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EXHIBIT 2.3
WASHINGTON ENERGY COMPANY
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of October 18, 1995 by and among
Puget Sound Power & Light Company , a Washington corporation ("Puget"), and
Washington Energy Company, a Washington corporation ("WeCo" or the "Company").
WHEREAS, concurrently with the execution and delivery of this
Agreement: (i) Puget, the Company and Washington Natural Gas Company, a
Washington corporation ("WNG"), are entering into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"), which provides,
among other things, on the terms and subject to the conditions thereof, for the
merger of the Company and WNG (or, in certain circumstances described therein,
only the Company) with and into Puget (the "Merger"), and (ii) Puget and the
Company are entering into a stock option agreement dated as of the date hereof
whereby Puget grants to the Company an option with respect to certain shares of
Common Stock, stated value $10 per share, of Puget, together with the Rights
under the Puget Rights Agreement (as defined in the Merger Agreement)
associated therewith (such Common Stock and the associated Rights being
collectively referred to herein as "Puget Shares"), on the terms and subject to
the conditions set forth therein (the "Puget Stock Option Agreement"); and
WHEREAS, as a condition to Puget's willingness to enter into the
Merger Agreement and the Puget Stock Option Agreement, Puget has requested that
the Company agree, and the Company has so agreed, to grant to Puget an option
with respect to certain shares of Common Stock, par value $5 per share, of the
Company ("Company Common Stock"), on the terms and subject to the conditions
set forth herein.
NOW, THEREFORE, to induce Puget to enter into the Merger Agreement and
the Puget Stock Option Agreement, and in consideration of the mutual covenants
and agreements set forth herein and in the Merger Agreement and the Puget Stock
Option Agreement, the parties hereto agree as follows:
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1. GRANT OF OPTION
The Company hereby grants Puget an irrevocable option (the "Company
Option") to purchase up to 4,789,960 shares, subject to adjustment as provided
in Section 11 (such shares being referred to herein as the "Company Shares") of
Company Common Stock (being 19.9% of the number of shares of Company Common
Stock outstanding on the date hereof) in the manner set forth below at a price
(the "Exercise Price") per Company Share of $20.00 (which is equal to the
product of (x) the Fair Market Value (as defined below) of a Puget Share on the
date hereof and (y) the Ratio set forth in Section 2.1(b) of the Merger
Agreement) payable, at Puget's option, (a) in cash or (b) subject to the
receipt of the approvals of any Governmental Authority required for the Company
to acquire the Puget Shares from Puget and for Puget to issue the Puget Shares
to WeCo, which approvals the Company and Puget shall use all commercially
reasonable efforts to obtain, in Puget Shares, in either case in accordance
with Section 4 hereof. Notwithstanding the foregoing, in no event shall the
number of Company Shares for which the Company Option is exercisable exceed
19.9% of the number of issued and outstanding shares of Company Common Stock.
As used herein, the "Fair Market Value" of any share shall be the average of
the daily closing sales price for such share on the New York Stock Exchange
(the "NYSE") during the 10 NYSE trading days prior to the fifth NYSE trading
day preceding the date such Fair Market Value is to be determined. Capitalized
terms used herein but not defined herein shall have the meanings set forth in
the Merger Agreement.
2. EXERCISE OF OPTION
The Company Option may be exercised by Puget, in whole or in part, at
any time or from time to time after the Merger Agreement becomes terminable by
Puget under circumstances which could entitle Puget to termination fees under
either Section 9.3(a) of the Merger Agreement (provided that the events
specified in Section 9.3(a)(ii)(x) of the Merger Agreement shall have occurred,
although the events specified in Section 9.3(a)(ii)(y) need not have occurred)
or Section 9.3(b) of the Merger Agreement (regardless of whether the Merger
Agreement is actually terminated or whether there occurs a closing of any
Business Combination involving a Target Party or a closing by which a Target
Party becomes a subsidiary), any such event by which the Merger Agreement
becomes so terminable by Puget being referred to herein as a "Trigger Event."
