goods and services tax, customs duties or other taxes, fees,
imports, assessments or charges of any kind whatsoever, together
with any interest and any penalties or additional amounts imposed by
any taxing authority (domestic or foreign) on such entity, and any
interest, penalties, additional taxes and additions to tax imposed
with respect to the foregoing.
AMENDED AND RESTATED COMBINATION AGREEMENT
25
3.13 Pension and Employee Benefits
(a) Section 3.13 of the Westcoast Disclosure Letter sets forth a list of
all employee benefit, health, welfare, supplemental unemployment
benefit, bonus, incentive, pension, profit sharing, deferred
compensation, stock compensation, stock option, stock purchase,
retirement, hospitalization insurance, medical, dental, legal,
disability and similar plans or arrangements or practices, whether
written or oral, which are sponsored, maintained or contributed to
by Westcoast or any of its subsidiaries (collectively referred to as
the "Westcoast Plans"). The Westcoast Disclosure Letter states which
of the Westcoast Plans are subject to the provisions of the United
States Employee Retirement Income Security Act of 1974, as amended
("ERISA"). For purposes of this Section 3.13, a subsidiary of
Westcoast shall be deemed to also include each corporation, trade,
business, or entity that would be considered to be a single employer
or under common control with Westcoast pursuant to Section 414 of
the Code or Section 4001 of ERISA.
(b) No step has been taken, no event has occurred and no condition or
circumstance exists that has resulted in or could be reasonably
expected to result in any Westcoast Plan being ordered or required
to be terminated or wound up in whole or in part or having its
registration under applicable Laws refused or revoked, or being
placed under the administration of any trustee or receiver or
regulatory authority or being required to pay any material amount of
Taxes, fees, penalties or levies under applicable Laws. There are no
actions, suits, claims (other than routine claims for payment of
benefits in the ordinary course), trials, demands, investigations,
arbitrations or other proceedings which are pending or threatened in
respect of any of the Westcoast Plans or their assets which
individually or in the aggregate would have a Material Adverse
Effect on Westcoast.
(c) Westcoast has provided to Duke Energy true, correct and complete
copies of all of the Westcoast Plans as amended (or, in the case of
any unwritten Westcoast Plan, a description thereof) together with
all related actuarial reports, and Westcoast has made available to
Duke Energy all other related documentation including, without
limitation, funding agreements, trust agreements, funding and
financial information returns and statements with respect to each
Westcoast Plan, and current plan summaries, booklets and personnel
manuals. Westcoast has provided to Duke Energy a true and complete
copy of (i) the most recent annual report on Form 5500 filed with
the United States Internal Revenue Service with respect to each
Westcoast Plan in respect of which such a report was required and
(ii) the most recent annual information return filed with the Canada
Customs and Revenue Agency with respect to each Westcoast Plan in
respect of which such a return was required.
(d) All of the Westcoast Plans are and have been established,
registered, qualified, invested and administered, in all material
respects, in accordance with all applicable Laws, and in accordance
with their terms and the terms of agreements between Westcoast or a
subsidiary of Westcoast, as the case may be, and their respective
employees. No fact or circumstance exists that could adversely
affect the existing tax status of a Westcoast Plan.
AMENDED AND RESTATED COMBINATION AGREEMENT
26
(e) All obligations of Westcoast or a subsidiary of Westcoast regarding
the Westcoast Plans have been satisfied in all material respects.
All contributions or premiums required to be made by Westcoast or a
subsidiary of Westcoast, as the case may be, under the terms of each
Westcoast Plan or by applicable Laws have been made in a timely
fashion in accordance with applicable Laws and the terms of the
Westcoast Plans.
(f) Each Westcoast Plan is fully insured or fully funded (both on a
going-concern and solvency basis) and in good standing with such
regulatory authorities as may be applicable and, as of the date
hereof, no notice of underfunding, noncompliance, failure to be in
good standing or otherwise has been received by Westcoast or its
subsidiaries from any such regulatory authority.
(g) There have been no improper withdrawals, applications or transfers
of assets from any Westcoast Plan or the trusts or other funding
media relating thereto that remain outstanding and unremedied, and
neither Westcoast, nor any subsidiary of Westcoast, nor, to the
knowledge of Westcoast, any of their respective agents has been in
breach of any fiduciary obligation with respect to the
administration of the Westcoast Plans or the trusts or other funding
media relating thereto.
(h) Westcoast or its subsidiaries may unilaterally amend or terminate,
in whole or in part, each Westcoast Plan and take contribution
holidays under or withdraw surplus from each Westcoast Plan, subject
only to approvals required by Law and, with respect to amendment or
termination, the collective agreements disclosed in Section 3.7 of
the Westcoast Disclosure Letter.
(i) No commitments to improve or otherwise amend any Westcoast Plan have
been made except as required by applicable Laws.
(j) None of the Westcoast Plans (other than pension plans) provide
benefits to retired or former employees or to the beneficiaries or
dependants of retired or former employees.
(k) No insurance policy or any other contract or agreement affecting any
Westcoast Plan requires or permits a retroactive increase in
premiums or payments due thereunder.
(l) All Westcoast Plans intended to be tax-qualified in the United
States have been the subject of determination letters from the
United States Internal Revenue Service to the effect that such
Westcoast Plans and their related trusts are qualified and exempt
from United States Federal income taxes under Sections 401(a) and
501(a), respectively, of the Code, and no such determination letter
has been revoked nor, to the knowledge of Westcoast, has revocation
been threatened, nor has any such Westcoast Plan been amended since
the date of its most recent determination letter or application
therefor in any respect that would adversely affect its
qualification or materially increase its costs and nothing has
occurred since the date of such letter that could adversely affect
the qualified status of such plan. As to any such Westcoast
AMENDED AND RESTATED COMBINATION AGREEMENT
27
Plan, there has been no termination or partial termination of such
Westcoast Plan within the meaning of Section 411(d)(3) of the Code.
(m) No amount or benefit that could be received (whether in cash or
property, the vesting of property or the acceleration of the
exerciseability of stock options) as a result of or in connection
with the transactions contemplated by this Agreement or the
Arrangement (whether or not some other subsequent action or event
would be required to cause the receipt of such amount or benefit to
occur) by any employee, officer or director of Westcoast or any of
its affiliates who is a "disqualified individual" (as such term is
defined in proposed United States Treasury Regulation Section
1.280G-1) under any employment, severance or termination agreement,
other compensation arrangement or Westcoast Plan currently in effect
will fail to be deductible for United States federal income tax
purposes by virtue of Section 280G of the Code.
(n) None of the Westcoast Plans is a "multiemployer plan" within the
meaning of Section 4001(a)(3) of ERISA or any other applicable Law,
nor has Westcoast or any subsidiary of Westcoast been obligated to
contribute to any such multiemployer plan at any time within the
past six years.
(o) No employment, severance or termination agreement, other
compensation arrangement or Westcoast Plan provides for payment of a
benefit, the increase of a benefit amount, the acceleration of
contributions or funding, the payment of a contingent benefit or the
acceleration of the payment or vesting of a benefit by reason of the
execution of this Agreement or the consummation of the transactions
contemplated by this Agreement or the Arrangement (whether or not
some other subsequent action or event would be required to cause
such payment, increase, acceleration, or vesting to be triggered).
(p) As to any Westcoast Plan that is subject to Title IV of ERISA, no
accumulated funding deficiency, whether or not waived, within the
meaning of Section 302 of ERISA or Section 412 of the Code has been
incurred, no reportable event within the meaning of Section 4043 of
ERISA has occurred, no notice of intent to terminate the plan has
been given under Section 4041 of ERISA, no proceeding has been
instituted under Section 4042 of ERISA to terminate the plan, and no
liability to the United States Pension Benefit Guaranty Corporation
has been incurred.
(q) As to any Westcoast Plan which is subject to ERISA or the Code, no
act, omission or transaction has occurred which would result in
imposition on Westcoast or any subsidiary of Westcoast of (i) breach
of fiduciary duty liability damages under Section 409 of ERISA, (ii)
a civil penalty assessed pursuant to subsections (c), (i) or (l) of
Section 502 of ERISA, or (iii) a tax imposed pursuant to Chapter 43
of Subtitle D of the Code.
(r) Each trust funding a Westcoast Plan, which trust is intended to be
exempt from United States federal income taxation pursuant to
Section 501(c)(9) of the Code, satisfies the requirements of such
section and has received a favourable determination
AMENDED AND RESTATED COMBINATION AGREEMENT
28
letter from the United States Internal Revenue Service regarding
such exempt status and has not, since receipt of the most recent
favourable determination letter, been amended or operated in a way
which would adversely affect such exempt status.
3.14 Affiliates
Section 3.14 of the Westcoast Disclosure Letter identifies all persons
who, to the knowledge of Westcoast, may be deemed to be affiliates of Westcoast
under Rule 145 of the 1933 Act, including all directors and executive officers
of Westcoast.
3.15 Compliance with Laws; Permits
(a) Westcoast, its subsidiaries and, to the knowledge of Westcoast, its
Partially Owned Entities are in compliance, and at all times since
January 1, 1998 have complied, with all applicable Laws other than
non-compliance which would not, individually or in the aggregate,
have a Material Adverse Effect on Westcoast. No investigation or
review by any Governmental Entity with respect to Westcoast, any of
its subsidiaries, or the knowledge of Westcoast, its Partially Owned
Entities, is pending or, to the knowledge of Westcoast, is
threatened, nor has any Governmental Entity indicated in writing an
intention to conduct the same, other than those the outcome of which
would not have a Material Adverse Effect on Westcoast.
(b) Westcoast and its subsidiaries and, to the knowledge of Westcoast,
its Partially Owned Entities are in possession of all franchises,
grants, authorizations, licenses, permits, easements, variances,
exemptions, consents, certificates, approvals and orders necessary
to own, lease and operate their properties and to lawfully carry on
their businesses as they are now being conducted (collectively, the
"Westcoast Permits"), except where the failure to be in possession
of such Westcoast Permits would not, individually or in the
aggregate, have a Material Adverse Effect on Westcoast, and there is
no action, proceeding or investigation pending or, to the knowledge
of Westcoast, threatened regarding any of the Westcoast Permits
which would have a Material Adverse Effect on Westcoast. None of
Westcoast, any of its subsidiaries or, to the knowledge of
Westcoast, any of its Partially Owned Entities is in conflict with,
or in default or violation of any of the Westcoast Permits, except
for any such conflicts, defaults or violations which would not,
individually or in the aggregate, have a Material Adverse Effect on
Westcoast.
(c) None of Westcoast, any of its subsidiaries or, to the knowledge of
Westcoast, any directors, officers, agents or employees of Westcoast
or any of its subsidiaries has (i) used any funds for unlawful
contributions, gifts, entertainment or other unlawful expenses
relating to political activity, or (ii) made any unlawful payment to
any government officials or employees or to political parties or
campaigns or violated any provision of the United States Foreign
Corrupt Practices Act of 1977, as amended in each case which could
reasonably be expected to have a material and adverse effect on
Westcoast.
AMENDED AND RESTATED COMBINATION AGREEMENT
29
3.16 Restrictions on Business Activities
There is no agreement, judgment, injunction, order or decree binding upon
Westcoast or any of its subsidiaries that has or could be reasonably expected to
have the effect of prohibiting, restricting or materially impairing any business
practice of Westcoast or any of its subsidiaries, any acquisition of property by
Westcoast or any of its subsidiaries or the conduct of business by Westcoast or
any of its subsidiaries as currently conducted other than such agreements,
judgments, injunctions, orders or decrees which would not, individually or in
the aggregate, have a Material Adverse Effect on Westcoast.
3.17 Intellectual Property
(a) Westcoast and its subsidiaries, directly or indirectly, own, license
or otherwise have legally enforceable rights to use, or can acquire
on reasonable terms and without material expense, all patents,
patent rights, trademarks, trade names, service marks, copyrights
and any applications therefore, technology, know-how, computer
software and applications and tangible or intangible proprietary
information or materials, that are material to and used in the
business of Westcoast and its subsidiaries as presently conducted
(the "Intellectual Property Rights").
(b) In the case of Intellectual Property Rights owned by Westcoast or
one of its subsidiaries, either Westcoast or one of its subsidiaries
owns such Intellectual Property Rights free and clear of any
material liens, charges or encumbrances. Westcoast or one of its
subsidiaries has an adequate right to the use of the Intellectual
Property Rights or the material covered thereby in connection with
the services or products in respect of which such Intellectual
Property Rights are being used. Westcoast has not received any
written notice or claim, nor has it received any other information,
stating that the manufacture, sale, licensing, or use of any of the
services or products of Westcoast or any of its subsidiaries as now
manufactured, sold, licensed or used or proposed for manufacture,
sale, licensing or use by Westcoast or any of its subsidiaries in
the ordinary course of Westcoast's business as presently conducted
infringes on any copyright, patent, trade ▇▇▇▇, service ▇▇▇▇ or
trade secret of a third party where such infringement would have a
Material Adverse Effect on Westcoast. Westcoast has not received any
written notice or claim, nor has it received any other information,
stating that the use by Westcoast or any of its subsidiaries of any
trademarks, service marks, trade names, trade secrets, copyrights,
patents, technology or know-how and applications used in the
business of Westcoast and any of its subsidiaries as presently
conducted infringes on any other person's trademarks, service marks,
trade names, trade secrets, copyrights, patents, technology or
know-how and applications where such infringement would have a
Material Adverse Effect on Westcoast. Westcoast has not received any
written notice or claim, nor has it received any other information,
challenging the ownership by Westcoast or any of its subsidiaries or
the validity of any of the Intellectual Property Rights. All
registered patents, trademarks, service marks and copyright held by
Westcoast and its subsidiaries are subsisting, except to the extent
any failure to be subsisting would not have a Material Adverse
Effect on Westcoast. To the knowledge of Westcoast, there is no
material unauthorized use, infringement or
AMENDED AND RESTATED COMBINATION AGREEMENT
30
misappropriation of any of the Intellectual Property Rights by any
third party, including any employee or former employee of Westcoast
or any of its subsidiaries No Intellectual Property Right is subject
to any known outstanding decree, order, judgment, or stipulation
restricting in any manner the licensing thereof by Westcoast or any
of its subsidiaries, except to the extent any such restriction would
not have a Material Adverse Effect on Westcoast.
3.18 Insurance
Each of Westcoast and its subsidiaries is, and has been continuously since
September 1, 1996, insured by reputable and financially responsible insurers in
amounts and against risks and losses as are customary for companies conducting
their respective businesses. Westcoast's and its subsidiaries' insurance
policies are in all material respects in full force and effect in accordance
with their terms, no notice of cancellation or termination has been received,
and there is no existing default or event which, with the giving of notice or
lapse of time or both would constitute a default thereunder.
3.19 Property
(a) Westcoast, its subsidiaries and, to the knowledge of Westcoast, its
Partially Owned Entities have defensible title (or, with respect to
pipelines, equipment and other tangible personal property used in
connection with Westcoast's pipeline operations (collectively,
"Westcoast Pipeline Assets") title to or interest in the applicable
Westcoast Pipeline Assets sufficient to enable Westcoast, its
subsidiaries and, to the knowledge of Westcoast, its Partially Owned
Entities to conduct their businesses with respect thereto without
material interference as it is currently being conducted) to all
their material properties and assets, whether tangible or
intangible, real, personal or mixed, free and clear of all liens,
except for liens disclosed in the Westcoast Documents and liens the
existence of which would not have a Material Adverse Effect on
Westcoast.
(b) The businesses of Westcoast and each of its subsidiaries have been
and are being operated in a manner which does not violate (in any
manner which would, or which would be reasonably expected to, have a
Material Adverse Effect on Westcoast) the terms of any easements,
rights of way, permits, servitudes, licenses, leasehold estates and
similar rights relating to real property (collectively, "Easements")
used by Westcoast and each of its subsidiaries in such businesses.
All Easements are valid and enforceable, except as the
enforceability thereof may be affected by bankruptcy, insolvency or
other Laws of general applicability affecting the rights of
creditors generally or principles of equity, and grant the rights
purported to be granted thereby and all rights necessary thereunder
for the current operation of such businesses where the failure of
any such Easement to be valid and enforceable or to grant the rights
purported to be granted thereby or necessary thereunder would have a
Material Adverse Effect on Westcoast. There are no special gaps in
the Easements which would impair the conduct of such businesses in a
manner that would, or that would be reasonably expected to, have a
Material Adverse Effect on Westcoast, and no part of the Westcoast
Pipeline Assets is located on property which is not owned in fee by
AMENDED AND RESTATED COMBINATION AGREEMENT
31
Westcoast or a subsidiary of Westcoast or subject to an Easement in
favour of Westcoast or a subsidiary of Westcoast, where the failure
of such Westcoast Pipeline Assets to be so located would have a
Material Adverse Effect on Westcoast.
3.20 Regulatory Proceedings
None of Westcoast, any of its subsidiaries or, to the knowledge of
Westcoast, any of its Partially Owned Entities, all or part of whose rates or
services are regulated by a Governmental Entity, is a party to any proceeding
before a Governmental Entity which is reasonably likely to result in orders
having a material burden on the future operations or business of Westcoast or
any Material Subsidiary of Westcoast nor has written notice of any such
proceeding been received by Westcoast, any of its subsidiaries or, to the
knowledge of Westcoast, any of its Partially Owned Entities.
3.21 Regulation as a Utility
(a) Westcoast and all of its "subsidiary companies" and "affiliates", as
such terms are defined in the 1935 Act, either are not subject to or
are exempt from all provisions of the 1935 Act other than Section
9(a)(2) of the 1935 Act.
(b) None of Westcoast or any of its "subsidiary companies" or
"affiliates" is subject to regulation as a "holding company" or a
"subsidiary company" or "affiliate" of a "holding company", as such
terms are defined in the ▇▇▇▇ ▇▇▇.
3.22 Futures Trading and Fixed Price Exposure
The Board of Directors of Westcoast has approved the formation and mandate
of the Corporate Risk Management Committee (the "CRMC"). The CRMC is responsible
for providing the overall direction on all aspects of Westcoast's business risk
management. Such responsibilities include approval and oversight of the
aggregate risk limits and the delegation of risk management authority and
accountability to the business units and functional units. The business risk
management programs of Westcoast and its subsidiaries are consistent with the
policies of the CRMC.
The Board of Directors of Westcoast has established risk parameters to
restrict the level of risk that Engage Energy Canada, Inc. ("Engage") and its
subsidiaries are authorized to take with respect to the net position of Engage
and its subsidiaries resulting from all physical commodity transactions,
exchange traded futures and options and over-the-counter derivative instruments
(the "Net Engage Position") and the CRMC monitors the compliance by Engage and
its subsidiaries with such risk parameters. The risk parameters established by
the Board of Directors of Westcoast as of the date hereof are set forth in
Section 3.22 of the Westcoast Disclosure Letter and may be modified only by the
Board of Directors of Westcoast. The Net Engage Position is within the risk
parameters which have been established by Westcoast's Board of Directors or
otherwise approved by Westcoast's Board of Directors.
In the case of Westcoast's regulated subsidiaries, risk management
programs have been established which govern the actions and conduct of such
subsidiaries with respect to their management of gas supply portfolio risk
arising from the use of physical commodity
AMENDED AND RESTATED COMBINATION AGREEMENT
32
transactions, exchange traded futures and options and over-the-counter
derivative instruments. The actions of each regulated subsidiary are reviewed by
each of such subsidiary's respective regulatory bodies. Such subsidiaries are in
compliance with their stated programs or policies.
3.23 Opinion of Financial Advisors
The Board of Directors of Westcoast has received the opinions of Credit
Suisse First Boston Corporation and CIBC World Markets Inc., Westcoast's
financial advisors, to the effect that, as of the date hereof, the consideration
to be received by the holders of Westcoast Common Shares pursuant to the
transactions contemplated hereby is fair to the holders of Westcoast Common
Shares from a financial point of view and those opinions have not been
withdrawn, reserved or modified in any material respect.
3.24 Brokerage and Finders' Fees
Except for Westcoast's obligations to Credit Suisse First Boston
Corporation and CIBC World Markets Inc., neither Westcoast nor any subsidiary of
Westcoast or any shareholder, director, officer or employee thereof, has
incurred or will incur on behalf of Westcoast, any brokerage, finders' or
similar fee in connection with the transactions contemplated hereby. Copies of
all written agreements relating to Westcoast's obligations to Credit Suisse
First Boston Corporation and CIBC World Markets Inc. have previously been
provided to Duke Energy and all other agreements relating to such obligations
are described in Section 3.24 of the Westcoast Disclosure Letter.
3.25 Westcoast Rights Plan
None of the execution or the delivery of this Agreement or the taking of
any action contemplated by this Agreement results, or will result, in Duke
Energy becoming an Acquiring Person (as defined in the Westcoast Rights Plan),
provided that, prior to the consummation of the Arrangement, the Westcoast
Rights Plan Waiver Resolution is approved by the affirmative vote of a majority
of the votes cast by holders of Westcoast Common Shares.
3.26 Solvency of Westcoast
Westcoast is not insolvent, and at the time of the consummation of the
Arrangement will not be insolvent, as defined in Section 192(2) of the CBCA.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF THE DUKE ENERGY PARTIES
The Duke Energy Parties represent and warrant to Westcoast as follows in
each case except as set forth in the Duke Energy Disclosure Letter (each of
which exceptions shall specifically identify the relevant section hereof to
which it relates):
AMENDED AND RESTATED COMBINATION AGREEMENT
33
4.1 Organization and Standing
(a) Each of the Duke Energy Parties has been duly organized or formed
and is validly existing under the Laws of its jurisdiction of
organization or formation with full corporate or legal power and
authority to own, lease and operate its properties and to conduct
its businesses as currently owned and conducted except where,
individually or in the aggregate, the failure of a subsidiary other
than a Material Subsidiary to be so organized, formed or existing or
to have such power or authority would not have a Material Adverse
Effect on Duke Energy. Each of the Duke Energy Parties is duly
qualified to do business in each jurisdiction in which the nature of
the business conducted by it or the ownership or leasing of its
properties requires it to so qualify, except where the failure to be
so qualified would not have a Material Adverse Effect on Duke
Energy.
(b) Duke Energy has heretofore made available to Westcoast complete and
correct copies of its governing documents as well as the governing
documents of Exchangeco, in each case as in effect on the date
hereof.
4.2 Capitalization
(a) The authorized capital stock of Duke Energy consists of 12.5 million
shares of Preferred Stock, 10.0 million shares of Preferred Stock A,
1.5 million shares of Preference Stock and 2.0 billion Duke Energy
Common Shares and there were 2,284,984 shares of Preferred Stock,
2,057,185 shares of Preferred Stock A and no Preference Stock issued
and outstanding and 775,386,163 Duke Energy Common Shares issued and
outstanding as of September 6, 2001. As of September 6, 2001 there
were 55,276,119 Duke Energy Common Shares reserved, in the
aggregate, for issuance in respect of the Duke Energy Stock Plans.
As of August 31, 2001, there were outstanding options permitting the
holders thereof to purchase 20,166,929 Duke Energy Common Shares in
the aggregate.
(b) All of the outstanding shares of capital stock of the Duke Energy
Parties have been duly authorized and are validly issued and fully
paid and non-assessable, were not issued in violation of pre-emptive
or similar rights or any other agreement or understanding binding
upon the Duke Energy Parties and were issued in compliance with all
applicable securities Laws and the governing documents of the Duke
Energy Parties except where, individually or in the aggregate, the
failure of the shares or ownership interest in a subsidiary other
than a Material Subsidiary to be so authorized or issued would not
have a Material Adverse Effect on Duke Energy. The authorized
capital stock of Exchangeco consists of an unlimited number of
common shares and an unlimited number of preference shares. As of
the date hereof, all of the outstanding capital stock of Exchangeco
is owned by N.S. U.L.C. and all of the outstanding capital stock of
N.S. U.L.C. is owned indirectly by Duke Energy.
(c) Except as described in Section 4.2(a) above, there are no
outstanding options, warrants, subscriptions, puts, calls or other
rights, agreements, arrangements or commitments (pre-emptive,
contingent or otherwise) obligating Duke Energy to offer,
AMENDED AND RESTATED COMBINATION AGREEMENT
▇▇
▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, otherwise acquire or transfer,
pledge or encumber any capital stock of Duke Energy nor are there
outstanding any securities or obligations of any kind convertible
into or exercisable or exchangeable for any capital stock of Duke
Energy and Duke Energy has no obligation of any kind to issue any
additional securities or to pay for or repurchase any securities.
There are not outstanding as of the date hereof any stock
appreciation rights, phantom equity or similar rights, agreements,
arrangements or commitments based upon the book value, income or any
other attribute of Duke Energy or any of its subsidiaries. There are
no outstanding bonds, debentures or other evidences of indebtedness
of Duke Energy or any of its subsidiaries having the right to vote
(or that are exchangeable or convertible for or exercisable into
securities having the right to vote) with the holders of the Duke
Energy Common Shares on any matter as of the date hereof.
4.3 Authority and No Conflicts
(a) Each of the Duke Energy Parties has all requisite corporate power
and authority to enter into this Agreement and to perform its
obligations hereunder and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by
the Duke Energy Parties and the consummation by the Duke Energy
Parties of the transactions contemplated by this Agreement have been
duly and validly authorized by all requisite corporate action and no
other corporate proceedings on the part of the Duke Energy Parties
are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby.
(b) This Agreement has been duly executed and delivered by the Duke
Energy Parties and constitutes a legal, valid and binding obligation
of each of the Duke Energy Parties, enforceable against each of them
in accordance with its terms, except as the same may be limited by
bankruptcy, insolvency and other applicable Laws affecting
creditors' rights generally, and by general principles of equity.
(c) The Board of Directors of Duke Energy at a meeting duly called and
held has determined by the unanimous approval of all directors
voting that this Agreement and the transactions contemplated hereby
are in the best interests of Duke Energy and the holders of Duke
Energy Common Shares.
(d) Neither the execution and delivery of this Agreement by the Duke
Energy Parties nor the performance by each of them of their
obligations hereunder and the completion of the transactions
contemplated hereby, will:
(i) conflict with, or violate any provision of, the governing
documents of any of the Duke Energy Parties;
(ii) subject to the consents, approvals, orders, authorizations,
registrations, declarations or filings referred to in Section
4.4 being made or obtained, violate or breach any Laws
applicable to Duke Energy or any of its subsidiaries;
(iii) subject to the consents, approvals, orders, authorizations,
registrations, declarations or filings referred to in Section
4.4 being made or obtained, violate or
AMENDED AND RESTATED COMBINATION AGREEMENT
35
conflict with or result in the breach of, or constitute a
default (or an event that with the giving of notice, the
passage of time, or both would constitute a default) under, or
entitle any party (with the giving of notice, the passage of
time or both) to terminate, accelerate, modify or call any
obligations or rights under any credit agreement, note, bond,
mortgage, indenture, deed of trust, contract, agreement,
lease, license, franchise, permit, concession, easement or
other instrument to which Duke Energy or any of its
subsidiaries is a party or by which Duke Energy or any of its
subsidiaries or its or their property is bound or subject; or
(iv) result in the imposition of any encumbrance, charge or lien
upon any of Duke Energy's assets or the assets of any of its
subsidiaries, or restrict, hinder, impair or limit the ability
of Duke Energy or any of its subsidiaries to carry on the
business of Duke Energy or any of its subsidiaries as and
where it is now being carried on;
except in the case of clauses (ii) through (iv) for any of the foregoing
that would not, individually or in the aggregate, have a Material Adverse
Effect on Duke Energy or materially impair the ability of Duke Energy to
perform its obligations hereunder or prevent or materially delay the
consummation of any of the transactions contemplated hereby.
4.4 Consents; Approvals
No consent, approval, order or authorization of, or registration,
declaration or filing with, any third party or Governmental Entity is required
by or with respect to any of the Duke Energy Parties in connection with the
execution and delivery of this Agreement by the Duke Energy Parties, the
performance of their obligations hereunder or the consummation by Duke Energy of
the transactions contemplated hereby other than (a) any approvals required by
the Interim Order, (b) the Final Order, (c) such registrations and other actions
required under federal, state, provincial and territorial securities Laws as are
contemplated by this Agreement, (d) any filings with the Director under the
CBCA, (e) the Appropriate Regulatory Approvals relating to the Duke Energy
Parties, (f) the consents or approvals set forth in Section 4.4 of the Duke
Energy Disclosure Letter and (g) any other consents, approvals, orders,
authorizations, registrations, declarations or filings which, if not obtained or
made, would not, individually or in the aggregate, have a Material Adverse
Effect on Duke Energy or prevent or materially delay the consummation of any of
the transactions contemplated hereby or materially impair Duke Energy's ability
to perform its obligations hereunder.
4.5 No Defaults
None of Duke Energy, any of its Material Subsidiaries or, to the knowledge
of Duke Energy, any other party thereto, is in default under or violation of,
and there has been no event, condition or occurrence which, after notice or
lapse of time or both, would constitute such a default or violation of, any
term, condition or provision of, or permit the termination of, (a) their
respective governing documents, (b) any credit agreement, note, bond, mortgage,
indenture, contract, agreement, lease, license, franchise, permit, concession,
easement or other instrument to which Duke Energy or any of its subsidiaries is
a party or by which Duke Energy or any of its
AMENDED AND RESTATED COMBINATION AGREEMENT
36
subsidiaries or any of its or their property is bound or subject, except, in the
case of clause (b), defaults and violations which, individually or in the
aggregate, would not have a Material Adverse Effect on Duke Energy.
4.6 Absence of Certain Changes or Events
Except as disclosed in the Duke Energy SEC Documents filed prior to the
date hereof, since December 31, 2000, there has been no Material Adverse Effect
with respect to Duke Energy or any event, occurrence or development which would
be reasonably expected to have a Material Adverse Effect on Duke Energy or which
materially and adversely affects the ability of Duke Energy to consummate the
transactions contemplated hereby.
4.7 Reports; Financial Statements
(a) Since January 1, 1998 Duke Energy and its subsidiaries have timely
filed all forms, reports, schedules, statements and other documents
required to be filed with (i) the SEC under the Exchange Act or the
1933 Act (the "Duke Energy SEC Documents"), (ii) any applicable
state securities authority and (iii) any other Governmental Entity,
except in each case where the failure to file any such forms,
reports, schedules, statements or other documents would not have a
Material Adverse Effect on Duke Energy (all such forms, reports,
schedules, statements and other documents are collectively referred
to as the "Duke Energy Documents"). The Duke Energy SEC Documents,
at the time filed (x) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements contained
therein not misleading in light of the circumstances under which
they were made and (y) complied in all material respects with the
requirements of applicable Laws (including the 1933 Act, the
Exchange Act and the rules and regulations thereunder).
(b) The consolidated financial statements (including in each case, any
related notes thereto) contained in any Duke Energy SEC Documents
(i) have been prepared in accordance with United States generally
accepted accounting principles applied on a consistent basis during
the periods involved (subject, in the case of unaudited financial
statements, to the absence of notes), (ii) complied in all material
respects with the requirements of applicable securities Laws, and
(iii) fairly present, in all material respects, the consolidated
financial position, results of operations and cash flows of Duke
Energy and its subsidiaries as of the respective dates thereof and
for the respective periods covered thereby, subject, in the case of
unaudited financial statements, to normal, recurring audit
adjustments none of which will be material.
(c) From January 1, 1998 to the date of this Agreement, there has been
no change in Duke Energy's accounting policies or methods of making
accounting estimates or changes in estimates that are material to
such financial statements, except as described in the notes thereto
with respect to periods ending prior to the date hereof.
AMENDED AND RESTATED COMBINATION AGREEMENT
37
4.8 Litigation
There are no claims, actions, proceedings or investigations pending or, to
the knowledge of Duke Energy, threatened against Duke Energy or any of its
subsidiaries before any Governmental Entity (and Duke Energy and its
subsidiaries have no knowledge of any facts that are likely to give rise to any
such claim, action, proceeding or investigation) that would be reasonably
expected to have a Material Adverse Effect on Duke Energy, or prevent or
materially delay consummation of the transactions contemplated by this
Agreement. Neither Duke Energy nor any of its subsidiaries, nor their respective
assets and properties, is subject to any outstanding judgment, order, writ,
injunction or decree that has had or would be reasonably expected to have a
Material Adverse Effect on Duke Energy or that would prevent or materially delay
consummation of the transactions contemplated by this Agreement.
4.9 Environmental
Except for any matters which individually or in the aggregate are not
reasonably likely to result in a Material Adverse Effect on Duke Energy:
(a) all operations of Duke Energy and its subsidiaries have been
conducted, and are now, in compliance with all Environmental Laws;
(b) Duke Energy and its subsidiaries are in possession of, and in
compliance with, all permits, authorizations, certificates,
registrations, approvals and consents necessary under Environmental
Laws to own, lease and operate their properties and to conduct their
respective businesses as they are now being conducted or as proposed
to be conducted (collectively the "Duke Energy Environmental
Permits"); and
(c) neither Duke Energy nor any of its subsidiaries is subject to:
(i) any Environmental Laws that require any work, repairs,
construction, change in business practices or operations, or
expenditures, including capital expenditures for facility
upgrades, environmental investigation and remediation
expenditures, or any other such expenditures;
(ii) any written demand or written notice alleging the breach of or
with respect to liability under any Environmental Laws
applicable to Duke Energy or any subsidiary of Duke Energy,
including any regulations respecting the use, storage,
treatment, transportation or disposition (including disposal
or arranging for disposal) of Hazardous Substances;
(iii) any written demand or written notice with respect to
liability, by contract or operation of Environmental Laws
applicable to Duke Energy or any current or former subsidiary
of Duke Energy or any of their respective predecessor
entities, divisions or any formerly owned, leased or operated
properties or assets of the foregoing, including liability
with respect to the presence, release, threatened release or
discharge of Hazardous Substances; or
AMENDED AND RESTATED COMBINATION AGREEMENT
38
(iv) any changes in the terms or conditions of any Duke Energy
Environmental Permits or any renewal (other than renewals in
the ordinary course on the expiry of permits), modification,
revocation, reissuance, alteration or amendment of such Duke
Energy Environmental Permits that are required in connection
with the execution or delivery of this Agreement, the
consummation of the transactions contemplated hereby or the
continuation of business of Duke Energy or any subsidiaries of
Duke Energy following such consummation.
4.10 Nuclear Operations
To the knowledge of Duke Energy, the operations of its Nuclear Steam
Generating Stations ("Nuclear Stations") are and have at all times been
conducted in material compliance with applicable health, safety, regulatory and
other legal requirements. To the knowledge of Duke Energy, the Nuclear Stations
maintain emergency plans designed to respond to an unplanned release therefrom
of radioactive materials into the environment, liability insurance to the extent
required by Law, and such further insurance (other than liability insurance) as
is consistent with Duke Energy's view of the risks inherent in the operation of
a nuclear power facility. To the knowledge of Duke Energy, plans for the
decommissioning of each of the Nuclear Stations and for the short-term storage
of spent nuclear fuel conform in all material respects with applicable
regulatory or other legal requirements, and such plans have at all times since
January 1, 1998 been funded to the extent required by Law (which funded amount
is not materially inconsistent, in the aggregate, with Duke Energy's budget
projections for the amount required to be spent under such plans) except for any
lack of funding which would not have a Material Adverse Effect on Duke Energy.
4.11 Compliance with Laws; Permits
(a) Duke Energy and its subsidiaries are in compliance, and at all times
since January 1, 1998 have complied, with all applicable Laws other
than non-compliance which would not, individually or in the
aggregate, have a Material Adverse Effect on Duke Energy. No
investigation or review by any Governmental Entity with respect to
Duke Energy or any of its subsidiaries is pending or, to the
knowledge of Duke Energy, is threatened, nor has any Governmental
Entity indicated in writing an intention to conduct the same, other
than those the outcome of which would not have a Material Adverse
Effect on Duke Energy.
(b) Duke Energy and its subsidiaries are in possession of all
franchises, grants, authorizations, licenses, permits, easements,
variances, exemptions, consents, certificates, approvals and orders
necessary to own, lease and operate their properties and to lawfully
carry on their businesses as they are now being conducted
(collectively, the "Duke Energy Permits"), except where the failure
to be in possession of such Duke Energy Permits would not,
individually or in the aggregate, have a Material Adverse Effect on
Duke Energy, and there is no action, proceeding or investigation
pending or, to the knowledge of Duke Energy, threatened regarding
any of the Duke Energy Permits which would have a Material Adverse
Effect on Duke Energy. Neither Duke Energy nor any of its
subsidiaries is in conflict with, or in default or violation of any
of the Duke Energy Permits, except for any such conflicts,
AMENDED AND RESTATED COMBINATION AGREEMENT
39
defaults or violations which, individually or in the aggregate,
would not have a Material Adverse Effect on Duke Energy.
(c) None of Duke Energy, any of its subsidiaries or, to the knowledge of
Duke Energy, any directors, officers, agents or employees of Duke
Energy or any of its subsidiaries has (i) used any funds for
unlawful contributions, gifts, entertainment or other unlawful
expenses relating to political activity, or (ii) made any unlawful
payment to any government officials or employees or to political
parties or campaigns or violated any provision of the United States
Foreign Corrupt Practices Act of 1977, as amended in each case which
could reasonably be expected to have a material and adverse effect
on Duke Energy.
4.12 Regulatory Proceedings
Neither Duke Energy nor any of its subsidiaries, all or part of whose
rates or services are regulated by a Governmental Entity, is a party to any
proceeding before a Governmental Entity which is reasonably likely to result in
orders having a material burden on the future operations or business of any
Material Subsidiary of Duke Energy nor has written notice of any such proceeding
been received by Duke Energy or any of its subsidiaries.
4.13 Futures Trading and Fixed Price Exposure
The Market Risk Committee of Duke Energy has established risk parameters
to restrict the level of risk that Duke Energy and its subsidiaries are
authorized to take with respect to the open position resulting from all physical
commodity transactions, exchange traded futures and options and over-the-counter
derivative instruments (the "Open Duke Energy Position") and monitors the
compliance by Duke Energy and its subsidiaries with such risk parameters. The
risk parameters established by the Market Risk Committee of Duke Energy may be
modified only by the Market Risk Committee of Duke Energy. The Open Duke Energy
Position is within the risk parameters which have been established by the Market
Risk Committee of Duke Energy.
4.14 Brokerage and Finders' Fees
Neither Duke Energy nor any of its shareholders, directors, officers or
employees has incurred or will incur on behalf of Duke Energy, any brokerage,
finders' or similar fee in connection with the transactions contemplated hereby,
except that Duke Energy has employed ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co. as its financial
advisor pursuant to a written agreement.
ARTICLE 5
COVENANTS AND AGREEMENTS
5.1 Covenants of Westcoast
(a) Westcoast agrees as follows until the Effective Date or the earlier
termination of this Agreement in accordance with Article 7, in each
case except (x) with the consent of Duke Energy to any deviation
therefrom, (y) with respect to any matters which are disclosed in
Section 5.1 of the Westcoast Disclosure Letter (each of which
exceptions
AMENDED AND RESTATED COMBINATION AGREEMENT
40
shall specifically identify the relevant subsection hereof to which
it relates) or (z) as expressly contemplated by this Agreement or
the Plan of Arrangement:
(i) Each of Westcoast and its subsidiaries shall (A) carry on its
businesses in the usual and ordinary course consistent with
past practices, (B) use reasonable best efforts to preserve
intact its present business organizations and material rights
and franchises, to keep available the services of its current
officers and employees, and to preserve its relationships with
customers, suppliers and others having business dealings with
it, (C) maintain and keep its material properties and assets
in as good repair and condition as at the date hereof, subject
to ordinary wear and tear, and (D) with respect to wholesale
power and energy trading transactions, comply with the risk
parameters approved by Westcoast's Board of Directors or, in
the case of regulated entities, contained in their program or
guidelines and in effect on the date hereof, all to the end
that its goodwill and ongoing businesses shall not be impaired
in any material respect at the Effective Time.
(ii) Westcoast shall not, and it shall not permit any of its
subsidiaries to: (A) declare or pay any dividends on, make
other distributions or return capital in respect of any of its
capital stock or any other equity interests, except for
regular quarterly cash dividends on Westcoast Common Shares of
Cdn$ 0.34 per share with record and payment dates consistent
with past practice, dividends required by the terms of any
securities outstanding on the date hereof, dividends,
distributions or return of capital payable by a subsidiary to
Westcoast or a wholly-owned subsidiary of Westcoast other than
an Excluded Asset; (B) split, combine or reclassify any of its
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; (C) issue,
sell, pledge, reserve, set aside, dispose of or encumber,
repurchase, redeem or otherwise acquire, any shares of its
capital stock or any securities or obligations convertible
into, exerciseable or exchangeable for, or any rights,
warrants, calls, subscriptions or options to acquire, shares
of its capital stock, except (1) pursuant to the terms of the
Westcoast Dividend Reinvestment Plan, as in effect on the date
hereof, (2) as required by the terms of any securities
outstanding on the date hereof, (3) pursuant to fully vested
Westcoast Options granted prior to the date hereof, (4) the
redemption of the Westcoast First Preferred Shares in
accordance with this Agreement, or (5) options granted in the
ordinary course of business consistent with past practice
under the Westcoast Stock Option Plans; or (D) enter into or
announce any agreement or arrangement with respect to the
sale, voting, registration or repurchase of any shares of its
capital stock or any security convertible into or exchangeable
for such shares.
(iii) Except for capital expenditures (A) included in the 2001
capital expenditures budget that was previously approved by
the Board of Directors of Westcoast (including any that are
not expended until 2002) or in the Second Quarter 2001 Outlook
previously provided to the Board of Directors of Westcoast,
each of which was previously provided to Duke Energy, (B) for
a business unit that are provided for in, and do not exceed
the lesser of $15 million
AMENDED AND RESTATED COMBINATION AGREEMENT
41
more than, or 150% of, the amount set forth for such business
unit in the forecast 2002 capital expenditure schedule to the
Westcoast Five Year Financial Forecast 2001-2005 which was
previously provided to the Board of Directors of Westcoast and
to Duke Energy and which expenditures are as otherwise
contemplated in such forecast; provided, that the aggregate
capital expenditures permitted hereunder do not exceed 110% of
the capital expenditures provided for Westcoast on a
consolidated basis in such forecast and provided further that
this covenant shall not apply to capital expenditures related
to Maritimes & Northeast Pipeline or P.T. Puncakjaya Power, or
(C) that are required under applicable Law, Westcoast shall
not, nor shall Westcoast permit any of its subsidiaries to,
make or commit to make any capital expenditures (including
capital lease obligations) in excess of $10 million
individually or in the aggregate other than capital
expenditures to repair or replace facilities destroyed or
damaged due to casualty or accident (whether or not covered by
insurance).
