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EXHIBIT 99.1
EXECUTION VERSION
COMBINATION AGREEMENT
AMONG
DUKE ENERGY CORPORATION,
3058368 NOVA SCOTIA COMPANY,
3946509 CANADA INC.
AND
WESTCOAST ENERGY INC.
SEPTEMBER 20, 2001
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TABLE OF CONTENTS
<Table>
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....................................................9
1.5 Schedules..............................................................9
ARTICLE 2 THE ARRANGEMENT
2.1 Implementation Steps by Westcoast.....................................10
2.2 Implementation Steps by Duke Energy Parties...........................10
2.3 Interim Order.........................................................11
2.4 Articles of Arrangement...............................................11
2.5 Westcoast Circular....................................................11
2.6 Securities Compliance.................................................12
2.7 Preparation of Filings................................................13
ARTICLE 3 REPRESENTATIONS AND WARRANTIES of Westcoast
3.1 Organization and Standing.............................................14
3.2 Capitalization........................................................15
3.3 Authority and No Conflicts............................................17
3.4 Consents; Approvals...................................................18
3.5 No Defaults...........................................................18
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.........................................25
3.14 Affiliates............................................................28
3.15 Compliance with Laws; Permits.........................................29
3.16 Restrictions on Business Activities...................................29
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 Advisor..........................................33
3.24 Brokerage and Finders' Fees...........................................33
3.25 Westcoast Rights Plan.................................................33
3.26 Solvency of Westcoast.................................................33
</Table>
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<Table>
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE DUKE ENERGY PARTIES
4.1 Organization and Standing.............................................33
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............................................................37
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.................................................49
5.4 Indemnification.......................................................50
5.5 Covenants Regarding Non-Solicitation..................................50
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..............................54
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...........................................................59
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....................................................66
</Table>
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<Table>
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.......................................................67
8.14 Entire Agreement......................................................67
8.15 Severability..........................................................67
8.16 Counterparts..........................................................67
</Table>
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
COMBINATION AGREEMENT
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COMBINATION AGREEMENT
THIS COMBINATION AGREEMENT dated 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."
RECITALS
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, arrangement, share exchange, take-over bid,
tender offer, recapitalization, consolidation
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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 Laws of the State of New York or the federal
Laws of the United States of America or in
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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;
"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
"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.
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"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;
"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,
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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 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
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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 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);
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"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);
"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
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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;
"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);
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"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."
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:
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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.
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
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(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) the number of Exchangeable Shares per Westcoast
Common Share equal to the Exchange Ratio, (b) the number of Duke Energy Common
Shares 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 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
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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 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
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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 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.
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(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):
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
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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 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
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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 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.
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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 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
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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.
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
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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.
(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
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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 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,
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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.
(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
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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 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
COMBINATION AGREEMENT
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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:
(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;
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(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 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
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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.
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
COMBINATION AGREEMENT
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(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.
(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.
COMBINATION AGREEMENT
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(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 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,
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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 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.
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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.
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.
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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 mark, service mark 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 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.
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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 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.
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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 1935 Act.
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 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.
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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):
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
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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, issue,
sell, redeem, repurchase, 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
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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 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,
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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 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.
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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.
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
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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
(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
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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, 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
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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 Merrill Lynch & 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 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
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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 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,
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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 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
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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
days prior to the filing or execution thereof.
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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
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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, 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;
(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;
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(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;
(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 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
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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:
(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
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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 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
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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.
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
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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, substantially the same coverage and containing
substantially similar terms and conditions for acts and omissions
prior to the Effective Time under the current policies of the
directors' and officers' liability insurance maintained by
Westcoast 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.
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.
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(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 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
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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, 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
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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 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
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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).
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
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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:
(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
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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:
(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
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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 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;
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(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 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
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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.
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,
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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 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 6.1(a) or
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Section 6.1(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.
(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
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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
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
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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 7.03(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 (z) the
proposal or expression of interest regarding an Acquisition
Proposal that is only publicly disclosed and 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.
COMBINATION AGREEMENT
63
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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:
1333 West Georgia Street
Vancouver, British Columbia
Canada V6E 3K9
Attention: Senior Vice President,
Law and Corporate Secretary
Telecopier No.: (604) 488-8088
with a copy to:
Torys
Suite 3000
Toronto - Dominion Centre
Toronto, Ontario
Canada M5K 1N2
Attention: Peter E. S. Jewett
Philip Symmonds
Telecopier No.: (416) 865-7380
(b) If to a Duke Energy Party, at:
Duke Energy Corporation
422 South Church Street
Charlotte, NC 28201-1244
Attention: Martha B. Wyrsch
Telecopier No.: (303) 605-1605
COMBINATION AGREEMENT
64
69
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.