The Company shall notify Puget promptly in writing of the occurrence of any
Trigger Event, it being understood that the giving of such notice by the
Company shall not be a condition to the right of Puget to exercise the Company
Option. In the event Puget wishes to exercise the Company Option, Puget shall
deliver to the Company a written notice (an "Exercise Notice") specifying the
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total number of Company Shares it wishes to purchase. Each closing of a
purchase of Company Shares (a "Closing") shall occur at a place, on a date and
at a time designated by Puget in an Exercise Notice delivered at least two
business days prior to the date of the Closing. The Company Option shall
terminate upon the earlier of: (i) the Effective Time; (ii) the termination of
the Merger Agreement pursuant to Section 9.1 thereof (other than upon or during
the continuance of a Trigger Event); or (iii) 180 days following any termination
of the Merger Agreement upon or during the continuance of a Trigger Event (or
if, at the expiration of such 180-day period, the Company Option cannot be
exercised by reason of any applicable judgment, decree, order, law or
regulation, 10 business days after such impediment to exercise shall have been
removed or shall have become final and not subject to appeal, but in no event
under this clause (iii) later than December 31, 1996; provided that such date
shall be extended to March 31, 1997 if the date after which either party may
terminate the Merger Agreement pursuant to Section 9.1(b) of the Merger
Agreement has been extended to March 31, 1997. Notwithstanding the foregoing,
the Company Option may not be exercised if Puget is in material breach of any of
its material representations or warranties, or in material breach of any of its
covenants or agreements, contained in this Agreement, the Puget Stock Option
Agreement or the Merger Agreement. Upon the giving by Puget to the Company of
the Exercise Notice and the tender of the applicable aggregate Exercise Price,
Puget shall be deemed to be the holder of record of the Company Shares issuable
upon such exercise, notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing such Company Shares shall
not then be actually delivered to Puget.
3. CONDITIONS TO CLOSING
The obligation of the Company to issue the Company Shares to Puget
hereunder is subject to the conditions (the condition described in clause (ii)
below may be waived by the Company in its sole discretion) that (i) all waiting
periods, if any, under the HSR Act, applicable to the issuance of the Company
Shares hereunder shall have expired or have been terminated; (ii) any Puget
Shares which are issued in payment of the Exercise Price, shall have been
approved for listing on the NYSE upon official notice of issuance; (iii) all
consents, approvals, orders or authorizations of, or registrations,
declarations or filings with, any federal, state or local administrative agency
or commission or other federal, state or local Governmental Authority, if any,
required in connection with the issuance of the Company Shares hereunder shall
have been obtained or made, as the case may be; and (iv) no preliminary or
permanent injunction or other order by any court of competent jurisdiction
prohibiting or otherwise restraining such issuance shall be in effect.
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4. CLOSING
At any Closing, (a) the Company will deliver to Puget or its designee
a single certificate in definitive form representing the number of the Company
Shares designated by Puget in its Exercise Notice, such certificate to be
registered in the name of Puget and to bear the legend set forth in Section 12
and (b) Puget will deliver to the Company the aggregate price for Company
Shares so designated and being purchased by (i) wire transfer of immediately
available funds or certified check or bank check or (ii) subject to the
condition in Section 1(b), a certificate or certificates representing the
number of Puget Shares being issued by Puget in consideration thereof, as the
case may be. For the purposes of this Agreement, the number of Puget Shares to
be delivered to the Company shall be equal to the quotient obtained by dividing
(i) the product of (x) the number of Company Shares with respect to which the
Company Option is being exercised and (y) the Exercise Price by (ii) the Fair
Market Value of the Puget Shares on the date immediately preceding the date the
Exercise Notice is delivered to the Company. The Company shall pay all
expenses, and any and all United States federal, state and local taxes and
other charges that may be payable in connection with the preparation, issuance
and delivery of stock certificates under this Section 4 in the name of Puget or
such of its designees as shall have obtained requisite regulatory approvals.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Puget that (a) the Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Washington and has the corporate power and authority to