(iv) Westcoast shall not, nor shall it permit any of its
subsidiaries to, reorganize, recapitalize, consolidate,
dissolve, liquidate, amalgamate or merge with any other
person, nor acquire or agree to acquire, by amalgamating,
merging or consolidating with, by purchasing an equity
interest in or a portion of the assets of, or by any other
manner, any business or person or otherwise acquire or agree
to acquire any assets of any other person as to which the
total consideration is in excess of $10 million individually
(or in respect of a series of related transactions) or $50
million in the aggregate (other than purchases of assets from
suppliers or vendors in the ordinary course of business
consistent with past practice). Westcoast may not acquire any
electric utility assets or any retail gas assets or properties
unless Westcoast consults with Duke Energy prior thereto and
such acquisition will not, in the opinion of Duke Energy,
violate Section 5.1(a)(xiii).
(v) Except with respect to the sale of assets of Westcoast or any
subsidiary of Westcoast as to which the aggregate market value
is not in excess of $10 million individually (or in respect of
a series of related transactions) or $50 million in the
aggregate and except for the sale of gas and other energy
products in the ordinary course of business consistent with
past practice, Westcoast shall not, nor shall it permit any of
its subsidiaries to sell, pledge, encumber, lease (whether
such lease is an operating or capital lease) or otherwise
dispose of any assets (other than relating to transactions
between two or more wholly-owned Westcoast subsidiaries or
between a wholly-owned subsidiary and Westcoast).
(vi) Westcoast shall not, nor shall it permit any of its
subsidiaries to, (A) incur any indebtedness for borrowed money
or purchase money indebtedness or assume, guarantee, endorse
or enter into a "keepwell" or similar arrangement with respect
to, any indebtedness, other than (1) indebtedness between
Westcoast or any of its subsidiaries and another of its
subsidiaries, (2) additional indebtedness incurred in the
ordinary course of business consistent with past practice in
an amount not to exceed $50 million in the aggregate and (3)
additional borrowings under credit lines existing as of the
date hereof incurred in the ordinary course of business
consistent with past practice, (B) enter into interest rate
swaps with a
AMENDED AND RESTATED COMBINATION AGREEMENT
42
notional amount in excess of $75 million in the aggregate, or
(C) enter into any material operating lease or create any
mortgages, liens, security interests or other encumbrances on
the property of Westcoast or any of its subsidiaries in
connection with any indebtedness.
(vii) Except as required by applicable Law or any agreement to which
Westcoast or any of its subsidiaries is a party on the date
hereof, Westcoast shall not, nor shall it permit any of its
subsidiaries to:
(A) increase the amount of (or accelerate the payment or
vesting of) any benefit or amount payable under, any
employee benefit plan or any other contract, agreement,
commitment, arrangement, plan or policy providing for
compensation or benefits to any former, present or
future director, officer or employee of Westcoast or any
of its subsidiaries;
(B) increase (or enter into any commitment or arrangement to
increase) the compensation or benefits, or otherwise to
extend, expand or enhance the engagement, employment or
any related rights, of any former, present or future
director, officer, employee or consultant of Westcoast
or any of its subsidiaries, except for normal increases
for persons who are not directors or officers made in
the ordinary course of business consistent with past
practice, provided that the overall compensation budget
shall not increase by more than 3.5% on an annual basis;
(C) whether through its Board of Directors or otherwise,
accelerate the vesting of any unvested Westcoast Options
or accelerate the release of, or the expiry date of any
hold period relating to, any Westcoast Common Shares
held in the Westcoast Employee Share Purchase Plans, or
otherwise amend, vary or modify such plans or the
Westcoast Stock Option Plans; or
(D) adopt, establish, enter into or implement any employee
benefit plan, policy, severance or termination agreement
providing for any form of benefits or other compensation
to any former, present or future director, officer or
employee of Westcoast or any of its subsidiaries or
amend any employee benefit plan, policy, severance or
termination agreement.
(viii) Westcoast shall not, nor shall it permit any of its
subsidiaries to, amend or propose to amend its governing
documents.
(ix) Subject to applicable Law, Westcoast shall not implement any
changes in its or any of its regulated subsidiaries' rates or
charges (other than pass-through or tracking rate charges
under existing tariffs or rate schedules), standards of
service or accounting or execute any agreement with respect
thereto that is otherwise permitted under this Agreement (a
"Rate Change") that could be reasonably expected to materially
decrease the revenues of the business unit implementing such
change. Westcoast shall, and shall cause its subsidiaries to,
deliver to Duke Energy a copy of each filing or agreement
relating to a Rate Change at least five
AMENDED AND RESTATED COMBINATION AGREEMENT
43
days prior to the filing or execution thereof. Westcoast
shall, and shall cause its subsidiaries to, make all such
filings only in the ordinary course of business consistent
with past practice.
(x) Westcoast shall not, nor shall it permit any of its
subsidiaries to, pay, discharge, satisfy, compromise or settle
any claims or liabilities prior to the same being due which,
individually or in the aggregate, are in excess of $25
million.
(xi) Except as required by applicable Laws, Westcoast shall not,
nor shall it permit any of its subsidiaries to, enter into,
terminate or waive any provision of, exercise any option or
relinquish any contractual rights under, or modify in any
material respect any contract, agreement, guarantee, lease
commitment or arrangement of the nature required to be
disclosed by Section 3.9 or any contract which involves
payments or receipts by Westcoast or any of its subsidiaries
of more than $25 million over the term of such contract or
agreement.
(xii) Westcoast shall not, nor shall it permit any of its
subsidiaries to, make any changes to the existing accounting
practices, methods and principles relating to Westcoast or any
subsidiary of Westcoast except as required by Law or by
Canadian generally accepted accounting principles as advised
by Westcoast's or such subsidiary's regular independent
accountants, as the case may be.
(xiii) Westcoast shall not, nor shall it permit any of its
subsidiaries to, engage in any activities which would cause a
change in its status, or that of its subsidiaries, under the
1935 Act, or that would impair the ability of Duke Energy to
continue to claim an exemption as of right under Rule 2 of the
1935 Act following the Arrangement.
(xiv) Westcoast shall not, nor shall it permit any of its
subsidiaries to, make or rescind any material tax election.
(xv) Westcoast shall not take any action to exempt from, waive or
make not subject to (including redemption of outstanding
rights) (A) the Westcoast Rights Plan or (B) any takeover Law
or other Law that purports to limit or restrict business
combinations or the ability to acquire or vote shares, any
person (other than Duke Energy and its subsidiaries) or any
action taken thereby, including any Take-over Bid (as defined
in the Westcoast Rights Plan), which person or action would
have otherwise been subject to the restrictive provisions
thereof and not exempt therefrom. Westcoast shall not nor
shall it permit any subsidiary to, (a) enter into any
confidentiality or standstill agreement except as permitted by
Section 5.5(a), (b) amend, release any third party from its
obligations or grant any consent under any confidentiality or
standstill provision or fail to fully enforce any such
provision.
(xvi) Westcoast shall not, nor shall it permit any of its
subsidiaries to, take or fail to take any action which would
cause any of Westcoast's representations or
AMENDED AND RESTATED COMBINATION AGREEMENT
44
warranties hereunder to be untrue or would be reasonably
expected to prevent or materially impede, interfere with or
delay the Arrangement.
(xvii) Westcoast shall not consent to a holder of Westcoast Common
Shares withdrawing or abandoning his or her dissent pursuant
to the Dissent Rights or provide notice to the Court under the
Final Order that the Appropriate Regulatory Approvals have
been obtained, in either case without the prior written
consent of Duke Energy.
(xviii) Westcoast shall not, nor shall it permit any of its
subsidiaries to, agree in writing or otherwise to take any of
the actions as described above in clauses (ii) through (xvi).
(b) Westcoast shall promptly advise Duke Energy in writing:
(i) of any event, condition or circumstance that might be
reasonably expected to cause any representation or warranty of
Westcoast contained in this Agreement to be untrue or
inaccurate on the Effective Date (or, in the case of any
representation or warranty made as of a specified date, as of
such specified date);
(ii) of any Material Adverse Effect on Westcoast or any event,
occurrence or development which would be reasonably expected
to have a Material Adverse Effect on Westcoast; and
(iii) of any material breach by Westcoast of any covenant,
obligation or agreement contained in this Agreement.
(c) Westcoast shall use its reasonable best efforts to, and shall use
its reasonable best efforts to cause its subsidiaries to, perform
all obligations required to be performed by Westcoast or any of its
subsidiaries under this Agreement, cooperate with Duke Energy in
connection therewith, and do all such other acts and things as may
be necessary or desirable in order to consummate and make effective,
as soon as reasonably practicable, the transactions contemplated in
this Agreement and, without limiting the generality of the
foregoing, Westcoast shall:
(i) subject to Section 5.6, at the request of Duke Energy, solicit
from the Westcoast Securityholders proxies in favour of
approval of the Arrangement Resolution and the Westcoast
Rights Plan Waiver Resolution (in a commercially reasonable
manner) and use reasonable best efforts to obtain the approval
by Westcoast Securityholders of the Arrangement and of the
Westcoast Rights Plan Waiver Resolution;
(ii) subject to the last sentence of Section 5.6(a), not adjourn,
postpone or cancel (or propose adjournment, postponement or
cancellation of) the Westcoast Meeting without Duke Energy's
prior written consent except as required by Laws or, in the
case of adjournment, as may be required by Westcoast
Securityholders as expressed by majority resolution;
AMENDED AND RESTATED COMBINATION AGREEMENT
45
(iii) use reasonable best efforts to satisfy or cause to be
satisfied as soon as reasonably practicable all the conditions
precedent that are set forth in Article 6 hereof;
(iv) apply for and use reasonable best efforts to obtain as
promptly as practicable all Appropriate Regulatory Approvals
relating to Westcoast or any of its subsidiaries and, in doing
so, to keep Duke Energy reasonably informed as to the status
of the proceedings related to obtaining the Appropriate
Regulatory Approvals, including, but not limited to, providing
Duke Energy the opportunity to be present for all
communications with any Governmental Entity and providing Duke
Energy with copies of all related applications and
notifications, in draft form, in order for Duke Energy to
provide its reasonable comments;
(v) apply for and use reasonable best efforts to obtain the
Interim Order and the Final Order, which Final Order shall be
applied for on the basis that it shall be effective only upon
Westcoast notifying the Court that the Appropriate Regulatory
Approvals have been obtained;
(vi) carry out the terms of the Interim Order and the Final Order
applicable to it and use reasonable best efforts to comply
promptly with all requirements which applicable Laws may
impose on Westcoast or its subsidiaries with respect to the
transactions contemplated hereby and by the Arrangement;
(vii) use reasonable best efforts to defend all lawsuits or other
legal, regulatory or other proceedings to which it is a party
challenging or affecting this Agreement or the consummation of
the transactions contemplated hereby;
(viii) use reasonable best efforts to have lifted or rescinded any
injunction or restraining order or other order which may
adversely affect the ability of the parties to consummate the
transactions contemplated hereby;
(ix) effect all necessary registrations, filings and submissions of
information required by Governmental Entities from Westcoast
or any of its subsidiaries in connection with the transactions
contemplated hereby;
(x) consult with Duke Energy prior to making publicly available
its financial results for any period after the date of this
Agreement and prior to filing any Westcoast SRA Reports or
Westcoast SEC Reports;
(xi) use reasonable best efforts to obtain all waivers, consents
and approvals from other parties to loan agreements, leases or
other contracts required to be obtained by Westcoast or a
subsidiary of Westcoast to consummate the transactions
contemplated hereby which the failure to obtain would
materially and adversely affect the ability of Westcoast or
its subsidiaries to consummate the transactions contemplated
hereby; and
(xii) use reasonable best efforts to ensure that Westcoast's
affiliates listed in Section 3.14 of the Westcoast Disclosure
Letter execute and deliver to Duke
AMENDED AND RESTATED COMBINATION AGREEMENT
46
Energy, on or prior to the date that is 30 days after the date
hereof, an Affiliate's Letter.
(d) The Board of Directors of Westcoast shall recommend to the Westcoast
Securityholders the approval of the Arrangement Resolution and the
Westcoast Rights Plan Waiver Resolution; provided that the Board of
Directors of Westcoast may withdraw, modify or change its
recommendation if prior to the approval of the Arrangement by the
Westcoast Securityholders, Westcoast receives a Superior Proposal
that was not solicited or encouraged in violation of Section 5.5 and
the Board of Directors of Westcoast determines in good faith (based
upon the written opinion of its outside legal counsel) that it is
necessary for the Board of Directors of Westcoast to take such
action in order to discharge properly its fiduciary duties. Any such
withdrawal, change or modification of the Westcoast Board of
Directors' recommendation of the Arrangement and the Westcoast
Rights Plan Waiver Resolution shall not change the approval of the
Board of Directors of Westcoast for any purpose or change the
obligation of Westcoast to present the Arrangement Resolution and
the Westcoast Rights Plan Waiver Resolution (without recommendation)
at a duly called and convened Westcoast Meeting in accordance with
Westcoast's obligations under this Agreement.
(e) Westcoast shall not waive the application of Section 3.1 of the
Westcoast Rights Plan to an Acquisition Proposal unless the
Acquisition Proposal is a Superior Proposal and Westcoast has
complied with Section 5.5 and Section 5.6, provided that, in such
case, the waiver cannot be effective until after the Westcoast
Meeting and further provided that such waiver cannot be effective if
the Arrangement Resolution shall have been approved by the requisite
majority of the Westcoast Securityholders at the Westcoast Meeting.
(f) Prior to the Effective Time, Westcoast will complete the corporate
reorganizations as set forth in Section 5.1(f) of the Westcoast
Disclosure Letter, subject only to (i) receipt of any required
approval of any provincial regulatory body with respect to any
portion of such reorganization which Westcoast shall use its
reasonable best efforts to obtain, (ii) receipt of any required
approvals under Westcoast's existing debt trust indentures and (iii)
approval by Duke Energy of the costs to be incurred to complete such
reorganization.
5.2 Covenants of Duke Energy
(a) Duke Energy agrees that, until the Effective Date or the earlier
termination of this Agreement in accordance with Article 7, in each
case except (x) with the consent of Westcoast to any deviation
therefrom, (y) with respect to any matters which are disclosed in
Section 5.2 of the Duke Energy Disclosure Schedule (each of which
exceptions shall specifically identify the relevant subsection
hereof to which it relates) or (z) as expressly contemplated by this
Agreement or the Plan of Arrangement, Duke Energy shall and will
cause its subsidiaries to:
AMENDED AND RESTATED COMBINATION AGREEMENT
47
(i) subject to Section 5.2(c)(viii), not adopt or propose to adopt
any amendments to its governing documents or the governing
documents of Exchangeco which would have a material adverse
impact on the consummation of the transactions contemplated
hereby; and
(ii) not take any action which may jeopardize the exchange of the
Westcoast Common Shares by holders of the Westcoast Common
Shares in Canada for the purposes of the Income Tax Act
(Canada) from being treated on a tax deferred basis under the
Income Tax Act (Canada) for holders who are otherwise eligible
for such treatment.
(b) Duke Energy shall promptly advise Westcoast in writing:
(i) of any event, condition or circumstance that might be
reasonably expected to cause any representation or warranty of
the Duke Energy Parties contained in this Agreement to be
untrue or inaccurate on the Effective Date (or, in the case of
any representation or warranty made as of a specified date, as
of such specified date);
(ii) of any Material Adverse Effect on Duke Energy or any event,
occurrence or development which would be reasonably expected
to have a Material Adverse Effect on Duke Energy; and
(iii) of any material breach by any of the Duke Energy Parties of
any of their covenants, obligations or agreements contained in
this Agreement.
(c) Duke Energy shall use its reasonable best efforts to, and shall use
its reasonable best efforts to cause its subsidiaries to, perform
all obligations required to be performed by it or any of its
subsidiaries under this Agreement, cooperate with Westcoast in
connection therewith, and do all such other acts and things as may
be necessary or desirable in order to consummate and make effective,
as soon as reasonably practicable, the transactions contemplated by
this Agreement and, without limiting the generality of the
foregoing:
(i) use reasonable best efforts to satisfy or cause to be
satisfied as soon as reasonably practicable all conditions
precedent that are set forth in Article 6 hereof;
(ii) apply for and use reasonable best efforts to obtain promptly
all Appropriate Regulatory Approvals relating to Duke Energy
or any of its subsidiaries, and, in doing so, to keep
Westcoast reasonably informed as to the status of the
proceedings related to obtaining the Appropriate Regulatory
Approvals, including, but not limited to, providing Westcoast
with copies of all related applications and notifications, in
draft form, in order for Westcoast to provide its reasonable
comments;
(iii) carry out the terms of the Interim Order and Final Order
applicable to it and use reasonable best efforts to comply
promptly with all requirements which
AMENDED AND RESTATED COMBINATION AGREEMENT
48
applicable Laws may impose on the Duke Energy Parties with
respect to the transactions contemplated hereby and by the
Arrangement;
(iv) in respect of holders of Westcoast Common Shares who are not
exempt from tax under Part 1 of the Income Tax Act (Canada)
and who receive Exchangeable Shares under the Arrangement, to
cause Exchangeco to enter into elections with such holders
under Section 85 of the Income Tax Act (Canada) and any
equivalents thereof under provincial Laws;
(v) use reasonable best efforts to defend all lawsuits or other
legal, regulatory or other proceedings to which it is a party
challenging or affecting this Agreement or the consummation of
the transactions contemplated hereby;
(vi) use reasonable best efforts to have lifted or rescinded any
injunction or restraining order or other order relating to the
Duke Energy Parties which may adversely affect the ability of
the parties to consummate the transactions contemplated
hereby;
(vii) effect all necessary registrations, filings and submissions of
information required by Governmental Entities from the Duke
Energy Parties or their subsidiaries in connection with the
transactions contemplated hereby;
(viii) cause governing documents of Exchangeco to be amended, among
other things, to create the Exchangeable Shares;
(ix) reserve or have available a sufficient number of Duke Energy
Common Shares for issuance upon the completion of the
Arrangement and the exchange from time to time of Exchangeable
Shares and the exercise from time to time of Replacement
Options and use reasonable best efforts to cause such Duke
Energy Common Shares to be approved for listing on The New
York Stock Exchange, subject to official notice of issuance,
prior to the Effective Time;
(x) use reasonable best efforts (A) to cause the Exchangeable
Shares to be listed for trading on The Toronto Stock Exchange
by the Effective Date and (B) to ensure that Exchangeco
remains a "public corporation" within the meaning of the
Income Tax Act (Canada) for so long as there are Exchangeable
Shares outstanding (other than those Exchangeable Shares held
by Duke Energy or any of its affiliates); and
(xi) use reasonable best efforts to obtain all waivers, consents
and approvals from other parties to loan agreements, leases or
other contracts required to be obtained by Duke Energy or any
subsidiary of Duke Energy to consummate the transactions
contemplated hereby which the failure to obtain would
materially and adversely affect the ability of the Duke Energy
Parties to consummate the transactions contemplated hereby.
AMENDED AND RESTATED COMBINATION AGREEMENT
49
5.3 Access to Information
(a) Subject to Section 5.3(b) and applicable Laws, upon reasonable
notice to an officer or business unit head of Westcoast, Westcoast
shall (and shall cause each of its subsidiaries to) afford the
officers, employees, counsel, accountants and other authorized
representatives and advisors ("Representatives") of Duke Energy
access, during normal business hours from the date hereof and until
the earlier of the Effective Date or the termination of this
Agreement, to its properties, books, contracts and records as well
as to its management personnel; provided that such access shall be
provided on a basis that minimizes the disruption to the operations
of Westcoast. During such period, Westcoast shall (and shall cause
each of its subsidiaries to) furnish promptly to Duke Energy all
information concerning Westcoast's business, properties and
personnel as Duke Energy may reasonably request. Subject to Section
5.3(b) and applicable Laws, Duke Energy shall afford the
Representatives of Westcoast access during normal business hours
from the date hereof and until the earlier of the Effective Date or
the termination of this Agreement, to such of Duke Energy's
management personnel as Westcoast may request, acting reasonably.
(b) The Duke Energy Parties and Westcoast acknowledge that certain
information received pursuant to Section 5.3(a) will be non-public
or proprietary in nature and as such will be deemed to be
"Confidential Information" for purposes of the Confidentiality
Agreement. The Duke Energy Parties and Westcoast further acknowledge
their obligation to maintain the confidentiality of such
Confidential Information in accordance with the Confidentiality
Agreement.
5.4 Indemnification
(a) Duke Energy agrees that all rights to indemnification for acts or
omissions occurring prior to the Effective Time existing as of the
date hereof in favour of the directors or officers of Westcoast as
provided in its governing documents or in written contracts in
effect on the date hereof, shall survive the Arrangement and shall
continue in full force and effect until the earlier of the
expiration of the applicable statute of limitations with respect to
any claims against directors or officers of Westcoast arising out of
such acts or omissions and the sixth anniversary of the Effective
Date, and Duke Energy hereby assumes, effective upon consummation of
the Arrangement, all such liability with respect to any matters
arising prior to the Effective Time.
(b) Duke Energy shall use reasonable best efforts to cause to be
maintained in effect, for not less than six years from the Effective
Time, policies of directors' and officers' liability insurance that
provide substantially the same coverage and contain substantially
similar terms and conditions for acts and omissions prior to the
Effective Time as is provided under or contained in the policies of
the directors' and officers' liability insurance maintained by
Westcoast as of the date of this Agreement so long as the annual
premium therefor would not be in excess of 200% of the last annual
premium paid prior to the date hereof.
AMENDED AND RESTATED COMBINATION AGREEMENT
50
5.5 Covenants Regarding Non-Solicitation
(a) Westcoast shall immediately cease and cause to be terminated any
existing solicitation, encouragement, activity, discussion or
negotiation with any parties by Westcoast, any of its subsidiaries
or any of its or its subsidiaries' officers, directors, employees,
representatives and agents with respect to an Acquisition Proposal
whether or not initiated by Westcoast and in connection therewith,
Westcoast shall request (and exercise all rights it has to require)
the return of information regarding Westcoast and its subsidiaries
previously provided to such parties and shall request (and exercise
all rights it has to require) the destruction of all materials
including or incorporating any information regarding Westcoast and
its subsidiaries.
(b) Subject to Section 5.6, Westcoast agrees that it shall not, and
shall not authorize or permit any of its subsidiaries or any of its
or its subsidiaries' officers, directors, employees, representatives
or agents, directly or indirectly, to (i) solicit, initiate,
encourage or knowingly facilitate, including by way of furnishing
information or entering into any form of agreement, arrangement or
understanding, any inquiries or the making of any proposals
regarding an Acquisition Proposal, (ii) participate in any
discussions or negotiations regarding any Acquisition Proposal,
(iii) withdraw or modify in a manner adverse to Duke Energy the
approval or recommendation of the Board of Directors of Westcoast of
the transactions contemplated hereby, (iv) approve or recommend any
Acquisition Proposal or (v) enter into any agreement, arrangement or
understanding related to any Acquisition Proposal or requiring
Westcoast to abandon, terminate or fail to consummate the
Arrangement or providing for the payment of any break, termination
or other fees or expenses to any person in the event that Westcoast
or any of its subsidiaries completes the transactions contemplated
hereby or any other transaction with Duke Energy or any of its
affiliates agreed to prior to any termination of this Agreement.
Notwithstanding the preceding sentence and any other provisions of
this Agreement, the Board of Directors of Westcoast may, prior to
the approval of the Arrangement by the Westcoast Securityholders,
consider, participate in any discussions or negotiations with, or
provide information in accordance with the last sentence of this
paragraph to, any person who has delivered a bona fide written
Acquisition Proposal which was not solicited or encouraged after the
date of this Agreement and did not otherwise result from a breach of
this Section 5.5 and that the Board of Directors of Westcoast
determines in good faith, after consultation with its financial
advisors and outside legal counsel, is a Superior Proposal;
provided, however, that prior to taking any such action, (x) the
Board of Directors of Westcoast must receive written advice of
outside counsel that it is necessary for the Board of Directors of
Westcoast to take such action in order to discharge properly its
fiduciary duties and (y) Westcoast must obtain a confidentiality
agreement from the person making such Acquisition Proposal that is
substantively the same as the Confidentiality Agreement, including a
standstill provision at least as stringent as contained in the
Confidentiality Agreement; provided further that Westcoast shall not
commence discussions or negotiations with, or provide information to
any person who has delivered an unsolicited bona fide written
Acquisition Proposal until 48 hours after Westcoast shall have
advised Duke Energy of its determination that such Acquisition
Proposal constitutes a Superior Proposal
AMENDED AND RESTATED COMBINATION AGREEMENT
51
and of its intention to take such actions. Westcoast shall not
consider, negotiate, accept, approve or recommend an Acquisition
Proposal or provide information to any person proposing an
Acquisition Proposal, in each case after the date of the approval of
the Arrangement by the Westcoast Securityholders. If Westcoast
receives a request for material non-public information from a person
who has made an unsolicited bona fide written Acquisition Proposal
and Westcoast is permitted, as contemplated under the second
sentence of this Section 5.5(b), to negotiate the terms of such
Acquisition Proposal, then, and only in such case, the Board of
Directors of Westcoast may, subject to the execution by such person
of the confidentiality agreement as described in (y) above, provide
such person with access to information regarding Westcoast; provided
that Westcoast sends a copy of any such confidentiality agreement to
Duke Energy promptly upon its execution and Duke Energy is provided
with a list of, and copies of, the information provided to such
person and is immediately provided with access to similar
information to which such person was provided.
(c) From and after the date of this Agreement, Westcoast shall promptly
(and in any event within 24 hours) notify Duke Energy, at first
orally and then in writing, of any inquiries, proposals or offers
relating to or constituting an Acquisition Proposal, or any request
for non-public information relating to Westcoast or any of its
subsidiaries. Such notice shall include a description of the terms
and conditions of any proposal, inquiry or offer, the identity of
the person making such proposal, inquiry or offer and provide such
other details of the proposal, inquiry or offer as Duke Energy may
reasonably request. Westcoast shall keep Duke Energy fully informed
on a prompt basis of the status, including any change to the
material terms, of any such inquiry, proposal or offer.
(d) Westcoast shall ensure that its officers, directors and employees
and its subsidiaries and their officers, directors and employees and
any financial advisors or other advisors or representatives retained
by it are aware of the provisions of this Section 5.5, and it shall
be responsible for any breach of this Section 5.5 by such officers,
directors, employees, financial advisors or other advisors or
representatives.
5.6 Right to Accept a Superior Proposal
(a) If Westcoast has complied with Section 5.5 with respect thereto,
Westcoast may accept, approve, recommend or enter into any
agreement, understanding or arrangement in respect of a Superior
Proposal prior to the approval of the Arrangement by the Westcoast
Securityholders if, and only if (with the exception of a
confidentiality agreement the execution of which shall not be
subject to the conditions of this Section 5.6), (i) Westcoast has
provided Duke Energy with a copy of the Superior Proposal document,
(ii) five Business Days shall have elapsed from the later of (x) the
date Duke Energy received written notice (a "Section 5.6 Notice")
advising Duke Energy that Westcoast's Board of Directors has
resolved, subject only to compliance with this Section 5.6, to
accept, approve, recommend or enter into an agreement in respect of
such Superior Proposal, specifying the terms and conditions of such
Superior Proposal and identifying the person making such Superior
Proposal,
AMENDED AND RESTATED COMBINATION AGREEMENT
52
and (y) the date Duke Energy received a copy of such Superior
Proposal, (iii) Westcoast's Board of Directors has determined in
good faith (based upon the written opinion of its outside legal
counsel) that it is necessary for the Board of Directors of
Westcoast to take such action in order to discharge properly its
fiduciary duties, (iv) such Superior Proposal does not provide for
the payment of any break, termination or other fees or expenses to
the other party in the event that Westcoast or any of its
subsidiaries completes the transactions contemplated by this
Agreement or any other transaction with Duke Energy or any of its
affiliates agreed to prior to any termination of this Agreement, and
(v) Westcoast has previously or concurrently will have paid to Duke
Energy the Termination Fee, if any, payable under Section 7.3. In
the event that Westcoast provides Duke Energy with a Section 5.6
Notice on a date that is less than five Business Days prior to the
Westcoast Meeting, Westcoast shall adjourn the Westcoast Meeting
(without notice on the Arrangement or any related matters) to a date
that is not less than five Business Days and not more than 10
Business Days after the date of the Section 5.6 Notice.
(b) During the five Business Day period referred to in Section
5.6(a)(ii), Westcoast agrees that Duke Energy shall have the right,
but not the obligation, to offer to amend the terms of this
Agreement. The Board of Directors of Westcoast will review any
proposal by Duke Energy to amend the terms of this Agreement in good
faith in order to determine, in its discretion in the exercise of
its fiduciary duties, whether Duke Energy's amended proposal upon
acceptance by Westcoast would result in such Superior Proposal
ceasing to be a Superior Proposal. If the Board of Directors of
Westcoast so determines, it will enter into an amended agreement
with Duke Energy reflecting Duke Energy's amended proposal. If the
Board of Directors of Westcoast continues to believe, in good faith
and after consultation with financial advisors and outside counsel,
that such Superior Proposal remains a Superior Proposal and
therefore rejects Duke Energy's amended proposal, Westcoast may,
subject to the terms of this Agreement, accept, approve, recommend
or enter into an agreement, understanding or arrangement in respect
of such Superior Proposal.
(c) Westcoast also acknowledges and agrees that each successive material
modification of any Acquisition Proposal shall constitute a new
Acquisition Proposal for purposes of Section 5.5 and the requirement
under clause (ii) of Section 5.6(a) to initiate an additional five
Business Day notice period.
5.7 Employee Benefits and Related Matters
Duke Energy agrees, and after the Effective Time will cause Westcoast or
any of its subsidiaries, as the case may be, to:
(a) from the Effective Time through December 31, 2002, provide Affected
Employees, taken as a whole, employee benefits pursuant to employee
benefit plans, programs, policies or arrangements maintained by Duke
Energy or any subsidiary of Duke Energy providing coverage and
benefits which, in the aggregate, are no less favourable than (i)
those provided to Affected Employees immediately prior to the
Effective Time (other than benefits provided pursuant to Westcoast
Employee Share
AMENDED AND RESTATED COMBINATION AGREEMENT
53
Purchase Plans) or, (ii) if elected by Duke Energy with respect to
all or certain Affected Employees, those provided from time to time
after the Effective Time to employees of Duke Energy or its
subsidiaries who are similarly situated, in terms of their
positions, tenure and geographic locations, to such Affected
Employees; "Affected Employees" means individuals who are actively
employed by Westcoast or any of its subsidiaries as of the Effective
Time, are not subject to a collective bargaining agreement and who
remain employed with Duke Energy or any subsidiary of Duke Energy;
(b) give each Affected Employee full credit for purposes of determining
severance pay and eligibility to participate, vesting and benefit
accrual (except for purposes of benefit accrual under any defined
benefit pension plans, or to the extent such treatment would result
in duplicative accrual on or after the Effective Date of benefits
for the same period maintained by Duke Energy or any subsidiary of
Duke Energy), for such Affected Employee's service with Westcoast or
any subsidiary of Westcoast to the same extent and for the same
purpose recognized by Westcoast immediately prior to the Effective
Time and previously disclosed to Duke Energy;
(c) waive all limitations as to preexisting conditions exclusions with
respect to participation and coverage requirements applicable to the
Affected Employees under any medical or dental benefit plans
maintained by Duke Energy in which such employees may be eligible to
participate, other than preexisting conditions exclusions imposed
with respect to any Affected Employee immediately prior to such
participation under any medical or dental plan maintained by
Westcoast for the Affected Employees and other than preexisting
conditions exclusions imposed by third-party health benefit
providers; and
(d) provide that any co-payments and deductibles paid by Affected
Employees under a welfare plan maintained by Westcoast during the
plan year in which the coverage under a similar type of welfare plan
maintained by Duke Energy begins shall be taken into account in
satisfying any applicable deductible or out-of-pocket requirements
under such Duke Energy welfare plan to the same extent such expenses
are taken into account for the benefit of similarly situated
employees of Duke Energy and its subsidiaries.
Nothing herein shall be construed as (i) requiring Duke Energy to continue
the employment of any Affected Employee following the Effective Time, (ii)
limiting Duke Energy's ability to amend, modify or terminate any individual
employee benefit plan or arrangement of Westcoast, Duke Energy or any of their
respective subsidiaries, or (iii) requiring Duke Energy to maintain any
particular level of employee benefits for any individual employee following the
Effective Time subject to compliance with Section 5.7(a).
5.8 Prohibition on Voluntary Liquidation
Duke Energy shall not, and shall cause its subsidiaries not to, take any
action relating to a voluntary liquidation, dissolution or winding-up of
Exchangeco, as the case may be, prior to the Redemption Date (as defined in the
Plan of Arrangement).
AMENDED AND RESTATED COMBINATION AGREEMENT
54
5.9 Conversion of Westcoast Preferred Shares
(a) On or prior to September 30, 2001, Westcoast shall deliver a
conversion notice (specifying a 30-day notice period) to the holders
of the outstanding Westcoast First Preferred Shares, Series 2
regarding the conversion of such shares into Westcoast Common Shares
in accordance with the terms of such First Preferred Shares, Series
2. Westcoast shall complete such conversion by such time as is
necessary to enable such holders to be holders entitled to receive
notice of the Westcoast Meeting. Notwithstanding any other provision
of this Agreement, the acts of Westcoast to convert the Westcoast
First Preferred Shares, Series 2 in accordance with their terms and
this Section 5.9 shall be deemed not to breach or violate or fail to
satisfy any representations, warranties, covenants or obligations of
Westcoast under this Agreement.
(b) Westcoast shall within two Business Days provide written notice to a
designated officer of Duke Energy of any conversion notice given to
Westcoast by a holder of First Preferred Shares, Series 5 (a "Series
5 Conversion Notice") or any conversion notice given to Westcoast by
a holder of UEI Holdings Inc. First Series Preferred Shares (a "UEI
Conversion Notice"). Westcoast shall redeem, unless Duke Energy
otherwise consents, all such First Preferred Shares, Series 5 in
respect of which a Series 5 Conversion Notice is given, in
accordance with the terms of such First Preferred Shares, Series 5
and shall redeem, unless Duke Energy otherwise consents, all such
UEI Holdings Inc. First Series Preferred Shares in respect of which
a UEI Conversion Notice is given, in accordance with the terms of
such UEI Holdings Inc. First Series Preferred Shares, as the case
may be. Notwithstanding any other provision of this Agreement, the
acts of Westcoast to redeem the First Preferred Shares, Series 5 and
the UEI Holdings Inc. First Series Preferred Shares in accordance
with their respective terms and this Section 5.9 shall be deemed not
to breach or violate or fail to satisfy any representations,
warranties, covenants or obligations of Westcoast under this
Agreement.
5.10 Closing Matters
Each of the Duke Energy Parties and Westcoast shall deliver, at the
Effective Time, such customary certificates, resolutions and other closing
documents as may be required by the other parties hereto, acting reasonably.
ARTICLE 6
CONDITIONS
6.1 Mutual Conditions
The respective obligations of the parties hereto to consummate the
Arrangement shall be subject to the satisfaction of the following conditions on
or before the Effective Date:
AMENDED AND RESTATED COMBINATION AGREEMENT
55
(a) the Arrangement shall have been approved by the Westcoast
Securityholders at the Westcoast Meeting in the manner required by
applicable Laws (including any conditions imposed by the Interim
Order);
(b) the Interim Order and the Final Order shall each have been obtained
in form and on terms satisfactory to each of Duke Energy and
Westcoast, acting reasonably, and shall not have been set aside or
modified in a manner unacceptable to such parties, acting
reasonably, on appeal or otherwise;
(c) the Form S-3 shall have become effective under the 1933 Act and no
stop order suspending the effectiveness of the Form S-3 shall be in
effect and no proceedings for such purpose shall be pending before
the SEC, and Duke Energy shall have received all United States state
securities or "blue sky" authorizations necessary to issue the Duke
Energy Common Shares to be issued pursuant to the Arrangement or
upon exchange for the Exchangeable Shares;
(d) no provision of any applicable Laws and no judgment, injunction,
order or decree shall be in effect which restrains or enjoins or
otherwise prohibits the consummation of the Arrangement or the
transactions contemplated by this Agreement;
(e) the Exchangeable Shares issuable pursuant to the Arrangement shall
have been conditionally approved for listing on The Toronto Stock
Exchange, subject to the filing of required documentation, and the
Duke Energy Common Shares issuable at the Effective Time pursuant to
the Arrangement, upon exchange of the Exchangeable Shares from time
to time and upon exercise of the Replacement Options from time to
time shall have been approved for listing on The New York Stock
Exchange, subject to official notice of issuance; and
(f) the Appropriate Regulatory Approvals shall have been obtained and be
in full force and effect and shall not be subject to any stop-order
or proceeding seeking a stop-order or revocation; and
(g) all other consents, waivers, permits, orders and approvals of any
Governmental Entity, and the expiry of any waiting periods, in
connection with, or required to permit, the consummation of the
Arrangement, the failure to obtain which or the non-expiry of which
would constitute a criminal offense, or would, individually or in
the aggregate, have a Material Adverse Effect on Duke Energy or
Westcoast after the Effective Time, shall have been obtained or
received.
6.2 Additional Conditions to the Obligations of the Duke Energy Parties
The obligations of the Duke Energy Parties to consummate the Arrangement
shall be subject to the satisfaction of the following conditions (each of which
is for the exclusive benefit of the Duke Energy Parties and may be waived by
Duke Energy on behalf of the Duke Energy Parties) on or before the Effective
Date:
AMENDED AND RESTATED COMBINATION AGREEMENT
56
(a) Westcoast shall have performed or complied with, in all material
respects, each of its obligations, covenants and agreements
hereunder to be performed and complied with by it on or before the
Effective Time;
(b) each of the representations and warranties of Westcoast under this
Agreement (which for purposes of this clause (b) shall be read as
though none of them contained any Material Adverse Effect or other
materiality qualification), except for the representations and
warranties set forth in Sections 3.1, 3.2 and 3.3, shall be true and
correct in all respects on the date of this Agreement and as of the
Effective Date as if made on and as of such date (except for such
representations and warranties made as of a specified date, which
shall be true and correct as of such specified date) except where
the failure of such representations and warranties in the aggregate
to be true and correct in all respects would not be reasonably
expected to have a Material Adverse Effect on Westcoast. Each of the
representations and warranties of Westcoast set forth in Sections
3.1, 3.2 and 3.3 of this Agreement shall be true and correct in all
material respects on the date of this Agreement and on the Effective
Date as if made on and as of such date (except for such
representations and warranties made as of a specified date, which
shall be true and correct in all material respects as of such
specified date);
(c) Since the date of this Agreement, there shall have been no Material
Adverse Effect with respect to Westcoast or any event, occurrence or
development which would be reasonably expected to have a Material
Adverse Effect on Westcoast or which would materially and adversely
affect the ability of Westcoast to consummate the transactions
contemplated hereby;
(d) Duke Energy shall have received a certificate of Westcoast addressed
to the Duke Energy Parties and dated the Effective Date, signed on
behalf of Westcoast by two senior executive officers of Westcoast,
confirming that the conditions in Sections 6.2(a), (b) and (c) have
been satisfied;
(e) there shall not be any action taken, any Law enacted, entered,
enforced or deemed applicable by any Governmental Entity or pending
or threatened any suit, action or proceeding by any Governmental
Entity in connection with the grant of any Appropriate Regulatory
Approval or otherwise, (i) seeking to prohibit or restrict the
acquisition by Duke Energy or any of its subsidiaries of any
Westcoast Common Shares, (ii) challenging or seeking to restrain or
prohibit the consummation of the Plan of Arrangement or seeking to
obtain from Westcoast or Duke Energy any damages that are material
in relation to Westcoast and its subsidiaries taken as a whole,
(iii) seeking to prohibit or materially limit the ownership or
operation by Duke Energy or any of its subsidiaries of any material
portion of the business or assets of Duke Energy, Westcoast or any
of their respective subsidiaries or to compel Duke Energy or any of
its subsidiaries to dispose of or hold separate any material portion
of the business or assets of Duke Energy or Westcoast or any of
their respective subsidiaries, as a result of the Plan of
Arrangement, (iv) seeking to impose limitations on the ability of
Duke Energy or any of its subsidiaries to acquire or hold, or
exercise full rights of ownership of, any Westcoast Common Shares,
including the right to
AMENDED AND RESTATED COMBINATION AGREEMENT
57
vote the Westcoast Common Shares purchased by it on all matters
properly presented to the shareholders of Westcoast, (v) seeking to
prohibit Duke Energy or any of its subsidiaries from effectively
controlling in any material respect the business or operations of
Westcoast and its subsidiaries or (vi) imposing any condition or
restriction that in the judgment of Duke Energy, acting reasonably,
would be materially burdensome to the future operations or business
of any business unit of Duke Energy or Westcoast after the Effective
Time;
(f) the Board of Directors of Westcoast shall have adopted all necessary
resolutions, and all other necessary corporate action shall have
been taken by Westcoast and its subsidiaries to permit the
consummation of the Arrangement;
(g) the holders of Westcoast Common Shares shall have approved the
Westcoast Rights Plan Waiver Resolution;
(h) Duke Energy shall have received a customary "Comfort Letter" from
Ernst & Young LLC, dated the Effective Date, in form and substance
reasonably satisfactory to Duke Energy, in connection with the
procedures undertaken by them with respect to the financial
statements of Westcoast and its subsidiaries to be contained in or
incorporated by reference into any filing by Duke Energy with the
SEC;
(i) holders of not more than 10% of the Westcoast Common Shares shall
have exercised their Dissent Rights (and not withdrawn such
exercise) in respect of the Arrangement;
(j) all outstanding Westcoast First Preferred Shares, Series 2 shall
have been converted into Westcoast Common Shares in accordance with
the terms of such First Preferred Shares, Series 2;
(k) the consents and approvals set forth in Section 3.4 of the Westcoast
Disclosure Letter shall have been obtained or received; and
(l) to the extent required, approval of the New York Public Services
Commission under the New York Public Services Law.