enter into this Agreement and, subject to obtaining the applicable approval of
shareholders of the Company for the repurchase of Company Shares pursuant to
Section 7(a) below under circumstances where the provisions of Section
23B.06.400 of the WBCA would be applicable (the "Buyback Approval") and subject
to any regulatory approvals referred to herein, to carry out its obligations
hereunder, (b) the execution and delivery of this Agreement by the Company and
the consummation by the Company of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of the
Company and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or any of the transactions contemplated
hereby (other than any required Buyback Approval), (c) such corporate action
(including the approval of the Board of Directors of the Company) is intended
to render inapplicable to this Agreement and the Merger Agreement, and to the
transactions contemplated hereby and thereby, the provisions of the WBCA
referred to in Section 4.15 of the Merger Agreement, (d) this Agreement has
been duly executed and delivered by the Company, constitutes a valid and
binding obligation of the Company and, assuming this Agreement constitutes a
valid and binding
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obligation of Puget, is enforceable against the Company in accordance with its
terms, (e) the Company has taken all necessary corporate action to authorize
and reserve for issuance and to permit it to issue, upon exercise of the
Company Option, and at all times from the date hereof through the expiration of
the Company Option will have reserved, ____________ authorized and unissued
Company Shares, such amount being subject to adjustment as provided in Section
11, all of which, upon their issuance and delivery in accordance with the terms
of this Agreement, will be validly issued, fully paid and nonassessable, (f)
upon delivery of the Company Shares to Puget upon the exercise of the Company
Option, Puget will acquire the Company Shares free and clear of all claims,
liens, charges, encumbrances and security interests of any nature whatsoever,
(g) except as described in Section 4.4(b) of the Merger Agreement, the
execution and delivery of this Agreement by the Company does not, and the
consummation by the Company of the transactions contemplated hereby will not,
violate, conflict with, or result in a breach of any provision of, or
constitute a default (with or without notice or lapse of time, or both) under,
or result in the termination of, or accelerate the performance required by, or
result in a right of termination, cancellation, or acceleration of any
obligation or the loss of a material benefit under, or the creation of a lien,
pledge, security interest or other encumbrance on assets (any such conflict,
violation, default, right of termination, cancellation or acceleration, loss or
creation, a "Violation") of the Company or any of its subsidiaries, pursuant to
(A) any provision of the Restated Articles of Incorporation or Bylaws of the
Company, (B) any provisions of any loan or credit agreement, note, mortgage,
indenture, lease, Company benefit plan or other agreement, obligation,
instrument, permit, concession, franchise, license or (C) any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the Company
or its properties or assets, which Violation, in the case of each of clauses
(B) and (C), could reasonably be expected to have a material adverse effect on
the Company and its subsidiaries taken as a whole, (h) except as described in
Section 4.4(c) of the Merger Agreement or Section 1(b) or Section 3 hereof, the
execution and delivery of this Agreement by the Company does not, and the
performance of this Agreement by the Company will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
Governmental Authority, (i) none of the Company, any of its affiliates or
anyone acting on its or their behalf has issued, sold or offered any security
of the Company to any person under circumstances that would cause the issuance
and sale of the Company Shares, as contemplated by this Agreement, to be
subject to the registration requirements of the Securities Act as in effect on
the date hereof and, assuming the representations of Puget contained in Section
6(h) are true and correct, the issuance, sale and delivery of the Company
Shares hereunder would be exempt from the registration and prospectus delivery
requirements of the Securities Act, as in effect on the date hereof (and the
Company shall not take any action which would
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cause the issuance, sale and delivery of the Company Shares hereunder not to be
exempt from such requirements), and (j) any Puget Shares acquired pursuant to
this Agreement will be acquired for the Company's own account, for investment
purposes only and will not be acquired by the Company with a view to the public
distribution thereof in violation of any applicable provision of the Securities
Act.