6.3 Additional Conditions to the Obligations of Westcoast
The obligations of Westcoast to consummate the Arrangement shall be
subject to satisfaction of the following conditions (each of which is for the
exclusive benefit of Westcoast and may be waived by Westcoast) on or before the
Effective Date:
(a) the Duke Energy Parties shall have performed or complied with, in
all material respects, each of their obligations, covenants and
agreements hereunder to be performed and complied with by them on or
before the Effective Time;
(b) each of the representations and warranties of the Duke Energy
Parties under this Agreement (which for purposes of this clause (b)
shall be read as though none of them contained any Material Adverse
Effect or other materiality qualification), except
AMENDED AND RESTATED COMBINATION AGREEMENT
58
for the representations and warranties set forth in Sections 4.1,
4.2 and 4.3, shall be true and correct in all respects on the date
of this Agreement and as of the Effective Date as if made on and as
of such date (except for such representations and warranties made as
of a specified date, which shall be true and correct as of such
specified date) except where the failure of such representations and
warranties in the aggregate to be true and correct in all respects
would not be reasonably expected to have a Material Adverse Effect
on Duke Energy. Each of the representations and warranties of the
Duke Energy Parties set forth in Sections 4.1, 4.2 and 4.3 of this
Agreement shall be true and correct in all material respects on the
date of this Agreement and on the Effective Date as if made on and
as of such date (except for such representations and warranties made
as of a specified date, which shall be true and correct in all
material respects as of such specified date);
(c) Since the date of this Agreement, there shall have been no Material
Adverse Effect with respect to Duke Energy or any event, occurrence
or development which would be reasonably expected to have a Material
Adverse Effect on Duke Energy or which would materially and
adversely affect the ability of Duke Energy to consummate the
transactions contemplated hereby except those which were disclosed
in the Circular as amended or supplemented;
(d) Westcoast shall have received a certificate of Duke Energy addressed
to Westcoast and dated the Effective Date, signed on behalf of Duke
Energy by two senior executive officers of Duke Energy, confirming
that the conditions in Sections 6.3(a), (b) and (c) have been
satisfied; and
(e) the Board of Directors of Duke Energy shall have adopted all
necessary resolutions, and all other necessary corporate action
shall have been taken by Duke Energy and its subsidiaries, to permit
the consummation of the Arrangement.
6.4 Satisfaction of Conditions
The conditions precedent set out in Sections 6.1, 6.2 and 6.3 shall be
conclusively deemed to have been satisfied, waived or released when, with the
agreement of Duke Energy and Westcoast, a certificate of arrangement in respect
of the Arrangement is issued by the Director.
ARTICLE 7
AMENDMENT AND TERMINATION
7.1 Amendment
This Agreement may not be amended except by mutual written agreement of
the parties hereto; provided that after approval by the Westcoast
Securityholders, no amendment may be made that by Law requires further approval
or authorization by the Westcoast Securityholders without such further approval
or authorization.
AMENDED AND RESTATED COMBINATION AGREEMENT
59
7.2 Termination
This Agreement may be terminated and the Arrangement abandoned at any time
prior to the Effective Time (notwithstanding any approval of the Arrangement by
the Westcoast Securityholders):
(a) by the mutual written consent of Duke Energy and Westcoast (without
further action on the part of the Westcoast Securityholders if
terminated after the Westcoast Meeting);
(b) by either Westcoast or Duke Energy, if there shall be any Law that
makes consummation of the Arrangement illegal or otherwise
prohibited, or if any judgment, injunction, order or decree of a
competent Governmental Entity (other than any order from the Court
refusing to grant the Final Order) enjoining Duke Energy or
Westcoast from consummating the Arrangement shall be entered and
such judgment, injunction, order or decree shall have become final
and non-appealable;
(c) by either Westcoast or Duke Energy, if the Effective Date does not
occur on or prior to September 20, 2002; provided, however, that the
right to terminate this Agreement under this Section 7.2(c) shall
not be available to any party whose failure or whose affiliate's
failure to perform any material covenant, agreement or obligation
hereunder has been the cause of, or resulted in, the failure of the
Effective Date to occur on or before such date;
(d) by Duke Energy if, (i) the Board of Directors of Westcoast fails to
recommend or withdraws, modifies or changes its approval or
recommendation of this Agreement, the Arrangement, the Arrangement
Resolution or the Westcoast Rights Plan Waiver Resolution in a
manner adverse to Duke Energy or recommends or approves a Superior
Proposal, (ii) the Board of Directors of Westcoast fails to affirm
its approval or recommendation of this Agreement, the Arrangement,
the Arrangement Resolution or the Westcoast Rights Plan Waiver
Resolution within 10 Business Days of any written request to do so
from Duke Energy, (iii) the Arrangement Resolution and the Westcoast
Rights Plan Waiver Resolution are not submitted for approval at the
Westcoast Meeting, or the Westcoast Meeting is not held prior to
January 31, 2002 or such later date to which the Westcoast Meeting
shall have been adjourned or postponed as may be permitted pursuant
to Section 5.6(a); provided that in the event a Force Majeure has
occurred which makes giving notice of the Westcoast Meeting
impractical, or if such notice has already been given, makes holding
the Westcoast Meeting impractical on or prior to such date, such
date shall be extended until the earlier of the thirty-fifth day
after the cessation of such Force Majeure or March 31, 2002, or (iv)
Westcoast shall have breached in any material respect its
obligations under Section 5.5 or 5.6;
(e) (i) by either Westcoast or Duke Energy, if at the Westcoast Meeting,
the requisite vote of Westcoast Securityholders to approve the
Arrangement shall not be obtained or (ii) by either Westcoast or
Duke Energy, if approval of the Court of the Final Order shall not
be obtained, or (iii) by Duke Energy, if at the Westcoast Meeting,
the
AMENDED AND RESTATED COMBINATION AGREEMENT
60
requisite vote of holders of Westcoast Common Shares to approve the
Westcoast Rights Plan Waiver Resolution shall not be obtained;
(f) by Duke Energy, if Westcoast has breached any of its
representations, warranties, agreements or obligations herein which
breach would result in the failure to satisfy one or more conditions
set forth in Section 6.2(a) or Section 6.2(b) and such breach is not
curable or if curable, is not cured within 30 days after notice
thereof has been received by the party alleged to be in breach; or
(g) by Westcoast, if any of the Duke Energy Parties has breached any of
its representations, warranties, agreements or obligations herein
which breach would result in the failure to satisfy one or more
conditions set forth in Section 6.3(a) or Section 6.3(b) and such
breach is not curable or if curable, is not cured within 30 days
after notice thereof has been received by the party alleged to be in
breach.
7.3 Effect of Termination
(a) If this Agreement is terminated in accordance with the provisions of
Section 7.2, no party shall have any further liability to perform
its obligations hereunder except for the provisions of this Section
7.3 and Section 5.3(b) and Section 8.9; provided that neither the
termination of this Agreement nor anything contained in this Section
7.3 shall relieve any party from any liability for any breach by it
of this Agreement, including from any inaccuracy in its
representations and warranties and any non-performance by it of its
covenants and agreements made herein. If it shall be judicially
determined that termination of this Agreement was caused by an
intentional breach of this Agreement, then, in addition to any other
remedies at law or equity for breach of this Agreement, the party so
found to have intentionally breached this Agreement shall indemnify
and hold harmless the other parties for their out-of-pocket costs,
including fees and expenses of their counsel, accountants, financial
advisors and other experts and advisors, incident to the
negotiation, preparation and execution of this Agreement and related
documentation.
(b) If this Agreement is terminated:
(i) by Duke Energy pursuant to Section 7.2(d); or
(ii) by either Party pursuant to Section 7.2(e)(i) or by Duke
Energy pursuant to Section 7.2(e)(iii) and at any time after
the date of this Agreement and prior to such termination a
bona fide Acquisition Proposal with respect to Westcoast or
its subsidiaries shall have been made, or any proposal or
expression of interest by a third party regarding an
Acquisition Proposal shall have been publicly disclosed;
then Westcoast will, in the case of a termination by Duke
Energy, within three Business Days following any such
termination or, in the case of a termination by Westcoast,
prior to such termination, pay to Duke Energy in cash by wire
transfer in immediately available funds to an account
designated by Duke Energy the Termination Fee.
AMENDED AND RESTATED COMBINATION AGREEMENT
61
(c) If this Agreement is terminated by either party pursuant to Section
7.2(e)(i) or by Duke Energy pursuant to Section 7.2(e)(iii) and
after the date of this Agreement and prior to such termination no
bona fide Acquisition Proposal with respect to Westcoast or its
subsidiaries shall have been made, and at such time no proposal or
expression of interest by a third party regarding an Acquisition
Proposal shall have been publicly disclosed and within 12 months
after the date of such termination, Westcoast enters into any
agreement for an Acquisition Proposal or consummates a transaction
that constitutes an Acquisition Proposal, Westcoast will, prior to
the earlier of consummation of a transaction that constitutes an
Acquisition Proposal, or execution of a definitive agreement with
respect thereto, pay to Duke Energy in cash by wire transfer in
immediately available funds to an account designated by Duke Energy,
the Termination Fee.
(d) If this Agreement is terminated by Duke Energy pursuant to Section
7.2(f) and after the date of this Agreement and prior to such
termination no bona fide Acquisition Proposal with respect to
Westcoast or its subsidiaries shall have been made, and at such time
no proposal or expression of interest by a third party regarding an
Acquisition Proposal shall have been publicly disclosed, or if this
Agreement is terminated by Westcoast pursuant to 7.2(g), then
Westcoast or Duke Energy, as the case may be, will, within three
Business Days following notice of such termination, pay to the
terminating party in cash by wire transfer in immediately available
funds to an account designated by the terminating party an amount
equal to the Expense Fee as payment in full of the terminating
party's costs and expenses in connection with the transactions
contemplated by this Agreement.
(e) If this Agreement is terminated by Duke Energy pursuant to Section
7.2(f) and at any time after the date of this Agreement and prior to
such termination a bona fide Acquisition Proposal with respect to
Westcoast or its subsidiaries shall have been made, or any proposal
or expression of interest by a third party regarding an Acquisition
Proposal shall have been publicly disclosed, then (i) Westcoast
will, within three Business Days following any such termination, pay
to Duke Energy in cash by wire transfer in immediately available
funds to an account designated by Duke Energy an amount equal to the
Expense Fee as payment in full of the Duke Energy Parties' costs and
expenses in connection with the transactions contemplated by this
Agreement and (ii) if within 12 months after the date of such
termination, Westcoast enters into any agreement for an Acquisition
Proposal or consummates a transaction that constitutes an
Acquisition Proposal, Westcoast will, prior to the earlier of
consummation of a transaction that constitutes an Acquisition
Proposal, or execution of a definitive agreement with respect
thereto, pay to Duke Energy in cash by wire transfer in immediately
available funds to an account designated by Duke Energy, the
Termination Fee minus the amount of any payment previously made
pursuant to clause (i) of this subsection (e).
(f) If this Agreement is terminated by either party pursuant to Section
7.2(c) or pursuant to Section 7.2(e)(ii) and within 12 months after
the date of such termination, Westcoast enters into any agreement
for an Acquisition Proposal or consummates a transaction that
constitutes an Acquisition Proposal, Westcoast will, prior to the
AMENDED AND RESTATED COMBINATION AGREEMENT
62
earlier of consummation of a transaction that constitutes an
Acquisition Proposal, or execution of a definitive agreement with
respect thereto, pay to Duke Energy in cash by wire transfer in
immediately available funds to an account designated by Duke Energy,
the Termination Fee minus any payment previously made pursuant to
Section 7.3(g).
(g) If this Agreement is terminated by either party pursuant to Section
7.2(c) and at the date of such termination any required approval of
any provincial regulatory body shall not have been obtained then
Westcoast will, in the case of a termination by Duke Energy, within
three Business Days following such termination or, in the case of a
termination by Westcoast, prior to such termination, pay to Duke
Energy in cash by wire transfer in immediately available funds to an
account designated by Duke Energy an amount equal to the Expense Fee
as payment in full of the Duke Energy Parties' costs and expenses in
connection with the transactions contemplated by this Agreement. If
this Agreement is terminated by either party pursuant to Section
7.2(c) and at the date of such termination any required approval of
Duke Energy's performance of its obligations under this Agreement by
the North Carolina Utilities Commission or The Public Service
Commission of South Carolina shall not have been obtained, then Duke
Energy will, in the event of a termination by Westcoast, within
three Business Days following such termination or in the case of a
termination by Duke Energy, prior to such termination, pay to
Westcoast in cash by wire transfer in immediately available funds to
an account designated by Duke Energy an amount equal to the Expense
Fee as payment in full of Westcoast's costs and expenses in
connection with the transactions contemplated by this Agreement.
(h) Solely for purposes of this Section 7.3, (x) each reference to 20%
in the definition of Acquisition Proposal shall be deemed to be 25%
and (y) for purposes of determining under Section 7.3(b)(ii) whether
the condition that an Acquisition Proposal shall have been made or a
proposal or expression of interest by a third party regarding an
Acquisition Proposal shall have been made or publicly disclosed, the
condition shall not be deemed to have been met to the extent (i) the
Acquisition Proposal is expressly conditioned upon completion of the
transactions contemplated hereby or (ii) the proposal or expression
of interest regarding an Acquisition Proposal that is only publicly
disclosed is not bona fide made.
7.4 Effect of Termination Fee Payment
For greater certainty, the parties hereto agree that if Westcoast pays the
Termination Fee to Duke Energy pursuant to the provisions of Section 7.3, Duke
Energy shall have no other remedy for any breach of this Agreement by Westcoast,
unless Westcoast makes a claim against Duke Energy for breach of a provision of
this Agreement, in which circumstances the liability of Westcoast to Duke Energy
for damages for claims in respect of breaches of this Agreement shall be subject
to a maximum limit equal to the liability of Duke Energy to Westcoast for
damages for claims in respect of breaches of this Agreement plus the Termination
Fee.
AMENDED AND RESTATED COMBINATION AGREEMENT
63
ARTICLE 8
GENERAL
8.1 Investigation
Any investigation by a party hereto and its advisors shall not mitigate,
diminish or affect the representations and warranties of any other party to this
Agreement.
8.2 Notices
All notices and other communications hereunder shall be in writing and
shall be deemed given when delivered personally, telecopied (which is confirmed)
or dispatched (postage prepaid) to a nationally recognized overnight courier
service with overnight delivery instructions, in each case addressed to the
particular party at:
(a) If to Westcoast, at:
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: Senior Vice President, Law and Corporate Secretary
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Torys
Suite 3000, Maritime Life ▇▇▇▇▇
▇▇▇▇▇▇▇-▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Attention: ▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
(b) If to a Duke Energy Party, at:
Duke Energy Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
AMENDED AND RESTATED COMBINATION AGREEMENT
64
or at such other address of which any party may, from time to time, advise the
other parties by notice in writing given in accordance with the foregoing.
8.3 Assignment
No party hereto may assign this Agreement or any of its rights, interests
or obligations under this Agreement or the Arrangement (whether by operation of
law or otherwise) except that Exchangeco may assign in its sole discretion, any
or all of its rights, interests and obligations hereunder to any wholly-owned
subsidiary of Duke Energy incorporated in Canada.
8.4 Binding Effect
Subject to Section 8.3, this Agreement and the Arrangement shall be
binding upon, enure to the benefit of and be enforceable by the parties hereto
and their respective successors and assigns.
8.5 Third-Party Beneficiaries
Except for the agreement set forth in Section 5.4, nothing in this
Agreement, express or implied, shall be construed to create any third-party
beneficiaries.
8.6 Waiver and Modification
Westcoast and the Duke Energy Parties may waive or consent to the
modification of, in whole or in part, any inaccuracy of any representation or
warranty made to them hereunder or in any document to be delivered pursuant
hereto and may waive or consent to the modification of any of the covenants or
agreements herein contained for their respective benefit or waive or consent to
the modification of any of the obligations of the other parties hereto. Any
waiver or consent to the modification of any of the provisions of this
Agreement, to be effective, must be in writing executed by the party granting
such waiver or consent.
8.7 No Personal Liability
(a) No director or officer of any Duke Energy Party or any of their
respective subsidiaries shall have any personal liability whatsoever
to Westcoast under this Agreement, or any other document delivered
in connection with the Arrangement on behalf of a Duke Energy Party.
(b) No director or officer of Westcoast or any of its subsidiaries shall
have any personal liability whatsoever to any Duke Energy Party
under this Agreement, or any other document delivered in connection
with the Arrangement on behalf of Westcoast.
8.8 Further Assurances
Each party hereto shall, from time to time, and at all times hereafter, at
the request of the other parties hereto, but without further consideration, do
all such further acts and execute
AMENDED AND RESTATED COMBINATION AGREEMENT
65
and deliver all such further documents and instruments as shall be reasonably
required in order to fully perform and carry out the terms and intent hereof.
8.9 Expenses
Subject to Section 7.3, the parties agree that all expenses of the parties
relating to this Agreement and the transactions contemplated hereby, including
legal fees, accounting fees, financial advisory fees, regulatory filing fees,
all disbursements of advisors, and printing and mailing costs, shall be paid by
the party incurring such expenses.
8.10 Public Announcements
The initial press release concerning the Arrangement shall be a joint
press release and thereafter Duke Energy and Westcoast agree to consult with
each other prior to issuing any news releases or public statements with respect
to this Agreement or the Arrangement, and to use their respective reasonable
best efforts not to issue any news releases or public statements inconsistent
with the results of such consultations. Subject to applicable Laws, each party
shall use its reasonable best efforts to enable the other parties to review and
comment on all such news releases prior to the release thereof. The parties
agree to issue jointly a news release with respect to this Arrangement as soon
as practicable following the execution of this Agreement. Duke Energy and
Westcoast also agree to consult with each other in preparing and making any
filings and communications in connection with any Appropriate Regulatory
Approvals.
8.11 Governing Laws; Consent to Jurisdiction
This Agreement shall be governed by and construed in accordance with the
Laws of the Province of British Columbia and the Laws of Canada applicable
therein and shall be treated in all respects as a British Columbia contract.
Each party hereby irrevocably attorns to the jurisdiction of the courts of the
Province of British Columbia in respect of all matters arising under or in
relation to this Agreement.
8.12 Remedies
The parties acknowledge and agree that an award of money damages would be
inadequate for any breach of this Agreement by any party or its representatives
and any such breach would cause the non-breaching party irreparable harm.
Accordingly, the parties hereto agree that, in the event of any breach or
threatened breach of this Agreement by one of the parties, the parties will also
be entitled, without the requirement of posting a bond or other security, to
equitable relief, including injunctive relief and specific performance, provided
such party is not in material default hereunder. Such remedies will not be the
exclusive remedies for any breach of this Agreement but will be in addition to
all other remedies available at law or equity to each of the parties.
8.13 Time of Essence
Time shall be of the essence in this Agreement.
AMENDED AND RESTATED COMBINATION AGREEMENT
66
8.14 Entire Agreement
This Agreement including the disclosure letters, the agreements and other
documents referred to herein constitute the entire agreement among the parties
hereto and supersede all other prior agreements, understandings, negotiations
and discussions, whether oral or written, among the parties hereto with respect
to the matters hereof and thereof.
8.15 Severability
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
8.16 Counterparts
This Agreement may be executed in counterparts, each of which shall be
deemed to be an original but all of which together shall constitute one and the
same instrument.
AMENDED AND RESTATED COMBINATION AGREEMENT
67
IN WITNESS WHEREOF the parties hereto have executed this Agreement on
November 5, 2001 effective as of the date first written above.
DUKE ENERGY CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. Priory
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. Priory
Title: Chairman, President and
Chief Executive Officer
3058368 NOVA SCOTIA COMPANY
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
3946509 CANADA INC.
By: /s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President
WESTCOAST ENERGY INC.
By: /s/ ▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇.▇. ▇▇▇▇▇▇
Title: Chairman and
Chief Executive Officer
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Executive Vice President
and Chief Financial Officer
AMENDED AND RESTATED COMBINATION AGREEMENT
68
SCHEDULE A
FORM OF AFFILIATE'S LETTER
_______________, 2001
Duke Energy Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Ladies and Gentlemen:
The undersigned acknowledges that as of the date hereof the undersigned
may be deemed to be an "affiliate" of Westcoast Energy Inc., a corporation
existing under the laws of Canada ("Westcoast"), as the term "affiliate" is used
in and for purposes of paragraphs (c) and (d) of Rule 145 ("Rule 145")
promulgated by the Securities and Exchange Commission (the "SEC") under the
Securities Act of 1933, as amended (the "Securities Act"), although nothing
contained herein shall be construed as an admission by the undersigned that the
undersigned is in fact an affiliate of Westcoast. In connection with the
arrangement pursuant to Section 192 of the Canada Business Corporations Act,
R.S.C. 1995, c. C-44 (the "Arrangement") to be entered pursuant to the terms and
subject to the conditions of the Combination Agreement dated as of September 20,
2001 (the "Agreement"), among Westcoast, 3946509 Canada Inc. ("Exchangeco") and
Duke Energy Corporation, a North Carolina corporation ("Duke Energy"), (i) all
of the shares of Westcoast Common Stock issued and outstanding immediately prior
to the time of the effectiveness of the Arrangement (the "Effective Time") will
be exchanged for cash, exchangeable shares of Exchangeco ("Exchangeable
Shares"), shares of common stock, no par value per share, of Duke Energy ("Duke
Energy Common Stock") or some combination of the foregoing, (ii) immediately
after the Effective Time, Duke Energy and its affiliates will own all of the
issued and outstanding shares of common stock of Westcoast ("Westcoast Common
Stock"), (iii) all of the shares of preferred stock of Westcoast ("Westcoast
Preferred Stock") issued and outstanding immediately prior to the Effective Time
will remain outstanding as shares of Westcoast Preferred Stock, and (iv)
unexpired and unexercised options and warrants to purchase Westcoast Common
Stock ("Westcoast Options") will become options to purchase Duke Energy Common
Stock ("Duke Energy Options"). In, or as a result of, the Arrangement, the
undersigned will receive (i) cash, Exchangeable Shares, Duke Energy Common Stock
or some combination of the foregoing, in exchange for all of the shares of
Westcoast Common Stock owned by the undersigned immediately prior to the
Effective Time and/or (ii) Duke Energy Options in exchange for all of the
Westcoast Options owned by the undersigned immediately prior to the Effective
Time (such Exchangeable Shares, shares of Duke Energy Common Stock, Westcoast
Preferred Stock and Westcoast Options collectively referred to herein as
"Securities").
The undersigned agrees with Duke Energy not to sell, transfer or otherwise
dispose of any Securities issued to the undersigned in the Arrangement unless
(i) such sale, transfer or other disposition is made in conformity with the
requirements of Rule 145(d) promulgated under the Securities Act, (ii) an
authorized representative of the SEC takes a position in writing reasonably
acceptable to Duke Energy to the effect that the SEC would take no action, or
that the staff of the
SEC would not recommend that the SEC take action, with respect to such sale,
transfer or other disposition, and a copy of such written position is delivered
to Duke Energy, (iii) the undersigned delivers to Duke Energy a written opinion
of counsel, reasonably acceptable to Duke Energy in form and substance, that
such sale, transfer or other disposition is otherwise exempt from registration
under the Securities Act, or (iv) such sale, transfer or disposition occurs
after the earlier of (A) the first anniversary of the Effective Time, provided
that, at the time of such sale, transfer or other disposition, the undersigned
is not an affiliate of Duke Energy, or (B) the date on which the restrictions
upon sale, transfer or disposition under Rule 145 are eliminated pursuant to
action of the SEC. The undersigned understands that Duke Energy will not be
required to file or maintain the effectiveness of any registration statement
under the Securities Act for the purpose of resale of Securities held by the
undersigned.
The undersigned acknowledges and agrees that appropriate restrictive
legends will be placed on certificates representing Securities received by the
undersigned in the Arrangement or held by a transferee thereof and that "stop
transfer" orders may be entered in the records of the transfer agent for
Securities with respect to such shares. Such orders will be removed and such
legends will be removed by delivery of substitute certificates upon receipt of
an opinion in form and substance reasonably satisfactory to Duke Energy from
counsel reasonably satisfactory to Duke Energy to the effect that such legends
are no longer required to assure compliance with applicable provisions of the
Securities Act.
The undersigned acknowledges that the undersigned has carefully read this
letter and understands the requirements hereof and the limitations imposed upon
the distribution, sale, transfer or other disposition of Securities and the
receipt by Duke Energy of this letter is an inducement to Duke Energy to
consummate the Arrangement.
Notwithstanding any other provision contained herein, this letter and all
obligations of the undersigned hereunder shall terminate upon the termination of
the Agreement in accordance with its terms.
Very truly yours,
------------------------------
------------------------------
------------------------------
Agreed and accepted this ___ day of ________, 2001
DUKE ENERGY CORPORATION
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
SCHEDULE B
APPROPRIATE REGULATORY APPROVALS
Canada
o receipt of an advance ruling certificate ("ARC") pursuant to Section
102 of the Competition Act (Canada) with respect to the transactions
contemplated by this Agreement or the expiration of the waiting period
under Part IX of the Competition Act (Canada) and receipt of a letter
from the Commissioner of Competition stating that he does not, at that
time, intend to make an application under Section 92 of the
Competition Act (Canada) with respect to the transactions contemplated
by this Agreement
o determination by the Minister responsible for Investment Canada under
the Investment Canada Act that the Arrangement is of "net benefit to
Canada" for purposes of such Act on terms and conditions satisfactory
to Duke Energy
o approval of acquisition by British Columbia Utilities Commission
o exemption orders from the provincial or territorial securities
regulators from the registration and prospectus requirements with
respect to the Exchangeable Share structure
o approval of The Toronto Stock Exchange regarding the conditional
listing of the Exchangeable Shares
United States
o expiration or earlier termination of the waiting period under the
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976
o approval of Federal Energy Regulatory Commission
o SEC order exempting Westcoast's public utility subsidiaries under
Section 3(b) of the 1935 Act
o approval of the North Carolina Utilities Commission and The Public
Service Commission of South Carolina of Duke Energy's performance of
its obligations under this Agreement to the extent required by Law,
including the issuance of its stock
o effectiveness of the registration statement on Form S-3 regarding the
Duke Energy Common Shares
o approval of The New York Stock Exchange regarding the listing of the
Duke Energy Common Shares subject to official notice of issuance
SCHEDULE C
FORM OF ARRANGEMENT RESOLUTION
BE IT RESOLVED THAT:
1. The arrangement (the "Arrangement") under Section 192 of the Canada
Business Corporations Act (the "CBCA") involving Westcoast Energy Inc.
("Westcoast"), as more particularly described and set forth in the
management proxy circular (the "Circular") of Westcoast accompanying the
notice of this meeting (as the Arrangement may be or may have been
modified or amended) is hereby authorized, approved and adopted.
2. The Plan of Arrangement (the "Plan of Arrangement") involving Westcoast,
the full text of which is set out as Appendix F to the Circular (as the
Plan of Arrangement may be or may have been modified or amended) is hereby
authorized, approved and adopted.
3. Notwithstanding that this resolution has been passed (and the Arrangement
adopted) by the shareholders and optionholders of Westcoast or that the
Arrangement has been approved by the Supreme Court of British Columbia,
the directors of Westcoast are hereby authorized and empowered (i) to
amend the Amended and Restated Combination Agreement dated as of September
20, 2001 among Duke Energy Corporation, 3058368 Nova Scotia Company,
3946509 Canada Inc. and Westcoast (the "Combination Agreement") or the
Plan of Arrangement to the extent permitted thereby, and (ii) not to
proceed with the Arrangement without further approval of the shareholders
or optionholders of Westcoast, but only if the Combination Agreement is
terminated in accordance with Article 7 thereof.
4. Any officer or director of Westcoast is hereby authorized and directed for
and on behalf of Westcoast to execute, under the seal of Westcoast or
otherwise, and to deliver articles of arrangement and such other documents
as are necessary or desirable to the Director under the CBCA in accordance
with the Combination Agreement for filing.
5. Any officer or director of Westcoast is hereby authorized and directed for
and on behalf of Westcoast to execute or cause to be executed, under the
seal of Westcoast or otherwise, and to deliver or cause to be delivered,
all such documents, agreements and instruments and to perform or cause to
be performed all such other acts and things as in such person's opinion
may be necessary or desirable to give full effect to the foregoing
resolution and the matters authorized hereby, such determination to be
conclusively evidenced by the execution and delivery of any such
documents, agreements or instruments and the taking of any such actions.
SCHEDULE D
FORM OF WESTCOAST RIGHTS PLAN WAIVER RESOLUTION
BE IT RESOLVED THAT:
1. The supplement to the Shareholder Protection Rights Plan Agreement (the
"Rights Plan") dated as of April 26, 2000 between Westcoast Energy Inc.
("Westcoast") and Computershare Trust Company of Canada, as assignee of
Montreal Trust Company of Canada, that provides that notwithstanding
anything in the Rights Plan to the contrary, the acquisition of common
shares of Westcoast pursuant to the Amended and Restated Combination
Agreement (the "Combination Agreement") dated as of September 20, 2001
among Duke Energy Corporation, 3058368 Nova Scotia Company, 3946509 Canada
Inc. and Westcoast, as such Combination Agreement may be amended or
restated from time to time, and any transactions contemplated by the
Combination Agreement, shall not constitute a Flip-In Event (as that term
is defined in the Rights Plan), is hereby authorized, adopted and approved
pursuant to Section 5.4(d) of the Rights Plan.
2. Any officer or director of Westcoast is hereby authorized and directed for
and on behalf of Westcoast to execute or cause to be executed, under the
seal of Westcoast or otherwise, and to deliver or cause to be delivered,
all such other documents, agreements and instruments and to perform or
cause to be performed all such other acts and things as in such person's
opinion may be necessary or desirable to give full effect to the foregoing
resolution and the matters authorized hereby, such determination to be
conclusively evidenced by the execution and delivery of any such
documents, agreements or instruments and the taking of any such actions.
SCHEDULE E
FORM OF PLAN OF ARRANGEMENT
ARTICLE 1
INTERPRETATION
1.1 Definitions
In this Plan of Arrangement, unless there is something in the subject
matter or context inconsistent therewith, the following terms shall have the
respective meanings set out below (and grammatical variations of such terms
shall have corresponding meanings):
"affiliate" has the meaning ascribed thereto in the Securities Act, unless
otherwise expressly stated herein;
"Aggregate Amount of Cash Elected" means the aggregate amount of cash that
would be payable to holders of Westcoast Common Shares based upon the
elections made pursuant to Section 2.2(a) before giving effect to the
proration provisions of Section 2.2(d);
"Aggregate Number of Shares Elected" means the aggregate number of
Exchangeable Shares and Duke Energy Common Shares that would be issuable
to holders of Westcoast Common Shares based upon the elections made
pursuant to Section 2.2(a) before giving effect to the proration
provisions of Section 2.2(d);
"Ancillary Rights" means the interest of a holder of Westcoast Common
Shares who elects or is deemed to have elected to receive Exchangeable
Shares as a beneficiary of the trust created under the Voting and Exchange
Trust Agreement;
"Arrangement" means the arrangement under section 192 of the CBCA on the
terms and subject to the conditions set out in this Plan of Arrangement,
subject to any amendments or variations thereto made in accordance with
Section 7.1 of the Combination Agreement or Article 6 or made at the
direction of the Court in the Final Order;
"Arrangement Resolution" means the special resolution of the Westcoast
Securityholders, to be substantially in the form and content of Schedule C
annexed to the Combination Agreement;
"Articles of Arrangement" means the articles of arrangement of Westcoast
in respect of the Arrangement that are required by the CBCA to be filed
with the Director after the Final Order is made;
"Business Day" means any day on which commercial banks are generally open
for business in New York, New York and Vancouver, British Columbia, other
than a Saturday, a Sunday or a day observed as a holiday in New York, New
York under the
-1-
PLAN OF ARRANGEMENT
laws of the State of New York or the federal laws of the United States of
America or in Vancouver, British Columbia under the laws of the Province
of British Columbia or the federal laws of Canada;
"Callco" means 3058368 Nova Scotia Company, an unlimited liability company
existing under the laws of the Province of Nova Scotia being an indirect
wholly-owned subsidiary of Duke Energy;
"Canadian Dollar Equivalent" means, in respect of an amount expressed in a
currency other than Canadian dollars (the "Foreign Currency Amount") at
any date, the product obtained by multiplying:
(a) the Foreign Currency Amount, by
(b) the noon spot rate of exchange on such date for such foreign
currency expressed in Canadian dollars as reported by The Bank of Canada
or, in the event such spot rate of exchange is not available, such spot
rate of exchange on such date for such foreign currency expressed in
Canadian dollars as may be deemed by the Board of Directors of Duke Energy
to be appropriate for such purpose (the "Currency Exchange Rate");
"Canadian Resident" means a resident of Canada for purposes of the ITA;
"Cash Available" means the Maximum Cash Consideration less the product of
(a) the number of Westcoast Common Shares held by Dissenting Shareholders
as of the Effective Time, if any and (b) Cdn$43.80;
"Cash Election" has the meaning ascribed thereto in Section 2.2(a);
"CBCA" means the Canada Business Corporations Act, as amended from time to
time prior to the Effective Date;
"CCRA" means Canada Customs and Revenue Agency;
"Certificate" means the certificate of arrangement giving effect to the
Arrangement, issued by the Director pursuant to subsection 192(7) of the
CBCA after the Articles of Arrangement have been filed with the Director;
"Circular" means the notice of the Westcoast Meeting and accompanying
management proxy circular, including all appendices thereto and the
accompanying CD-ROM, to be sent to Westcoast Securityholders in connection
with the Westcoast Meeting;
"Combination Agreement" means the amended and restated agreement made as
of the 20th day of September, 2001 among Duke Energy, Callco, Exchangeco
and Westcoast, as amended, supplemented and/or restated in accordance
therewith prior to the Effective Date, providing for, among other things,
the Arrangement;
"Court" means the Supreme Court of British Columbia;
-2-
PLAN OF ARRANGEMENT
"Depositary" means Computershare Trust Company of Canada at its offices
set out in the Letter of Transmittal and Election Form;
"Director" means the Director appointed pursuant to section 260 of the
CBCA;
"Dissent Rights" has the meaning ascribed thereto in Section 3.1;
"Dissenting Shareholder" means a holder of Westcoast Common Shares who
dissents in respect of the Arrangement in strict compliance with the
Dissent Rights;
"Distribution Date" has the meaning ascribed thereto in the Exchangeable
Share Provisions;
"Drop Dead Date" means the twelve month anniversary of the date of the
Combination Agreement, or such other date as may be agreed by the parties
to the Combination Agreement;
"Duke Energy" means Duke Energy Corporation, a corporation existing under
the laws of the State of North Carolina;
"Duke Energy Average Price" means 1.54 multiplied by the Weighted Average
Trading Price of Duke Energy Common Shares, with such product being
expressed to the fourth decimal point. The "Weighted Average Trading Price
of Duke Energy Common Shares" shall be an amount determined by dividing
the aggregate sale price of all Duke Energy Common Shares sold on the NYSE
during the period of 20 consecutive trading days ending on the day that is
two Business Days prior to the Effective Date by the total number of Duke
Energy Common Shares sold on the NYSE during such period (as reported by
Bloomberg) expressed to the fourth decimal point;
"Duke Energy Common Shares" means the shares of common stock, no par value
per share, in the capital of Duke Energy and any other securities into
which such shares may be changed;
"Duke Energy Control Transaction" has the meaning ascribed thereto in the
Exchangeable Share Provisions;
"Effective Date" means the date shown on the Certificate, provided that
such date occurs on or prior to the Drop Dead Date;
"Effective Time" means 12:01 a.m. (Vancouver time) on the Effective Date;
"elected" means elected in a duly completed Letter of Transmittal and
Election Form deposited with the Depositary no later than the Election
Deadline and, except where the term "election" is used with respect to
elections and election forms under the ITA and provincial tax law,
"elects" and "election" shall have corresponding meanings;
"Election Date" has the meaning ascribed thereto in Section 2.3(a);
-3-
PLAN OF ARRANGEMENT
"Election Deadline" means 4:30 p.m. (local time) at the place of deposit
on the Election Date;
"Exchangeco" means 3946509 Canada Inc., a corporation existing under the
laws of Canada and being a direct subsidiary of Callco;
"Exchange Ratio" means, subject to adjustment, if any, as provided in
Section 2.4, the number, calculated to four decimal places, equal to
Cdn$43.80 divided by the Duke Energy Average Price; provided that if the
Weighted Average Trading Price of Duke Energy Common Shares is equal to or
less than $36.88, the Exchange Ratio shall be 0.7711 and further, provided
that if the Weighted Average Trading Price of Duke Energy Common Shares is
equal to or greater than $46.48 the Exchange Ratio shall be 0.6119;
"Exchangeable Share Consideration" has the meaning ascribed thereto in the
Exchangeable Share Provisions;
"Exchangeable Share Price" has the meaning ascribed thereto in the
Exchangeable Share Provisions;
"Exchangeable Share Provisions" means the rights, privileges, restrictions
and conditions attaching to the Exchangeable Shares, which rights,
privileges, restrictions and conditions shall be substantially as set out
in Appendix 1 hereto;
"Exchangeable Shares" means the non-voting exchangeable shares in the
capital of Exchangeco, having the rights, privileges, restrictions and
conditions set out in the Exchangeable Share Provisions;
"Final Order" means the final order of the Court approving the Arrangement
as such order may be amended by the Court at any time prior to the
Effective Date or, if appealed, then, unless such appeal is withdrawn or
denied, as affirmed;
"First Preferred Shares" means the first preferred shares in the capital
of Westcoast, including each series thereof designated and outstanding;
"Governmental Entity" means any (a) multinational, federal, provincial,
territorial, state, regional, municipal, local or other government,
governmental or public department, central bank, court, tribunal, arbitral
body, commission, board, bureau or agency, domestic or foreign, (b)
subdivision, agent, commission, board, or authority of any of the
foregoing, or (c) quasi-governmental or private body exercising any
regulatory, expropriation or taxing authority under or for the account of
any of the foregoing;
"holders" means, when used with reference to the Westcoast Common Shares,
the holders of Westcoast Common Shares shown from time to time in the
register maintained by or on behalf of Westcoast in respect of the
Westcoast Common Shares and, when used with reference to the Exchangeable
Shares, the holders of Exchangeable Shares shown from time to time in the
register maintained by or on behalf of Exchangeco in respect of the
Exchangeable Shares and, when used with reference to the Westcoast
Options, the Persons to whom such options were issued;
-4-
PLAN OF ARRANGEMENT
"Initial Election Date" has the meaning ascribed thereto in Section
2.3(a);
"Interim Order" means the interim order of the Court, as the same may be
amended, in respect of the Arrangement, as contemplated by Section 2.3 of
the Combination Agreement;
"ITA" means the Income Tax Act (Canada), as amended;
"Letter of Transmittal and Election Form" means the letter of transmittal
and election form provided for use by holders of Westcoast Common Shares,
to be sent to holders of Westcoast Common Shares as described in Section
2.3 hereof, together with notice of the Election Deadline, in order that
holders of Westcoast Common Shares may make the elections described in
Section 2.3;
"Liquidation Amount" has the meaning ascribed thereto in the Exchangeable
Share Provisions;
"Liquidation Call Purchase Price" has the meaning ascribed thereto in
Section 5.1(a);
"Liquidation Call Right" has the meaning ascribed thereto in Section
5.1(a);
"Liquidation Date" has the meaning ascribed thereto in the Exchangeable
Share Provisions;
"Maximum Cash Consideration" means the amount equal to Cdn$21.90 times the
aggregate number of Westcoast Common Shares immediately prior to the
Effective Time (other than Westcoast Common Shares held by Duke Energy or
any affiliate thereof);
"Maximum Number of Duke Energy Common Shares" means the number equal to
the number of Shares Available multiplied by the aggregate number of Duke
Energy Common Shares that would be issuable to holders of Westcoast Common
Shares based upon the elections made pursuant to Section 2.2(a) before
giving effect to the proration provisions of Section 2.2(d), divided by
the Aggregate Number of Shares Elected;
"Maximum Number of Exchangeable Shares" means the number equal to the
number of Shares Available multiplied by the aggregate number of
Exchangeable Shares that would be issuable to holders of Westcoast Common
Shares based upon the elections made pursuant to Section 2.2(a) before
giving effect to the proration provisions of Section 2.2(d), divided by
the Aggregate Number of Shares Elected;
"Mixed Election" has the meaning ascribed thereto in Section 2.2(a);
"Non-Election Cash Amount" has the meaning ascribed thereto in Section
2.2(b);
"Non-Election Shares" has the meaning ascribed thereto in Section 2.2(b);
"NYSE" means The New York Stock Exchange, Inc.;
-5-
PLAN OF ARRANGEMENT
"Person" includes any individual, firm, partnership, joint venture,
venture capital fund, limited liability company, unlimited liability
company, association, trust, trustee, executor, administrator, legal
personal representative, estate, group, body corporate, corporation,
unincorporated association or organization, Governmental Entity, syndicate
or other entity, whether or not having legal status;
"Redemption Call Purchase Price" has the meaning ascribed thereto in
Section 5.2(a);
"Redemption Call Right" has the meaning ascribed thereto in Section
5.2(a);
"Redemption Date" has the meaning ascribed thereto in the Exchangeable
Share Provisions;
"Redemption Price" has the meaning ascribed thereto in the Exchangeable
Share Provisions;
"Replacement Option" has the meaning ascribed thereto in Section 2.2(f);
"Securities Act" means the Securities Act (Ontario) and the rules,
regulations and policies made thereunder, as now in effect and as they may
be amended from time to time prior to the Effective Date;
"Shares Available" means the product, rounded down to the nearest whole
number, of the Exchange Ratio multiplied by the aggregate number of
Westcoast Common Shares immediately prior to the Effective Time (other
than Westcoast Common Shares held by Duke Energy or any affiliate
thereof), divided by 2;
"Transfer Agent" has the meaning ascribed thereto in Section 5.1(b);
"Trustee" means the trustee to be chosen by Duke Energy and Westcoast,
acting reasonably, to act as trustee under the Voting and Exchange Trust
Agreement, being a corporation organized and existing under the laws of
the State of New York or the State of Delaware, and any successor trustee
appointed under the Voting and Exchange Trust Agreement;
"Voting and Exchange Trust Agreement" means an agreement to be made
between Duke Energy, Exchangeco and the Trustee in connection with the
Plan of Arrangement substantially in the form of Schedule G annexed to the
Combination Agreement, with such changes thereto as the parties to the
Combination Agreement, acting reasonably, may agree;
"Westcoast" means Westcoast Energy Inc., a corporation existing under the
laws of Canada;
"Westcoast Common Shares" means the issued and outstanding common shares
in the capital of Westcoast immediately prior to the Effective Time;
-6-
PLAN OF ARRANGEMENT
"Westcoast Meeting" means the special meeting of Westcoast
Securityholders, including any adjournment, adjournments, postponement or
postponements thereof, to be called and held in accordance with the
Interim Order to consider the Arrangement and the Westcoast Rights Plan
Waiver Resolution;
"Westcoast Options" means all Westcoast Common Share purchase options
granted under the Westcoast Stock Option Plans;
"Westcoast Rights Plan Waiver Resolution" means the ordinary resolution of
the holders of Westcoast Common Shares to be substantially in the form and
content of Schedule D annexed to the Combination Agreement;
"Westcoast Securityholders" means the holders of Westcoast Common Shares
and the holders of Westcoast Options, collectively;
"Westcoast Stock Option Plans" means Westcoast's Long-Term Incentive Share
Option Plan 1989 as amended effective April 26, 2000 and Westcoast's 1999
Key Employee Plan;
1.2 Interpretations Not Affected by Headings
The division of this Plan of Arrangement into articles, sections and other
portions and the insertion of headings are for convenience of reference only and
shall not affect the construction or interpretation hereof. Unless otherwise
indicated, all references to an "Article" or "Section" followed by a number
refer to the specified Article or Section of this Plan of Arrangement. The terms
"this Plan of Arrangement," "hereof," "herein" and "hereunder" and similar
expressions refer to this Plan of Arrangement and not to any particular Article,
Section or other portion hereof.
1.3 Rules of Construction
Unless otherwise specifically indicated or the context otherwise requires,
(a) all references to "dollars" or "$" mean United States dollars, (b) words
importing the singular shall include the plural and vice versa and words
importing any gender shall include all genders, and (c) "include," "includes"
and "including" shall be deemed to be followed by the words "without
limitation."
1.4 Date For Any Action
In the event that any date on which any action is required to be taken
hereunder by any of the parties hereto is not a Business Day, such action shall
be required to be taken on the next succeeding day that is a Business Day.
-7-
PLAN OF ARRANGEMENT
ARTICLE 2
ARRANGEMENT
2.1 Binding Effect
This Plan of Arrangement will become effective at, and be binding at and
after, the Effective Time on (i) Westcoast, (ii) Duke Energy, Callco and
Exchangeco, (iii) all holders and all beneficial owners of Westcoast Common
Shares, (iv) all holders and all beneficial owners of Exchangeable Shares, and
(v) all holders and all beneficial owners of Westcoast Options.
2.2 Arrangement
Commencing at the Effective Time, the following shall occur and shall be
deemed to occur without any further act or formality:
(a) Subject to the proration adjustments set forth in Section
2.2(d), each Westcoast Common Share that is not held by (i) a Dissenting
Shareholder who is ultimately entitled to be paid the fair value of the
Westcoast Common Shares held by such Dissenting Shareholder or (ii) Duke Energy
or any affiliate thereof (which shall not be exchanged under the Arrangement and
shall remain outstanding as a Westcoast Common Share held by Duke Energy or any
affiliate thereof), will be transferred to, and acquired by, Exchangeco, without
any act or formality on the part of the holder of such Westcoast Common Share or
Exchangeco, free and clear of all liens, claims and encumbrances in exchange
for, at the holder's election (or deemed election), (w) Cdn$43.80 in cash
without interest (a "Cash Election"); or (x) a fraction of a fully paid and
non-assessable Exchangeable Share (and the Ancillary Rights) as is equal to the
Exchange Ratio; or (y) a fraction of a fully paid and non-assessable Duke Energy
Common Share as is equal to the Exchange Ratio; or (z) a combination of the
foregoing, with the aggregate value of the cash portion to be less than
Cdn$43.80 and the total number of Exchangeable Shares and/or Duke Energy Common
Shares (if any) determined in accordance with Section 2.2(d) (a "Mixed
Election"), payable, in each case, in accordance with Article 4, and the name of
each such holder of Westcoast Common Shares will be removed from the register of
holders of Westcoast Common Shares and added to the register of holders of the
Exchangeable Shares or Duke Energy Common Shares, as the case may be, if any,
comprising all or part of the consideration to be received by such holder for
such transfer, and Exchangeco will be recorded as the registered holder of such
Westcoast Common Shares so exchanged and will be deemed to be the legal and
beneficial owner thereof; provided, however, that holders of Westcoast Common
Shares who are not Canadian Residents will not be entitled to elect or be deemed
to have elected to receive Exchangeable Shares (and the Ancillary Rights), and
any such election or deemed election otherwise made by any such holder shall be
deemed to be an election to receive Duke Energy Common Shares.
(b) After application of the proration provisions in Section 2.2(d)
to all Westcoast Common Shares in respect of which an election has been made by
the holder thereof in accordance with Section 2.2(a), each Westcoast Common
Share in respect of which no election has been made by the holder thereof, or in
respect of which an effective election has not been made (other than Westcoast
Common Shares held by (i) a Dissenting Shareholder
-8-
PLAN OF ARRANGEMENT
who is ultimately entitled to be paid the fair value of the Westcoast Common
Shares held by such Dissenting Shareholder and (ii) Duke Energy or any affiliate
thereof (which shall not be exchanged under the Arrangement and shall remain
outstanding as a Westcoast Common Share held by Duke Energy or any affiliate
thereof)) ("Non-Election Shares") will be transferred to, and acquired by,
Exchangeco, without any act or formality on the part of the holder of such
Westcoast Common Share or Exchangeco, free and clear of all liens, claims and
encumbrances, and the holder shall be deemed to have elected to receive in
exchange therefor (x) if the Aggregate Amount of Cash Elected equals or exceeds
the Cash Available, such number of fully paid and non-assessable Exchangeable
Shares (and the Ancillary Rights) if such holder is a Canadian Resident (or such
number of fully paid and non-assessable Duke Energy Common Shares if such holder
is not a Canadian Resident) as is equal to the Exchange Ratio, (y) if the
Aggregate Number of Shares Elected equals or exceeds the Shares Available,
Cdn$43.80 in cash, without interest, or (z) if neither Clause (x) or (y) is
applicable, (1) an amount of cash, without interest, equal to (A) the Cash
Available minus the Aggregate Amount of Cash Elected divided by (B) the number
of outstanding Non-Election Shares (the "Non-Election Cash Amount") and (2) the
number of Exchangeable Shares (and the Ancillary Rights) if such holder is a
Canadian Resident (or the number of Duke Energy Common Shares if such holder is
not a Canadian Resident) as is equal to (A) the Exchange Ratio multiplied by (B)
a fraction the numerator of which is Cdn$43.80 minus the Non-Election Cash
Amount and the denominator of which is Cdn$43.80, in all such cases payable in
accordance with Article 4, and the name of each such holder of Westcoast Common
Shares will be removed from the register of holders of Westcoast Common Shares
and added to the register of holders of the Exchangeable Shares or Duke Energy
Common Shares, as the case may be, if any, comprising all or part of the
consideration to be received by such holder for such transfer, and Exchangeco
will be recorded as the registered holder of such Westcoast Common Shares so
exchanged and will be deemed to be the legal and beneficial owner of such
Westcoast Common Shares.
(c) For greater certainty, a pro rata portion of the total number of
Exchangeable Shares, the total amount of cash, and the total number of Duke
Energy Common Shares received under the Arrangement by any particular holder
will be allocated to every Westcoast Common Share held by that holder at the
Effective Time, so that such holder will receive for each Westcoast Common Share
held by the holder at the Effective Time the same combination of Exchangeable
Shares, cash and/or Duke Energy Common Shares as is received for every other
Westcoast Common Share held by that holder at the Effective Time.
Notwithstanding any provisions of this Plan of Arrangement, of the aggregate
consideration to be received by the holders of Westcoast Common Shares pursuant
to the Arrangement, 50% will consist of cash and 50% will consist of
Exchangeable Shares and/or Duke Energy Common Shares.
(i) The consideration which each holder of Westcoast Common
Shares has elected in accordance with Section 2.2(a) to receive in exchange for
such holder's Westcoast Common Shares shall be subject to adjustment and
proration on the following bases:
(ii) if the Aggregate Amount of Cash Elected exceeds the Cash
Available, then the amount of cash payable under the Arrangement to each holder
of Westcoast Common Shares who has made a Cash Election or a Mixed Election
shall be prorated (based on the fraction equal to the Cash Available divided by
the Aggregate Amount of Cash Elected)
-9-
PLAN OF ARRANGEMENT
among all such holders of Westcoast Common Shares who made a Cash Election or a
Mixed Election so that the aggregate amount of cash payable to all such holders
of Westcoast Common Shares who made a Cash Election or a Mixed Election shall be
equal to the Cash Available and each such holder of Westcoast Common Shares who
made a Cash Election or a Mixed Election shall be entitled to receive cash equal
to the amount of cash payable to such holder of Westcoast Common Shares after
giving effect to the proration provisions of this Section 2.2(d)(i) and (x) if
such holder of Westcoast Common Shares has made a further election to receive
Exchangeable Shares or Duke Energy Common Shares in such event, then such holder
shall be deemed to have elected to receive the number of Exchangeable Shares per
Westcoast Common Share equal to the Exchange Ratio or the number of Duke Energy
Common Shares per Westcoast Common Share equal to the Exchange Ratio, as the
case may be, in respect of the balance of such holder's Westcoast Common Shares
in respect of which cash was elected but not available, or (y) if such holder
shall not have made a valid further election to receive Exchangeable Shares or
Duke Energy Common Shares, (A) if such holder is a Canadian Resident, such
holder shall be deemed to have elected to receive the number of Exchangeable
Shares per Westcoast Common Share equal to the Exchange Ratio in respect of the
balance of such holder's Westcoast Common Shares in respect of which cash was
elected but not available and (B) if such holder is not a Canadian Resident,
such holder shall be deemed to have elected to receive the number of Duke Energy
Common Shares per Westcoast Common Share equal to the Exchange Ratio in respect
of the balance of such holder's Westcoast Common Shares in respect of which cash
was elected but not available; and
(iii) if the Aggregate Number of Shares Elected exceeds the
Shares Available, then (x) the number of Exchangeable Shares issuable under the
Arrangement to each holder of Westcoast Common Shares who has elected to receive
all or part of the consideration for such holder's Westcoast Common Shares in
the form of Exchangeable Shares shall be prorated (based on the fraction equal
to the Maximum Number of Exchangeable Shares divided by the aggregate number of
Exchangeable Shares that would be issuable to holders of Westcoast Common Shares
based upon the elections made pursuant to Section 2.2(a) before giving effect to
the proration provisions of this Section 2.2(d)) among all holders who have
elected to receive all or part of the consideration for their Westcoast Common
Shares in the form of Exchangeable Shares so that the number of Exchangeable
Shares issuable to all holders who have elected to receive all or part of the
consideration for their Westcoast Common Shares in the form of Exchangeable
Shares under the Arrangement shall be equal to the Maximum Number of
Exchangeable Shares and each such holder shall be entitled to receive that
number of Exchangeable Shares that is equal to the number of Exchangeable Shares
issuable to such holder, after giving effect to the proration provisions of this
Section 2.2(d)(ii)(x), and an amount of cash, without interest, equal to (A) the
difference between the number of Exchangeable Shares such holder elected to
receive pursuant to Section 2.2(a) and the number of Exchangeable Shares such
holder will be entitled to receive after giving effect to the proration
provisions of this Section 2.2(d)(ii)(x), divided by (B) the Exchange Ratio, and
multiplied by (C) Cdn$43.80; and (y) the number of Duke Energy Common Shares
issuable under the Arrangement to each holder of Westcoast Common Shares who has
elected (or is deemed to have elected) to receive all or part of the
consideration for such holder's Westcoast Common Shares, as the case may be, in
the form of Duke Energy Common Shares shall be prorated (based on the fraction
equal to the Maximum Number of
-10-
PLAN OF ARRANGEMENT
Duke Energy Common Shares divided by the aggregate number of Duke Energy Common
Shares that would be issuable to holders of Westcoast Common Shares based upon
the elections made pursuant to Section 2.2(a) before giving effect to the
proration provisions of this Section 2.2(d)) among all holders who have elected
to receive all or part of the consideration for their Westcoast Common Shares in
the form of Duke Energy Common Shares so that the number of Duke Energy Common
Shares issuable to all holders who have elected to receive all or part of the
consideration for their Westcoast Common Shares in the form of Duke Energy
Common Shares under the Arrangement shall be equal to the Maximum Number of Duke
Energy Common Shares and each such holder shall be entitled to receive that
number of Duke Energy Common Shares that is equal to the number of Duke Energy
Common Shares issuable to such holder, after giving effect to the proration
provisions of this Section 2.2(d)(ii)(y), and an amount of cash, without
interest, equal to (A) the difference between the number of Duke Energy Common
Shares such holder elected (or is deemed to have elected) to receive pursuant to
Section 2.2(a) and the number of Duke Energy Common Shares such holder will be
entitled to receive after giving effect to the proration provisions of this
Section 2.2(d)(ii)(y), divided by (B) the Exchange Ratio, and multiplied by (C)
Cdn$43.80.
(d) Each of the outstanding First Preferred Shares shall remain
outstanding in accordance with its terms.
(e) Each Westcoast Option that has not been duly exercised prior to
the Effective Time shall be exchanged for or converted into an option (a
"Replacement Option") to purchase that number of Duke Energy Common Shares equal
to the number of Westcoast Common Shares subject to such Westcoast Option
multiplied by the Exchange Ratio. Such Replacement Option shall provide for an
exercise price per Duke Energy Common Share equal to (x) the exercise price per
Westcoast Common Share of such Westcoast Option immediately prior to the
Effective Time divided by the Exchange Ratio, divided by (y) the Currency
Exchange Rate for United States dollars on the Effective Date, provided that in
no circumstance shall the exercise price per Duke Energy Common Share be less
than $.01 and if the calculation results in an exercise price less than $.01,
the exercise price shall be deemed to be $.01 per Duke Energy Common Share. If
the foregoing calculation results in a Replacement Option being exercisable for
a fraction of a Duke Energy Common Share, then the number of Duke Energy Common
Shares subject to such Replacement Option shall be rounded down to the next
whole number of Duke Energy Common Shares and the total exercise price for the
Replacement Option shall be reduced by the exercise price of the fractional Duke
Energy Common Share, provided that in no circumstance shall the exercise price
per Duke Energy Common Share be less than $.01 and if the calculation results in
an exercise price less than $.01, the exercise price shall be deemed to be $.01
per Duke Energy Common Share. The term to expiry, conditions to and manner of
exercising, vesting schedule and all other terms and conditions of such
Replacement Option will be the same as the terms and conditions of such
Westcoast Option (except for the provisions precluding such options from being
exercised for less than ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Shares at one time or requiring
that options be exercised only in blocks of ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Shares or
multiples thereof), and any document or agreement previously evidencing such
Westcoast Option shall thereafter evidence and be deemed to evidence such
Replacement Options. Notwithstanding the foregoing, the holder of a Westcoast
Option may, at his or her sole option, notify Duke Energy in writing on or
before the
-11-
PLAN OF ARRANGEMENT
Effective Time that he or she wishes to increase the exercise price per Duke
Energy Common Share for his or her Replacement Option in the event that the
value of such Replacement Option immediately after the Effective Time (measured
as the difference between the closing price of the Duke Energy Common Shares on
the NYSE on the Effective Date and the exercise price for such shares pursuant
to such Replacement Option) exceeds the value of the Westcoast Option
immediately before the Effective Time (measured as (x) the difference between
the closing price of the Westcoast Common Shares underlying such Westcoast
Option on The Toronto Stock Exchange on the trading day immediately preceding
the Effective Date and the exercise price for such shares pursuant to such
Westcoast Option, divided by (y) the Currency Exchange Rate for United States
dollars on the Effective Date) to the amount necessary to make the value of such
Replacement Option immediately after the Effective Time equal to the value of
such Westcoast Option immediately before the Effective Time and in the event
such notice is given, the exercise price per Duke Energy Common Share under such
Replacement Option shall be deemed to be equal to such amount; provided that in
no circumstances shall the exercise price per Duke Energy Common Share be less
than $.01.
2.3 Elections
(a) The initial election date (the "Initial Election Date") shall be
February 28, 2002, unless otherwise agreed in writing by Duke Energy and
Westcoast. If, after the Letter of Transmittal and Election Form has been
mailed, Westcoast and Duke Energy determine that the Effective Date is not
reasonably likely to occur by the tenth Business Day after the Initial Election
Date, then the date by which Letters of Transmittal and Election Forms must be
received shall be extended to a date which the parties expect to be not more
than 10 Business Days before the Effective Date. In the event that the date by
which Letters of Transmittal and Election Forms must be received is extended,
Westcoast shall provide at least 5 days notice of the new Election Date (and
shall provide such notice prior to the Initial Election Date if practicable) to
holders of Westcoast Common Shares by means of publication, at least once, in
The Globe and Mail; national edition, or any other English language daily
newspaper of general circulation in Canada and in a French language daily
newspaper of general circulation in the Province of Quebec. Any duly completed
Letter of Transmittal and Election Form deposited by the Election Deadline on
the Initial Election Date shall not be required to be re-deposited if the date
by which Letters of Transmittal and Election Forms must be received is extended
pursuant hereto. The Initial Election Date, as extended and published pursuant
to the terms hereof, shall be the "Election Date."
(b) The Letter of Transmittal and Election Form shall be sent not
less than 21 days prior to the Initial Election Date to each holder of record of
Westcoast Common Shares.
(c) Each Person who, at or prior to the Election Deadline, is a
holder of record of Westcoast Common Shares will be entitled, with respect to
all or a portion of their shares, to make an election at or prior to the
Election Deadline to receive (i) cash, (ii) Exchangeable Shares (and the
Ancillary Rights), (iii) Duke Energy Common Shares, or (iv) a combination
thereof, in exchange for such holder's Westcoast Common Shares on the basis set
forth herein and in the Letter of Transmittal and Election Form; provided that,
notwithstanding anything to the contrary herein, a holder of Westcoast Common
Shares who is not a Canadian Resident will not be entitled to elect to receive
Exchangeable Shares (and the Ancillary Rights) and any
-12-
PLAN OF ARRANGEMENT
such election otherwise made by any such holder shall be and be deemed to be an
election to receive Duke Energy Common Shares.
(d) Holders of Westcoast Common Shares who are Canadian Residents,
other than any such holder who is exempt from tax under the ITA, and who have
elected (or who are deemed to have elected) to receive Exchangeable Shares (and
the Ancillary Rights) shall be entitled to make an income tax election pursuant
to subsection 85(1) of the ITA or, if the holder is a partnership, subsection
85(2) of the ITA (and in each case, where applicable, the analogous provisions
of provincial income tax law) with respect to the transfer of their Westcoast
Common Shares to Exchangeco by providing two signed copies of the necessary
prescribed election forms to the Depositary within 90 days following the
Effective Date, duly completed with the details of the number of Westcoast
Common Shares transferred and the applicable agreed amounts for the purposes of
such elections. Thereafter, subject to the election forms being correct and
complete and complying with the provisions of the ITA (or any applicable
provincial income tax law), the forms will be signed by Exchangeco and returned
to such holders of Westcoast Common Shares within 30 days after the receipt
thereof by the Depositary for filing with CCRA (or the applicable provincial
taxing authority). Exchangeco will not be responsible for the proper completion
of any election form and, except for Exchangeco's obligation to return duly
completed election forms which are received by the Depositary within 90 days
following the Effective Date, within 30 days after the receipt thereof by the
Depositary, Exchangeco will not be responsible for any taxes, interest,
penalties or any other costs or damages resulting from the failure by a holder
of Westcoast Common Shares to properly complete or file the election forms in
the form and manner and within the time prescribed by the ITA (or any applicable
provincial income tax law). In its sole discretion, Exchangeco may choose to
sign and return an election form received more than 90 days following the
Effective Date, but Exchangeco will have no obligation to do so.
2.4 Adjustments to Exchange Ratio
The Exchange Ratio, including the minimum and maximum Exchange Ratio used
in the calculation thereof, shall be proportionately and appropriately adjusted
to reflect fully the effect of (a) any stock split, reverse split, stock
dividend (including any dividend or distribution of securities convertible into
Duke Energy Common Shares or Westcoast Common Shares), reorganization,
recapitalization or other like change with respect to Duke Energy Common Shares
or Westcoast Common Shares and (b) any extraordinary dividend or distribution
with respect to Duke Energy Common Shares (other than a dividend or distribution
referenced in clause (a)), but only if the Weighted Average Trading Price of
Duke Energy Common Shares is less than $36.88 as of the Effective Date, in each
case of clause (a) or (b) the record date for which occurs after the date of the
Combination Agreement and prior to the Effective Time. Regular quarterly cash
dividends and increases therein shall not be considered extraordinary for
purposes of the preceding sentence.
-13-
PLAN OF ARRANGEMENT
ARTICLE 3
RIGHTS OF DISSENT
3.1 Rights of Dissent
Holders of Westcoast Common Shares may exercise rights of dissent with
respect to such Westcoast Common Shares pursuant to and in the manner set forth
in section 190 of the CBCA as modified by the Interim Order and this Section 3.1
(the "Dissent Rights") in connection with the Arrangement. Holders of Westcoast
Common Shares who duly exercise such rights of dissent and who:
(a) are ultimately determined to be entitled to be paid fair value
for their Westcoast Common Shares shall be deemed to have transferred such
Westcoast Common Shares as of the Effective Time, without any further act or
formality and free and clear of all liens, claims and encumbrances, to
Exchangeco, in consideration for a payment of cash from Exchangeco equal to
such fair value; or
(b) are ultimately determined not to be entitled, for any reason, to
be paid fair value for their Westcoast Common Shares, shall be deemed to have
participated in the Arrangement, as of the Effective Time, on the same basis
as a non-dissenting holder of Westcoast Common Shares who did not make an
election and shall receive cash, Exchangeable Shares or Duke Energy Common
Shares on the same basis as holders of Non-Election Shares,
but in no case shall Duke Energy, Exchangeco, Callco, Westcoast or any other
Person be required to recognize any Dissenting Shareholder as a holder of
Westcoast Common Shares after the Effective Time, and the names of each
Dissenting Shareholder shall be deleted from the register of holders of
Westcoast Common Shares at the Effective Time.
ARTICLE 4
CERTIFICATES AND FRACTIONAL SHARES
4.1 Payment of Cash
At or promptly after the Effective Time, Exchangeco shall deposit with the
Depositary, for the benefit of the holders of Westcoast Common Shares who will
receive cash in connection with the Arrangement, cash in the amount of the Cash
Available. Upon surrender to the Depositary for transfer to Exchangeco of a
certificate which immediately prior to or upon the Effective Time represented
Westcoast Common Shares in respect of which the holder is entitled to receive
cash under the Arrangement, together with a duly completed Letter of Transmittal
and Election Form, and such other documents and instruments as would have been
required to effect the transfer of the shares formerly represented by such
certificate under the CBCA and the by-laws of Westcoast and such additional
documents and instruments as the Depositary may reasonably require, the holder
of such surrendered certificate shall be entitled to receive in exchange
therefor, and after the Effective Time the Depositary shall deliver to such
holder the amount of cash such holder is entitled to receive under the
Arrangement (together with any unpaid dividends or distributions declared on the
Westcoast Common Shares, if any, prior to the
-14-
PLAN OF ARRANGEMENT
Effective Time), and any certificate so surrendered shall forthwith be
transferred to Exchangeco. In the event of a transfer of ownership of such
Westcoast Common Shares that was not registered in the securities register of
Westcoast, the amount of cash payable for such Westcoast Common Shares under the
Arrangement may be delivered to the transferee if the certificate representing
such Westcoast Common Shares is presented to the Depositary as provided above,
accompanied by all documents required to evidence and effect such transfer and
to evidence that any applicable stock transfer taxes have been paid. Until
surrendered as contemplated by this Section 4.1, each certificate which
immediately prior to or upon the Effective Time represented one or more
outstanding Westcoast Common Shares that, under the Arrangement, were exchanged
or were deemed to be exchanged for cash pursuant to Section 2.2 shall be deemed
at all times after the Effective Time to represent only the right to receive
upon such surrender the cash payment contemplated by this Section 4.1.
4.2 Issuance of Certificates Representing Exchangeable Shares
At or promptly after the Effective Time, Exchangeco shall deposit with the
Depositary, for the benefit of the holders of Westcoast Common Shares who will
receive Exchangeable Shares (and the Ancillary Rights) in connection with the
Arrangement, certificates representing the Maximum Number of Exchangeable
Shares. Upon surrender to the Depositary for transfer to Exchangeco of a
certificate which immediately prior to or upon the Effective Time represented
Westcoast Common Shares in respect of which the holder is entitled to receive
Exchangeable Shares under the Arrangement, together with a duly completed Letter
of Transmittal and Election Form and such other documents and instruments as
would have been required to effect the transfer of the shares formerly
represented by such certificate under the CBCA and the by-laws of Westcoast and
such additional documents and instruments as the Depositary may reasonably
require, the holder of such surrendered certificate shall be entitled to receive
in exchange therefor, and after the Effective Time the Depositary shall deliver
to such holder, a certificate representing that number (rounded down to the
nearest whole number) of Exchangeable Shares which such holder has the right to
receive (together with any unpaid dividends or distributions declared on the
Westcoast Common Shares prior to the Effective Time) and any certificate so
surrendered shall forthwith be transferred to Exchangeco. No interest shall be
paid or accrued on the cash in lieu of fractional shares, if any, or on unpaid
dividends and distributions, if any, payable to holders of certificates that
formerly represented Westcoast Common Shares. In the event of a transfer of
ownership of Westcoast Common Shares that was not registered in the securities
register of Westcoast, a certificate representing the proper number of
Exchangeable Shares (together with any unpaid dividends or distributions
declared on the Westcoast Common Shares prior to the Effective Time) may be
issued to the transferee if the certificate representing such Westcoast Common
Shares is presented to the Depositary as provided above, accompanied by all
documents required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 4.2, each certificate which immediately prior to or
upon the Effective Time represented one or more Westcoast Common Shares that,
under the Arrangement, were exchanged or were deemed to be exchanged for
Exchangeable Shares pursuant to Section 2.2 shall be deemed at all times after
the Effective Time, but subject to Section 4.5, to represent only the right to
receive upon such surrender a certificate representing that number (rounded down
to the nearest whole number) of Exchangeable Shares (together with any unpaid
dividends or distributions declared
-15-
PLAN OF ARRANGEMENT
on the Westcoast Common Shares prior to the Effective Time) which such holder
has the right to receive.
4.3 Issuance of Certificates Representing Duke Energy Common Shares
At or promptly after the Effective Time, Exchangeco shall deposit with the
Depositary, for the benefit of the holders of Westcoast Common Shares who will
receive Duke Energy Common Shares in connection with the Arrangement,
certificates representing the Maximum Number of Duke Energy Common Shares. Upon
surrender to the Depositary for transfer to Exchangeco of a certificate which
immediately prior to or upon the Effective Time represented Westcoast Common
Shares in respect of which the holder is entitled to receive Duke Energy Common
Shares under the Arrangement, together with a duly completed Letter of
Transmittal and Election Form and such other documents and instruments as would
have been required to effect the transfer of the shares formerly represented by
such certificate under the CBCA and the by-laws of Westcoast and such additional
documents and instruments as the Depositary may reasonably require, the holder
of such surrendered certificate shall be entitled to receive in exchange
therefor, and after the Effective Time the Depositary shall deliver to such
holder, a certificate representing that number (rounded down to the nearest
whole number) of Duke Energy Common Shares which such holder has the right to
receive (together with any unpaid dividends or distributions declared on the
Westcoast Common Shares prior to the Effective Time) and any certificate so
surrendered shall forthwith be transferred to Exchangeco. No interest shall be
paid or accrued on the cash in lieu of fractional shares, if any, or on unpaid
dividends and distributions, if any, payable to holders of certificates that
formerly represented Westcoast Common Shares. In the event of a transfer of
ownership of Westcoast Common Shares that was not registered in the securities
register of Westcoast, a certificate representing the proper number of Duke
Energy Common Shares (together with any unpaid dividends or distributions
declared on the Westcoast Common Shares prior to the Effective Time) may be
issued to the transferee if the certificate representing such Westcoast Common
Shares is presented to the Depositary as provided above, accompanied by all
documents required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid. Until surrendered as
contemplated by this Section 4.3, each certificate which immediately prior to or
upon the Effective Time represented one or more Westcoast Common Shares, under
the Arrangement, that were exchanged or were deemed to be exchanged for Duke
Energy Common Shares pursuant to Section 2.2 shall be deemed at all times after
the Effective Time, but subject to Section 4.5, to represent only the right to
receive upon such surrender a certificate representing that number (rounded down
to the nearest whole number) of Duke Energy Common Shares (together with any
unpaid dividends or distributions declared prior to the Effective Time) which
such holder has the right to receive.
4.4 Distributions with Respect to Unsurrendered Certificates
No dividends or other distributions paid, declared or made with respect to
Exchangeable Shares or Duke Energy Common Shares, in each case with a record
date after the Effective Time, shall be paid to the holder of any unsurrendered
certificate which immediately prior to the Effective Time represented
outstanding Westcoast Common Shares that were exchanged for Exchangeable Shares
or Duke Energy Common Shares pursuant to Section 2.2 unless and until the holder
of such certificate shall comply with the provisions of Section 4.2 or 4.3, as
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PLAN OF ARRANGEMENT
applicable. Subject to applicable law, at the time such holder shall have
complied with the provisions of Section 4.2 or 4.3, as applicable, (or, in the
case of clause (ii) below, at the appropriate payment date), there shall be paid
to the holder of the certificates formerly representing Westcoast Common Shares,
without interest, (i) the amount of dividends or other distributions with a
record date after the Effective Time theretofore paid with respect to the
Exchangeable Shares or Duke Energy Common Shares, as the case may be, to which
such holder is entitled pursuant hereto and (ii) on the appropriate payment
date, the amount of dividends or other distributions with a record date after
the Effective Time but prior to the date of compliance by such holder with the
provisions of Section 4.2 or 4.3 and a payment date subsequent to the date of
such compliance and payable with respect to such Exchangeable Shares or Duke
Energy Common Shares, as the case may be.
4.5 No Fractional Shares
No certificates representing fractional Exchangeable Shares or fractional
Duke Energy Common Shares shall be issued upon compliance with the provisions of
Section 4.2 or 4.3 and no dividend, stock split or other change in the capital
structure of Exchangeco or Duke Energy shall relate to any such fractional
security and such fractional interests shall not entitle the owner thereof to
exercise any rights as a security holder of Exchangeco or Duke Energy. In lieu
of any such fractional securities, each holder otherwise entitled to a
fractional interest in an Exchangeable Share or to a fractional interest in a
Duke Energy Common Share will be entitled to receive a cash payment from the
Depositary equal to the product of such fractional interest and the Weighted
Average Trading Price of Duke Energy Common Shares, such amount to be provided
to the Depositary by Exchangeco upon request. Such payment with respect to
fractional shares is merely intended to provide a mechanical rounding off of,
and is not separately bargained for, consideration. If more than one certificate
formerly representing Westcoast Common Shares are surrendered for the account of
the same holder, the number of Exchangeable Shares or Duke Energy Common Shares
for which such certificates have been surrendered shall be computed on the basis
of the aggregate number of Westcoast Common Shares represented by the
certificates so surrendered. On the date of the notice referred to in Section
7.2 of the Exchangeable Share Provisions, the aggregate number of Exchangeable
Shares and the aggregate number of Duke Energy Common Shares for which no
certificates were issued as a result of the foregoing provisions of this Section
4.5 shall be deemed to have been surrendered by the Depositary for no
consideration to Exchangeco.
4.6 Lost Certificates
In the event any certificate which immediately prior to the Effective Time
represented one or more outstanding Westcoast Common Shares that were exchanged
pursuant to Section 2.2 shall have been lost, stolen or destroyed, upon the
making of an affidavit of that fact by the holder of Westcoast Common Shares
claiming such certificate to be lost, stolen or destroyed, the Depositary will
issue in exchange for such lost, stolen or destroyed certificate, any cash
pursuant to Section 4.1 and/or one or more certificates representing one or more
Exchangeable Shares pursuant to Section 4.2 or Duke Energy Common Shares
pursuant to Section 4.3 (and any dividends or distributions with respect
thereto) in each case deliverable in accordance with Section 2.2. When
authorizing such payment in exchange for any lost, stolen or destroyed
certificate, the holder to whom cash and/or certificates representing
Exchangeable Shares or
-17-
PLAN OF ARRANGEMENT
Duke Energy Common Shares are to be issued shall, as a condition precedent to
the issuance thereof, give a bond satisfactory to Westcoast, Exchangeco, Duke
Energy and their respective transfer agents in such sum as Westcoast, Exchangeco
or Duke Energy may direct or otherwise indemnify Westcoast, Exchangeco and Duke
Energy in a manner satisfactory to Westcoast, Exchangeco and Duke Energy against
any claim that may be made against Westcoast, Exchangeco or Duke Energy with
respect to the certificate alleged to have been lost, stolen or destroyed.
4.7 Extinguishment of Rights
Any certificate which immediately prior to the Effective Time represented
outstanding Westcoast Common Shares that are not held by a Dissenting
Shareholder who is ultimately entitled to be paid fair value of the Westcoast
Common Shares held by such Dissenting Shareholder but was exchanged or was
deemed to have been exchanged pursuant to Section 2.2, that has not been
deposited with all other instruments required by Section 4.1, 4.2 or 4.3, on or
prior to the earlier of the fifth anniversary of the Effective Date and the date
of the notice referred to in Section 7.2 of the Exchangeable Share Provisions
shall cease to represent a claim or interest of any kind or nature to such cash
payment and/or as a holder of Exchangeable Shares or Duke Energy Common Shares.
On such date, the cash payment and/or the Exchangeable Shares or Duke Energy
Common Shares (and any dividends or distributions with respect thereto) to which
the former holder of the certificate referred to in the preceding sentence was
ultimately entitled shall be deemed to have been surrendered for no
consideration to Exchangeco or Duke Energy, as the case may be, together with
all entitlements to dividends, distributions, cash and interest in respect
thereof held for such former holder. None of Duke Energy, Exchangeco, Callco,
Westcoast or the Depositary shall be liable to any Person in respect of any cash
payment, Duke Energy Common Shares or Exchangeable Shares (or dividends,
distributions and/or cash in lieu of fractional shares) delivered to a public
official pursuant to and in compliance with any applicable abandoned property,
escheat or similar law.
4.8 Withholding Rights
Westcoast, Exchangeco, Callco, Duke Energy and the Depositary shall be
entitled to deduct and withhold from any dividend or consideration otherwise
payable to any holder of Westcoast Common Shares, Duke Energy Common Shares or
Exchangeable Shares such amounts as Westcoast, Exchangeco, Callco, Duke Energy
or the Depositary is required to deduct and withhold with respect to such
payment under the ITA, the United States Internal Revenue Code of 1986 or any
provision of federal, provincial, territorial, state, local or foreign tax law,
in each case, as amended. To the extent that amounts are so withheld, such
withheld amounts shall be treated for all purposes hereof as having been paid to
the holder of the shares in respect of which such deduction and withholding was
made, provided that such withheld amounts are actually remitted to the
appropriate taxing authority. To the extent that the amount so required to be
deducted or withheld from any payment to a holder exceeds the cash portion of
the consideration otherwise payable to the holder, Westcoast, Exchangeco,
Callco, Duke Energy and the Depositary are hereby authorized to sell or
otherwise dispose of such portion of the consideration as is necessary to
provide sufficient funds to Westcoast, Exchangeco, Callco, Duke Energy or the
Depositary, as the case may be, to enable it to comply with such deduction or
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PLAN OF ARRANGEMENT
withholding requirement and Westcoast, Exchangeco, Callco, Duke Energy or the
Depositary shall notify the holder thereof and remit any unapplied balance of
the net proceeds of such sale.
4.9 Termination of Depositary
Any Exchangeable Shares or Duke Energy Common Shares, together with any
funds held by the Depositary, that remain undistributed to former holders of
Westcoast Common Shares nine months after the Effective Date shall be delivered
to Exchangeco, upon demand therefor, and holders of certificates previously
representing Westcoast Common Shares who have not theretofore complied with
Sections 4.1, 4.2 or 4.3 shall thereafter look only to Exchangeco for payment of
any claim to cash, Exchangeable Shares, Duke Energy Common Shares, cash in lieu
of fractional shares thereof or dividends or distributions, if any, in respect
thereof.
ARTICLE 5
CERTAIN RIGHTS OF CALLCO TO ACQUIRE
EXCHANGEABLE SHARES
5.1 Callco Liquidation Call Right
(a) Callco shall have the overriding right (the "Liquidation Call
Right"), in the event of and notwithstanding the proposed liquidation,
dissolution or winding-up of Exchangeco or any other distribution of the assets
of Exchangeco among its shareholders for the purpose of winding-up its affairs,
pursuant to Article 5 of the Exchangeable Share Provisions, to purchase from all
but not less than all of the holders of Exchangeable Shares (other than any
holder of Exchangeable Shares which is an affiliate of Duke Energy) on the
Liquidation Date all but not less than all of the Exchangeable Shares held by
each such holder upon payment by Callco to each such holder of the Exchangeable
Share Price applicable on the last Business Day prior to the Liquidation Date
(the "Liquidation Call Purchase Price") in accordance with Section 5.1(c). In
the event of the exercise of the Liquidation Call Right by Callco, each holder
shall be obligated to sell all the Exchangeable Shares held by such holder to
Callco on the Liquidation Date upon payment by Callco to such holder of the
Liquidation Call Purchase Price for each such Exchangeable Share, whereupon
Exchangeco shall have no obligation to pay any Liquidation Amount to the holders
of such shares so purchased by Callco.
(b) To exercise the Liquidation Call Right, Callco must notify
Exchangeco and Exchangeco's transfer agent (the "Transfer Agent"), as agent for
the holders of Exchangeable Shares, and Exchangeco of Callco's intention to
exercise such right at least 45 days before the Liquidation Date in the case of
a voluntary liquidation, dissolution or winding-up of Exchangeco or any other
voluntary distribution of the assets of Exchangeco among its shareholders for
the purpose of winding-up its affairs, and at least five Business Days before
the Liquidation Date in the case of an involuntary liquidation, dissolution or
winding-up of Exchangeco or any other involuntary distribution of the assets of
Exchangeco among its shareholders for the purpose of winding up its affairs. The
Transfer Agent will notify the holders of Exchangeable Shares as to whether
Callco has exercised the Liquidation Call Right forthwith after the expiry of
the period during which the same may be exercised by Callco. If
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PLAN OF ARRANGEMENT
Callco exercises the Liquidation Call Right, then on the Liquidation Date,
Callco will purchase and the holders of Exchangeable Shares will sell all of the
Exchangeable Shares then outstanding for a price per share equal to the
Liquidation Call Purchase Price.
(c) For the purposes of completing the purchase of the Exchangeable
Shares pursuant to the Liquidation Call Right, Callco shall deposit or cause to
be deposited with the Transfer Agent, on or before the Liquidation Date, the
Exchangeable Share Consideration representing the total Liquidation Call
Purchase Price. Provided that such Exchangeable Share Consideration has been so
deposited with the Transfer Agent, on and after the Liquidation Date, the
holders of the Exchangeable Shares shall cease to be holders of the Exchangeable
Shares and shall not be entitled to exercise any of the rights of holders in
respect thereof (including any rights under the Voting and Exchange Trust
Agreement), other than the right to receive their proportionate part of the
total Liquidation Call Purchase Price payable by Callco, without interest, upon
presentation and surrender by the holder of certificates representing the
Exchangeable Shares held by such holder and the holder shall on and after the
Liquidation Date be considered and deemed for all purposes to be the holder of
the Duke Energy Common Shares to which such holder is entitled. Upon surrender
to the Transfer Agent of a certificate or certificates representing Exchangeable
Shares, together with such other documents and instruments as may be required to
effect a transfer of Exchangeable Shares under the CBCA and the by-laws of
Exchangeco and such additional documents and instruments as the Transfer Agent
may reasonably require, the holder of such surrendered certificate or
certificates shall be entitled to receive in exchange therefor, and the Transfer
Agent on behalf of Callco shall deliver to such holder, the Exchangeable Share
Consideration to which such holder is entitled. If Callco does not exercise the
Liquidation Call Right in the manner described above, on the Liquidation Date
the holders of the Exchangeable Shares will be entitled to receive in exchange
therefor the Liquidation Amount otherwise payable by Exchangeco in connection
with the liquidation, dissolution or winding-up of Exchangeco pursuant to
Article 5 of the Exchangeable Share Provisions.
5.2 Callco Redemption Call Right
In addition to Callco's rights contained in the Exchangeable Share
Provisions, including the Retraction Call Right (as defined in the Exchangeable
Share Provisions), Callco shall have the following rights in respect of the
Exchangeable Shares:
(a) Callco shall have the overriding right (the "Redemption Call
Right"), in the event of and notwithstanding the proposed redemption of the
Exchangeable Shares by Exchangeco pursuant to Article 7 of the Exchangeable
Share Provisions, to purchase from all but not less than all of the holders of
Exchangeable Shares (other than any holder of Exchangeable Shares which is an
affiliate of Duke Energy) on the Redemption Date all but not less than all of
the Exchangeable Shares held by each such holder upon payment by Callco to each
such holder of the Exchangeable Share Price applicable on the last Business Day
prior to the Redemption Date (the "Redemption Call Purchase Price") in
accordance with 5.2(c). In the event of the exercise of the Redemption Call
Right by Callco, each holder shall be obligated to sell all the Exchangeable
Shares held by such holder to Callco on the Redemption Date upon payment by
Callco to such holder of the Redemption Call Purchase Price for each
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PLAN OF ARRANGEMENT
such Exchangeable Share, whereupon Exchangeco shall have no obligation to
redeem, or to pay the Redemption Price in respect of, such shares so purchased
by Callco.
(b) To exercise the Redemption Call Right, Callco must notify the
Transfer Agent, as agent for the holders of Exchangeable Shares, and Exchangeco
of Callco's intention to exercise such right at least 60 days before the
Redemption Date, except in the case of a redemption occurring as a result of a
Duke Energy Control Transaction, an Exchangeable Share Voting Event, an Exempt
Exchangeable Share Voting Event or a Distribution Date (each as defined in the
Exchangeable Share Provisions), in which case Callco shall so notify the
Transfer Agent and Exchangeco on or before the Redemption Date. The Transfer
Agent will notify the holders of the Exchangeable Shares as to whether Callco
has exercised the Redemption Call Right forthwith after the expiry of the period
during which the same may be exercised by Callco. If Callco exercises the
Redemption Call Right, then on the Redemption Date, Callco will purchase and the
holders of Exchangeable Shares will sell all of the Exchangeable Shares then
outstanding for a price per share equal to the Redemption Call Purchase Price.