6. REPRESENTATIONS AND WARRANTIES OF PUGET
Puget represents and warrants to the Company that (a) Puget is a
corporation duly organized, validly existing and in good standing under the
laws of the state of Washington and has the corporate power and authority to
enter into this Agreement and to carry out its obligations hereunder, (b) the
execution and delivery of this Agreement by Puget and the consummation by Puget
of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Puget and no other corporate
proceedings on the part of Puget are necessary to authorize this Agreement or
any of the transactions contemplated hereby, (c) this Agreement has been duly
executed and delivered by Puget and constitutes a valid and binding obligation
of Puget, and, assuming this Agreement constitutes a valid and binding
obligation of the Company, is enforceable against Puget in accordance with its
terms, (d) prior to any delivery of Puget Shares in consideration of the
purchase of Company Shares pursuant hereto, Puget will have taken all necessary
corporate action to authorize for issuance and to permit it to issue such Puget
Shares, all of which, upon their issuance and delivery in accordance with the
terms of this Agreement, will be validly issued, fully paid and nonassessable,
and to render inapplicable to the receipt by the Company of the Puget Shares
the provisions of the WBCA referred to in Section 5.15 of the Merger Agreement,
(e) upon any delivery of such Puget Shares to the Company in consideration of
the purchase of Company Shares pursuant hereto, the Company will acquire the
Puget Shares free and clear of all claims, liens, charges, encumbrances and
security interests of any nature whatsoever, (f) except as described in Section
5.4(b) of the Merger Agreement, the execution and delivery of this Agreement by
Puget does not, and the consummation by Puget of the transactions contemplated
hereby will not, violate, conflict with, or result in the breach of any
provision of, or constitute a default (with or without notice or lapse of time,
or both) under, or result in any Violation by Puget or any of its subsidiaries,
pursuant to (A) any provision of the Restated Articles of Incorporation or
Bylaws of Puget, (B) any provisions of any loan or credit agreement, note,
mortgage, indenture, lease, Puget benefit plan or other agreement, obligation,
instrument, permit, concession, franchise or license or (C) any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to Puget
or its properties or assets, which Violation, in the case of each of clauses
(B) and or (C), would have a material adverse effect on Puget and its
subsidiaries taken as a whole, (g) except as described in Section 5.4(c) of the
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Merger Agreement or Section 1(b) or Section 3 hereof, the execution and
delivery of this Agreement by Puget does not, and the consummation by Puget of
the transactions contemplated hereby will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental
Authority, (h) any Company Shares acquired upon exercise of the Company Option
will be acquired for Puget's own account, for investment purposes only and will
not be, and the Company Option is not being, acquired by Puget with a view to
the public distribution thereof in violation of any applicable provision of the
Securities Act and (i) the delivery of Puget Shares to the Company in
consideration of the purchase of Company Shares pursuant hereto will not result
in the Company becoming an "Acquiring Person" for purposes of the Puget Rights
Agreement or otherwise result in the triggering of any right (including,
without limitation, a "flip-in" or "flip-over" or similar event commonly
described in rights agreements) or entitlement of Puget shareholders under the
Puget Rights Agreement or any similar agreement to which Puget or any of its
affiliates is a party.
7. CERTAIN REPURCHASES
(a) Puget Put. At the request of Puget by written notice at any
time during which the Company Option is exercisable pursuant to Section 2 (the
"Repurchase Period"), the Company (or any successor entity thereof) shall
repurchase from Puget all or any portion of the Company Option, at the price
set forth in subparagraph (i) below, or, at the request of Puget by written
notice at any time prior to December 31, 1996 (provided that such date shall be
extended to March 31, 1997 if the date after which either party may terminate
the Merger Agreement pursuant to Section 9.1(b) of the Merger Agreement has
been extended to March 31, 1997), the Company (or any successor entity thereof)
shall repurchase from Puget all or any portion of the Company Shares purchased
by Puget pursuant to the Company Option, at the price set forth in subparagraph
(ii) below:
(i) the difference between (x) the "Market/Offer Price"
for shares of Company Common Stock as of the date Puget gives notice
of its intent to exercise its rights under this Section 7 (defined as
the higher of (A) the price per share offered as of such date pursuant
to any tender or exchange offer or other offer with respect to a
Business Combination which was made prior to such date and not
terminated or withdrawn as of such date (the "Offer Price") and (B)
the Fair Market Value of Company Common Stock as of such date (the
"Market Price")) and (y) the Exercise Price, multiplied by the number
of Company Shares purchasable pursuant to the Company Option (or
portion thereof with respect to which Puget is exercising its rights
under this Section 7), but only if the Market/Offer Price is greater
than the Exercise Price;
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(ii) the product of (x) the sum of (A) the Exercise Price
paid by Puget per Company Share acquired pursuant to the Company
Option and (B) the difference between the Market/Offer Price and the
Exercise Price, but only if the Market/Offer Price is greater than the
Exercise Price, and (y) the number of Company Shares so to be
repurchased pursuant to this Section 7. For purposes of this clause
(ii), the Offer Price shall be the highest price per share offered
pursuant to a tender or exchange offer or other Business Combination
offer during the Repurchase Period prior to the delivery by Puget of a
notice of repurchase.