(c) For the purposes of completing the purchase of the Exchangeable
Shares pursuant to the Redemption Call Right, Callco shall deposit or cause to
be deposited with the Transfer Agent, on or before the Redemption Date, the
Exchangeable Share Consideration representing the total Redemption Call Purchase
Price. Provided that such Exchangeable Share Consideration has been so deposited
with the Transfer Agent, on and after the Redemption Date the holders of the
Exchangeable Shares shall cease to be holders of the Exchangeable Shares and
shall not be entitled to exercise any of the rights of holders in respect
thereof (including any rights under the Voting and Exchange Trust Agreement),
other than the right to receive their proportionate part of the total Redemption
Call Purchase Price payable by Callco, without interest, upon presentation and
surrender by the holder of certificates representing the Exchangeable Shares
held by such holder and the holder shall on and after the Redemption Date be
considered and deemed for all purposes to be the holder of the Duke Energy
Common Shares to which such holder is entitled. Upon surrender to the Transfer
Agent of a certificate or certificates representing Exchangeable Shares,
together with such other documents and instruments as may be required to effect
a transfer of Exchangeable Shares under the CBCA and the by-laws of Exchangeco
and such additional documents and instruments as the Transfer Agent may
reasonably require, the holder of such surrendered certificate or certificates
shall be entitled to receive in exchange therefor, and the Transfer Agent on
behalf of Callco shall deliver to such holder, the Exchangeable Share
Consideration to which such holder is entitled. If Callco does not exercise the
Redemption Call Right in the manner described above, on the Redemption Date the
holders of the Exchangeable Shares will be entitled to receive in exchange
therefor the Redemption Price otherwise payable by Exchangeco in connection with
the redemption of the Exchangeable Shares pursuant to Article 7 of the
Exchangeable Share Provisions.
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PLAN OF ARRANGEMENT
ARTICLE 6
AMENDMENTS
6.1 Amendments to Plan of Arrangement
Westcoast and Duke Energy reserve the right to amend, modify and/or
supplement this Plan of Arrangement at any time and from time to time prior to
the Effective Date subject to amendment in the manner provided for in the
Combination Agreement, provided that each such amendment, modification and/or
supplement must be (i) set out in writing, (ii) approved by Duke Energy, (iii)
filed with the Court and, if made following the Westcoast Meeting, approved by
the Court, and (iv) communicated to Westcoast Securityholders if and as required
by the Court.
Any amendment, modification or supplement to this Plan of Arrangement may
be proposed by Westcoast and Duke Energy at any time prior to the Westcoast
Meeting (provided that Duke Energy shall have consented thereto) with or without
any other prior notice or communication, and if so proposed and accepted by the
Persons voting at the Westcoast Meeting (other than as may be required under the
Interim Order), shall become part of this Plan of Arrangement for all purposes.
Any amendment, modification or supplement to this Plan of Arrangement that
is approved or directed by the Court following the Westcoast Meeting shall be
effective only if (i) it is consented to by each of Westcoast and Duke Energy
and (ii) if required by the Court, it is consented to by Westcoast
Securityholders voting in the manner directed by the Court.
Subject to applicable law, any amendment, modification or supplement to
this Plan of Arrangement may be made following the Effective Date unilaterally
by Duke Energy, provided that it concerns a matter which, in the reasonable
opinion of Duke Energy, is of an administrative nature required to better give
effect to the implementation of this Plan of Arrangement and is not adverse to
the financial or economic interests of any Westcoast Securityholder.
ARTICLE 7
FURTHER ASSURANCES
7.1 Notwithstanding that the transactions and events set out herein
shall occur and be deemed to occur in the order set out in this Plan of
Arrangement without any further act or formality, each of the parties to the
Combination Agreement shall make, do and execute, or cause to be made, done and
executed, all such further acts, deeds, agreements, transfers, assurances,
instruments or documents as may reasonably be required by any of them in order
further to document or evidence any of the transactions or events set out
herein.
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PLAN OF ARRANGEMENT
APPENDIX 1
TO THE PLAN OF ARRANGEMENT
PROVISIONS ATTACHING TO THE
EXCHANGEABLE SHARES OF
3946509 CANADA INC.
The Exchangeable Shares shall have the following rights, privileges,
restrictions and conditions:
ARTICLE 1
INTERPRETATION
1.1 For the purposes of these share provisions:
"affiliate" has the meaning ascribed thereto in the Securities Act, unless
otherwise expressly stated herein;
"Arrangement" means an arrangement under section 192 of the CBCA on the
terms and subject to the conditions set out in the Plan of Arrangement to
which plan these share provisions are attached as Appendix 1 and which
Plan of Arrangement (other than Appendix 1 thereto) is attached to the
Combination Agreement as Schedule E, subject to any amendments or
variations thereto made in accordance with Article 6 of the Plan of
Arrangement or Section 7.1 of the Combination Agreement or made at the
direction of the Court in the Final Order;
"Automatic Exchange Right" has the meaning ascribed thereto in the Voting
and Exchange Trust Agreement;
"Board of Directors" means the board of directors of the Company;
"Business Day" means any day on which commercial banks are generally open
for business in New York, New York and Vancouver, British Columbia, other
than a Saturday, a Sunday or a day observed as a holiday in New York, New
York under the laws of the State of New York or the federal laws of the
United States of America or in Vancouver, British Columbia under the laws
of the Province of British Columbia or the federal laws of Canada;
"Callco" means 3058368 Nova Scotia Company, an unlimited liability company
existing under the laws of the Province of Nova Scotia and an indirect
wholly-owned subsidiary of Duke Energy;
"Callco Call Notice" has the meaning ascribed thereto in Section 6.3 of
these share provisions;
"Canadian Dollar Equivalent" means in respect of an amount expressed in a
currency other than Canadian dollars (the "Foreign Currency Amount") at
any date the product obtained by multiplying:
1-1
(a) the Foreign Currency Amount, by
(b) the noon spot exchange rate on such date for such foreign
currency expressed in Canadian dollars as reported by the Bank of Canada
or, in the event such spot exchange rate is not available, such spot
exchange rate on such date for such foreign currency expressed in Canadian
dollars as may be deemed by the Board of Directors to be appropriate for
such purpose;
"CBCA" means Canada Business Corporations Act, as amended from time to
time prior to the Effective Date;
"Combination Agreement" means the agreement made as of the 20th day of
September, 2001 among Duke Energy, Callco, the Company and Westcoast, as
amended, supplemented and/or restated in accordance therewith prior to the
Effective Date, providing for, among other things, the Arrangement;
"Common Shares" means the common shares in the capital of the Company;
"Company" means 3946509 Canada Inc., a corporation existing under the
CBCA;
"Current Market Price" means, in respect of a Duke Energy Common Share on
any date, the Canadian Dollar Equivalent of the average of the closing bid
and asked prices of Duke Energy Common Shares during a period of 20
consecutive trading days ending two trading days before such date on the
NYSE, or, if the Duke Energy Common Shares are not then listed on the
NYSE, on such other stock exchange or automated quotation system on which
the Duke Energy Common Shares are listed or quoted, as the case may be, as
may be selected by the Board of Directors for such purpose; provided,
however, that if in the opinion of the Board of Directors the public
distribution or trading activity of Duke Energy Common Shares during such
period does not create a market which reflects the fair market value of a
Duke Energy Common Share, then the Current Market Price of a Duke Energy
Common Share shall be determined by the Board of Directors, in good faith
and in its sole discretion, and provided further that any such selection,
opinion or determination by the Board of Directors shall be conclusive and
binding;
"Director" means the Director appointed pursuant to section 260 of the
CBCA;
"Distribution Date" has the meaning ascribed thereto in the Duke Energy
Rights Agreement;
"Duke Energy" means Duke Energy Corporation, a corporation existing under
the laws of the State of Duke North Carolina;
"Duke Energy Common Shares" mean the shares of common stock, no par value
per share, in the capital of Duke Energy and any other securities into
which such shares may be changed;
1-2
"Duke Energy Control Transaction" means any merger, amalgamation, tender
offer, material sale of shares or rights or interests therein or thereto
or similar transactions involving Duke Energy, or any proposal to carry
out the same; and
"Duke Energy Dividend Declaration Date" means the date on which the board
of directors of Duke Energy declares any dividend on the Duke Energy
Common Shares.
"Duke Energy Rights Agreement" means the Rights Agreement, dated December
17, 1998, between Duke Energy and The Bank of New York, as Rights Agent;
"Effective Date" means the date shown on the certificate of arrangement to
be issued by the Director under the CBCA giving effect to the Arrangement;
"Effective Time" means 12:01 a.m. (Vancouver time) on the Effective Date;
"Exchange Right" has the meaning ascribed thereto in the Voting and
Exchange Trust Agreement;
"Exchangeable Share Consideration" means, with respect to each
Exchangeable Share, for any acquisition of, redemption of or distribution
of assets of the Company in respect of, or purchase pursuant to, these
share provisions, the Plan of Arrangement, the Support Agreement or the
Voting and Exchange Trust Agreement:
(a) the Current Market Price of one Duke Energy Common Share
deliverable in connection with such action; plus
(b) a cheque or cheques payable at par at any branch of the bankers
of the payor in the amount of all declared, payable and unpaid, and all
undeclared but payable, cash dividends deliverable in connection with such
action; plus
(c) such stock or other property constituting any declared and
unpaid non-cash dividends deliverable in connection with such action,
provided that (i) the part of the consideration which represents (a) above
shall be fully paid and satisfied by the delivery of one Duke Energy
Common Share, such share to be duly issued, fully paid and non-assessable,
(ii) the part of the consideration which represents (c) above shall be
fully paid and satisfied by delivery of such non-cash items, (iii) any
such consideration shall be delivered free and clear of any lien, claim,
encumbrance, security interest or adverse claim or interest and (iv) any
such consideration shall be paid less any tax required to be deducted and
withheld therefrom and without interest;
"Exchangeable Share Price" means, for each Exchangeable Share, an amount
equal to the aggregate of:
(a) the Current Market Price of a Duke Energy Common Share; plus
1-3
(b) an additional amount equal to the full amount of all cash
dividends declared, payable and unpaid, on such Exchangeable Share to
which the holder is entitled pursuant to the dividend trading rules of any
stock exchange on which the Exchangeable Shares then trade; plus
(c) an additional amount equal to the full amount of all dividends
declared and payable or paid on Duke Energy Common Shares which have not
been declared or paid on Exchangeable Shares in accordance herewith; plus
(d) an additional amount representing the full amount of all
non-cash dividends declared, payable and unpaid, on such Exchangeable
Share to which the holder is entitled pursuant to the dividend trading
rules of any stock exchange on which the Exchangeable Shares then trade;
"Exchangeable Share Voting Event" means any matter in respect of which
holders of Exchangeable Shares are entitled to vote as shareholders of the
Company, other than an Exempt Exchangeable Share Voting Event, and, for
greater certainty, excluding any matter in respect of which holders of
Exchangeable Shares are entitled to vote (or instruct the Trustee to vote)
in their capacity as Beneficiaries under (and as that term is defined in)
the Voting and Exchange Trust Agreement;
"Exchangeable Shares" mean the non-voting exchangeable shares in the
capital of the Company, having the rights, privileges, restrictions and
conditions set forth herein;
"Exempt Exchangeable Share Voting Event" means any matter in respect of
which holders of Exchangeable Shares are entitled to vote as shareholders
of the Company in order to approve or disapprove, as applicable, any
change to, or in the rights of the holders of, the Exchangeable Shares,
where the approval or disapproval, as applicable, of such change would be
required to maintain the equivalence of the Exchangeable Shares and the
Duke Energy Common Shares;
"Governmental Entity" means any (a) multinational, federal, provincial,
territorial, state, regional, municipal, local or other government,
governmental or public department, central bank, court, tribunal, arbitral
body, commission, board, bureau or agency, domestic or foreign, (b)
subdivision, agent, commission, board, or authority of any of the
foregoing, or (c) quasi-governmental or private body exercising any
regulatory, expropriation or taxing authority under or for the account of
any of the foregoing;
"holder" means, when used with reference to the Exchangeable Shares, the
holders of Exchangeable Shares shown from time to time in the register
maintained by or on behalf of the Company in respect of the Exchangeable
Shares and, when used with reference to the Westcoast Options, means the
Person to whom such option was issued;
"Liquidation Amount" has the meaning ascribed thereto in Section 5.1(a) of
these share provisions;
"Liquidation Call Right" has the meaning ascribed thereto in the Plan of
Arrangement;
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"Liquidation Date" has the meaning ascribed thereto in Section 5.1(a) of
these share provisions;
"NYSE" means The New York Stock Exchange, Inc.;
"Person" includes any individual, firm, partnership, joint venture,
venture capital fund, limited liability company, unlimited liability
company, association, trust, trustee, executor, administrator, legal
personal representative, estate, group, body corporate, corporation,
unincorporated association or organization, Governmental Entity, syndicate
or other entity, whether or not having legal status;
"Plan of Arrangement" means the plan of arrangement involving and
affecting Westcoast, Duke Energy, Callco, the Company, all holders and all
beneficial owners of Westcoast Common Shares, all holders and all
beneficial owners of Exchangeable Shares and all holders of Westcoast
Options under section 192 of the CBCA contemplated in the Combination
Agreement, to which these share provisions are attached as Appendix 1;
"Purchase Price" has the meaning ascribed thereto in Section 6.3 of these
share provisions;
"Redemption Call Purchase Price" has the meaning ascribed thereto in the
Plan of Arrangement;
"Redemption Call Right" has the meaning ascribed thereto in the Plan of
Arrangement;
"Redemption Date" means the earlier of (a) the day immediately preceding a
Distribution Date or (b) the date, if any, established by the Board of
Directors for the redemption by the Company of all but not less than all
of the outstanding Exchangeable Shares pursuant to Article 7 of these
share provisions, which date, in the case of clause (b), shall be no
earlier than the eighth anniversary of the Effective Date, unless:
(i) there are less than twenty percent (20%) of the number of
Exchangeable Shares issuable on the Effective Date outstanding (other than
Exchangeable Shares held by Duke Energy and its affiliates, as such number
of shares may be adjusted as deemed appropriate by the Board of Directors
to give effect to any subdivision or consolidation of or stock dividend on
the Exchangeable Shares, any issue or distribution of rights to acquire
Exchangeable Shares or securities exchangeable for or convertible into
Exchangeable Shares, any issue or distribution of other securities or
rights or evidences of indebtedness or assets, or any other capital
reorganization or other transaction affecting the Exchangeable Shares), in
which case the Board of Directors may accelerate such redemption date to
such date prior to the eighth anniversary of the Effective Date as it may
determine, upon at least 60 days' prior written notice to the registered
holders of the Exchangeable Shares and the Trustee;
(ii) a Duke Energy Control Transaction occurs, in which case,
provided that the Board of Directors determines, in good faith and in its
sole discretion, that it is not reasonably practicable to substantially
replicate the terms and conditions of the Exchangeable Shares in
connection with such Duke Energy Control Transaction and that
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the redemption of all but not less than all of the outstanding
Exchangeable Shares is necessary to enable the completion of such Duke
Energy Control Transaction in accordance with its terms, the Board of
Directors may accelerate such redemption date to such date prior to the
eighth anniversary of the Effective Date as it may determine, upon such
number of days' prior written notice to the registered holders of the
Exchangeable Shares and the Trustee as the Board of Directors may
determine to be reasonably practicable in such circumstances;
(iii) an Exchangeable Share Voting Event is proposed, in which case,
provided that the Board of Directors has determined, in good faith and in
its sole discretion, that it is not reasonably practicable to accomplish
the business purpose intended by the Exchangeable Share Voting Event in
any other commercially reasonable manner that does not result in an
Exchangeable Share Voting Event, which business purpose must be bona fide
and not for the primary purpose of causing the occurrence of a Redemption
Date, the redemption date shall be the Business Day prior to the record
date for any meeting or vote of the holders of the Exchangeable Shares to
consider the Exchangeable Share Voting Event and the Board of Directors
shall give such number of days' prior written notice of such redemption to
the registered holders of the Exchangeable Shares and the Trustee as the
Board of Directors may determine to be reasonably practicable in such
circumstances; or
(iv) an Exempt Exchangeable Share Voting Event is proposed and the
holders of the Exchangeable Shares fail to take the necessary action at a
meeting or other vote of holders of Exchangeable Shares, to approve or
disapprove, as applicable, the Exempt Exchangeable Share Voting Event, in
which case the redemption date shall be the Business Day following the day
on which the holders of the Exchangeable Shares failed to take such
action,
provided, however, that the accidental failure or omission to give any
notice of redemption under clauses (a), (b) or (c) above to any of such
holders of Exchangeable Shares shall not affect the validity of any such
redemption;
"Redemption Price" has the meaning ascribed thereto in Section 7.1 of
these share provisions;
"Retracted Shares" has the meaning ascribed thereto in Section 6.1(a) of
these share provisions;
"Retraction Call Right" has the meaning ascribed thereto in Section 6.1(c)
of these share provisions;
"Retraction Date" has the meaning ascribed thereto in Section 6.1(b) of
these share provisions;
"Retraction Price" has the meaning ascribed thereto in Section 6.1 of
these share provisions;
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"Retraction Request" has the meaning ascribed thereto in Section 6.1 of
these share provisions;
"Securities Act" means the Securities Act (Ontario) and the rules,
regulations and policies made thereunder, as now in effect and as they may
be amended from time to time prior to the Effective Date;
"Support Agreement" means the agreement made between Westcoast, Duke
Energy, Callco and the Company substantially in the form and content of
Schedule F annexed to the Combination Agreement, with such changes thereto
as the parties to the Combination Agreement, acting reasonably, may agree;
"Transfer Agent" means Computershare Trust Company of Canada or such other
Person as may from time to time be appointed by the Company as the
registrar and transfer agent for the Exchangeable Shares;
"Trustee" means the trustee to be chosen by Duke Energy and Westcoast,
acting reasonably, to act as trustee under the Voting and Exchange Trust
Agreement, and any successor trustee appointed under the Voting and
Exchange Trust Agreement;
"Voting and Exchange Trust Agreement" means the agreement made between
Duke Energy, Callco, the Company and the Trustee in connection with the
Plan of Arrangement substantially in the form and content of Schedule G
annexed to the Combination Agreement with such changes thereto as the
parties to the Combination Agreement, acting reasonably, may agree;
"Westcoast" means Westcoast Energy Inc., a corporation existing under the
laws of Canada;
"Westcoast Common Shares" means the issued and outstanding common shares
in the capital of Westcoast immediately prior to the Effective Time;
"Westcoast Options" means all Westcoast Common Share purchase options
granted under the Westcoast Stock Option Plans;
"Westcoast Stock Option Plans" means Westcoast's Long-Term Incentive Share
Option Plan 1989 as amended effective April 26, 2000 and Westcoast's 1999
Key Employee Plan;
ARTICLE 2
RANKING OF EXCHANGEABLE SHARES
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2.1 The Exchangeable Shares shall be entitled to a preference over the
Common Shares and any other shares ranking junior to the Exchangeable Shares
with respect to the payment of dividends and the distribution of assets in the
event of the liquidation, dissolution or winding-up of the Company, whether
voluntary or involuntary, or any other distribution of the assets of the
Company, among its shareholders for the purpose of winding-up its affairs.
ARTICLE 3
DIVIDENDS
3.1 A holder of an Exchangeable Share shall be entitled to receive and
the Board of Directors shall, subject to applicable law, on each Duke Energy
Dividend Declaration Date, declare a dividend on each Exchangeable Share:
(a) in the case of a cash dividend declared on the Duke Energy
Common Shares, in an amount in cash for each Exchangeable Share in U.S. dollars,
or the Canadian Dollar Equivalent thereof on the Duke Energy Dividend
Declaration Date, in each case, corresponding to the cash dividend declared on
each Duke Energy Common Share;
(b) in the case of a stock dividend declared on the Duke Energy
Common Shares to be paid in Duke Energy Common Shares subject to Section 3.2, by
the issue or transfer by the Company of such number of Exchangeable Shares for
each Exchangeable Share as is equal to the number of Duke Energy Common Shares
to be paid on each Duke Energy Common Share; or
(c) in the case of a dividend declared on the Duke Energy Common
Shares in property other than cash or Duke Energy Common Shares, in such type
and amount of property for each Exchangeable Share as is the same as or
economically equivalent to (to be determined by the Board of Directors as
contemplated by Section 3.6) the type and amount of property declared as a
dividend on each Duke Energy Common Share.
Such dividends shall be paid out of money, assets or property of the
Company properly applicable to the payment of dividends, or out of authorized
but unissued shares of the Company, as applicable.
3.2 In the case of a stock dividend declared on the Duke Energy Common
Shares to be paid in Duke Energy Common Shares, in lieu of declaring the stock
dividend contemplated by Section 3.1(b) on the Exchangeable Shares, the Board of
Directors may, in good faith and in its discretion and subject to applicable law
and to obtaining all required regulatory approvals, subdivide, redivide or
change (the "Subdivision") each issued and unissued Exchangeable Share on the
basis that each Exchangeable Share before the subdivision becomes a number of
Exchangeable Shares equal to the sum of (i) one Duke Energy Common Share and
(ii) the number of Duke Energy Common shares to be paid as a share dividend on
each Duke Energy Common Share. In making such Subdivision, the Board of
Directors shall consider the effect thereof upon the then outstanding
Exchangeable Shares and the general taxation consequences of the Subdivision to
the holders of the Exchangeable Shares. In such instance, and notwithstanding
any other provision hereof, such Subdivision shall become effective on the
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effective date specified in Section 3.4 without any further act or formality on
the part of the Board of Directors or of the holders of Exchangeable Shares.
3.3 Cheques of the Company payable at par at any branch of the bankers
of the Company shall be issued in respect of any cash dividends contemplated by
Section 3.1(a) and the sending of such a cheque to each holder of an
Exchangeable Share shall satisfy the cash dividend represented thereby unless
the cheque is not paid on presentation. Subject to applicable law, certificates
registered in the name of the registered holder of Exchangeable Shares shall be
issued or transferred in respect of any stock dividends contemplated by Section
3.1(b) or any Subdivision contemplated by Section 3.2 and the sending of such a
certificate to each holder of an Exchangeable Share shall satisfy the stock
dividend represented thereby. Such other type and amount of property in respect
of any dividends contemplated by Section 3.1(c) shall be issued, distributed or
transferred by the Company in such manner as it shall determine and the
issuance, distribution or transfer thereof by the Company to each holder of an
Exchangeable Share shall satisfy the dividend represented thereby. No holder of
an Exchangeable Share shall be entitled to recover by action or other legal
process against the Company any dividend that is represented by a cheque that
has not been duly presented to the Company's bankers for payment or that
otherwise remains unclaimed for a period of six years from the date on which
such dividend was first payable.
3.4 The record date for the determination of the holders of Exchangeable
Shares entitled to receive payment of, and the payment date for, any dividend
declared on the Exchangeable Shares under Section 3.1 shall be the same dates as
the record date and payment date, respectively, for the corresponding dividend
declared on the Duke Energy Common Shares. The record date for the determination
of the holders of Exchangeable Shares entitled to receive Exchangeable Shares in
connection with any Subdivision of the Exchangeable Shares under Section 3.2 and
the effective date of such Subdivision shall be the same dates as the record
date and payment date, respectively, for the corresponding dividend declared on
the Duke Energy Common Shares.
3.5 If on any payment date for any dividends declared on the
Exchangeable Shares under Section 3.1 the dividends are not paid in full on all
of the Exchangeable Shares then outstanding, any such dividends that remain
unpaid shall be paid on a subsequent date or dates determined by the Board of
Directors on which the Company shall have sufficient moneys, assets or property
properly applicable to the payment of such dividends.
3.6 The Board of Directors shall determine, in good faith and in its
sole discretion, economic equivalence for the purposes of Sections 3.1 and 3.2,
and each such determination shall be conclusive and binding on the Company and
its shareholders. In making each such determination, the following factors
shall, without excluding other factors determined by the Board of Directors to
be relevant, be considered by the Board of Directors:
(a) in the case of any stock dividend or other distribution payable
in Duke Energy Common Shares, the number of such shares issued in proportion to
the number of Duke Energy Common Shares previously outstanding;
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(b) in the case of the issuance or distribution of any rights,
options or warrants to subscribe for or purchase Duke Energy Common Shares (or
securities exchangeable for or convertible into or carrying rights to acquire
Duke Energy Common Shares), the relationship between the exercise price of each
such right, option or warrant and the Current Market Price;
(c) in the case of the issuance or distribution of any other form of
property (including any shares or securities of Duke Energy of any class other
than Duke Energy Common Shares, any rights, options or warrants other than those
referred to in Section 3.6(b) above, any evidences of indebtedness of Duke
Energy or any assets of Duke Energy) the relationship between the fair market
value (as determined by the Board of Directors in the manner above contemplated)
of such property to be issued or distributed with respect to each outstanding
Duke Energy Common Share and the Current Market Price; and
(d) in all such cases, the general taxation consequences of the
relevant event to holders of Exchangeable Shares to the extent that such
consequences may differ from the taxation consequences to holders of Duke Energy
Common Shares as a result of differences between taxation laws of Canada and the
United States (except for any differing consequences arising as a result of
differing marginal taxation rates and without regard to the individual
circumstances of holders of Exchangeable Shares).
3.7 Except as provided in this Article 3, the holders of Exchangeable
Shares shall not be entitled to receive dividends in respect thereof.
Notwithstanding any provision of this Article 3 to the contrary, if the
Exchangeable Share Price is paid to a holder of an Exchangeable Share by Callco
pursuant to the Retraction Call Right, the Redemption Call Right or the
Liquidation Call Right or by Duke Energy pursuant to the Exchange Right or the
Automatic Exchange Right, the holder of the Exchangeable Share shall cease to
have any right to be paid any amount by the Company in respect of any unpaid
dividends on such Exchangeable Shares.
ARTICLE 4
CERTAIN RESTRICTIONS
4.1 So long as any of the Exchangeable Shares are outstanding, the
Company shall not at any time without, but may at any time with, the approval of
the holders of the Exchangeable Shares given as specified in Section 10.2 of
these share provisions:
(a) pay any dividends on the Common Shares or any other shares
ranking junior to the Exchangeable Shares with respect to the payment of
dividends, other than stock dividends payable in Common Shares or any such other
shares ranking junior to the Exchangeable Shares, as the case may be;
(b) redeem or purchase or make any capital distribution in respect
of Common Shares or any other shares ranking junior to the Exchangeable Shares
with respect to the payment of dividends or on any liquidation, dissolution or
winding-up of the Company or any other distribution of the assets of the
Company;
(c) redeem or purchase any other shares of the Company ranking
equally with the Exchangeable Shares with respect to the payment of dividends or
on any liquidation,
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dissolution or winding-up of the Company or any other distribution of the assets
of the Company; or
(d) issue any Exchangeable Shares or any other shares of the Company
ranking equally with, or superior to, the Exchangeable Shares other than by way
of stock dividends to the holders of such Exchangeable Shares;
The restrictions in Sections 4.1(a), (b), (c) and (d) shall not apply if
all dividends on the outstanding Exchangeable Shares corresponding to dividends
declared and paid to date on the Duke Energy Common Shares shall have been
declared and paid on the Exchangeable Shares.
ARTICLE 5
DISTRIBUTION ON LIQUIDATION
5.1 In the event of the liquidation, dissolution or winding-up of the
Company or any other distribution of the assets of the Company among its
shareholders for the purpose of winding up its affairs, a holder of Exchangeable
Shares shall be entitled, subject to applicable law and to the exercise by
Callco of the Liquidation Call Right, to receive from the assets of the Company
in respect of each Exchangeable Share held by such holder on the effective date
(the "Liquidation Date") of such liquidation, dissolution, winding-up or
distribution of assets, before any distribution of any part of the assets of the
Company among the holders of the Common Shares or any other shares ranking
junior to the Exchangeable Shares, an amount per share equal to the Exchangeable
Share Price applicable on the last Business Day prior to the Liquidation Date
(the "Liquidation Amount").
5.2 On or promptly after the Liquidation Date, and subject to the
exercise by Callco of the Liquidation Call Right, the Company shall cause to be
delivered to the holders of the Exchangeable Shares the Liquidation Amount for
each such Exchangeable Share upon presentation and surrender of the certificates
representing such Exchangeable Shares, together with such other documents and
instruments as may be required to effect a transfer of Exchangeable Shares under
the CBCA and the articles and by-laws of the Company and such additional
documents and instruments as the Transfer Agent and the Company may reasonably
require, at the registered office of the Company or at any office of the
Transfer Agent as may be specified by the Company by notice to the holders of
the Exchangeable Shares. Payment of the total Liquidation Amount for such
Exchangeable Shares shall be made by delivery to each holder, at the address of
the holder recorded in the register of the Company for the Exchangeable Shares
or by holding for pick-up by the holder at the registered office of the Company
or at any office of the Transfer Agent as may be specified by the Company by
notice to the holders of Exchangeable Shares, on behalf of the Company of the
Exchangeable Share Consideration representing the total Liquidation Amount. On
and after the Liquidation Date, the holders of the Exchangeable Shares shall
cease to be holders of such Exchangeable Shares and shall not be entitled to
exercise any of the rights of holders in respect thereof (including any rights
under the Voting and Exchange Trust Agreement), other than the right to receive
their proportionate part of the total Liquidation Amount, unless payment of the
total Liquidation Amount for such Exchangeable Shares shall not be made upon
presentation and surrender of share certificates in accordance with the
foregoing provisions, in which case the rights of the holders shall remain
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unaffected until the total Liquidation Amount to which such holders are entitled
shall have been paid to such holders in the manner hereinbefore provided. The
Company shall have the right at any time on or after the Liquidation Date to
deposit or cause to be deposited the Exchangeable Share Consideration in respect
of the Exchangeable Shares represented by certificates that have not at the
Liquidation Date been surrendered by the holders thereof in a custodial account
with any chartered bank or trust company in Canada. Upon such deposit being
made, the rights of the holders of Exchangeable Shares, after such deposit,
shall be limited to receiving their proportionate part of the total Liquidation
Amount for such Exchangeable Shares so deposited, against presentation and
surrender of the said certificates held by them, respectively, in accordance
with the foregoing provisions. Upon such payment or deposit of such Exchangeable
Share Consideration, the holders of the Exchangeable Shares shall thereafter be
considered and deemed for all purposes to be holders of the Duke Energy Common
Shares delivered to them or the custodian on their behalf.
5.3 After the Company has satisfied its obligations to pay the holders
of the Exchangeable Shares the Liquidation Amount per Exchangeable Share
pursuant to Section 5.1 of these share provisions, such holders shall not be
entitled to share in any further distribution of the assets of the Company.
ARTICLE 6
RETRACTION OF EXCHANGEABLE SHARES BY HOLDER
6.1 A holder of Exchangeable Shares shall be entitled at any time,
subject to the exercise by Callco of the Retraction Call Right and otherwise
upon compliance with the provisions of this Article 6, to require the Company to
redeem any or all of the Exchangeable Shares registered in the name of such
holder for an amount per share equal to the Exchangeable Share Price applicable
on the last Business Day prior to the Retraction Date (the "Retraction Price"),
which shall be satisfied in full by the Company causing to be delivered to such
holder the Exchangeable Share Consideration representing the Retraction Price.
To effect such redemption, the holder shall present and surrender at the
registered office of the Company or at any office of the Transfer Agent as may
be specified by the Company by notice to the holders of Exchangeable Shares, the
certificate or certificates representing the Exchangeable Shares which the
holder desires to have the Company redeem, together with such other documents
and instruments as may be required to effect a transfer of Exchangeable Shares
under the CBCA and the articles and bylaws of the Company and such additional
documents and instruments as the Transfer Agent and the Company may reasonably
require, and together with a duly executed statement (the "Retraction Request")
in the form of Schedule A hereto or in such other form as may be acceptable to
the Company:
(a) specifying that the holder desires to have all or any number
specified therein of the Exchangeable Shares represented by such certificate or
certificates (the "Retracted Shares") redeemed by the Company;
(b) stating the Business Day on which the holder desires to have the
Company redeem the Retracted Shares (the "Retraction Date"), provided that the
Retraction Date shall be not less than 10 Business Days nor more than 15
Business Days after the date on which the
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Retraction Request is received by the Company and further provided that, in the
event that no such Business Day is specified by the holder in the Retraction
Request, the Retraction Date shall be deemed to be the 15th Business Day after
the date on which the Retraction Request is received by the Company; and
(c) acknowledging the overriding right (the "Retraction Call Right")
of Callco to purchase all but not less than all the Retracted Shares directly
from the holder and that the Retraction Request shall be deemed to be a
revocable offer by the holder to sell the Retracted Shares to Callco in
accordance with the Retraction Call Right on the terms and conditions set out in
Section 6.3 below.
6.2 Subject to the exercise by Callco of the Retraction Call Right, upon
receipt by the Company or the Transfer Agent in the manner specified in Section
6.1 of a certificate or certificates representing the number of Retracted
Shares, together with a Retraction Request and such additional documents and
instruments as the Transfer Agent and the Company may reasonably require, and
provided that the Retraction Request is not revoked by the holder in the manner
specified in Section 6.7, the Company shall redeem the Retracted Shares
effective at the close of business on the Retraction Date and shall cause to be
delivered to such holder the total Retraction Price with respect to such shares
in accordance with Section 6.4. If only a part of the Exchangeable Shares
represented by any certificate is redeemed (or purchased by Callco pursuant to
the Retraction Call Right), a new certificate for the balance of such
Exchangeable Shares shall be issued to the holder at the expense of the Company.
6.3 Upon receipt by the Company of a Retraction Request, the Company
shall immediately notify Callco thereof and shall provide to Callco a copy of
the Retraction Request. In order to exercise the Retraction Call Right, Callco
must notify the Company of its determination to do so (the "Callco Call Notice")
within five Business Days of notification to Callco by the Company of the
receipt by the Company of the Retraction Request. If Callco does not so notify
the Company within such five Business Day period, the Company will notify the
holder as soon as possible thereafter that Callco will not exercise the
Retraction Call Right. If Callco delivers the Callco Call Notice within such
five Business Day period, and provided that the Retraction Request is not
revoked by the holder in the manner specified in Section 6.7, the Retraction
Request shall thereupon be considered only to be an offer by the holder to sell
all but not less than all the Retracted Shares to Callco in accordance with the
Retraction Call Right. In such event, the Company shall not redeem the Retracted
Shares and Callco shall purchase from such holder and such holder shall sell to
Callco on the Retraction Date all but not less than all the Retracted Shares for
a purchase price (the "Purchase Price") per share equal to the Retraction Price,
which, as set forth in Section 6.4, shall be fully paid and satisfied by the
delivery by or on behalf of Callco, of the Exchangeable Share Consideration
representing the total Purchase Price, whereupon the Company shall have no
obligation to pay the Retraction Price to such holder of Exchangeable Shares so
purchased by Callco. For the purposes of completing a purchase pursuant to the
Retraction Call Right, Callco shall deposit with the Transfer Agent, on or
before the Retraction Date, the Exchangeable Share Consideration representing
the total Purchase Price. Provided that Callco has complied with Section 6.4,
the closing of the purchase and sale of the Retracted Shares pursuant to the
Retraction Call Right shall be deemed to have occurred as at the close of
business on the Retraction Date and, for greater certainty, no redemption by the
Company of such Retracted Shares shall take place on the Retraction Date. In the
event that
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Callco does not deliver a Callco Call Notice within such five Business Day
period, and provided that the Retraction Request is not revoked by the holder in
the manner specified in Section 6.7, the Company shall redeem the Retracted
Shares on the Retraction Date and in the manner otherwise contemplated in this
Article 6.
6.4 The Company or Callco, as the case may be, shall deliver or cause
the Transfer Agent to deliver to the relevant holder, at the address of the
holder recorded in the register of the Company for the Exchangeable Shares or at
the address specified in the holder's Retraction Request or by holding for
pick-up by the holder at the registered office of the Company or at any office
of the Transfer Agent as may be specified by the Company by notice to such
holder of Exchangeable Shares, the Exchangeable Share Consideration representing
the total Retraction Price or the total Purchase Price, as the case may be, and
such delivery of such Exchangeable Share Consideration to the Transfer Agent
shall be deemed to be payment of and shall satisfy and discharge all liability
for the total Retraction Price or total Purchase Price, as the case may be, to
the extent that the same is represented by such Exchangeable Share
Consideration.
6.5 On and after the close of business on the Retraction Date, the
holder of the Retracted Shares shall cease to be a holder of such Retracted
Shares and shall not be entitled to exercise any of the rights of a holder in
respect thereof, other than the right to receive the total Retraction Price or
total Purchase Price, as the case may be, unless upon presentation and surrender
of certificates in accordance with the foregoing provisions, payment of the
total Retraction Price or the total Purchase Price, as the case may be, shall
not be made as provided in Section 6.4, in which case the rights of such holder
shall remain unaffected until the total Retraction Price or the total Purchase
Price, as the case may be, has been paid in the manner hereinbefore provided. On
and after the close of business on the Retraction Date, provided that
presentation and surrender of certificates and payment of the total Retraction
Price or the total Purchase Price, as the case may be, has been made in
accordance with the foregoing provisions, the holder of the Retracted Shares so
redeemed by the Company or purchased by Callco shall thereafter be considered
and deemed for all purposes to be the holder of the Duke Energy Common Shares
delivered to it.
6.6 Notwithstanding any other provision of this Article 6, the Company
shall not be obligated to redeem Retracted Shares specified by a holder in a
Retraction Request to the extent that such redemption of Retracted Shares would
be contrary to solvency requirements or other provisions of applicable law. If
the Company believes that on any Retraction Date it would not be permitted by
any of such provisions to redeem the Retracted Shares tendered for redemption on
such date, and provided that Callco shall not have exercised the Retraction Call
Right with respect to the Retracted Shares, the Company shall only be obligated
to redeem Retracted Shares specified by a holder in a Retraction Request to the
extent of the maximum number that may be so redeemed (rounded down to a whole
number of shares) as would not be contrary to such provisions and shall notify
the holder at least two Business Days prior to the Retraction Date as to the
number of Retracted Shares which will not be redeemed by the Company. In any
case in which the redemption by the Company of Retracted Shares would be
contrary to solvency requirements or other provisions of applicable law, the
Company shall redeem the maximum number of Exchangeable Shares which the Board
of Directors determines the Company is permitted to redeem as of the Retraction
Date on a pro rata basis and shall issue to each holder of Retracted Shares a
new certificate, at the expense of the Company, representing the Retracted
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Shares not redeemed by the Company pursuant to Section 6.2. Provided that the
Retraction Request is not revoked by the holder in the manner specified in
Section 6.7 and Callco does not exercise the Retraction Call Right, the holder
of any such Retracted Shares not redeemed by the Company pursuant to Section 6.2
as a result of solvency requirements or other provisions of applicable law shall
be deemed by giving the Retraction Request to have instructed the Trustee to
require Duke Energy to purchase such Retracted Shares from such holder on the
Retraction Date or as soon as practicable thereafter on payment by Duke Energy
to such holder of the Retraction Price for each such Retracted Share, all as
more specifically provided in the Voting and Exchange Trust Agreement.
6.7 A holder of Retracted Shares may, by notice in writing given by the
holder to the Company before the close of business on the Business Day
immediately preceding the Retraction Date, withdraw its Retraction Request, in
which event such Retraction Request shall be null and void and, for greater
certainty, the revocable offer constituted by the Retraction Request to sell the
Retracted Shares to Callco shall be deemed to have been revoked.
ARTICLE 7
REDEMPTION OF EXCHANGEABLE SHARES BY THE COMPANY
7.1 Subject to applicable law, and provided Callco has not exercised the
Redemption Call Right, the Company shall on the Redemption Date redeem all but
not less than all of the then outstanding Exchangeable Shares for an amount per
share equal to the Exchangeable Share Price applicable on the last Business Day
prior to the Redemption Date (the "Redemption Price").
7.2 In any case of a redemption of Exchangeable Shares under this
Article 7, the Company shall, at least 45 days before the Redemption Date (other
than a Redemption Date established in connection with a Duke Energy Control
Transaction, an Exchangeable Share Voting Event, an Exempt Exchangeable Share
Voting Event or a Distribution Date), send or cause to be sent to each holder of
Exchangeable Shares a notice in writing of the redemption by the Company or the
purchase by Callco under the Redemption Call Right, as the case may be, of the
Exchangeable Shares held by such holder. In the case of a Redemption Date
established in connection with a Duke Energy Control Transaction, an
Exchangeable Share Voting Event, an Exempt Exchangeable Share Voting Event or a
Distribution Date, the written notice of redemption by the Company or the
purchase by Callco under the Redemption Call Right will be sent on or before the
Redemption Date, on as many days prior written notice as may be determined by
the Board of Directors to be reasonably practicable in the circumstances. In any
such case, such notice shall set out the formula for determining the Redemption
Price or the Redemption Call Purchase Price, as the case may be, the Redemption
Date and, if applicable, particulars of the Redemption Call Right. In the case
of any notice given in connection with a possible Redemption Date, such notice
will be given contingently and will be withdrawn if the contingency does not
occur.
7.3 On or after the Redemption Date and subject to the exercise by
Callco of the Redemption Call Right, the Company shall cause to be delivered to
the holders of the Exchangeable Shares to be redeemed the Redemption Price for
each such Exchangeable Share
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upon presentation and surrender at the registered office of the Company or at
any office of the Transfer Agent as may be specified by the Company in the
notice described in Section 7.2 of the certificates representing such
Exchangeable Shares, together with such other documents and instruments as may
be required to effect a transfer of Exchangeable Shares under the CBCA and the
articles and by-laws of the Company and such additional documents and
instruments as the Transfer Agent and the Company may reasonably require.
Payment of the total Redemption Price for such Exchangeable Shares shall be made
by delivery to each holder, at the address of the holder recorded in the
securities register of the Company or by holding for pick-up by the holder at
the registered office of the Company or at any office of the Transfer Agent as
may be specified by the Company in such notice, on behalf of the Company of the
Exchangeable Share Consideration representing the total Redemption Price. On and
after the Redemption Date, the holders of the Exchangeable Shares called for
redemption shall cease to be holders of such Exchangeable Shares and shall not
be entitled to exercise any of the rights of holders in respect thereof, other
than the right to receive their proportionate part of the total Redemption
Price, unless payment of the total Redemption Price for such Exchangeable Shares
shall not be made upon presentation and surrender of certificates in accordance
with the foregoing provisions, in which case the rights of the holders shall
remain unaffected until the total Redemption Price has been paid in the manner
hereinbefore provided. The Company shall have the right at any time after the
sending of notice of its intention to redeem the Exchangeable Shares as
aforesaid to deposit or cause to be deposited the Exchangeable Share
Consideration with respect to the Exchangeable Shares so called for redemption,
or of such of the said Exchangeable Shares represented by certificates that have
not at the date of such deposit been surrendered by the holders thereof in
connection with such redemption, in a custodial account with any chartered bank
or trust company in Canada named in such notice. Upon the later of such deposit
being made and the Redemption Date, the Exchangeable Shares in respect whereof
such deposit shall have been made shall be redeemed and the rights of the
holders thereof after such deposit or Redemption Date, as the case may be, shall
be limited to receiving their proportionate part of the total Redemption Price
for such Exchangeable Shares so deposited, against presentation and surrender of
the said certificates held by them, respectively, in accordance with the
foregoing provisions. Upon such payment or deposit of such Exchangeable Share
Consideration, the holders of the Exchangeable Shares shall thereafter be
considered and deemed for all purposes to be holders of the Duke Energy Common
Shares delivered to them or the custodian on their behalf; provided that in the
case of a Redemption Date established in connection with a Distribution Date,
the holders of Exchangeable Shares shall be considered and deemed for the
purposes of the Duke Energy Rights Agreement to be and treated as record holders
of Duke Energy Common Shares on and after the Redemption Date, regardless of
when such payment or deposit of such Exchangeable Share Consideration is made.
ARTICLE 8
PURCHASE FOR CANCELLATION
1-16
8.1 Subject to applicable law and the articles of the Company and
notwithstanding Section 8.2, the Company may at any time and from time to time
purchase for cancellation all or any part of the Exchangeable Shares by private
agreement with any holder of Exchangeable Shares.
8.2 Subject to applicable law and the articles of the Company, the
Company may at any time and from time to time purchase for cancellation all or
any part of the outstanding Exchangeable Shares by tender to all the holders of
record of Exchangeable Shares then outstanding or through the facilities of any
stock exchange on which the Exchangeable Shares are listed or quoted at any
price per share together with an amount equal to all declared and unpaid
dividends thereon for which the record date has occurred prior to the date of
purchase. If in response to an invitation for tenders under the provisions of
this Section 8.2, more Exchangeable Shares are tendered at a price or prices
acceptable to the Company than the Company is prepared to purchase, the
Exchangeable Shares to be purchased by the Company shall be purchased as nearly
as may be pro rata according to the number of shares tendered by each holder who
submits a tender to the Company, provided that when shares are tendered at
different prices, the pro rating shall be effected (disregarding fractions) only
with respect to the shares tendered at the price at which more shares were
tendered than the Company is prepared to purchase after the Company has
purchased all the shares tendered at lower prices. If only part of the
Exchangeable Shares represented by any certificate shall be purchased, a new
certificate for the balance of such shares shall be issued at the expense of the
Company.
ARTICLE 9
VOTING RIGHTS
9.1 Except as required by applicable law and by Article 10, Section 11.1
and Section 12.2, the holders of the Exchangeable Shares shall not be entitled
as such to receive notice of or to attend any meeting of the shareholders of the
Company or to vote at any such meeting.
ARTICLE 10
AMENDMENT AND APPROVAL
10.1 The rights, privileges, restrictions and conditions attaching to the
Exchangeable Shares may be added to, changed or removed but only with the
approval of the holders of the Exchangeable Shares given as hereinafter
specified.
10.2 Any approval given by the holders of the Exchangeable Shares to add
to, change or remove any right, privilege, restriction or condition attaching to
the Exchangeable Shares or any other matter requiring the approval or consent of
the holders of the Exchangeable Shares shall be deemed to have been sufficiently
given if it shall have been given in accordance with applicable law subject to a
minimum requirement that such approval be evidenced by resolution passed by not
less than 66 2/3% of the votes cast on such resolution by holders represented in
person or by proxy at a meeting of holders of Exchangeable Shares duly called
and held at which the holders of at least 25% of the outstanding Exchangeable
Shares at that time are present or represented by proxy; provided that if at any
such meeting the holders of at least 25% of the outstanding Exchangeable Shares
at that time are not present or represented by proxy within one-
1-17
half hour after the time appointed for such meeting, then the meeting shall be
adjourned to such date not less than five days thereafter and to such time and
place as may be designated by the Chair of such meeting. At such adjourned
meeting, the holders of Exchangeable Shares present or represented by proxy
thereat may transact the business for which the meeting was originally called
and a resolution passed thereat by the affirmative vote of not less than 66 2/3%
of the votes cast on such resolution by holders represented in person or by
proxy at such meeting shall constitute the approval or consent of the holders of
the Exchangeable Shares. For purposes of this section, any spoiled votes,
illegible votes, defective votes and abstentions shall be deemed to be votes not
cast.
ARTICLE 11
RECIPROCAL CHANGES, ETC. IN RESPECT OF
DUKE ENERGY COMMON SHARES
11.1 Each holder of an Exchangeable Share acknowledges that the Support
Agreement provides, in part, that Duke Energy will not, without the prior
approval of the Company and the prior approval of the holders of the
Exchangeable Shares given in accordance with Section 10.2 of these share
provisions:
(a) issue or distribute Duke Energy Common Shares (or securities
exchangeable for or convertible into or carrying rights to acquire Duke Energy
Common Shares) to the holders of all or substantially all of the then
outstanding Duke Energy Common Shares by way of stock dividend or other
distribution, other than an issue of Duke Energy Common Shares (or securities
exchangeable for or convertible into or carrying rights to acquire Duke Energy
Common Shares) to holders of Duke Energy Common Shares who (i) exercise an
option to receive dividends in Duke Energy Common Shares (or securities
exchangeable for or convertible into or carrying rights to acquire Duke Energy
Common Shares) in lieu of receiving cash dividends, or (ii) pursuant to any
dividend reinvestment plan or scrip dividend;
(b) issue or distribute rights, options or warrants to the holders
of all or substantially all of the then outstanding Duke Energy Common Shares
entitling them to subscribe for or to purchase Duke Energy Common Shares (or
securities exchangeable for or convertible into or carrying rights to acquire
Duke Energy Common Shares); or
(c) issue or distribute to the holders of all or substantially all
of the then outstanding Duke Energy Common Shares:
(i) shares or securities of Duke Energy of any class other
than Duke Energy Common Shares (other than shares convertible into or
exchangeable for or carrying rights to acquire Duke Energy Common Shares);
(ii) rights, options or warrants other than those referred to
in Section 11.1(b) above;
(iii) evidences of indebtedness of Duke Energy; or
(iv) assets of Duke Energy,
1-18
unless the economic equivalent on a per share basis of such rights, options,
warrants, securities, shares, evidences of indebtedness or other assets is
issued or distributed simultaneously to holders of the Exchangeable Shares.
11.2 Each holder of an Exchangeable Share acknowledges that the Support
Agreement further provides, in part, that Duke Energy will not without the prior
approval of the Company and the prior approval of the holders of the
Exchangeable Shares given in accordance with Section 10.2:
(a) subdivide, redivide or change the then outstanding Duke Energy
Common Shares into a greater number of Duke Energy Common Shares;
(b) reduce, combine, consolidate or change the then outstanding Duke
Energy Common Shares into a lesser number of Duke Energy Common Shares; or
(c) reclassify or otherwise change the Duke Energy Common Shares or
effect an amalgamation, merger, reorganization or other transaction affecting
the Duke Energy Common Shares,
unless the same or an economically equivalent change shall simultaneously be
made to, or in the rights of the holders of, the Exchangeable Shares and such
change is permitted under applicable law. The Support Agreement further
provides, in part, that the aforesaid provisions of the Support Agreement shall
not be changed without the approval of the holders of the Exchangeable Shares
given in accordance with Section 10.2.
ARTICLE 12
ACTIONS BY THE COMPANY UNDER SUPPORT AGREEMENT
12.1 The Company will take all such actions and do all such things as
shall be necessary or advisable to perform and comply with and to ensure
performance and compliance by Duke Energy, Callco and the Company with all
provisions of the Support Agreement and the Voting Trust and Exchange Agreement
applicable to Duke Energy, Callco and the Company, respectively, in accordance
with the terms thereof including taking all such actions and doing all such
things as shall be necessary or advisable to enforce to the fullest extent
possible for the direct benefit of the Company all rights and benefits in favour
of the Company under or pursuant thereto.
12.2 The Company shall not propose, agree to or otherwise give effect to
any amendment to, or waiver or forgiveness of its rights or obligations under,
the Support Agreement or the Voting Trust and Exchange Agreement without the
approval of the holders of the Exchangeable Shares given in accordance with
Section 10.2 other than such amendments, waivers and/or forgiveness as may be
necessary or advisable for the purposes of:
(a) adding to the covenants of the other parties to such agreement
for the protection of the Company or the holders of the Exchangeable Shares
thereunder;
1-19
(b) making such provisions or modifications not inconsistent with
such agreement as may be necessary or desirable with respect to matters or
questions arising thereunder which, in the good faith opinion of the Board of
Directors, it may be expedient to make, provided that the Board of Directors
shall be of the good faith opinion, after consultation with counsel, that such
provisions and modifications will not be prejudicial to the interests of the
holders of the Exchangeable Shares; or
(c) making such changes in or corrections to such agreement which,
on the advice of counsel to the Company, are required for the purpose of curing
or correcting any ambiguity or defect or inconsistent provision or clerical
omission or mistake or manifest error contained therein, provided that the Board
of Directors shall be of the good faith opinion, after consultation with
counsel, that such changes or corrections will not be prejudicial to the
interests of the holders of the Exchangeable Shares.
ARTICLE 13
LEGEND; CALL RIGHTS; WITHHOLDING RIGHTS
13.1 The certificates evidencing the Exchangeable Shares shall contain or
have affixed thereto a legend in form and on terms approved by the Board of
Directors, with respect to the Support Agreement, the provisions of the Plan of
Arrangement relating to the Liquidation Call Right and the Redemption Call
Right, and the Voting and Exchange Trust Agreement (including the provisions
with respect to the voting rights, exchange right and automatic exchange
thereunder) and the Retraction Call Right.
13.2 Each holder of an Exchangeable Share, whether of record or
beneficial, by virtue of becoming and being such a holder shall be deemed to
acknowledge each of the Liquidation Call Right, the Retraction Call Right and
the Redemption Call Right, in each case, in favour of Callco, and the overriding
nature thereof in connection with the liquidation, dissolution or winding-up of
the Company or any other distribution of the assets of the Company among its
shareholders for the purpose of winding-up its affairs, or the retraction or
redemption of Exchangeable Shares, as the case may be, and to be bound thereby
in favour of Callco as therein provided.
13.3 The Company, Callco, Duke Energy and the Transfer Agent shall be
entitled to deduct and withhold from any dividend or consideration otherwise
payable to any holder of Exchangeable Shares such amounts as the Company,
Callco, Duke Energy or the Transfer Agent is required to deduct and withhold
with respect to such payment under the Income Tax Act (Canada), the United
States Internal Revenue Code of 1986 or any provision of provincial, state,
territorial, local or foreign tax law, in each case, as amended. To the extent
that amounts are so withheld, such withheld amounts shall be treated for all
purposes hereof as having been paid to the holder of the Exchangeable Shares in
respect of which such deduction and withholding was made, provided that such
withheld amounts are actually remitted to the appropriate taxing authority. To
the extent that the amount so required or permitted to be deducted or withheld
from any payment to a holder exceeds the cash portion of the consideration
otherwise payable to the holder, the Company, Callco, Duke Energy and the
Transfer Agent are hereby authorized to sell or otherwise dispose of such
portion of the consideration as is necessary to provide sufficient
1-20
funds to the Company, Callco, Duke Energy or the Transfer Agent, as the case may
be, to enable it to comply with such deduction or withholding requirement and
the Company, Callco, Duke Energy or the Transfer Agent shall notify the holder
thereof and remit any unapplied balance of the net proceeds of such sale.
ARTICLE 14
GENERAL
14.1 Any notice, request or other communication to be given to the
Company by a holder of Exchangeable Shares shall be in writing and shall be
valid and effective if given by mail (postage prepaid) or by telecopy or by
delivery to the registered office of the Company and addressed to the attention
of the Secretary of the Company. Any such notice, request or other
communication, if given by mail, telecopy or delivery, shall only be deemed to
have been given and received upon actual receipt thereof by the Company.
14.2 Any presentation and surrender by a holder of Exchangeable Shares
to the Company or the Transfer Agent of certificates representing Exchangeable
Shares in connection with the liquidation, dissolution or winding-up of the
Company or the retraction or redemption of Exchangeable Shares shall be made by
registered mail (postage prepaid) or by delivery to the registered office of the
Company or to such office of the Transfer Agent as may be specified by the
Company, in each case, addressed to the attention of the Secretary of the
Company. Any such presentation and surrender of certificates shall only be
deemed to have been made and to be effective upon actual receipt thereof by the
Company or the Transfer Agent, as the case may be. Any such presentation and
surrender of certificates made by registered mail shall be at the sole risk of
the holder mailing the same.
14.3 Any notice, request or other communication to be given to a holder
of Exchangeable Shares by or on behalf of the Company shall be in writing and
shall be valid and effective if given by mail (postage prepaid) or by delivery
to the address of the holder recorded in the register of the Company or, in the
event of the address of any such holder not being so recorded, then at the last
address of such holder known to the Company. Any such notice, request or other
communication, if given by mail, shall be deemed to have been given and received
on the third Business Day following the date of mailing and, if given by
delivery, shall be deemed to have been given and received on the date of
delivery. Accidental failure or omission to give any notice, request or other
communication to one or more holders of Exchangeable Shares shall not invalidate
or otherwise alter or affect any action or proceeding intended to be taken by
the Company pursuant thereto.
14.4 Subject to the requirements of National Policy Statement 41 and any
successor policy statement or rule of the Canadian Securities Administrators or
other applicable law, for greater certainty, the Company shall not be required
for any purpose under these share provisions to recognize or take account of
Persons who are not recorded as such in the securities register for the
Exchangeable Shares.
14.5 If the Company determines that mail service is or is threatened to
be interrupted at the time when the Company is required or elects to give any
notice to the holders of
1-21
Exchangeable Shares hereunder, the Company shall, notwithstanding the provisions
hereof, give such notice by means of publication in The Globe and Mail; national
edition, or any other English language daily newspaper or newspapers of general
circulation in Canada and in a French language daily newspaper of general
circulation in the Province of Quebec, once in each of two successive weeks, and
notice so published shall be deemed to have been given on the latest date on
which the first publication has taken place. If, by reason of any actual or
threatened interruption of mail service due to strike, lock-out or otherwise,
any notice to be given to the Company would be unlikely to reach its destination
in a timely manner, such notice shall be valid and effective only if delivered
personally to the Company in accordance with Section 14.1 or 14.2, as the case
may be.
1-22
SCHEDULE A
RETRACTION REQUEST
[TO BE PRINTED ON EXCHANGEABLE SHARE CERTIFICATES]
To 3946509 Canada Inc. ("Exchangeco") and 3058368 Nova Scotia Company ("Callco")
This notice is given pursuant to Article 6 of the rights, privileges,
restrictions and conditions (the "Share Provisions") attaching to the
Exchangeable Shares of Exchangeco represented by this certificate and all
capitalized words and expressions used in this notice that are defined in the
Share Provisions have the meanings ascribed to such words and expressions in
such Share Provisions.
The undersigned hereby notifies Exchangeco that, subject to the Retraction
Call Right referred to below, the undersigned desires to have Exchangeco redeem
in accordance with Article 6 of the Share Provisions:
[ ] all share(s) represented by this certificate; or
[ ] _________ share(s) only represented by this certificate.
The undersigned hereby notifies Exchangeco that the Retraction Date shall
be ___________________________.
NOTE: The Retraction Date must be a Business Day and must not be less than 10
Business Days nor more than 15 Business Days after the date upon which
this notice is received by Exchangeco. If no such Business Day is
specified above, the Retraction Date shall be deemed to be the 15th
Business Day after the date on which this notice is received by
Exchangeco.
The undersigned acknowledges the overriding Retraction Call Right of
Callco to purchase all but not less than all the Retracted Shares from the
undersigned and that this notice is and shall be deemed to be a revocable offer
by the undersigned to sell the Retracted Shares to Callco in accordance with the
Retraction Call Right on the Retraction Date for the Purchase Price and on the
other terms and conditions set out in Section 6.3 of the Share Provisions. This
Retraction Request, and this offer to sell the Retracted Shares to Callco, may
be revoked and withdrawn by the undersigned only by notice in writing given to
Exchangeco at any time before the close of business on the Business Day
immediately preceding the Retraction Date.
The undersigned acknowledges that if, as a result of solvency provisions
of applicable law, Exchangeco is unable to redeem all Retracted Shares, the
undersigned will be deemed to have exercised the Exchange Right (as defined in
the Voting and Exchange Trust Agreement) so as to require Duke Energy to
purchase the unredeemed Retracted Shares.
A-1
The undersigned hereby represents and warrants to Callco and Exchangeco
that the undersigned:
[ ] is
(select one)
[ ] is not
a resident in Canada for purposes of the Income Tax Act (Canada). The
undersigned acknowledges that in the absence of an indication that the
undersigned is a resident in Canada, withholding on account of Canadian tax may
be made from amounts payable to the undersigned on the redemption or purchase of
the Retracted Shares.
The undersigned hereby represents and warrants to Callco and Exchangeco
that the undersigned has good title to, and owns, the share(s) represented by
this certificate to be acquired by Callco or Exchangeco, as the case may be,
free and clear of all liens, claims and encumbrances.
_______ ______________________________________ __________________________
(Date) (Signature of Shareholder) (Guarantee of Signature)
[ ] Please check box if the securities and any cheque(s) resulting from the
retraction or purchase of the Retracted Shares are to be held for pick-up
by the shareholder from the Transfer Agent, failing which the securities
and any cheque(s) will be mailed to the last address of the shareholder as
it appears on the register.
NOTE: This panel must be completed and this certificate, together with such
additional documents as the Transfer Agent may require, must be
deposited with the Transfer Agent. The securities and any cheque(s)
resulting from the retraction or purchase of the Retracted Shares will
be issued and registered in, and made payable to, respectively, the name
of the shareholder as it appears on the register of Exchangeco and the
securities and any cheque(s) resulting from such retraction or purchase
will be delivered to such shareholder as indicated above, unless the
form appearing immediately below is duly completed.
Date:__________________
Name of Person in Whose Name Securities
or Cheque(s) Are to be Registered, Issued or
Delivered (please print): ______________________________________________________
Street Address or P.O. Box: ____________________________________________________
Signature of Shareholder: ______________________________________________________
City, Province and Postal Code: ________________________________________________
Signature Guaranteed by: _______________________________________________________
A-2
NOTE: If this Retraction Request is for less than all of the shares
represented by this certificate, a certificate representing the
remaining share(s) of Exchangeco represented by this certificate will be
issued and registered in the name of the shareholder as it appears on
the register of Exchangeco, unless the Share Transfer Power on the share
certificate is duly completed in respect of such share(s).
A-3
SCHEDULE F
FORM OF SUPPORT AGREEMENT
SUPPORT AGREEMENT ("Agreement") made as of the ___ day of _____, 200_.
B E T W E E N:
DUKE ENERGY CORPORATION,
a corporation existing under the laws of the State of North Carolina
(hereinafter referred to as "Duke Energy"),
OF THE FIRST PART,
- and -
3058368 NOVA SCOTIA COMPANY,
an unlimited liability company existing under
the laws of the Province of Nova Scotia
(hereinafter referred to as "Callco"),
OF THE SECOND PART,
- and -
3946509 CANADA INC.,
a company existing under the laws of Canada
(hereinafter referred to as "Exchangeco"),
OF THE THIRD PART.
WHEREAS, in connection with a combination agreement (the "Combination
Agreement") made as of September 20, 2001 among Duke Energy, Exchangeco, Callco
and Westcoast Energy Inc., a corporation existing under the laws of Canada
("Westcoast"), Exchangeco is to issue exchangeable shares (the "Exchangeable
Shares") to certain holders of common shares in the capital of Westcoast
pursuant to the plan of arrangement (the "Arrangement") contemplated by the
Combination Agreement; and
WHEREAS, pursuant to the Combination Agreement, Duke Energy and Exchangeco
have agreed to execute a support agreement substantially in the form of this
Agreement on the Effective Date (as defined in the Combination Agreement);
NOW, THEREFORE, in consideration of the respective covenants and
agreements provided in this Agreement and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged),
the parties hereto covenant and agree as follows:
ARTICLE 1
INTERPRETATION
1.1 Defined Terms
Each term denoted herein by initial capital letters and not otherwise
defined herein shall have the meaning ascribed thereto in the rights,
privileges, restrictions and conditions (collectively, the "Exchangeable Share
Provisions") attaching to the Exchangeable Shares attached as Appendix 1 to the
Arrangement and as set out in the Articles of Arrangement of Westcoast, unless
the context requires otherwise.
1.2 Interpretation Not Affected by Headings
The division of this agreement into articles, sections and other portions
and the insertion of headings are for convenience of reference only and shall
not affect the construction or interpretation hereof. Unless otherwise
indicated, all references to an "Article" or "Section" followed by a number
refer to the specified Article or Section of this Agreement. The terms "this
Agreement," "hereof," "herein" and "hereunder" and similar expressions refer to
this agreement and not to any particular Article, Section or other portion
hereof.
1.3 Rules of Construction
Unless otherwise specifically indicated or the context otherwise requires,
(a) all references to "dollars" or "$" mean United States dollars, (b) words
importing the singular shall include the plural and vice versa and words
importing any gender shall include all genders, and (c) "include," "includes"
and "including" shall be deemed to be followed by the words "without
limitation."
1.4 Date for any Action
If the event that any date on which any action is required to be taken
hereunder by any of the parties hereto is not a Business Day, such action shall
be required to be taken on the next succeeding day that is a Business Day.
ARTICLE 2
COVENANTS OF DUKE ENERGY AND EXCHANGECO
2.1 Covenants Regarding Exchangeable Shares
So long as any Exchangeable Shares not owned by Duke Energy or its
Affiliates are outstanding, Duke Energy will:
(a) not declare or pay any dividend on the Duke Energy Common Shares
unless (i) Exchangeco shall (w) on the same day declare or pay, as
the case may be, an equivalent dividend (as provided for in the
Exchangeable Share Provisions) on the Exchangeable Shares (an
"Equivalent Dividend") and (x) Exchangeco shall have sufficient
money or other assets or authorized but unissued securities
available to enable the due declaration and the due and punctual
payment, in accordance with
-2-
applicable law, of any such Equivalent Dividend, or (ii) Exchangeco
shall (y) subdivide the Exchangeable Shares in lieu of stock
dividend thereon (as provided for in the Exchangeable Share
Provisions) (an "Equivalent Stock Subdivision"), and (z) have
sufficient authorized but unissued securities available to enable
the Equivalent Stock Subdivision;
(b) advise Exchangeco sufficiently in advance of the declaration by Duke
Energy of any dividend on Duke Energy Common Shares and take all
such other actions as are reasonably necessary, in cooperation with
Exchangeco, to ensure that (i) the respective declaration date,
record date and payment date for an Equivalent Dividend on the
Exchangeable Shares shall be the same as the declaration date,
record date and payment date for the corresponding dividend on the
Duke Energy Common Shares, or (ii) the record date and effective
date for an Equivalent Stock Subdivision shall be the same as the
record date and payment date for the stock dividend on the Duke
Energy Common Shares;
(c) ensure that the record date for any dividend declared on Duke Energy
Common Shares is not less than 10 Business Days after the
declaration date of such dividend;
(d) take all such actions and do all such things as are reasonably
necessary or desirable to enable and permit Exchangeco, in
accordance with applicable law, to pay and otherwise perform its
obligations with respect to the satisfaction of the Liquidation
Amount, the Retraction Price or the Redemption Price in respect of
each issued and outstanding Exchangeable Share (other than
Exchangeable Shares owned by Duke Energy or its Affiliates) upon the
liquidation, dissolution or winding-up of Exchangeco or any other
distribution of the assets of Exchangeco among its shareholders for
the purpose of winding-up its affairs, the delivery of a Retraction
Request by a holder of Exchangeable Shares or a redemption of
Exchangeable Shares by Exchangeco, as the case may be, including all
such actions and all such things as are necessary or desirable to
enable and permit Exchangeco to cause to be delivered Duke Energy
Common Shares to the holders of Exchangeable Shares in accordance
with the provisions of Article 5, 6 or 7, as the case may be, of the
Exchangeable Share Provisions; and
(e) take all such actions and do all such things as are reasonably
necessary or desirable to enable and permit Callco, in accordance
with applicable law, to perform its obligations arising upon the
exercise by it of the Liquidation Call Right, the Retraction Call
Right or the Redemption Call Right, including all such actions and
all such things as are necessary or desirable to enable and permit
Callco to cause to be delivered Duke Energy Common Shares to the
holders of Exchangeable Shares in accordance with the provisions of
the Liquidation Call Right, the Retraction Call Right or the
Redemption Call Right, as the case may be.
2.2 Segregation of Funds
Duke Energy will cause Exchangeco to deposit a sufficient amount of funds
in a separate account of Exchangeco and segregate a sufficient amount of such
other assets and property as is
-3-
necessary to enable Exchangeco to pay dividends when due and to pay or otherwise
satisfy its respective obligations under Article 5, 6 or 7 of the Exchangeable
Share Provisions, as applicable.
2.3 Reservation of Duke Energy Common Shares
Duke Energy hereby represents, warrants and covenants in favour of
Exchangeco and Callco that Duke Energy has either issued to the Trustee or
reserved for issuance and will, at all times while any Exchangeable Shares
(other than Exchangeable Shares held by Duke Energy or its Affiliates) are
outstanding, keep available, free from preemptive and other rights, out of its
authorized and unissued capital stock such number of Duke Energy Common Shares
(or other shares or securities into which Duke Energy Common Shares may be
reclassified or changed as contemplated by Section 2.7 hereof) (a) as is equal
to the sum of (i) the number of Exchangeable Shares issued and outstanding from
time to time and (ii) the number of Exchangeable Shares issuable upon the
exercise of all rights to acquire Exchangeable Shares outstanding from time to
time and (b) as are now and may hereafter be required to enable and permit Duke
Energy to meet its obligations under the Voting and Exchange Trust Agreement and
under any other security or commitment pursuant to the Arrangement with respect
to which Duke Energy may now or hereafter be required to issue Duke Energy
Common Shares, to enable and permit Callco to meet its obligations arising upon
exercise by it of each of the Liquidation Call Right, the Retraction Call Right
and the Redemption Call Right and to enable and permit Exchangeco to meet its
obligations hereunder and under the Exchangeable Share Provisions.
2.4 Notification of Certain Events
In order to assist Duke Energy in compliance with its obligations
hereunder and to permit Callco to exercise the Liquidation Call Right, the
Retraction Call Right and the Redemption Call Right, Exchangeco will notify Duke
Energy and Callco of each of the following events at the times set forth below:
(a) in the event of any determination by the Board of Directors of
Exchangeco to institute voluntary liquidation, dissolution or
winding-up proceedings with respect to Exchangeco or to effect any
other distribution of the assets of Exchangeco among its
shareholders for the purpose of winding up its affairs, at least 60
days prior to the proposed effective date of such liquidation,
dissolution, winding-up or other distribution;
(b) promptly, upon the earlier of receipt by Exchangeco of notice of and
Exchangeco otherwise becoming aware of any threatened or instituted
claim, suit, petition or other proceeding with respect to the
involuntary liquidation, dissolution or winding-up of Exchangeco or
to effect any other distribution of the assets of Exchangeco among
its shareholders for the purpose of winding up its affairs;
(c) promptly, upon receipt by Exchangeco of a Retraction Request;
(d) promptly following the date on which notice of redemption is given
to holders of Exchangeable Shares, upon the determination of a
Redemption Date in accordance with the Exchangeable Share
Provisions; and
-4-
(e) promptly upon the issuance by Exchangeco of any Exchangeable Shares
or rights to acquire Exchangeable Shares (other than the issuance of
Exchangeable Shares and rights to acquire Exchangeable Shares in
exchange for outstanding Westcoast Common Shares pursuant to the
Arrangement).
2.5 Delivery of Duke Energy Common Shares to Exchangeco and Callco
In furtherance of its obligations under Sections 2.1(d) and (e) hereof,
upon notice from Exchangeco or Callco of any event that requires Exchangeco or
Callco to cause to be delivered Duke Energy Common Shares to any holder of
Exchangeable Shares, Duke Energy shall forthwith issue and deliver the requisite
number of Duke Energy Common Shares to be received by, and issued to or to the
order of, the former holder of the surrendered Exchangeable Shares, as
Exchangeco or Callco shall direct. All such Duke Energy Common Shares shall be
duly authorized, validly issued and fully paid and non-assessable and shall be
free and clear of any lien, claim or encumbrance. In consideration of the
issuance and delivery of such Duke Energy Common Share, Callco or Exchangeco, as
the case may be, shall pay a purchase price equal to the fair market value of
such Duke Energy Common Share.
2.6 Qualification of Duke Energy Common Shares
Duke Energy covenants that if any Duke Energy Common Shares (or other
shares or securities into which Duke Energy Common Shares may be reclassified or
changed as contemplated by Section 2.7 hereof) (other than Duke Energy Common
Shares held by the Trustee) to be issued and delivered hereunder (including for
greater certainty, pursuant to the Exchangeable Share Provisions, or pursuant to
the Exchange Right or the Automatic Exchange Rights (all as defined in the
Voting and Exchange Trust Agreement)) require registration or qualification
with, or approval of, or the filing of any document, including any prospectus or
similar document, the taking of any proceeding with, or the obtaining of any
order, ruling or consent from, any governmental or regulatory authority under
any Canadian or United States federal, provincial, territorial or state
securities or other law or regulation or pursuant to the rules and regulations
of any securities or other regulatory authority, or the fulfillment of any other
United States or Canadian legal requirement (collectively, the "Applicable
Laws") before such shares (or other shares or securities into which Duke Energy
Common Shares may be reclassified or changed as contemplated by Section 2.7
hereof) may be issued and delivered by Duke Energy at the direction of
Exchangeco or Callco, if applicable, to the holder of surrendered Exchangeable
Shares or in order that such shares (or other shares or securities into which
Duke Energy Common Shares may be reclassified or changed as contemplated by
Section 2.7 hereof) may be freely traded thereafter (other than any restrictions
of general application on transfer by reason of a holder being a "control
person" of Duke Energy for purposes of Canadian provincial securities law or an
"affiliate" of Duke Energy for purposes of United States federal or state
securities law), Duke Energy will use its reasonable best efforts and in good
faith expeditiously take all such actions and do all such things as are
necessary or desirable and within its power to cause such Duke Energy Common
Shares (or other shares or securities into which Duke Energy Common Shares may
be reclassified or changed as contemplated by Section 2.7 hereof) to be and
remain duly registered, qualified or approved under United States and/or
Canadian law, as the case may be, to the extent expressly provided in the
Combination Agreement. Duke Energy will use its reasonable best efforts and in
good faith expeditiously take all such actions and do all
-5-
such things as are reasonably necessary or desirable to cause all Duke Energy
Common Shares (or other shares or securities into which Duke Energy Common
Shares may be reclassified or changed as contemplated by Section 2.7 hereof)
(other than Duke Energy Common Shares held by the Trustee) to be delivered
hereunder to be listed, quoted or posted for trading on all stock exchanges and
quotation systems on which outstanding Duke Energy Common Shares (or other
shares or securities into which Duke Energy Common Shares may be reclassified or
changed as contemplated by Section 2.7 hereof) are listed and are quoted or
posted for trading at such time.
2.7 Economic Equivalence
So long as any Exchangeable Shares not owned by Duke Energy or its
Affiliates are outstanding:
(a) Duke Energy will not, without prior approval of Exchangeco and the
prior approval of the holders of the Exchangeable Shares given in
accordance with Section 10.2 of the Exchangeable Share Provisions:
(i) issue or distribute Duke Energy Common Shares (or securities
exchangeable for or convertible into or carrying rights to
acquire Duke Energy Common Shares) to the holders of all or
substantially all of the then outstanding Duke Energy Common
Shares by way of stock dividend or other distribution, other
than an issue of Duke Energy Common Shares (or securities
exchangeable for or convertible into or carrying rights to
acquire Duke Energy Common Shares) to holders of Duke Energy
Common Shares who (A) exercise an option to receive dividends
in Duke Energy Common Shares (or securities exchangeable for
or convertible into or carrying rights to acquire Duke Energy
Common Shares) in lieu of receiving cash dividends, or (B)
pursuant to any dividend reinvestment plan or scrip dividend;
or
(ii) issue or distribute rights, options or warrants to the holders
of all or substantially all of the then outstanding Duke
Energy Common Shares entitling them to subscribe for or to
purchase Duke Energy Common Shares (or securities exchangeable
for or convertible into or carrying rights to acquire Duke
Energy Common Shares); or
(iii) issue or distribute to the holders of all or substantially all
of the then outstanding Duke Energy Common Shares (A) shares
or securities of Duke Energy of any class other than Duke
Energy Common Shares (other than shares convertible into or
exchangeable for or carrying rights to acquire Duke Energy
Common Shares), (B) rights, options or warrants other than
those referred to in Section 2.7(a)(ii) above, (C) evidences
of indebtedness of Duke Energy or (D) assets of Duke Energy,
unless the economic equivalent on a per share basis of such
rights, options, warrants, securities, shares, evidences of
indebtedness or other assets is issued or distributed
simultaneously to holders of the Exchangeable Shares.
-6-
(b) Duke Energy will not without the prior approval of Exchangeco and
the prior approval of the holders of the Exchangeable Shares given
in accordance with Section 10.2 of the Exchangeable Share
Provisions:
(i) subdivide, redivide or change the then outstanding Duke Energy
Common Shares into a greater number of Duke Energy Common
Shares; or
(ii) reduce, combine, consolidate or change the then outstanding
Duke Energy Common Shares into a lesser number of Duke Energy
Common Shares; or
(iii) reclassify or otherwise change Duke Energy Common Shares or
effect an amalgamation, merger, reorganization or other
transaction affecting the Duke Energy Common Shares,
unless the same or an economically equivalent change shall
simultaneously be made to, or in the rights of the holders of,
the Exchangeable Shares.
(c) Duke Energy will ensure that the record date for any event referred
to in Section 2.7(a) or 2.7(b) above, or (if no record date is
applicable for such event) the effective date for any such event, is
not less than five Business Days after the date on which such event
is declared or announced by Duke Energy (with contemporaneous
notification thereof by Duke Energy to Exchangeco).
(d) The Board of Directors of Exchangeco shall determine, in good faith
and in its sole discretion, economic equivalence for the purposes of
any event referred to in Section 2.7(a) or 2.7(b) above and each
such determination shall be conclusive and binding on Duke Energy.
In making each such determination, the following factors shall,
without excluding other factors determined by the Board of Directors
of Exchangeco to be relevant, be considered by the Board of
Directors of Exchangeco:
(i) in the case of any stock dividend or other distribution
payable in Duke Energy Common Shares, the number of such
shares issued in proportion to the number of Duke Energy
Common Shares previously outstanding;
(ii) in the case of the issuance or distribution of any rights,
options or warrants to subscribe for or purchase Duke Energy
Common Shares (or securities exchangeable for or convertible
into or carrying rights to acquire Duke Energy Common Shares),
the relationship between the exercise price of each such
right, option or warrant and the Current Market Price;
(iii) in the case of the issuance or distribution of any other form
of property (including any shares or securities of Duke Energy
of any class other than Duke Energy Common Shares, any rights,
options or warrants other than those referred to in Section
2.7(d)(ii) above, any evidences of indebtedness of Duke Energy
or any assets of Duke Energy), the relationship between the
fair market value (as determined by the Board of Directors of
Exchangeco in the manner above contemplated) of such property
to be issued or distributed with respect to each outstanding
Duke Energy Common Share and the Current Market Price;
-7-
(iv) in the case of any subdivision, redivision or change of the
then outstanding Duke Energy Common Shares into a greater
number of Duke Energy Common Shares or the reduction,
combination, consolidation or change of the then outstanding
Duke Energy Common Shares into a lesser number of Duke Energy
Common Shares or any amalgamation, merger, reorganization or
other transaction affecting Duke Energy Common Shares, the
effect thereof upon the then outstanding Duke Energy Common
Shares; and
(v) in all such cases, the general taxation consequences of the
relevant event to holders of Exchangeable Shares to the extent
that such consequences may differ from the taxation
consequences to holders of Duke Energy Common Shares as a
result of differences between taxation laws of Canada and the
United States (except for any differing consequences arising
as a result of differing marginal taxation rates and without
regard to the individual circumstances of holders of
Exchangeable Shares).
(e) Exchangeco agrees that, to the extent required, upon due notice from
Duke Energy, Exchangeco will use its best efforts to take or cause
to be taken such steps as may be necessary for the purposes of
ensuring that appropriate dividends are paid or other distributions
are made by Exchangeco, or subdivisions, redivisions or changes are
made to the Exchangeable Shares, in order to implement the required
economic equivalent with respect to the Duke Energy Common Shares
and Exchangeable Shares as provided for in this Section 2.7.
2.8 Tender Offers
In the event that a tender offer, share exchange offer, issuer bid,
take-over bid or similar transaction with respect to Duke Energy Common Shares
(an "Offer") is proposed by Duke Energy or is proposed to Duke Energy or its
shareholders and is recommended by the Board of Directors of Duke Energy, or is
otherwise effected or to be effected with the consent or approval of the Board
of Directors of Duke Energy, and the Exchangeable Shares are not redeemed by
Exchangeco or purchased by Callco pursuant to the Redemption Call Right, Duke
Energy will use its reasonable best efforts expeditiously and in good faith to
take all such actions and do all such things as are necessary or desirable to
enable and permit holders of Exchangeable Shares (other than Duke Energy and its
Affiliates) to participate in such Offer to the same extent and on an
economically equivalent basis as the holders of Duke Energy Common Shares,
without discrimination. Without limiting the generality of the foregoing, Duke
Energy will use its reasonable best efforts expeditiously and in good faith to
ensure that holders of Exchangeable Shares may participate in each such Offer
without being required to retract Exchangeable Shares as against Exchangeco (or,
if so required, to ensure that any such retraction, shall be effective only
upon, and shall be conditional upon, the closing of such Offer and only to the
extent necessary to tender or deposit to the Offer). Nothing herein shall affect
the rights of Exchangeco to redeem (or Callco to purchase pursuant to the
Redemption Call Right) Exchangeable Shares, as applicable, in the event of a
Duke Energy Control Transaction.
-8-
2.9 Ownership of Outstanding Shares
Without the prior approval of Exchangeco and the prior approval of the
holders of the Exchangeable Shares given in accordance with Section 10.2 of the
Exchangeable Share Provisions, Duke Energy covenants and agrees in favour of
Exchangeco that, as long as any outstanding Exchangeable Shares are owned by any
Person other than Duke Energy or any of its Affiliates, Duke Energy will be and
remain the direct or indirect beneficial owner of all issued and outstanding
voting shares in the capital of Exchangeco and Callco. Notwithstanding the
foregoing, Duke Energy shall not be in violation of this section if any person
or group of persons acting jointly or in concert acquires all or substantially
all of the assets of Duke Energy or the Duke Energy Common Shares pursuant to
any merger of Duke Energy pursuant to which Duke Energy was not the surviving
corporation.
2.10 Duke Energy and Affiliates Not to Vote Exchangeable Shares
Duke Energy covenants and agrees that it will appoint and cause to be
appointed proxyholders with respect to any Exchangeable Shares held by it and
its Affiliates for the sole purpose of attending each meeting of holders of
Exchangeable Shares in order to be counted as part of the quorum for each such
meeting. Duke Energy further covenants and agrees that it will not, and will
cause its Affiliates not to, exercise any voting rights which may be exercisable
by holders of Exchangeable Shares from time to time pursuant to the Exchangeable
Share Provisions or pursuant to the provisions of the CBCA (or any successor or
other corporate statute by which Exchangeco may in the future be governed) with
respect to any Exchangeable Shares held by it or by its Affiliates in respect of
any matter considered at any meeting of holders of Exchangeable Shares.
2.11 Rule l0b-18 Purchases
For greater certainty, nothing contained in this Agreement, including the
obligations of Duke Energy contained in Section 2.8 hereof, shall limit the
ability of Duke Energy or Exchangeco to make a "Rule 10b-18 purchase" of Duke
Energy Common Shares pursuant to Rule 10b-18 of the United States Securities
Exchange Act of 1934, as amended, or any successor rule.
2.12 Stock Exchange Listing
Duke Energy covenants and agrees in favour of Exchangeco that, as long as
any outstanding Exchangeable Shares are owned by any Person other than Duke
Energy or any of its Affiliates, Duke Energy will use its reasonable best
efforts to maintain a listing for such Exchangeable Shares on a Canadian stock
exchange.
ARTICLE 3
DUKE ENERGY SUCCESSORS
3.1 Certain Requirements in Respect of Combination, etc.
Duke Energy shall not consummate any transaction (whether by way of
reconstruction, reorganization, consolidation, merger, transfer, sale, lease or
otherwise) whereby all or
-9-
substantially all of its undertaking, property and assets would become the
property of any other Person or, in the case of a merger, of the continuing
corporation resulting therefrom unless, but may do so if:
(a) such other Person or continuing corporation (the "Duke Energy
Successor") by operation of law, becomes, without more, bound by the
terms and provisions of this Agreement or, if not so bound,
executes, prior to or contemporaneously with the consummation of
such transaction, an agreement supplemental hereto and such other
instruments (if any) as are reasonably necessary or advisable to
evidence the assumption by the Duke Energy Successor of liability
for all moneys payable and property deliverable hereunder and the
covenant of such Duke Energy Successor to pay and deliver or cause
to be delivered the same and its agreement to observe and perform
all the covenants and obligations of Duke Energy under this
Agreement; and
(b) such transaction shall be upon such terms and conditions as
substantially to preserve and not to impair in any material respect
any of the rights, duties, powers and authorities of the other
parties hereunder or the holders of Exchangeable Shares.
3.2 Vesting of Powers in Successor
Whenever the conditions of Section 3.1 have been duly observed and
performed, the parties, if required by Section 3.1, shall execute and deliver
the supplemental agreement provided for in Section 3.1(a) and thereupon the Duke
Energy Successor shall possess and from time to time may exercise each and every
right and power of Duke Energy under this Agreement in the name of Duke Energy
or otherwise and any act or proceeding by any provision of this Agreement
required to be done or performed by the Board of Directors of Duke Energy or any
officers of Duke Energy may be done and performed with like force and effect by
the directors or officers of such Duke Energy Successor.
3.3 Wholly-Owned Subsidiaries
Nothing herein shall be construed as preventing the amalgamation or merger
of any wholly-owned direct or indirect subsidiary of Duke Energy with or into
Duke Energy or the winding-up, liquidation or dissolution of any wholly-owned
subsidiary of Duke Energy provided that all of the assets of such subsidiary are
transferred to Duke Energy or another wholly-owned direct or indirect subsidiary
of Duke Energy and any such transactions are expressly permitted by this
Article 3.