(b) Redelivery of Puget Shares. If Puget elected to purchase
Company Shares pursuant to the exercise of the Company Option by the issuance
and delivery of Puget Shares, then the Company shall, if so requested by Puget,
in fulfillment of its obligation pursuant to clause (A) of Section 7(a)(ii)(x)
(that is, with respect to the Exercise Price only and without limitation to its
obligation to pay additional consideration under clause (B) of Section
7(a)(ii)(x)), redeliver the certificate for such Puget Shares to Puget, free
and clear of all liens, claims, damages, charges and encumbrances of any kind
or nature whatsoever; provided, however, that if less than all of the Company
Shares purchased by Puget pursuant to the Company Option are to be repurchased
pursuant to this Section 7, then Puget shall issue to the Company a new
certificate representing those Puget Shares which are not due to be redelivered
to Puget pursuant to this Section 7 as they constituted payment of the Exercise
Price for the Company Shares not being repurchased.
(c) Payment and Redelivery of Company Option or Shares. If Puget
exercises its rights under this Section 7, the Company shall, within 10
business days thereafter, pay the required amount to Puget in immediately
available funds and Puget shall surrender to the Company the Company Option or
the certificates evidencing the Company Shares purchased by Puget pursuant
thereto, and Puget shall warrant that it owns the Company Option or such shares
and that the Company Option or such shares are then free and clear of all
liens, claims, damages, charges and encumbrances of any kind or nature
whatsoever.
(d) Puget Call. If Puget has elected to purchase Company Shares
pursuant to the exercise of the Company Option by the issuance and delivery of
Puget Shares, notwithstanding that Puget may no longer hold any such Company
Shares or that Puget elects not to exercise its other rights under this Section
7, Puget may require, at any time or from time to time prior to December 31,
1996 (provided that such date shall be extended to March 31, 1997 if the date
after which either party may terminate the Merger Agreement pursuant to Section
9.l(b) of the Merger Agreement has been extended to [March 31, 1997]), the
Company to sell to Puget any such Puget Shares at
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the price attributed to such Puget Shares pursuant to Section 4 plus interest
at the rate of 6.5% per annum on such amount, from the date of the Closing
relating to the exchange of such Puget Shares pursuant to Section 4 to the
closing date under this Section 7(d) less any dividends on such Puget Shares
paid during such period or declared and payable to stockholders of record on a
date during such period.
(e) Repurchase Price Reduced at Puget's Option. If the repurchase
price specified in Section 7(a) would subject the repurchase of the Company
Option or the Company Shares purchased by Puget pursuant to the Company Option
to a vote of the shareholders of the Company pursuant to the provisions of
Section 23B.06.400 of the WBCA, then Puget may, at its election, reduce the
repurchase price to an amount which would permit such repurchase without the
necessity for such a shareholder vote.
8. VOTING OF SHARES
Following the date hereof and prior to the fifth anniversary of the
date hereof (the "Expiration Date"), each party shall vote any shares of
capital stock of the other party acquired by such party pursuant to this
Agreement, including any Puget Shares issued pursuant to Section l(b)
("Restricted Shares") or otherwise beneficially owned (within the meaning of
Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) by such party on each matter submitted to a vote of
shareholders of such other party for and against such matter in the same
proportion as the vote of all other shareholders of such other party are voted
(whether by proxy or otherwise) for and against such matter.
9. RESTRICTIONS ON TRANSFER
(a) Restrictions on Transfer. Prior to the Expiration Date,
neither party shall, directly or indirectly, by operation of law or otherwise,
sell, assign, pledge, or otherwise dispose of or transfer any Restricted Shares
beneficially owned by such party, other than (i) pursuant to Section 7 or (ii)
in accordance with Section 9(b) or Section 10.
(b) Permitted Sales. Following the termination of the Merger
Agreement, a party shall be permitted to sell any Restricted Shares
beneficially owned by it if such sale is made pursuant to a tender or exchange
offer that has been approved or recommended, or otherwise determined to be fair
to and in the best interests of the shareholders of the other party, by a
majority of the members of the Board of Directors of such other party which
majority shall include a majority of directors who were directors prior to the
announcement of such tender or exchange offer.