ARTICLE 4
GENERAL
4.1 Term
This Agreement shall come into force and be effective as of the date
hereof and shall terminate and be of no further force and effect at such time as
no Exchangeable Shares (or securities or rights convertible into or exchangeable
for or carrying rights to acquire Exchangeable Shares) are held by any Person
other than Duke Energy and any of its Affiliates.
-10-
4.2 Changes in Capital of Duke Energy and Exchangeco
At all times after the occurrence of any event contemplated pursuant to
Sections 2.7 and 2.8 hereof or otherwise, as a result of which either Duke
Energy Common Shares or the Exchangeable Shares or both are in any way changed,
this Agreement shall forthwith be deemed amended and modified as necessary in
order that it shall apply with full force and effect, mutatis mutandis, to all
new securities into which Duke Energy Common Shares or the Exchangeable Shares
or both are so changed and the parties hereto shall execute and deliver an
agreement in writing giving effect to and evidencing such necessary amendments
and modifications.
4.3 Notices to Parties
All notices and other communications hereunder shall be in writing and
shall be deemed given when delivered personally, telecopied (which is confirmed)
or dispatched (postage prepaid) to a nationally recognized overnight courier
service with overnight delivery instructions, in each case addressed to the
particular party at:
(a) If to Duke Energy, at:
________________________________________
________________________________________
________________________________________
Attention: _____________________________
Telecopier Number: (_____) _____-______
(b) If to Exchangeco, at:
________________________________________
________________________________________
________________________________________
Attention: _____________________________
Telecopier Number: (_____) _____-______
or at such other address of which any party may, from time to time, advise the
other parties by notice in writing given in accordance with the foregoing.
4.4 Assignment
No party hereto may assign this Agreement or any of its rights, interests
or obligations under this Agreement or the Arrangement (whether by operation of
law or otherwise) except that Exchangeco may assign in its sole discretion, any
or all of its rights, interests and obligations hereunder to any wholly-owned
subsidiary of Duke Energy.
4.5 Binding Effect
Subject to Section 4.4, this Agreement and the Arrangement shall be
binding upon, enure to the benefit of and be enforceable by the parties hereto
and their respective successors and assigns.
-11-
4.6 Amendments, Modifications
This Agreement may not be amended or modified except by an agreement in
writing executed by Exchangeco, Callco and Duke Energy and approved by the
holders of the Exchangeable Shares in accordance with Section 10.2 of the
Exchangeable Share Provisions.
4.7 Ministerial Amendments
Notwithstanding the provisions of Section 4.6, the parties to this
Agreement may in writing at any time and from time to time, without the approval
of the holders of the Exchangeable Shares, amend or modify this Agreement for
the purposes of:
(a) adding to the covenants of any or all parties provided that the
board of directors of each of Exchangeco, Callco and Duke Energy
shall be of the good faith opinion that such additions will not be
prejudicial to the rights or interests of the holders of the
Exchangeable Shares;
(b) making such amendments or modifications not inconsistent with this
Agreement as may be necessary or desirable with respect to matters
or questions which, in the good faith opinion of the board of
directors of each of Exchangeco, Callco and Duke Energy, it may be
expedient to make, provided that each such board of directors shall
be of the good faith opinion that such amendments or modifications
will not be prejudicial to the rights or interests of the holders of
the Exchangeable Shares; or
(c) making such changes or corrections which, on the advice of counsel
to Exchangeco, Callco and Duke Energy, are required for the purpose
of curing or correcting any ambiguity or defect or inconsistent
provision or clerical omission or mistake or manifest error,
provided that the board of directors of each of Exchangeco, Callco
and Duke Energy shall be of the good faith opinion that such changes
or corrections will not be prejudicial to the rights or interests of
the holders of the Exchangeable Shares.
4.8 Meeting to Consider Amendments
Exchangeco, at the request of Duke Energy, shall call a meeting or
meetings of the holders of the Exchangeable Shares for the purpose of
considering any proposed amendment or modification requiring approval pursuant
to Section 4.6 hereof. Any such meeting or meetings shall be called and held in
accordance with the bylaws of Exchangeco, the Exchangeable Share Provisions and
all applicable laws.
4.9 Amendments Only in Writing
No amendment to or modification or waiver of any of the provisions of this
Agreement otherwise permitted hereunder shall be effective unless made in
writing and signed by all of the parties hereto.
-12-
4.10 Governing Laws; Consent to Jurisdiction
This Agreement shall be governed by and construed in accordance with the
laws of the Province of British Columbia and the laws of Canada applicable
therein and shall be treated in all respects as a British Columbia contract.
Each party hereby irrevocably attorns to the jurisdiction of the courts of the
Province of British Columbia in respect of all matters arising under or in
relation to this Agreement.
4.11 Severability
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
4.12 Counterparts
This Agreement may be executed in counterparts, each of which shall be
deemed to be an original but all of which together shall constitute one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
DUKE ENERGY CORPORATION
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
3946509 CANADA INC.
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
3058368 NOVA SCOTIA COMPANY
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
-13-
SCHEDULE G
FORM OF VOTING AND EXCHANGE TRUST AGREEMENT
VOTING AND EXCHANGE AGREEMENT ("Agreement") made as of the ___ day of
_________, 2002.
BETWEEN:
DUKE ENERGY CORPORATION,
a corporation existing under the laws of the State of North Carolina
(hereinafter referred to as "Duke Energy"),
OF THE FIRST PART,
- and -
3946509 CANADA INC.,
a corporation existing under the laws of Canada
(hereinafter referred to as "Exchangeco"),
OF THE SECOND PART,
- and -
Computershare Trust Company, Inc.
a United States trust company incorporated under the laws of the
State of Colorado (hereinafter referred to as the "Trustee"),
OF THE THIRD PART.
WHEREAS, in connection with the Combination Agreement, Exchangeco may be
required to issue Exchangeable Shares to certain holders of common shares in the
capital of Westcoast pursuant to the Plan of Arrangement contemplated in the
Combination Agreement; and
WHEREAS, pursuant to the Combination Agreement, Duke Energy and Exchangeco
have agreed to execute a voting and exchange trust agreement substantially in
the form of this Agreement;
NOW, THEREFORE, in consideration of the respective covenants and
agreements provided in this Agreement and for other good and valuable
consideration (the receipt and sufficiency of which are hereby acknowledged),
the parties hereto covenant and agree as follows:
ARTICLE 1
INTERPRETATION
1.1 Definitions
In this Agreement, unless the context otherwise requires, the following
terms shall have the following meanings respectively:
"Affiliate" has the meaning ascribed thereto in the Securities Act, unless
otherwise expressly stated herein;
"Arrangement" means the arrangement under Section 192 of the CBCA on the
terms and subject to the conditions set out in the Plan of Arrangement, subject
to any amendments or variations thereto made in accordance with Article 6 of the
Plan of Arrangement and Section 7.1 of the Combination Agreement or made at the
direction of the Court;
"Automatic Exchange Rights" means the benefit of the obligation of Duke
Energy to effect the automatic exchange of Exchangeable Shares for Duke Energy
Common Shares pursuant to Section 5.12;
"Beneficiaries" means the registered holders from time to time of
Exchangeable Shares, other than Duke Energy and its Affiliates;
"Beneficiary Votes" has the meaning ascribed thereto in Section 4.2;
"Business Day" means any day on which (i) commercial banks are generally
open for business in New York, New York and Vancouver, British Columbia, other
than a Saturday, a Sunday or a day observed as a holiday in New York, New York
under the laws of the State of New York or the federal laws of the United States
of America or in Vancouver, British Columbia under the laws of the Province of
British Columbia or the federal laws of Canada or (ii) the NYSE is open for
trading;
"Callco" means 3058368 Nova Scotia Company, an unlimited liability company
existing under the laws of the Province of Nova Scotia;
"CBCA" means the Canada Business Corporations Act as now in effect and as
it may be amended from time to time prior to the date hereof;
"Combination Agreement" means the combination agreement made as of
September 20, 2001 among Duke Energy, Exchangeco, Callco and Westcoast, as
amended, supplemented and/or restated in accordance therewith prior to the date
hereof, providing for, among other things, the Arrangement;
"Court" has the meaning ascribed thereto in the Plan of Arrangement;
"Distribution Date" has the meaning ascribed thereto in the Duke Energy
Rights Agreement;
-2-
VOTING AND EXCHANGE TRUST AGREEMENT
"Duke Energy Common Shares" means the shares of common stock, no par value
per share, in the capital of Duke Energy;
"Duke Energy Consent" has the meaning ascribed thereto in Section 4.2;
"Duke Energy Meeting" has the meaning ascribed thereto in Section 4.2;
"Duke Energy Rights Agreement" has the meaning ascribed thereto in the
Exchangeable Share Provisions;
"Duke Energy Successor" has the meaning ascribed thereto in Section
10.1(a).
"Equivalent Vote Amount" means, with respect to any matter, proposition or
question on which holders of Duke Energy Common Shares are entitled to vote,
consent or otherwise act, the number of votes to which a holder of one Duke
Energy Common Share is entitled with respect to such matter, proposition or
question;
"Exchange Right" has the meaning ascribed thereto in Section 5.1;
"Exchangeable Shares" means the non-voting exchangeable shares in the
capital of Exchangeco, having substantially the rights, privileges, restrictions
and conditions set out in Appendix 1 to the Plan of Arrangement;
"Exchangeable Share Consideration" has the meaning ascribed thereto in the
Exchangeable Share Provisions;
"Exchangeable Share Price" has the meaning ascribed thereto in the
Exchangeable Share Provisions;
"Exchangeable Share Provisions" means the rights, privileges, restrictions
and conditions attaching to the Exchangeable Shares;
"Final Order" means the final order of the Court approving the Arrangement
as such order may be amended by the Court at any time prior to the date hereof
or, if appealed, then, unless such appeal is withdrawn or denied, as affirmed;
"Indemnified Parties" has the meaning ascribed thereto in Section 8.1;
"Insolvency Event" means (i) the institution by Exchangeco of any
proceeding to be adjudicated a bankrupt or insolvent or to be wound up, or the
consent of Exchangeco to the institution of bankruptcy, insolvency or winding-up
proceedings against it, or (ii) the filing of a petition, answer or consent
seeking dissolution or winding-up under any bankruptcy, insolvency or analogous
laws, including the Companies Creditors' Arrangement Act (Canada) and the
Bankruptcy and Insolvency Act (Canada), and the failure by Exchangeco to contest
in good faith any such proceedings commenced in respect of Exchangeco within 30
days of becoming aware thereof, or the consent by Exchangeco to the filing of
any such petition or to the appointment of a receiver, or (iii) the making by
Exchangeco of a general assignment for the benefit of creditors, or the
admission in writing by Exchangeco of its inability to pay its debts generally
as they
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VOTING AND EXCHANGE TRUST AGREEMENT
become due, or (iv) Exchangeco not being permitted, pursuant to solvency
requirements of applicable law, to redeem any Retracted Shares pursuant to
Section 6.6 of the Exchangeable Share Provisions;
"Liquidation Call Right" has the meaning ascribed thereto in the Plan of
Arrangement;
"Liquidation Event" has the meaning ascribed thereto in Section 5.12(b);
"Liquidation Event Effective Time" has the meaning ascribed thereto in
Section 5.12(c);
"List" has the meaning ascribed thereto in Section 4.6;
"NYSE" means The New York Stock Exchange, Inc.;
"Officer's Certificate" means, with respect to Duke Energy or Exchangeco,
as the case may be, a certificate signed by any one of the authorized
signatories of Duke Energy or Exchangeco, as the case may be;
"person" includes any individual, firm, partnership, joint venture,
venture capital fund, limited liability company, unlimited liability company,
association, trust, trustee, executor, administrator, legal personal
representative, estate, group, body corporate, corporation, unincorporated
association or organization, government body, syndicate or other entity, whether
or not having legal status;
"Plan of Arrangement" means the plan of arrangement substantially in the
form and content of Schedule E annexed to the Combination Agreement and any
amendments or variations thereto made in accordance with Section 7.1 of the
Combination Agreement or Article 6 of the Plan of Arrangement or made at the
direction of the Court in the Final Order;
"Redemption Call Right" has the meaning ascribed thereto in the Plan of
Arrangement;
"Redemption Date" has the meaning ascribed thereto in the Exchangeable
Share Provisions;
"Retracted Shares" has the meaning ascribed thereto in Section 5.7;
"Retraction Call Right" has the meaning ascribed thereto in the
Exchangeable Share Provisions;
"Securities Act" means the Securities Act (Ontario) and the rules,
regulations and policies made thereunder, as now in effect and as they may be
amended from time to time prior to the Effective Date;
"Support Agreement" means that certain support agreement made as of even
date herewith between Exchangeco, Callco and Duke Energy substantially in the
form and content of Schedule F to the Combination Agreement, with such changes
thereto as the parties to the Combination Agreement, acting reasonably, may
agree;
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VOTING AND EXCHANGE TRUST AGREEMENT
"Trust" means the trust created by this Agreement;
"Trust Estate" means the Duke Energy Common Shares, any other securities,
the Exchange Right, the Automatic Exchange Rights and any money or other
property which may be held by the Trustee from time to time pursuant to this
Agreement;
"Voting Rights" means the voting rights of the Duke Energy Common Shares
held by the Trustee in respect of which the Beneficiaries are, in accordance
with this Agreement, entitled to instruct the Trustee to vote;
"Westcoast" means Westcoast Energy Inc., a corporation existing under the
laws of Canada;
1.2 Interpretation Not Affected by Headings, etc.
The division of this Agreement into articles, sections and other portions
and the insertion of headings are for convenience of reference only and should
not affect the construction or interpretation hereof. Unless otherwise
indicated, all references to an "Article" or "Section" followed by a number
refer to the specified Article or Section of this Agreement. The terms "this
Agreement," "hereof," "herein" and "hereunder" and similar expressions refer to
this Agreement and not to any particular Article, Section or other portion
hereof.
1.3 Rules of Construction
Unless otherwise specifically indicated or the context otherwise requires,
(a) all references to "dollars" or "$" mean United States dollars, (b) words
importing the singular shall include the plural and vice versa and words
importing any gender shall include all genders, and (c) "include," "includes"
and "including" shall be deemed to be followed by the words "without
limitation."
1.4 Date for any Action
In the event that any date on which any action is required to be taken
hereunder by any of the parties hereto is not a Business Day, such action shall
be required to be taken on the next succeeding day that is a Business Day.
ARTICLE 2
PURPOSE OF AGREEMENT
2.1 Establishment of Trust
The purpose of this Agreement is to create the Trust for the benefit of
the Beneficiaries and Duke Energy, as herein provided. The Trustee will hold
Duke Energy Common Shares in order to enable the Trustee to exercise the Voting
Rights and will hold the Exchange Right and the Automatic Exchange Rights in
order to enable the Trustee to exercise such rights and will hold the rights
relating to the covenant of Duke Energy in Section 3.5 hereof, in each case as
trustee for and on behalf of the Beneficiaries as provided in this Agreement.
The Trustee will
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VOTING AND EXCHANGE TRUST AGREEMENT
hold the Duke Energy Common Shares for and on behalf of Duke Energy for all
other rights associated with such Duke Energy Common Shares other than the
Voting Rights.
ARTICLE 3
DUKE ENERGY COMMON SHARES
3.1 Issue and Ownership of the Duke Energy Common Shares
Duke Energy hereby agrees to issue to, and deposit with, the Trustee from
time to time such number of Duke Energy Common Shares so that upon such deposit
the Trustee shall hold a number of Duke Energy Common Shares which is equal to
the number of Exchangeable Shares issued and outstanding as of such time (other
than Exchangeable Shares held by Duke Energy or any Affiliate thereof). Such
Duke Energy Common Shares issued pursuant to this Section 3.1 shall be hereafter
held of record by the Trustee as trustee for and on behalf of, and for the use
and benefit of, the Beneficiaries and Duke Energy in accordance with the
provisions of this Agreement. During the term of the Trust and subject to the
terms and conditions of this Agreement, the Trustee shall possess and be vested
with full legal ownership of such Duke Energy Common Shares and shall be
entitled to exercise all of the rights and powers of an owner with respect to
such Duke Energy Common Shares provided that the Trustee shall:
(a) hold such Duke Energy Common Shares and the legal title thereto as
trustee solely for the use and benefit of the Beneficiaries and Duke
Energy in accordance with the provisions of this Agreement; and
(b) except as specifically authorized by this Agreement, have no power
or authority to sell, transfer, vote or otherwise deal in or with
such Duke Energy Common Shares and such Duke Energy Common Shares
shall not be used or disposed of by the Trustee for any purpose
other than the purposes for which this Trust is created pursuant to
this Agreement.
3.2 Transfer of Duke Energy Common Shares and Dividends to Duke Energy
In connection with the exchange by a holder or redemption or retraction of
Exchangeable Shares from time to time for Duke Energy Common Shares, the Trustee
shall concurrently therewith distribute to Duke Energy such Duke Energy Common
Shares from the Trust Estate equal to the number of Exchangeable Shares
exchanged by such holder for Duke Energy Common Shares. Upon receipt of any
dividend or other distribution on the Duke Energy Common Shares (except to the
extent such dividend or distribution is paid in Duke Energy Common Shares), the
Trustee shall immediately transfer such dividend or distribution to Duke Energy;
provided, however, that the Trustee may not transfer any dividend or
distribution on the Duke Energy Common Shares held by the Trustee to Duke Energy
pursuant to the preceding clause until such time as an Equivalent Dividend (as
defined in the Support Agreement) is declared and paid on the Exchangeable
Shares.
3.3 Legended Share Certificates
Exchangeco will cause each certificate representing Exchangeable Shares to
bear an appropriate legend notifying the Beneficiaries of their right to
instruct the Trustee with respect to
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VOTING AND EXCHANGE TRUST AGREEMENT
the exercise of the portion of the Voting Rights in respect of the Exchangeable
Shares held by the Beneficiaries.
3.4 Safe Keeping of Certificate
If physical certificates representing the Duke Energy Common Shares are
held by the Trust, such certificates shall at all times be held in safe keeping
by the Trustee or its agent.
3.5 Redemption in Connection with a Distribution Date
A holder of Exchangeable Shares who receives Duke Energy Common Shares
upon redemption of Exchangeable Shares in connection with a Distribution Date
pursuant to the Exchangeable Share Provisions will be treated by Duke Energy for
purposes of the Duke Energy Rights Agreement as if such holder were a record
holder of Duke Energy Common Shares on and after the Redemption Date, which
shall be the day immediately preceding the Distribution Date.
ARTICLE 4
EXERCISE OF VOTING RIGHTS
4.1 Voting Rights
The Trustee, as the holder of record of Duke Energy Common Shares forming
part of the Trust Estate, shall be entitled to all of the Voting Rights,
including the right to vote in person or by proxy the Duke Energy Common Shares
held by the Trustee on any matter, question, proposal or proposition whatsoever
that may properly come before the shareholders of Duke Energy at a Duke Energy
Meeting or in connection with a Duke Energy Consent. The Voting Rights shall be
and remain vested in and exercised by the Trustee. Subject to Section 6.15
hereof:
(a) the Trustee shall exercise the Voting Rights only on the basis of
instructions received pursuant to this Article 4 from Beneficiaries
entitled to instruct the Trustee as to the voting thereof at the
time at which the Duke Energy Meeting is held or a Duke Energy
Consent is sought; and
(b) to the extent that no instructions are received from a Beneficiary
with respect to the Voting Rights to which such Beneficiary is
entitled, the Trustee shall not exercise or permit the exercise of
such Voting Rights.
4.2 Number of Votes
With respect to all meetings of shareholders of Duke Energy at which
holders of Duke Energy Common Shares are entitled to vote (each, a "Duke Energy
Meeting") and with respect to all written consents sought from Duke Energy's
shareholders, including the holders of Duke Energy Common Shares (each, a "Duke
Energy Consent"), each Beneficiary shall be entitled to instruct the Trustee to
cast and exercise, in the manner instructed, a number of votes equal to the
Equivalent Vote Amount for each Exchangeable Share owned of record by such
Beneficiary on the record date established by Duke Energy or by applicable law
for such Duke Energy Meeting
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VOTING AND EXCHANGE TRUST AGREEMENT
or Duke Energy Consent, as the case may be (collectively, the "Beneficiary
Votes"), in respect of each matter, question, proposal or proposition to be
voted on at such Duke Energy Meeting or consented to in connection with such
Duke Energy Consent.
4.3 Mailings to Shareholders
With respect to each Duke Energy Meeting and Duke Energy Consent, the
Trustee will use its reasonable efforts promptly to mail or cause to be mailed
(or otherwise communicate in the same manner as Duke Energy utilizes in
communications to holders of Duke Energy Common Shares subject to applicable
regulatory requirements and provided such manner of communications is reasonably
available to the Trustee) to each of the Beneficiaries named in the List, such
mailing or communication to commence on the same day as the mailing or notice
(or other communication) with respect thereto is commenced by Duke Energy to its
shareholders:
(a) a copy of such notice, together with any related materials,
including any proxy or information statement, to be provided to
shareholders of Duke Energy;
(b) a statement that such Beneficiary is entitled to instruct the
Trustee as to the exercise of the Beneficiary Votes with respect to
such Duke Energy Meeting or Duke Energy Consent or, pursuant to
Section 4.7, to attend such Duke Energy Meeting and to exercise
personally thereat the Beneficiary Votes of such Beneficiary;
(c) a statement as to the manner in which such instructions may be given
to the Trustee, including an express indication that instructions
may be given to the Trustee to give:
(i) a proxy to such Beneficiary or its designee to exercise
personally the Beneficiary Votes; or
(ii) a proxy to a designated agent or other representative of the
management of Duke Energy to exercise such Beneficiary Votes;
(d) a statement that if no such instructions are received from the
Beneficiary, the Beneficiary Votes to which such Beneficiary is
entitled will not be exercised;
(e) a form of direction whereby the Beneficiary may so direct and
instruct the Trustee as contemplated herein; and
(f) a statement of the time and date by which such instructions must be
received by the Trustee in order to be binding upon it, which in the
case of a Duke Energy Meeting shall not be earlier than the close of
business on the second Business Day prior to such meeting, and of
the method for revoking or amending such instructions.
For the purpose of determining Beneficiary Votes to which a Beneficiary is
entitled in respect of any Duke Energy Meeting or Duke Energy Consent, the
number of Exchangeable Shares owned of record by the Beneficiary shall be
determined at the close of business on the record date established by Duke
Energy or by applicable law for purposes of determining shareholders entitled to
vote at such Duke Energy Meeting or to give written consent in
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VOTING AND EXCHANGE TRUST AGREEMENT
connection with such Duke Energy Consent. Duke Energy will notify the Trustee of
any decision of the Board of Directors of Duke Energy with respect to the
calling of any Duke Energy Meeting or the seeking of any Duke Energy Consent and
shall provide all necessary information and materials to the Trustee in each
case promptly and in any event in sufficient time to enable the Trustee to
perform its obligations contemplated by this Section 4.3.
The materials referred to in this Section 4.3 are to be provided to the
Trustee by Duke Energy and the materials referred to in Section 4.3(c), (e) and
(f) shall be subject to reasonable comment by the Trustee in a timely manner.
Duke Energy shall ensure that the materials to be provided to the Trustee are
provided in sufficient time to permit the Trustee to comment as aforesaid and to
send all materials to each Beneficiary at the same time as such materials are
first sent to holders of Duke Energy Common Shares. Duke Energy agrees not to
communicate with holders of Duke Energy Common Shares with respect to the
materials referred to in this Section 4.3 otherwise than by mail unless such
method of communication is also reasonably available to the Trustee for
communication with the Beneficiaries. Notwithstanding the foregoing, Duke Energy
may at its option exercise the duties of the Trustee to deliver copies of all
materials to each Beneficiary as required by this Section 4.3 so long as in each
case Duke Energy delivers a certificate to the Trustee stating that Duke Energy
has undertaken to perform the obligations set forth in this Section 4.3.
4.4 Copies of Shareholder Information
Duke Energy will deliver to the Trustee copies of all proxy materials
(including notices of Duke Energy Meetings but excluding proxies to vote Duke
Energy Common Shares), information statements, reports (including all interim
and annual financial statements) and other written communications that, in each
case, are to be distributed from time to time to holders of Duke Energy Common
Shares in sufficient quantities and in sufficient time so as to enable the
Trustee to send those materials to each Beneficiary, to the extent possible, at
the same time as such materials are first sent to holders of Duke Energy Common
Shares. The Trustee will mail or otherwise send to each Beneficiary, at the
expense of Duke Energy, copies of all such materials (and all materials
specifically directed to the Beneficiaries or to the Trustee for the benefit of
the Beneficiaries by Duke Energy) received by the Trustee from Duke Energy, to
the extent possible, at the same time as such materials are sent to holders of
Duke Energy Common Shares. The Trustee will make copies of all such materials
available for inspection by any Beneficiary at the Trustee's principal office in
Lakewood, Colorado. Notwithstanding the foregoing, Duke Energy at its option may
exercise the duties of the Trustee to deliver copies of all materials to each
Beneficiary as required by this Section 4.4 so long as in each case Duke Energy
delivers a certificate to the Trustee stating that Duke Energy has undertaken to
perform the obligations set forth in this Section 4.4.
4.5 Other Materials
As soon as reasonably practicable after receipt by Duke Energy or holders
of Duke Energy Common Shares (if such receipt is known by Duke Energy) of any
material sent or given by or on behalf of a third party to holders of Duke
Energy Common Shares generally, including dissident proxy and information
circulars (and related information and material) and tender and exchange offer
circulars (and related information and material), Duke Energy shall use its
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VOTING AND EXCHANGE TRUST AGREEMENT
reasonable best efforts to obtain and deliver to the Trustee copies thereof in
sufficient quantities so as to enable the Trustee to forward such material
(unless the same has been provided directly to Beneficiaries by such third
party) to each Beneficiary as soon as possible thereafter. As soon as reasonably
practicable after receipt thereof, the Trustee will mail or otherwise send to
each Beneficiary, at the expense of Duke Energy, copies of all such materials
received by the Trustee from Duke Energy. The Trustee will also make available
for inspection by any Beneficiary at the Trustee's principal office in Lakewood,
Colorado copies of all such materials. Notwithstanding the foregoing, Duke
Energy at its option may exercise the duties of the Trustee to deliver copies of
all such materials to each Beneficiary as required by this Section 4.5 so long
as in each case Duke Energy delivers a certificate to the Trustee stating that
Duke Energy has undertaken to perform the obligations set forth in this Section
4.5.
4.6 List of Persons Entitled to Vote
Exchangeco shall, (a) prior to each annual and special Duke Energy Meeting
or the seeking of any Duke Energy Consent and (b) forthwith upon each request
made at any time by the Trustee in writing, prepare or cause to be prepared a
list (a "List") of the names and addresses of the Beneficiaries arranged in
alphabetical order and showing the number of Exchangeable Shares held of record
by each such Beneficiary, in each case at the close of business on the date
specified by the Trustee in such request or, in the case of a List prepared in
connection with a Duke Energy Meeting or a Duke Energy Consent, at the close of
business on the record date established by Duke Energy or pursuant to applicable
law for determining the holders of Duke Energy Common Shares entitled to receive
notice of and/or to vote at such Duke Energy Meeting or to give consent in
connection with such Duke Energy Consent. Each such List shall be delivered to
the Trustee promptly after receipt by Exchangeco of such request or the record
date for such meeting or seeking of consent, as the case may be, and in any
event within sufficient time as to permit the Trustee to perform its obligations
under this Agreement. Duke Energy agrees to give Exchangeco notice (with a copy
to the Trustee) of the calling of any Duke Energy Meeting or the seeking of any
Duke Energy Consent by Duke Energy or its management, together with the record
dates therefor, sufficiently prior to the date of the calling of such meeting or
seeking of such consent so as to enable Exchangeco to perform its obligations
under this Section 4.6.
4.7 Entitlement to Direct Votes
Any Beneficiary named in a List prepared in connection with any Duke
Energy Meeting or Duke Energy Consent will be entitled (a) to instruct the
Trustee in the manner described in Section 4.3 with respect to the exercise of
the Beneficiary Votes to which such Beneficiary is entitled or (b) to attend
such meeting and personally exercise thereat (or to personally exercise with
respect to any Duke Energy Consent), as the proxy of the Trustee, the
Beneficiary Votes to which such Beneficiary is entitled.
4.8 Voting by Trustee and Attendance of Trustee Representative at
Meeting
(a) In connection with each Duke Energy Meeting and Duke Energy Consent,
the Trustee shall exercise, either in person or by proxy, in
accordance with the instructions received from a Beneficiary
pursuant to Section 4.3, the Beneficiary
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VOTING AND EXCHANGE TRUST AGREEMENT
Votes as to which such Beneficiary is entitled to direct the vote
(or any lesser number thereof as may be set forth in the
instructions); provided, however, that such written instructions are
received by the Trustee from the Beneficiary prior to the time and
date fixed by the Trustee for receipt of such instruction in the
notice given by the Trustee to the Beneficiary pursuant to Section
4.3.
(b) The Trustee shall cause a representative who is empowered by it to
sign and deliver, on behalf of the Trustee, proxies for Voting
Rights to attend each Duke Energy Meeting. Upon submission by a
Beneficiary (or its designee) of identification satisfactory to the
Trustee's representative, and at the Beneficiary's request, such
representative shall sign and deliver to such Beneficiary (or its
designee) a proxy to exercise personally the Beneficiary Votes as to
which such Beneficiary is otherwise entitled hereunder to direct the
vote, if such Beneficiary either (i) has not previously given the
Trustee instructions pursuant to Section 4.3 in respect of such
meeting or (ii) submits to such representative written revocation of
any such previous instructions. At such meeting, upon receipt of a
proxy from the Trustee's representative, the Beneficiary exercising
such Beneficiary Votes shall have the same rights as the Trustee to
speak at the meeting in respect of any matter, question, proposal or
proposition, to vote by way of ballot at the meeting in respect of
any matter, question, proposal or proposition, and to vote at such
meeting by way of a show of hands in respect of any matter, question
or proposition.
4.9 Distribution of Written Materials
Any written materials distributed by or on behalf of the Trustee pursuant
to this Agreement shall be sent by mail (or otherwise communicated in the same
manner as Duke Energy utilizes in communications to holders of Duke Energy
Common Shares, subject to applicable regulatory requirements and provided such
manner of communications is reasonably available to the Trustee) to each
Beneficiary at its address as shown on the books of Exchangeco. Duke Energy
agrees not to communicate with holders of Duke Energy Common Shares with respect
to such written material otherwise than by mail unless such method of
communication is also reasonably available to the Trustee for communication with
the Beneficiaries. Exchangeco shall provide or cause to be provided to the
Trustee for purposes of communication, on a timely basis and without charge or
other expense:
(a) a current List; and
(b) upon the request of the Trustee, mailing labels to enable the
Trustee to carry out its duties under this Agreement.
Exchangeco's obligations under this Section 4.9 shall be deemed satisfied to the
extent Duke Energy exercises its option to perform the duties of the Trustee to
deliver copies of materials to each Beneficiary and Exchangeco provides the
required information and materials to Duke Energy.
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VOTING AND EXCHANGE TRUST AGREEMENT
4.10 Termination of Voting Rights
Except as otherwise provided herein or in the Exchangeable Share
Provisions, all of the rights of a Beneficiary with respect to the Beneficiary
Votes exercisable in respect of the Exchangeable Shares held by such
Beneficiary, including the right to instruct the Trustee as to the voting of or
to vote personally such Beneficiary Votes, shall cease and be terminated
immediately, before the delivery by such Beneficiary to the Trustee of the
certificates representing such Exchangeable Shares in connection with the
exercise by the Beneficiary of the Exchange Right or upon the occurrence of the
automatic exchange of Exchangeable Shares for Duke Energy Common Shares, as
specified in Article 5 (unless, in either case, Duke Energy shall not have
delivered the Exchangeable Share Consideration deliverable in exchange therefor
to the Trustee for delivery to the Beneficiaries), or the redemption of
Exchangeable Shares pursuant to Article 6 or Article 7 of the Exchangeable Share
Provisions, or upon the effective date of the liquidation, dissolution or
winding-up of Exchangeco pursuant to Article 5 of the Exchangeable Share
Provisions, or the purchase of Exchangeable Shares from the holder thereof by
Callco pursuant to the exercise by Callco of the Retraction Call Right, the
Redemption Call Right or the Liquidation Call Right.
ARTICLE 5
EXCHANGE RIGHT AND AUTOMATIC EXCHANGE
5.1 Grant and Ownership of the Exchange Right
Duke Energy hereby grants to the Trustee as trustee for and on behalf of,
and for the use and benefit of, the Beneficiaries the right (the "Exchange
Right"), upon the occurrence and during the continuance of an Insolvency Event,
to require Duke Energy to purchase from each or any Beneficiary all or any part
of the Exchangeable Shares held by such Beneficiary and the Automatic Exchange
Rights, all in accordance with the provisions of this Agreement. Duke Energy
hereby acknowledges receipt from the Trustee as trustee for and on behalf of the
Beneficiaries of good and valuable consideration (and the adequacy thereof) for
the grant of the Exchange Right and the Automatic Exchange Rights by Duke Energy
to the Trustee. During the term of the Trust and subject to the terms and
conditions of this Agreement, the Trustee shall possess and be vested with full
legal ownership of the Exchange Right and the Automatic Exchange Rights and
shall be entitled to exercise all of the rights and powers of an owner with
respect to the Exchange Right and the Automatic Exchange Rights, provided that
the Trustee shall:
(a) hold the Exchange Right and the Automatic Exchange Rights and the
legal title thereto as trustee solely for the use and benefit of the
Beneficiaries in accordance with the provisions of this Agreement;
and
(b) except as specifically authorized by this Agreement, have no power
or authority to exercise or otherwise deal in or with the Exchange
Right or the Automatic Exchange Rights, and the Trustee shall not
exercise any such rights for any purpose other than the purposes for
which the Trust is created pursuant to this Agreement.
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VOTING AND EXCHANGE TRUST AGREEMENT
5.2 Legended Share Certificates
Exchangeco will cause each certificate representing Exchangeable Shares to
bear an appropriate legend notifying the Beneficiaries of:
(a) their right to instruct the Trustee with respect to the exercise of
the Exchange Right in respect of the Exchangeable Shares held by a
Beneficiary; and
(b) the Automatic Exchange Rights.
5.3 General Exercise of Exchange Right
The Exchange Right shall be and remain vested in and exercisable by the
Trustee. Subject to Section 6.15, the Trustee shall exercise the Exchange Right
only on the basis of instructions received pursuant to this Article 5 from
Beneficiaries entitled to instruct the Trustee as to the exercise thereof. To
the extent that no instructions are received from a Beneficiary with respect to
the Exchange Right, the Trustee shall not exercise or permit the exercise of the
Exchange Right.
5.4 Purchase Price
The purchase price payable by Duke Energy for each Exchangeable Share to
be purchased by Duke Energy under the Exchange Right shall be an amount per
share equal to the Exchangeable Share Price on the last Business Day prior to
the day of closing of the purchase and sale of such Exchangeable Share under the
Exchange Right. In connection with each exercise of the Exchange Right, Duke
Energy shall provide to the Trustee an Officer's Certificate setting forth the
calculation of the Exchangeable Share Price for each Exchangeable Share. The
Exchangeable Share Price for each such Exchangeable Share so purchased may be
satisfied only by Duke Energy delivering or causing to be delivered to the
Trustee, on behalf of the relevant Beneficiary, the Exchangeable Share
Consideration representing the total Exchangeable Share Price. Upon payment by
Duke Energy of such purchase price to the Trustee for the benefit of the
Beneficiary, the relevant Beneficiary shall cease to have any right to be paid
any amount in respect of declared and unpaid dividends on each such Exchangeable
Share by Exchangeco.
5.5 Exercise Instructions
Subject to the terms and conditions herein set forth, a Beneficiary shall
be entitled, upon the occurrence and during the continuance of an Insolvency
Event, to instruct the Trustee to exercise the Exchange Right with respect to
all or any part of the Exchangeable Shares registered in the name of such
Beneficiary on the books of Exchangeco. To cause the exercise of the Exchange
Right by the Trustee, the Beneficiary shall deliver to the Trustee, in person or
by certified or registered mail, at its principal office in Lakewood, Colorado
or at such other places as the Trustee may from time to time designate by
written notice to the Beneficiaries, the certificates representing the
Exchangeable Shares which such Beneficiary desires Duke Energy to purchase, duly
endorsed in blank for transfer, and accompanied by such other documents and
instruments as may be required to effect a transfer of Exchangeable Shares under
the CBCA and the by-laws of Exchangeco and such additional documents and
instruments as the Trustee,
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VOTING AND EXCHANGE TRUST AGREEMENT
Exchangeco and Duke Energy may reasonably require together with (a) a duly
completed form of notice of exercise of the Exchange Right, contained on the
reverse of or attached to the Exchangeable Share certificates, stating (i) that
the Beneficiary thereby instructs the Trustee to exercise the Exchange Right so
as to require Duke Energy to purchase from the Beneficiary the number of
Exchangeable Shares specified therein, (ii) that such Beneficiary has good title
to and owns all such Exchangeable Shares to be acquired by Duke Energy free and
clear of all liens, claims, security interests and encumbrances, (iii) the names
in which the certificates representing Duke Energy Common Shares issuable in
connection with the exercise of the Exchange Right are to be issued and (iv) the
names and addresses of the persons to whom such new certificates should be
delivered, and (b) payment (or evidence satisfactory to the Trustee, Exchangeco
and Duke Energy of payment) of the taxes (if any) payable as contemplated by
Section 5.8 of this Agreement. If only a part of the Exchangeable Shares
represented by any certificate or certificates delivered to the Trustee are to
be purchased by Duke Energy under the Exchange Right, a new certificate for the
balance of such Exchangeable Shares shall be issued to the holder at the expense
of Exchangeco.
5.6 Delivery of Duke Energy Common Shares; Effect of Exercise
Promptly after the receipt by the Trustee of the certificates representing
the Exchangeable Shares which the Beneficiary desires Duke Energy to purchase
under the Exchange Right, together with such documents and instruments of
transfer and a duly completed form of notice of exercise of the Exchange Right
(and payment of taxes, if any payable as contemplated by Section 5.8 or evidence
thereof), duly endorsed for transfer to Duke Energy, the Trustee shall notify
Duke Energy and Exchangeco of its receipt of the same, which notice to Duke
Energy and Exchangeco shall constitute exercise of the Exchange Right by the
Trustee on behalf of the Beneficiary in respect of such Exchangeable Shares, and
Duke Energy shall promptly thereafter deliver or cause to be delivered to the
Trustee, for delivery to the Beneficiary in respect of such Exchangeable Shares
(or to such other persons, if any, properly designated by such Beneficiary) the
Exchangeable Share Consideration deliverable in connection with the exercise of
the Exchange Right; provided, however, that no such delivery shall be made
unless and until the Beneficiary requesting the same shall have paid (or
provided evidence satisfactory to the Trustee, Exchangeco and Duke Energy of the
payment of) the taxes (if any) payable as contemplated by Section 5.8 of this
Agreement. Immediately upon the giving of notice by the Trustee to Duke Energy
and Exchangeco of the exercise of the Exchange Right, as provided in this
Section 5.6, the closing of the transaction of purchase and sale contemplated by
the Exchange Right shall be deemed to have occurred, and the Beneficiary of such
Exchangeable Shares shall be deemed to have transferred to Duke Energy all of
such Beneficiary's right, title and interest in and to such Exchangeable Shares
and in the related interest in the Trust Estate and shall cease to be a holder
of such Exchangeable Shares and shall not be entitled to exercise any of the
rights of a holder in respect thereof, other than the right to receive his
proportionate part of the total purchase price therefor, unless such
Exchangeable Share Consideration is not delivered by Duke Energy to the Trustee
for delivery to such Beneficiary (or to such other person, if any, properly
designated by such Beneficiary) within five Business Days of the date of the
giving of such notice by the Trustee, in which case the rights of the
Beneficiary shall remain unaffected until such Exchangeable Share Consideration
is delivered by Duke Energy and any cheque included therein is paid. Upon
delivery of such Exchangeable Share Consideration by Duke Energy to the Trustee,
the Trustee shall deliver such Exchangeable Share Consideration to such
Beneficiary (or
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to such other person, if any, properly designated by such Beneficiary).
Concurrently with such Beneficiary ceasing to be a holder of Exchangeable
Shares, the Beneficiary shall be considered and deemed for all purposes to be
the holder of the Duke Energy Common Shares delivered to it pursuant to the
Exchange Right.
5.7 Exercise of Exchange Right Subsequent to Retraction
In the event that a Beneficiary has exercised its right under Article 6 of
the Exchangeable Share Provisions to require Exchangeco to redeem any or all of
the Exchangeable Shares held by the Beneficiary (the "Retracted Shares") and is
notified by Exchangeco pursuant to Section 6.6 of the Exchangeable Share
Provisions that Exchangeco will not be permitted as a result of solvency
requirements of applicable law to redeem all such Retracted Shares, and provided
that Callco shall not have exercised the Retraction Call Right with respect to
the Retracted Shares and that the Beneficiary has not revoked the retraction
request delivered by the Beneficiary to Exchangeco pursuant to Section 6.7 of
the Exchangeable Share Provisions, and provided further that the Trustee has
received written notice of same from Exchangeco or Duke Energy, the retraction
request will constitute and will be deemed to constitute notice from the
Beneficiary to the Trustee instructing the Trustee to exercise the Exchange
Right with respect to those Retracted Shares that Exchangeco is unable to
redeem. In any such event, Exchangeco hereby agrees with the Trustee and in
favour of the Beneficiary promptly to forward or cause to be forwarded to the
Trustee all relevant materials delivered by the Beneficiary to Exchangeco or to
the transfer agent of the Exchangeable Shares (including a copy of the
retraction request delivered pursuant to Section 6.1 of the Exchangeable Share
Provisions) in connection with such proposed redemption of the Retracted Shares
and the Trustee will thereupon exercise the Exchange Right with respect to the
Retracted Shares that Exchangeco is not permitted to redeem and will require
Duke Energy to purchase such shares in accordance with the provisions of this
Article 5.
5.8 Stamp or Other Transfer Taxes
Upon any sale of Exchangeable Shares to Duke Energy pursuant to the
Exchange Right or the Automatic Exchange Rights, the share certificate or
certificates representing Duke Energy Common Shares to be delivered in
connection with the payment of the purchase price therefor shall be issued in
the name of the Beneficiary in respect of the Exchangeable Shares so sold or in
such names as such Beneficiary may otherwise direct in writing without charge to
the holder of the Exchangeable Shares so sold; provided, however, that such
Beneficiary (a) shall pay (and none of Duke Energy, Exchangeco or the Trustee
shall be required to pay) any documentary, stamp, transfer or other taxes that
may be payable in respect of any transfer involved in the issuance or delivery
of such shares to a person other than such Beneficiary or (b) shall have
evidenced to the satisfaction of the Trustee, Duke Energy and Exchangeco that
such taxes, if any, have been paid.