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10. REGISTRATION RIGHTS
Following the termination of the Merger Agreement, each party hereto
(a "Designated Holder") may by written notice (the "Registration Notice") to
the other party (the "Registrant") request the Registrant to register under the
Securities Act all or any part of the Restricted Shares beneficially owned by
such Designated Holder (the "Registrable Securities") pursuant to a bona fide
firm commitment underwritten public offering in which the Designated Holder and
the underwriters shall effect as wide a distribution of such Registrable
Securities as is reasonably practicable and shall use their best efforts to
prevent any person (including any Group (as used in Rule 13d-5 under the
Exchange Act)) and its affiliates from purchasing through such offering
Restricted Shares representing more than 1% of the outstanding shares of common
stock of the Registrant on a fully diluted basis (a "Permitted Offering"). The
Registration Notice shall include a certificate executed by the Designated
Holder and its proposed managing underwriter, which underwriter shall be an
investment banking firm of nationally recognized standing (the "Manager"),
stating that (i) they have a good-faith intention to commence promptly a
Permitted Offering and (ii) the Manager in good faith believes that, based on
the then prevailing market conditions, it will be able to sell the Registrable
Securities at a per share price equal to at least 80% of the then Fair Market
Value of such shares. The Registrant (and/or any person designated by the
Registrant) shall thereupon have the option, exercisable by written notice
delivered to the Designated Holder within 10 business days after the receipt of
the Registration Notice, irrevocably to agree to purchase all or any part of
the Registrable Securities proposed to be so sold for cash at a price (the
"Option Price") equal to the product of (i) the number of Registrable
Securities to be so purchased by the Registrant and (ii) the then Fair Market
Value of such shares. Any such purchase of Registrable Securities by the
Registrant (or its designee) hereunder shall take place at a closing to be held
at the principal executive offices of the Registrant or at the offices of its
counsel at any reasonable date and time designated by the Registrant and/or
such designee in such notice within 20 business days after delivery of such
notice. Any payment for the shares to be purchased shall be made by delivery
at the time of such closing of the Option Price in immediately available funds.
If the Registrant does not elect to exercise its option pursuant to
this Section 10 with respect to all Registrable Securities, it shall use its
best efforts to effect, as promptly as practicable, the registration under the
Securities Act of the unpurchased Registrable Securities proposed to be so
sold; provided, however, that (i) neither party shall be entitled to more than
an aggregate of two effective registration statements hereunder and (ii) the
Registrant will not be required to file any such registration statement during
any period of time (not to exceed 40 days after such request in the case of
clause (A) below or 90 days in the case of clauses (B) and (C) below) when
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(A) the Registrant is in possession of material nonpublic information which it
reasonably believes would be detrimental to be disclosed at such time and, in
the opinion of counsel to the Registrant, such information would have to be
disclosed if a registration statement were filed at that time; (B) the
Registrant is required under the Securities Act to include audited financial
statements for any period in such registration statement and such financial
statements are not yet available for inclusion in such registration statement;
or (C) the Registrant determines, in its reasonable judgment, that such
registration would interfere with any financing, acquisition or other material
transaction involving the Registrant or any of its affiliates. The Registrant
shall use its reasonable best efforts to cause any Registrable Securities
registered pursuant to this Section 10 to be qualified for sale under the
securities or Blue Sky laws of such jurisdictions as the Designated Holder may
reasonably request and shall continue such registration or qualification in
effect in such jurisdiction; provided, however, that the Registrant shall not
be required to qualify to do business in, or consent to general service of
process in, any jurisdiction by reason of this provision.
The registration rights set forth in this Section 10 are subject to
the condition that the Designated Holder shall provide the Registrant with such
information with respect to such holder's Registrable Securities, the plans for
the distribution thereof, and such other information with respect to such
holder as, in the reasonable judgment of counsel for the Registrant, is
necessary to enable the Registrant to include in such registration statement
all material facts required to be disclosed with respect to a registration
thereunder.
A registration effected under this Section 10 shall be effected at the
Registrant's expense, except for underwriting discounts and commissions and the
fees and the expenses of counsel to the Designated Holder, and the Registrant
shall provide to the underwriters such documentation (including certificates,
opinions of counsel and "comfort" letters from auditors) as are customary in
connection with underwritten public offerings as such underwriters may
reasonably require. In connection with any such registration, the parties
agree to (i) indemnify each other and the underwriters in the customary manner,
(ii) enter into an underwriting agreement in form and substance customary for
transactions of such type with the Manager and the other underwriters
participating in such offering, and (iii) take all further actions which shall
be reasonably necessary to effect such registration and sale (including, if the
Manager deems it necessary, participating in road-show presentations).
The Registrant shall be entitled to include (at its expense)
additional shares of its common stock in a registration effected pursuant to
this Section 10 only if and to
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the extent the Manager determines that such inclusion will not adversely affect
the prospects for success of such offering.
11. ADJUSTMENT UPON CHANGES IN CAPITALIZATION
Without limitation to any restriction on the Company contained in this
Agreement or in the Merger Agreement, in the event of any change in Company
Common Stock by reason of stock dividends, splitups, mergers (other than the
Merger), recapitalizations, combinations, exchange of shares or the like, the
type and number of shares or securities subject to the Company Option, and the
purchase price per share provided in Section 1, shall be adjusted appropriately
to restore to Puget its rights hereunder, including the right to purchase from
the Company (or its successors) shares of Company Common Stock representing
19.9% of the outstanding Company Common Stock for the aggregate Exercise Price
calculated as of the date of this Agreement as provided in Section 1.
12. RESTRICTIVE LEGENDS
Each certificate representing shares of Company Common Stock issued to
Puget hereunder, and Puget Shares, if any, delivered to the Company at a
Closing, shall include a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE
REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN A STOCK OPTION
AGREEMENT DATED AS OF OCTOBER 18, 1995, A COPY OF WHICH MAY BE
OBTAINED FROM THE ISSUER UPON REQUEST.
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if Puget or the Company, as
the case may be, shall have delivered to the other party a copy of a letter
from the staff of the Securities and Exchange Commission, or an opinion of
counsel, in form and substance satisfactory to the other party, to the effect
that such legend is not required for purposes of the Securities Act; (ii) the
reference to the provisions to this Agreement in the above legend shall be
removed by delivery of substitute certificate(s) without such reference if the
shares have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of such
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reference; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both satisfied. In
addition, such certificates shall bear any other legend as may be required by
law. Certificates representing shares sold in a registered public offering
pursuant to Section 10 shall not be required to bear the legend set forth in
this Section 12.
13. BINDING EFFECT; NO ASSIGNMENT; NO THIRD-PARTY BENEFICIARIES
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. Except
as expressly provided for in this Agreement, neither this Agreement nor the
rights or the obligations of either party hereto are assignable, except by
operation of law, or with the written consent of the other party. Nothing
contained in this Agreement, express or implied, is intended to confer upon any
person other than the parties hereto and their respective permitted assigns any
rights or remedies of any nature whatsoever by reason of this Agreement. Any
Restricted Shares sold by a party in compliance with the provisions of Section
10 shall, upon consummation of such sale, be free of the restrictions imposed
with respect to such shares by this Agreement, unless and until such party
shall repurchase or otherwise become the beneficial owner of such shares, and
any transferee of such shares shall not be entitled to the registration rights
of such party.
14. SPECIFIC PERFORMANCE
The parties recognize and agree that if for any reason any of the
provisions of this Agreement are not performed in accordance with their
specific terms or are otherwise breached, immediate and irreparable harm or
injury would be caused for which money damages would not be an adequate remedy.
Accordingly, each party agrees that, in addition to other remedies, the other
party shall be entitled to an injunction restraining any violation or
threatened violation of the provisions of this Agreement. In the event that
any action should be brought in equity to enforce the provisions of the
Agreement, neither party will allege, and each party hereby waives the defense,
that there is adequate remedy at law.
15. ENTIRE AGREEMENT
This Agreement, the Puget Stock Option Agreement, the Confidentiality
Agreement and the Merger Agreement (including the exhibits and schedules
thereto) constitute the entire agreement among the parties with respect to the
subject matter hereof and thereof and supersede all other prior agreements and
understandings, both written and oral, among the parties or any of them with
respect to the subject matter hereof and thereof.
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16. FURTHER ASSURANCES
Each party will execute and deliver all such further documents and
instruments and take all such further action as may be necessary in order to
consummate the transactions contemplated hereby.
17. VALIDITY
The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of the other provisions of this
Agreement, which shall remain in full force and effect. In the event any court
or other competent authority holds any provisions of this Agreement to be null,
void or unenforceable, the parties hereto shall negotiate in good faith the
execution and delivery of an amendment to this Agreement in order, as nearly as
possible, to effectuate, to the extent permitted by law, the intent of the
parties hereto with respect to such provision and the economic effects thereof.
If for any reason any such court or regulatory agency determines that Puget is
not permitted to acquire, or the Company is not permitted to repurchase
pursuant to Section 7, the full number of shares of Company Common Stock
provided in Section 1 hereof (as the same may be adjusted), it is the express
intention of the Company to allow Puget to acquire or to require the Company to
repurchase such lesser number of shares as may be permissible, without any
amendment or modification hereof. Each party agrees that, should any court or
other competent authority hold any provision of this Agreement or part hereof
to be null, void or unenforceable, or order any party to take any action
inconsistent herewith, or not take any action required herein, the other party
shall not be entitled to specific performance of such provision or part hereof
or to any other remedy, including, but not limited to, money damages, for
breach hereof or of any other provision of this Agreement or part hereof as the
result of such holding or order.