5.9 Notice of Insolvency Event
As soon as practicable following the occurrence of an Insolvency Event or
any event that with the giving of notice or the passage of time or both would be
an Insolvency Event, Exchangeco and Duke Energy shall give written notice
thereof to the Trustee. As soon as practicable following the receipt of notice
from Exchangeco and Duke Energy of the occurrence
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of an Insolvency Event, or upon the Trustee becoming aware of an Insolvency
Event, the Trustee will mail to each Beneficiary, at the expense of Duke Energy
(such funds to be received in advance), a notice of such Insolvency Event in the
form provided by Duke Energy, which notice shall contain a brief statement of
the rights of the Beneficiaries with respect to the Exchange Right.
5.10 Qualification of Duke Energy Common Shares
Duke Energy covenants that if any Duke Energy Common Shares to be issued
and delivered pursuant to the Exchange Right or the Automatic Exchange Rights
require registration or qualification with or approval of or the filing of any
document, including any prospectus or similar document, or the taking of any
proceeding with or the obtaining of any order, ruling or consent from any
governmental or regulatory authority under any Canadian or United States
federal, provincial, territorial or state law or regulation or pursuant to the
rules and regulations of any regulatory authority or the fulfillment of any
other Canadian or United States federal, provincial, territorial or state legal
requirement before such shares may be issued and delivered by Duke Energy to the
initial holder thereof or in order that such shares may be freely traded
thereafter (other than any restrictions of general application on transfer by
reason of a holder being a "control person" of Duke Energy for purposes of
Canadian provincial securities law or an "affiliate" of Duke Energy for purposes
of United States federal or state securities law), Duke Energy will in good
faith take all such actions and do all such things as are necessary or desirable
to cause such Duke Energy Common Shares to be and remain duly registered,
qualified or approved under United States and/or Canadian law, as the case may
be, to the extent expressly provided in the Combination Agreement. Duke Energy
will use its reasonable best efforts and in good faith expeditiously take all
such actions and do all such things as are reasonably necessary or desirable to
cause all Duke Energy Common Shares to be delivered pursuant to the Exchange
Right or the Automatic Exchange Rights to be listed, quoted or posted for
trading on all stock exchanges and quotation systems on which outstanding Duke
Energy Common Shares are listed, quoted or posted for trading at such time.
5.11 Duke Energy Common Shares
Duke Energy hereby represents, warrants and covenants that the Duke Energy
Common Shares issuable to Beneficiaries as described herein will be duly
authorized and validly issued, fully paid and non-assessable and shall be free
and clear of any lien, claim or encumbrance.
5.12 Automatic Exchange on Liquidation of Duke Energy
(a) Duke Energy will give the Trustee written notice of each of the
following events at the time set forth below:
(i) in the event of any determination by the Board of Directors of
Duke Energy to institute voluntary liquidation, dissolution or
winding-up proceedings with respect to Duke Energy or to
effect any other distribution of assets of Duke Energy among
its shareholders for the purpose of winding up its affairs, at
least 60 days prior to the proposed effective date of such
liquidation, dissolution, winding-up or other distribution;
and
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VOTING AND EXCHANGE TRUST AGREEMENT
(ii) promptly following the earlier of (A) receipt by Duke Energy
of notice of, and (B) Duke Energy otherwise becoming aware of,
any threatened or instituted claim, suit, petition or other
proceedings with respect to the involuntary liquidation,
dissolution or winding-up of Duke Energy or to effect any
other distribution of assets of Duke Energy among its
shareholders for the purpose of winding up its affairs, in
each case where Duke Energy has failed to contest in good
faith any such proceeding commenced in respect of Duke Energy
within 30 days of becoming aware thereof.
(b) Promptly following receipt by the Trustee from Duke Energy of notice
of any event (a "Liquidation Event") contemplated by Section 5.12(a)
above, the Trustee will give notice or cause such notice to be given
thereof to the Beneficiaries. Such notice shall be provided to the
Trustee by Duke Energy and shall include a brief description of
rights of the Beneficiaries with respect to the Automatic Exchange
Rights provided for in Section 5.12(c).
(c) In order that the Beneficiaries will be able to participate on a pro
rata basis with the holders of Duke Energy Common Shares in the
distribution of assets of Duke Energy in connection with a
Liquidation Event, immediately prior to the effective time (the
"Liquidation Event Effective Time") of a Liquidation Event all of
the then outstanding Exchangeable Shares shall be automatically
exchanged for Duke Energy Common Shares. To effect such automatic
exchange, Duke Energy shall purchase each Exchangeable Share
outstanding immediately prior to the Liquidation Event Effective
Time and held by Beneficiaries, and each Beneficiary shall sell the
Exchangeable Shares held by such Beneficiary at such time, for a
purchase price per share equal to the Exchangeable Share Price
applicable at that time. Duke Energy shall provide the Trustee with
an Officer's Certificate in connection with any automatic exchange
setting forth the calculation of the Exchangeable Share Price for
each Exchangeable Share.
(d) The closing of the transaction of purchase and sale contemplated by
the automatic exchange of Exchangeable Shares for Duke Energy Common
Shares shall be deemed to have occurred immediately prior to the
Liquidation Event Effective Time, and each Beneficiary shall be
deemed to have transferred to Duke Energy all of the Beneficiary's
right, title and interest in and to such Beneficiary's Exchangeable
Shares and the related interest in the Trust Estate. Any right of
each such Beneficiary to receive declared and unpaid dividends from
Exchangeco shall be deemed to be satisfied and discharged and each
such Beneficiary shall cease to be a holder of such Exchangeable
Shares and Duke Energy shall deliver to the Beneficiary the
Exchangeable Share Consideration deliverable upon the automatic
exchange of Exchangeable Shares. Concurrently with such Beneficiary
ceasing to be a holder of Exchangeable Shares, the Beneficiary shall
be considered and deemed for all purposes to be the holder of the
Duke Energy Common Shares issued pursuant to the automatic exchange
of Exchangeable Shares for Duke Energy Common Shares and the
certificates held by the Beneficiary previously representing the
Exchangeable Shares exchanged by the Beneficiary with Duke Energy
pursuant to such automatic exchange shall thereafter be deemed to
represent Duke Energy Common Shares
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VOTING AND EXCHANGE TRUST AGREEMENT
issued to the Beneficiary by Duke Energy pursuant to such automatic
exchange. Upon the request of a Beneficiary and the surrender by the
Beneficiary of Exchangeable Share certificates deemed to represent
Duke Energy Common Shares, duly endorsed in blank and accompanied by
such instruments of transfer as Duke Energy may reasonably require,
Duke Energy shall deliver or cause to be delivered to the
Beneficiary certificates representing Duke Energy Common Shares of
which the Beneficiary is the holder.
5.13 Withholding Rights
Duke Energy, Exchangeco and the Trustee shall be entitled to deduct and
withhold from any consideration otherwise payable under this Agreement to any
holder of Exchangeable Shares or Duke Energy Common Shares such amounts as Duke
Energy, Exchangeco or the Trustee is required to deduct and withhold with
respect to such payment under the Income Tax Act (Canada), the United States
Internal Revenue Code of 1986 or any provision of federal, provincial, state,
local or foreign tax law, in each case as amended or succeeded. The Trustee may
act on the advice of counsel with respect to such matters. To the extent that
amounts are so withheld, such withheld amounts shall be treated for all purposes
as having been paid to the holder of the shares in respect of which such
deduction and withholding was made, provided that such withheld amounts are
actually remitted to the appropriate taxing authority. To the extent that the
amount so required to be deducted or withheld from any payment to a holder
exceeds the cash portion of the consideration otherwise payable to the holder,
Duke Energy, Exchangeco and the Trustee are hereby authorized to sell or
otherwise dispose of such portion of the consideration as is necessary to
provide sufficient funds to Duke Energy, Exchangeco or the Trustee, as the case
may be, to enable it to comply with such deduction or withholding requirement
and Duke Energy, Exchangeco or the Trustee shall notify the holder thereof and
remit to such holder any unapplied balance of the net proceeds of such sale.
Duke Energy represents and warrants that, based upon facts currently known to
it, it has no current intention, as at the date of this Agreement, to deduct or
withhold from any consideration paid to holders of Exchangeable Shares any
amounts under the United States Internal Revenue Code of 1986.
ARTICLE 6
CONCERNING THE TRUSTEE
6.1 Powers and Duties of the Trustee
The rights, powers, duties and authorities of the Trustee under this
Agreement, in its capacity as trustee of the Trust, shall include:
(a) receipt and deposit of Duke Energy Common Shares from Duke Energy as
trustee for and on behalf of the Beneficiaries and Duke Energy in
accordance with the provisions of this Agreement;
(b) granting proxies and distributing materials to Beneficiaries as
provided in this Agreement;
(c) casting and exercising the Beneficiary Votes in accordance with the
provisions of this Agreement;
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VOTING AND EXCHANGE TRUST AGREEMENT
(d) receiving the grant of the Exchange Right and the Automatic Exchange
Rights from Duke Energy as trustee for and on behalf of the
Beneficiaries in accordance with the provisions of this Agreement;
(e) exercising the Exchange Right and enforcing the benefit of the
Automatic Exchange Rights, in each case in accordance with the
provisions of this Agreement, and in connection therewith receiving
from Beneficiaries Exchangeable Shares and other requisite documents
and distributing to such Beneficiaries Duke Energy Common Shares and
cheques, if any, to which such Beneficiaries are entitled upon the
exercise of the Exchange Right or pursuant to the Automatic Exchange
Rights, as the case may be;
(f) holding title to the Trust Estate;
(g) investing any moneys forming, from time to time, a part of the Trust
Estate as provided in this Agreement;
(h) taking action on its own initiative or at the direction of a
Beneficiary or Beneficiaries to enforce the obligations of Duke
Energy and Exchangeco under this Agreement; and
(i) taking such other actions and doing such other things as are
specifically provided in this Agreement.
In the exercise of such rights, powers, duties and authorities, the
Trustee shall have (and is granted) such incidental and additional rights,
powers, duties and authority not in conflict with any of the provisions of this
Agreement as the Trustee, acting in good faith and in the reasonable exercise of
its discretion, may deem necessary, appropriate or desirable to effect the
purpose of the Trust. Any exercise of such discretionary rights, powers, duties
and authorities by the Trustee shall be final, conclusive and binding upon all
persons.
The Trustee in exercising its rights, powers, duties and authorities
hereunder shall act honestly and in good faith and with a view to the best
interests of the Beneficiaries and shall exercise the care, diligence and skill
that a reasonably prudent trustee would exercise in comparable circumstances.
The Trustee shall not be bound to give notice or do or take any act,
action or proceeding by virtue of the powers conferred on it hereby unless and
until it shall be specifically required to do so under the terms hereof, nor
shall the Trustee be required to take any notice of, or to do, or to take any
act, action or proceeding as a result of any default or breach of any provision
hereunder, unless and until notified in writing of such default or breach, which
notices shall distinctly specify the default or breach desired to be brought to
the attention of the Trustee, and in the absence of such notice the Trustee may
for all purposes of this Agreement conclusively assume that no default or breach
has been made in the observance or performance of any of the representations,
warranties, covenants, agreements or conditions contained herein.
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VOTING AND EXCHANGE TRUST AGREEMENT
6.2 No Conflict of Interest
The Trustee represents to Duke Energy and Exchangeco that at the date of
execution and delivery of this Agreement there exists no material conflict of
interest in the role of the Trustee as a fiduciary hereunder and the role of the
Trustee in any other capacity. The Trustee shall, within 90 days after it
becomes aware that such material conflict of interest exists, either eliminate
such material conflict of interest or resign in the manner and with the effect
specified in Article 10. If, notwithstanding the foregoing provisions of this
Section 6.2, the Trustee has such a material conflict of interest, the validity
and enforceability of this Agreement shall not be affected in any manner
whatsoever by reason only of the existence of such material conflict of
interest. If the Trustee contravenes the foregoing provisions of this Section
6.2, any interested party may apply to the Court for an order that the Trustee
be replaced as trustee hereunder.
6.3 Dealings with Transfer Agents, Registrars, etc.
Duke Energy and Exchangeco irrevocably authorize the Trustee, from time to
time, to:
(a) consult, communicate and otherwise deal with the respective
registrars and transfer agents, and with any such subsequent
registrar or transfer agent, of the Exchangeable Shares and Duke
Energy Common Shares; and
(b) requisition, from time to time, (i) from any such registrar or
transfer agent any information readily available from the records
maintained by it which the Trustee may reasonably require for the
discharge of its duties and responsibilities under this Agreement
and (ii) from the transfer agent of Duke Energy Common Shares, and
any subsequent transfer agent of such shares, the share certificates
issuable upon the exercise from time to time of the Exchange Right
and pursuant to the Automatic Exchange Rights.
Duke Energy and Exchangeco irrevocably authorize their respective
registrars and transfer agents to comply with all such requests. Duke Energy
covenants that it will supply its transfer agent with duly executed share
certificates for the purpose of completing the exercise from time to time of the
Exchange Right and the Automatic Exchange Rights.
6.4 Books and Records
The Trustee shall keep available for inspection by Duke Energy and
Exchangeco at the Trustee's principal office in Lakewood, Colorado correct and
complete books and records of account relating to the Trust created by this
Agreement, including all relevant data relating to mailings and instructions to
and from Beneficiaries and all transactions pursuant to the Exchange Right and
the Automatic Exchange Rights. On or before January 15, 2002, and on or before
January 15 in every year thereafter, so long as any Duke Energy Common Shares
are on deposit with the Trustee, the Trustee shall transmit to Duke Energy and
Exchangeco a brief report, dated as of the preceding December 31, with respect
to:
(a) the property and funds comprising the Trust Estate as of that date;
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VOTING AND EXCHANGE TRUST AGREEMENT
(b) the number of exercises of the Exchange Right, if any, and the
aggregate number of Exchangeable Shares received by the Trustee on
behalf of Beneficiaries in consideration of the issuance by Duke
Energy of Duke Energy Common Shares in connection with the Exchange
Right, during the calendar year ended on such December 31; and
(c) any action taken by the Trustee in the performance of its duties
under this Agreement which it had not previously reported and which,
in the Trustee's opinion, materially affects the Trust Estate.
6.5 Income Tax Returns and Reports
The Trustee shall, to the extent necessary, prepare and file on behalf of
the Trust appropriate United States and Canadian income tax returns and any
other returns or reports as may be required by applicable law or pursuant to the
rules and regulations of any securities exchange or other trading system through
which the Exchangeable Shares are traded. In connection therewith, the Trustee
may obtain the advice and assistance of such experts or advisors as the Trustee
reasonably considers necessary or advisable (who may be experts or advisors to
Duke Energy or Exchangeco). If requested by the Trustee, Duke Energy or
Exchangeco shall retain qualified experts or advisors for the purpose of
providing such tax advice or assistance.
6.6 Indemnification Prior to Certain Actions by Trustee
The Trustee shall exercise any or all of the rights, duties, powers or
authorities vested in it by this Agreement at the request, order or direction of
any Beneficiary upon such Beneficiary furnishing to the Trustee reasonable
funding, security or indemnity against the costs, expenses and liabilities which
may be incurred by the Trustee therein or thereby, provided that no Beneficiary
shall be obligated to furnish to the Trustee any such security or indemnity in
connection with the exercise by the Trustee of any of its rights, duties, powers
and authorities with respect to the Duke Energy Common Shares held by the
Trustee pursuant to Article 4, subject to Section 6.15, with respect to the
Exchange Right pursuant to Article 5, subject to Section 6.15, and with respect
to the Automatic Exchange Rights pursuant to Article 5, subject to Section 6.15.
None of the provisions contained in this Agreement shall require the
Trustee to expend or risk its own funds or otherwise incur financial liability
in the exercise of any of its rights, powers, duties, or authorities unless
funded, given security or indemnified as aforesaid.
6.7 Action of Beneficiaries
No Beneficiary shall have the right to institute any action, suit or
proceeding or to exercise any other remedy authorized by this Agreement for the
purpose of enforcing any of its rights or for the execution of any trust or
power hereunder unless the Beneficiary has requested the Trustee to take or
institute such action, suit or proceeding and furnished the Trustee with the
funding, security or indemnity referred to in Section 6.6 and the Trustee shall
have failed to act within a reasonable time thereafter. In such case, but not
otherwise, the Beneficiary shall be entitled to take proceedings in any court of
competent jurisdiction such as the Trustee might have
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VOTING AND EXCHANGE TRUST AGREEMENT
taken; it being understood and intended that no one or more Beneficiaries shall
have any right in any manner whatsoever to affect, disturb or prejudice the
rights hereby created by any such action, or to enforce any right hereunder or
the Voting Rights, the Exchange Rights or the Automatic Exchange Rights except
subject to the conditions and in the manner herein provided, and that all powers
and trusts hereunder shall be exercised and all proceedings at law shall be
instituted, had and maintained by the Trustee, except only as herein provided,
and in any event for the equal benefit of all Beneficiaries.
6.8 Reliance Upon Declarations
The Trustee shall not be considered to be in contravention of any of its
rights, powers, duties and authorities hereunder if, when required, it acts and
relies in good faith upon statutory declarations, certificates, opinions, Lists,
reports or other papers or documents furnished pursuant to the provisions hereof
or required by the Trustee to be furnished to it in the exercise of its rights,
powers, duties and authorities hereunder if such statutory declarations,
certificates, opinions, Lists, reports or other papers or documents comply with
the provisions of Section 6.9, if applicable, and with any other applicable
provisions of this Agreement.
6.9 Evidence and Authority to Trustee
Duke Energy and/or Exchangeco shall furnish to the Trustee evidence of
compliance with the conditions provided for in this Agreement relating to any
action or step required or permitted to be taken by Duke Energy and/or
Exchangeco or the Trustee under this Agreement or as a result of any obligation
imposed under this Agreement, including in respect of the Voting Rights or the
Exchange Right or the Automatic Exchange Rights and the taking of any other
action to be taken by the Trustee at the request of or on the application of
Duke Energy and/or Exchangeco promptly if and when:
(a) such evidence is required by any other section of this Agreement to
be furnished to the Trustee in accordance with the terms of this
Section 6.9; or
(b) the Trustee, in the exercise of its rights, powers, duties and
authorities under this Agreement, gives Duke Energy and/or
Exchangeco written notice requiring it to furnish such evidence in
relation to any particular action or obligation specified in such
notice.
Such evidence shall consist of an Officer's Certificate of Duke Energy
and/or Exchangeco or a statutory declaration or a certificate made by persons
entitled to sign an Officer's Certificate stating that any such condition has
been complied with in accordance with the terms of this Agreement.
Whenever such evidence relates to a matter other than the Voting Rights or
the Exchange Right or the Automatic Exchange Rights or the taking of any other
action to be taken by the Trustee at the request or on the application of Duke
Energy and/or Exchangeco, and except as otherwise specifically provided herein,
such evidence may consist of a report or opinion of any solicitor, attorney,
auditor, accountant, appraiser, valuer, engineer or other expert or any other
person whose qualifications give authority to a statement made by him, provided
that if such
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VOTING AND EXCHANGE TRUST AGREEMENT
report or opinion is furnished by a director, officer or employee of Duke Energy
and/or Exchangeco it shall be in the form of an Officer's Certificate or a
statutory declaration.
Each statutory declaration, Officer's Certificate, opinion or report
furnished to the Trustee as evidence of compliance with a condition provided for
in this Agreement shall include a statement by the person giving the evidence:
(c) declaring that such person has read and understands the provisions
of this Agreement relating to the condition in question;
(d) describing the nature and scope of the examination or investigation
upon which such person based the statutory declaration, certificate,
statement or opinion; and
(e) declaring that such person has made such examination or
investigation as such person believes is necessary to enable such
person to make the statements or give the opinions contained or
expressed therein.
6.10 Experts, Advisers and Agents
The Trustee may:
(a) in relation to these presents act and rely on the opinion or advice
of or information obtained from any solicitor, attorney, auditor,
accountant, appraiser, valuer, engineer or other expert, whether
retained by the Trustee or by Duke Energy and/or Exchangeco or
otherwise, and may retain or employ such assistants as may be
necessary to the proper discharge of its powers and duties and
determination of its rights hereunder and may pay proper and
reasonable compensation for all such legal and other advice or
assistance as aforesaid; and
(b) employ such agents and other assistants as it may reasonably require
for the proper determination and discharge of its powers and duties
hereunder, and may pay reasonable remuneration for all services
performed for it (and shall be entitled to receive reasonable
remuneration for all services performed by it) in the discharge of
the trusts hereof and compensation for all disbursements, costs and
expenses made or incurred by it in the discharge of its duties
hereunder and in the management of the Trust.
6.11 Investment of Moneys Held by Trustee
Unless otherwise provided in this Agreement, any moneys held by or on
behalf of the Trustee which under the terms of this Agreement may or ought to be
invested or which may be on deposit with the Trustee or which may be in the
hands of the Trustee may be invested and reinvested in the name or under the
control of the Trustee, in trust for Duke Energy, in securities in which, under
the laws of the State of New York, trustees are authorized to invest trust
moneys, provided that such securities are stated to mature within two years
after their purchase by the Trustee, and the Trustee shall so invest such moneys
on the written direction of Duke Energy. Pending the investment of any moneys as
hereinbefore provided, such moneys may be deposited in the name of the Trustee
in any chartered bank in the United States of America or, with
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VOTING AND EXCHANGE TRUST AGREEMENT
the consent of Duke Energy, in the deposit department of the Trustee or any
other loan or trust company authorized to accept deposits under the laws of the
United States of America or any state thereof at the rate of interest then
current on similar deposits. Any interest earned or received from moneys held by
the trust shall be the property of and distributed to Duke Energy upon demand
therefore.
6.12 Trustee Not Required to Give Security
The Trustee shall not be required to give any bond or security in respect
of the execution of the trusts, rights, duties, powers and authorities of this
Agreement or otherwise in respect of the premises.
6.13 Trustee Not Bound to Act on Request
Except as in this Agreement otherwise specifically provided, the Trustee
shall not be bound to act in accordance with any direction or request of Duke
Energy and/or Exchangeco or of the directors thereof until a duly authenticated
copy of the instrument or resolution containing such direction or request shall
have been delivered to the Trustee, and the Trustee shall be empowered to act
and rely upon any such copy purporting to be authenticated and believed by the
Trustee to be genuine.
6.14 Authority to Carry on Business
The Trustee represents to Duke Energy and Exchangeco that at the date of
execution and delivery by it of this Agreement it is authorized to carry on the
business of a trust company in the State of Colorado but if, notwithstanding the
provisions of this Section 6.14, it ceases to be so authorized to carry on
business, the validity and enforceability of this Agreement and the Voting
Rights, the Exchange Right and the Automatic Exchange Rights shall not be
affected in any manner whatsoever by reason only of such event but the Trustee
shall, within 90 days after ceasing to be authorized to carry on the business of
a trust company in the State of Colorado, either become so authorized or resign
in the manner and with the effect specified in Article 10.
6.15 Conflicting Claims
If conflicting claims or demands are made or asserted with respect to any
interest of any Beneficiary in any Exchangeable Shares, including any
disagreement between the heirs, representatives, successors or assigns
succeeding to all or any part of the interest of any Beneficiary in any
Exchangeable Shares, resulting in conflicting claims or demands being made in
connection with such interest, then the Trustee shall be entitled, at its sole
discretion, to refuse to recognize or to comply with any such claims or demands.
In so refusing, the Trustee may elect not to exercise any Voting Rights,
Exchange Right or Automatic Exchange Rights subject to such conflicting claims
or demands and, in so doing, the Trustee shall not be or become liable to any
person on account of such election or its failure or refusal to comply with any
such conflicting claims or demands. The Trustee shall be entitled to continue to
refrain from acting and to refuse to act until:
(a) the rights of all adverse claimants with respect to the Voting
Rights, Exchange Right or Automatic Exchange Rights subject to such
conflicting claims or demands
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VOTING AND EXCHANGE TRUST AGREEMENT
have been adjudicated by a final judgment of a court of competent
jurisdiction and all rights of appeal have expired; or
(b) all differences with respect to the Voting Rights, Exchange Right or
Automatic Exchange Rights subject to such conflicting claims or
demands have been conclusively settled by a valid written agreement
binding on all such adverse claimants, and the Trustee shall have
been furnished with an executed copy of such agreement certified to
be in full force and effect.
If the Trustee elects to recognize any claim or comply with any demand
made by any such adverse claimant, it may in its discretion require such
claimant to furnish such surety bond or other security satisfactory to the
Trustee as it shall deem appropriate to fully indemnify it as between all
conflicting claims or demands.
6.16 Acceptance of Trust
The Trustee hereby accepts the Trust created and provided for by and in
this Agreement and agrees to perform the same upon the terms and conditions
herein set forth and to hold all rights, privileges and benefits conferred
hereby and by law in trust for the various persons who shall from time to time
be Beneficiaries, subject to all the terms and conditions herein set forth.
6.17 Maintenance of Office or Agency
Duke Energy will maintain in Vancouver an office or agency where
certificates representing Exchangeable Shares may be presented or surrendered
for exchange by Beneficiaries and where notices and demands to or upon Duke
Energy or Exchangeco in respect of the Exchangeable Shares may be served. Duke
Energy will give prompt written notice to the Trustee of the location, and any
change in the location, of such office or agency. If at any time Duke Energy
shall fail to maintain any such office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be served at the Corporate Trust Office of the Trustee, and Duke
Energy and Exchangeco hereby appoint the Trustee as their agent to receive all
such presentations, surrenders, notices and demands. Furthermore, copies of all
Duke Energy proxy materials will be made available for inspection by any
Beneficiary at such office or agency.
ARTICLE 7
COMPENSATION
7.1 Fees and Expenses of the Trustee
Duke Energy and Exchangeco jointly and severally agree to pay the Trustee
reasonable compensation for all of the services rendered by it under this
Agreement and will reimburse the Trustee for all reasonable expenses (including
taxes other than taxes based on the net income of the Trustee, fees paid to
legal counsel and other experts and advisors and travel expenses) and
disbursements, including the cost and expense of any suit or litigation of any
character and any proceedings before any governmental agency reasonably incurred
by the Trustee in connection with its duties under this Agreement; provided that
Duke Energy and Exchangeco shall have no obligation to reimburse the Trustee for
any expenses or disbursements paid, incurred or suffered
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VOTING AND EXCHANGE TRUST AGREEMENT
by the Trustee in any suit or litigation in which the Trustee is determined to
have acted in bad faith or with gross negligence, recklessness or willful
misconduct.
ARTICLE 8
INDEMNIFICATION AND LIMITATION OF LIABILITY
8.1 Indemnification of the Trustee
Duke Energy and Exchangeco jointly and severally agree to indemnify and
hold harmless the Trustee and each of its directors, officers, employees and
agents appointed and acting in accordance with this Agreement (collectively, the
"Indemnified Parties") against all claims, losses, damages, reasonable costs,
penalties, fines and reasonable expenses (including reasonable expenses of the
Trustee's legal counsel) which, without fraud, gross negligence, recklessness,
willful misconduct or bad faith on the part of such Indemnified Party, may be
paid, incurred or suffered by the Indemnified Party by reason or as a result of
the Trustee's acceptance or administration of the Trust, its compliance with its
duties set forth in this Agreement, or any written or oral instruction delivered
to the Trustee by Duke Energy or Exchangeco pursuant hereto.
In no case shall Duke Energy or Exchangeco be liable under this indemnity
for any claim against any of the Indemnified Parties unless Duke Energy and
Exchangeco shall be notified by the Trustee of the written assertion of a claim
or of any action commenced against the Indemnified Parties, promptly after any
of the Indemnified Parties shall have received any such written assertion of a
claim or shall have been served with a summons or other first legal process
giving information as to the nature and basis of the claim. Subject to (ii)
below, Duke Energy and Exchangeco shall be entitled to participate at their own
expense in the defense and, if Duke Energy and Exchangeco so elect at any time
after receipt of such notice, either of them may assume the defense of any suit
brought to enforce any such claim. The Trustee shall have the right to employ
separate counsel in any such suit and participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of the Trustee
unless: (i) the employment of such counsel has been authorized by Duke Energy or
Exchangeco; or (ii) the named parties to any such suit include both the Trustee
and Duke Energy or Exchangeco and the Trustee shall have been advised by counsel
acceptable to Duke Energy or Exchangeco that there may be one or more legal
defenses available to the Trustee that are different from or in addition to
those available to Duke Energy or Exchangeco and that, in the judgment of such
counsel, would present a conflict of interest were a joint representation to be
undertaken (in which case Duke Energy and Exchangeco shall not have the right to
assume the defense of such suit on behalf of the Trustee but shall be liable to
pay the reasonable fees and expenses of counsel for the Trustee). This indemnity
shall survive the termination of this Agreement and the resignation or removal
of the Trustee.
8.2 Limitation of Liability
The Trustee shall not be held liable for any loss which may occur by
reason of depreciation of the value of any part of the Trust Estate or any loss
incurred on any investment of funds pursuant to this Agreement, except to the
extent that such loss is attributable to the fraud, gross negligence,
recklessness, willful misconduct or bad faith on the part of the Trustee.
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VOTING AND EXCHANGE TRUST AGREEMENT
ARTICLE 9
CHANGE OF TRUSTEE
9.1 Resignation
The Trustee, or any trustee hereafter appointed, may at any time resign by
giving written notice of such resignation to Duke Energy and Exchangeco
specifying the date on which it desires to resign, provided that such notice
shall not be given less than thirty (30) days before such desired resignation
date unless Duke Energy and Exchangeco otherwise agree and provided further that
such resignation shall not take effect until the date of the appointment of a
successor trustee and the acceptance of such appointment by the successor
trustee. Upon receiving such notice of resignation, Duke Energy and Exchangeco
shall promptly appoint a successor trustee, which shall be a corporation
organized and existing under the laws of the State of New York or the State of
Delaware, by written instrument in duplicate, one copy of which shall be
delivered to the resigning trustee and one copy to the successor trustee.
Failing the appointment and acceptance of a successor trustee, a successor
trustee may be appointed by order of a court of competent jurisdiction upon
application of one or more of the parties to this Agreement. If the retiring
trustee is the party initiating an application for the appointment of a
successor trustee by order of a court of competent jurisdiction, Duke Energy and
Exchangeco shall be jointly and severally liable to reimburse the retiring
trustee for its legal costs and expenses in connection with same.
9.2 Removal
The Trustee, or any trustee hereafter appointed, may (provided a successor
trustee is appointed) be removed at any time on not less than 30 days' prior
notice by written instrument executed by Duke Energy and Exchangeco, in
duplicate, one copy of which shall be delivered to the trustee so removed and
one copy to the successor trustee.
9.3 Successor Trustee
Any successor trustee appointed as provided under this Agreement shall
execute, acknowledge and deliver to Duke Energy and Exchangeco and to its
predecessor trustee an instrument accepting such appointment. Thereupon the
resignation or removal of the predecessor trustee shall become effective and
such successor trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, duties and obligations of its
predecessor under this Agreement, with the like effect as if originally named as
trustee in this Agreement. However, on the written request of Duke Energy and
Exchangeco or of the successor trustee, the trustee ceasing to act shall, upon
payment of any amounts then due it pursuant to the provisions of this Agreement,
execute and deliver an instrument transferring to such successor trustee all the
rights and powers of the trustee so ceasing to act. Upon the request of any such
successor trustee, Duke Energy, Exchangeco and such predecessor trustee shall
execute any and all instruments in writing for more fully and certainly vesting
in and confirming to such successor trustee all such rights and powers.
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VOTING AND EXCHANGE TRUST AGREEMENT
9.4 Notice of Successor Trustee
Upon acceptance of appointment by a successor trustee as provided herein,
Duke Energy and Exchangeco shall cause to be mailed notice of the succession of
such trustee hereunder to each Beneficiary specified in a List. If Duke Energy
or Exchangeco shall fail to cause such notice to be mailed within 10 days after
acceptance of appointment by the successor trustee, the successor trustee shall
cause such notice to be mailed at the expense of Duke Energy and Exchangeco.
ARTICLE 10
DUKE ENERGY SUCCESSORS
10.1 Certain Requirements in Respect of Combination, etc.
Duke Energy shall not consummate any transaction (whether by way of
reconstruction, reorganization, consolidation, merger, transfer, sale, lease or
otherwise) whereby all or substantially all of its undertaking, property and
assets would become the property of any other person or, in the case of a
merger, of the continuing corporation resulting therefrom unless, but may do so
if:
(a) such other person or continuing corporation (herein called the "Duke
Energy Successor"), by operation of law, becomes, without more,
bound by the terms and provisions of this Agreement or, if not so
bound, executes, prior to or contemporaneously with the consummation
of such transaction, a trust agreement supplemental hereto and such
other instruments (if any) as are satisfactory to the Trustee,
acting reasonably, and in the opinion of legal counsel to the
Trustee are reasonably necessary or advisable to evidence the
assumption by the Duke Energy Successor of liability for all moneys
payable and property deliverable hereunder and the covenant of such
Duke Energy Successor to pay and deliver or cause to be delivered
the same and its agreement to observe and perform all the covenants
and obligations of Duke Energy under this Agreement; and
(b) such transaction shall be upon such terms and conditions as
substantially to preserve and not to impair in any material respect
any of the rights, duties, powers and authorities of the Trustee or
of the Beneficiaries hereunder.
10.2 Vesting of Powers in Successor
Whenever the conditions of Section 10.1 have been duly observed and
performed, the Trustee, Duke Energy Successor and Exchangeco shall, if required
by Section 10.1, execute and deliver the supplemental trust agreement provided
for in Article 11 and thereupon Duke Energy Successor shall possess and from
time to time may exercise each and every right and power of Duke Energy under
this Agreement in the name of Duke Energy or otherwise and any act or proceeding
by any provision of this Agreement required to be done or performed by the Board
of Directors of Duke Energy or any officers of Duke Energy may be done and
performed with like force and effect by the directors or officers of such Duke
Energy Successor.
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VOTING AND EXCHANGE TRUST AGREEMENT
10.3 Wholly-Owned Subsidiaries
Nothing herein shall be construed as preventing the amalgamation or merger
of any wholly-owned direct or indirect subsidiary of Duke Energy with or into
Duke Energy or the winding-up, liquidation or dissolution of any wholly-owned
subsidiary of Duke Energy provided that all of the assets of such subsidiary are
transferred to Duke Energy or another wholly-owned direct or indirect subsidiary
of Duke Energy and any such transactions are expressly permitted by this Article
10.
ARTICLE 11
AMENDMENTS AND SUPPLEMENTAL TRUST AGREEMENTS
11.1 Amendments, Modifications, etc.
This Agreement may not be amended or modified except by an agreement in
writing executed by Duke Energy, Exchangeco and the Trustee and approved by the
Beneficiaries in accordance with Section 10.2 of the Exchangeable Share
Provisions.
11.2 Ministerial Amendments
Notwithstanding the provisions of Section 11.1, the parties to this
Agreement may in writing, at any time and from time to time, without the
approval of the Beneficiaries, amend or modify this Agreement for the purposes
of
(a) adding to the covenants of any or all parties hereto for the
protection of the Beneficiaries hereunder provided that the Board of
Directors of each of Exchangeco and Duke Energy shall be of the good
faith opinion that such additions will not be prejudicial to the
rights or interests of the Beneficiaries;
(b) making such amendments or modifications not inconsistent with this
Agreement as may be necessary or desirable with respect to matters
or questions which, in the good faith opinion of the Board of
Directors of each of Duke Energy and Exchangeco and in the opinion
of the Trustee, having in mind the best interests of the
Beneficiaries it may be expedient to make, provided that such Boards
of Directors and the Trustee, acting on the advice of counsel, shall
be of the opinion that such amendments and modifications will not be
prejudicial to the interests of the Beneficiaries; or
(c) making such changes or corrections which, on the advice of counsel
to Duke Energy, Exchangeco and the Trustee, are required for the
purpose of curing or correcting any ambiguity or defect or
inconsistent provision or clerical omission or mistake or manifest
error, provided that the Trustee, acting on the advice of counsel,
and the Board of Directors of each of Duke Energy and Exchangeco
shall be of the opinion that such changes or corrections will not be
prejudicial to the rights and interests of the Beneficiaries.
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VOTING AND EXCHANGE TRUST AGREEMENT
11.3 Meeting to Consider Amendments
Exchangeco, at the request of Duke Energy, shall call a meeting or
meetings of the Beneficiaries for the purpose of considering any proposed
amendment or modification requiring approval pursuant hereto. Any such meeting
or meetings shall be called and held in accordance with the by-laws of
Exchangeco, the Exchangeable Share Provisions and all applicable laws.
11.4 Changes in Capital of Duke Energy and Exchangeco
At all times after the occurrence of any event contemplated pursuant to
Section 2.7 or 2.8 of the Support Agreement or otherwise, as a result of which
either Duke Energy Common Shares or the Exchangeable Shares or both are in any
way changed, this Agreement shall forthwith be deemed amended and modified as
necessary in order that it shall apply with full force and effect, mutatis
mutandis, to all new securities into which Duke Energy Common Shares or the
Exchangeable Shares or both are so changed.
11.5 Execution of Supplemental Trust Agreements
No amendment to or modification or waiver of any of the provisions of this
Agreement otherwise permitted hereunder shall be effective unless made in
writing and signed by all of the parties hereto. From time to time Exchangeco,
Duke Energy and the Trustee may, subject to the provisions of these presents,
and they shall, when so directed by these presents, execute and deliver by their
proper officers, trust agreements or other instruments supplemental hereto,
which thereafter shall form part hereof, for any one or more of the following
purposes:
(a) evidencing the succession of Duke Energy Successors and the
covenants of and obligations assumed by each such Duke Energy
Successor in accordance with the provisions of Article 10 and the
successors of any successor trustee in accordance with the
provisions of Article 9;
(b) making any additions to, deletions from or alterations of the
provisions of this Agreement or the Voting Rights, the Exchange
Right or the Automatic Exchange Rights which, in the opinion of the
Trustee, will not be prejudicial to the interests of the
Beneficiaries or are, in the opinion of counsel to the Trustee,
necessary or advisable in order to incorporate, reflect or comply
with any legislation the provisions of which apply to Duke Energy,
Exchangeco, the Trustee or this Agreement; and
(c) for any other purposes not inconsistent with the provisions of this
Agreement, including to make or evidence any amendment or
modification to this Agreement as contemplated hereby, provided
that, in the opinion of the Trustee, the rights of the Trustee and
Beneficiaries will not be prejudiced thereby.
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VOTING AND EXCHANGE TRUST AGREEMENT
ARTICLE 12
TERMINATION
12.1 Term
The Trust created by this Agreement shall continue until the earliest to
occur of the following events:
(a) no outstanding Exchangeable Shares are held by a Beneficiary;
(b) each of Duke Energy and Exchangeco elects in writing to terminate
the Trust and such termination is approved by the Beneficiaries in
accordance with Section 10.2 of the Exchangeable Share Provisions;
and
(c) 21 years after the death of the last survivor of the descendants of
His Majesty King ▇▇▇▇▇▇ VI of Canada and the United Kingdom of Great
Britain and Northern Ireland living on the date of the creation of
the Trust.
12.2 Survival of Agreement
This Agreement shall survive any termination of the Trust and shall
continue until there are no Exchangeable Shares outstanding held by a
Beneficiary; provided, however, that the provisions of Articles 7 and 8 shall
survive any such termination of this Agreement.
ARTICLE 13
GENERAL
13.1 Severability
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner to the end that
transactions contemplated hereby are fulfilled to the extent possible.
13.2 Assignment
No party hereto may assign this Agreement or any of its rights, interests
or obligations under this Agreement (whether by operation of law or otherwise)
except that Exchangeco may assign in its sole discretion, any or all of its
rights, interests and obligations hereunder to any wholly-owned subsidiary of
Duke Energy.
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VOTING AND EXCHANGE TRUST AGREEMENT
13.3 Binding Effect
Subject to Section 13.2, this Agreement and the Arrangement shall be
binding upon, enure to the benefit of and be enforceable by the parties hereto
and their respective successors and assigns and to the benefit of the
Beneficiaries.
13.4 Notices to Parties
All notices and other communications hereunder shall be in writing and
shall be deemed given when delivered personally, telecopied (which is confirmed)
or dispatched (postage prepaid) to a nationally recognized overnight courier
service with overnight delivery instructions, in each case addressed to the
particular party at:
(a) if to Duke Energy or Exchangeco, at:
Duke Energy Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopier Number: (▇▇▇) ▇▇▇-▇▇▇▇
(b) if to the Trustee, at:
Computershare Trust Company, Inc.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust
Telecopier Number: (▇▇▇) ▇▇▇-▇▇▇▇
or at such other address of which any party may, from time to time, advise the
other parties by notice in writing given in accordance with the foregoing.
13.5 Notice to Beneficiaries
Any and all notices to be given and any documents to be sent to any
Beneficiaries may be given or sent to the address of such Beneficiary shown on
the register of holders of Exchangeable Shares in any manner permitted by the
by-laws of Exchangeco from time to time in force in respect of notices to
shareholders and shall be deemed to be received (if given or sent in such
manner) at the time specified in such by-laws, the provisions of which by-laws
shall apply mutatis mutandis to notices or documents as aforesaid sent to such
Beneficiaries.
13.6 Counterparts
This Agreement may be executed in counterparts, each of which shall be
deemed to be an original but all of which together shall constitute one and the
same instrument.
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VOTING AND EXCHANGE TRUST AGREEMENT
13.7 Governing Laws; Consent to Jurisdiction
This Agreement shall be governed by and construed in accordance with the
laws of New York. Each party hereby irrevocably attorns to the jurisdiction of
the courts of New York in respect of all matters arising under or in relation to
this Agreement and Duke Energy hereby appoints _____________ as its registered
office in New York as attorney for service of process.
13.8 United States Tax Characterization
The parties hereto recognize and intend that, for United States federal,
state and local income, franchise and similar tax purposes, the Trust will be
disregarded as an entity separate from Duke Energy pursuant to Treas. Reg.
301.7701-3(b), and no party shall take any position on any tax return or
otherwise that is inconsistent with such treatment.
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VOTING AND EXCHANGE TRUST AGREEMENT
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
DUKE ENERGY CORPORATION
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
EXCHANGECO
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
COMPUTERSHARE TRUST COMPANY
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
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VOTING AND EXCHANGE TRUST AGREEMENT