18. NOTICES
All notices and other communications hereunder shall be in writing and
shall be deemed given if (i) delivered personally, (ii) sent by reputable
overnight courier service, (iii) telecopied (which is confirmed), or (iv) five
days after being mailed by registered or certified mail (return-receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
A. If to Puget, to:
Puget Sound Power & Light Company
P.O. Box 97034
Bellevue, WA 98009-9734
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Attention: William S. Weaver
Telephone: (206) 462-3162
Telecopy: (206) 462-3686
with a copy to:
Perkins Coie
1201 Third Avenue
Seattle, WA 98101
Attention: Stephen A. McKeon, Esq.
Telephone: (206) 583-8888
Telecopy: (206) 583-8500
and a copy to:
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, NY 10022
Attention: Sheldon S. Adler, Esq.
Telephone: (212) 735-3000
Telecopy: (212) 735-2001
B. If to the Company, to:
Washington Energy Company
815 Mercer Street
Seattle, WA 98109
Attention: James P. Torgerson
Telephone: (206) 224-2358
Telecopy: (206) 224-2435
with a copy to:
Graham & James/Riddell Williams
1001 Fourth Avenue
Plaza Building, Suite 4400
Seattle, WA 98154
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Attention: Marion V. Larson, Esq.
Telephone: (206) 389-1798
Telecopy: (206) 389-1708
and a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Attention: David B. Chapnick, Esq.
Telephone: (212) 455-2530
Telecopy: (212) 455-2502
19. GOVERNING LAW; CHOICE OF FORUM
This Agreement shall be governed by and construed in accordance with
the laws of the state of Washington applicable to agreements made and to be
performed entirely within such State and without regard to its choice of law
principles. Each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any federal court located in the state of Washington
or any Washington state court in the event any dispute arises out of this
Agreement or any of the transactions contemplated by this Agreement, (b) agrees
that it will not attempt to deny or defeat such personal jurisdiction by motion
or other request for leave from any such court, and (c) agrees that it will not
bring any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than a federal court sitting
in the state of Washington or a Washington state court.
20. INTERPRETATION
When a reference is made in this Agreement to a Section such reference
shall be to a Section of this Agreement unless otherwise indicated. Whenever
the words "include," "includes" and "including" are used in this Agreement,
they shall be deemed to be followed by the words "without limitation." The
descriptive headings herein are inserted for convenience of reference only and
are not intended to be part of or to affect the meaning or interpretation of
this Agreement.
21. COUNTERPARTS
This Agreement may be executed in two counterparts, each of which
shall be deemed to be an original, but both of which, taken together, shall
constitute one and the same instrument.
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22. EXPENSES
Except as otherwise expressly provided herein or in the Merger
Agreement, all costs and expenses incurred in connection with the transactions
contemplated by this Agreement shall be paid by the party incurring such
expenses.
23. AMENDMENTS; WAIVER
This Agreement may be amended by the parties hereto and the terms and
conditions hereof may be waived only by an instrument in writing signed on
behalf of each of the parties hereto, or, in the case of a waiver, by an
instrument signed on behalf of the party waiving compliance.
24. EXTENSION OF TIME PERIODS
The time periods for exercise of certain rights under Sections 2, 6
and 7 shall be extended (i) to the extent necessary to obtain all regulatory
approvals for the exercise of such rights, and for the expiration of all
statutory waiting periods; and (ii) to the extent necessary to avoid any
liability under Section 16(b) of the Exchange Act by reason of such exercise.
25. REPLACEMENT OF COMPANY OPTION
Upon receipt by the Company of evidence reasonably satisfactory to it
of the loss, theft, destruction or mutilation of this Agreement, and (in the
case of loss, theft or destruction) of reasonably satisfactory indemnification,
and upon surrender and cancellation of this Agreement, if mutilated, the
Company will execute and deliver a new Agreement of like tenor and date.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective duly authorized officers as of the date first
above written.
PUGET SOUND POWER & LIGHT COMPANY
By:
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Name:
Title:
WASHINGTON ENERGY COMPANY
By:
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Name:
Title:
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