65
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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 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.
COMBINATION AGREEMENT
66
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8.13 TIME OF ESSENCE
Time shall be of the essence in this Agreement.
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.
COMBINATION AGREEMENT
67
72
IN WITNESS WHEREOF the parties hereto have executed this Agreement as
of the date first written above.
DUKE ENERGY CORPORATION
By: /s/ RICHARD B. PRIORY
---------------------------------------
Name: Richard B. Priory
Title: Chairman, President and
Chief Executive Officer
3058368 NOVA SCOTIA COMPANY
By: /s/ FRED J. FOWLER
---------------------------------------
Name: Fred J. Fowler
Title: President
3946509 CANADA INC.
By: /s/ FRED J. FOWLER
---------------------------------------
Name: Fred J. Fowler
Title: President
WESTCOAST ENERGY INC.
By: /s/ MICHAEL E.J. PHELPS
---------------------------------------
Name: Michael E.J. Phelps
Title: Chairman and Chief Executive
Officer
By: /s/ GRAHAM M. WILSON
---------------------------------------
Name: Graham M. Wilson
Title: Executive Vice President and
Chief Financial Officer
COMBINATION AGREEMENT
68
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SCHEDULE A
FORM OF AFFILIATE'S LETTER
_______________, 2001
Duke Energy Corporation
422 South Church Street
Charlotte, North Carolina 28201-1244
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
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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: _____________________________________
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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
Hart-Scott-Rodino Antitrust Improvements Act of 1976
o approval of Federal Energy Regulatory Commission under Section 203
of the Federal Power Act
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, 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
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SCHEDULE C
FORM OF ARRANGEMENT RESOLUTION
SPECIAL RESOLUTION OF THE WESTCOAST SECURITYHOLDERS
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 Schedule E to the
Combination Agreement made as of September o, 2001 among Duke Energy
Corporation, 3058368 Nova Scotia Company, 3946509 Canada Inc. and
Westcoast (the "COMBINATION Agreement") (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 Combination Agreement or the Plan of
Arrangement to the extent permitted by the Combination Agreement, 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 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.
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SCHEDULE D
FORM OF WESTCOAST RIGHTS PLAN WAIVER RESOLUTION
ORDINARY RESOLUTION OF THE WESTCOAST SHAREHOLDERS
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 Montreal Trust Company of Canada that waives the
application of Section 3.1 of the Rights Plan to any Flip-in Event (as
that term is defined in the Rights Plan) that may occur as a result of
entering into, and/or the actions taken pursuant to, the Combination
Agreement (the "COMBINATION AGREEMENT") dated as of September 20, 2001
among Duke Energy Corporation, 3058368 Nova Scotia Company, 3946509
Canada Inc. and Westcoast and the Plan of Arrangement attached to the
Combination Agreement as Schedule E 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.
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SCHEDULE E
FORM OF PLAN OF ARRANGEMENT
PLAN OF ARRANGEMENT
UNDER SECTION 192
OF THE CANADA BUSINESS CORPORATIONS ACT
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
-1-
PLAN OF ARRANGEMENT
79
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 which,
at the Effective Time, will be 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, to be sent
to Westcoast Securityholders in connection with the Westcoast Meeting;
"COMBINATION AGREEMENT" means the 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;
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PLAN OF ARRANGEMENT
80
"COURT" means the Supreme Court of British Columbia;
"DEPOSITARY" means ____________ 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;
"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 the Duke Energy Common Shares, with such
product being expressed to the fourth decimal point. The "Weighted
Average Trading Price of the 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 Election Deadline 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; and
"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 DEADLINE" means 5:00 p.m. (local time) at the place of
deposit on the date that is two Business Days prior to the Effective
Date;
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PLAN OF ARRANGEMENT
81
"EXCHANGECO" means 3946509 Canada Inc., a corporation existing under
the laws of Canada and being a direct wholly-owned 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;
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PLAN OF ARRANGEMENT
82
"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, in the form accompanying the Circular;
"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.;
"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,
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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;
"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 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.
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.
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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) such number of fully paid and
non-assessable Exchangeable Shares (and the Ancillary Rights) as is equal to the
Exchange Ratio; or (y) such number of fully paid and non-assessable Duke Energy
Common Shares 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 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
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86
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, 50% will
consist of cash and 50% will consist of Exchangeable Shares and/or Duke Energy
Common Shares, subject to the effects of Dissenting Shareholders pursuant to
Section 3.1.
(d) 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:
(i) 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) 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
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PLAN OF ARRANGEMENT
87
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
(ii) 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 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
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88
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.
(e) Each of the outstanding First Preferred Shares shall remain
outstanding in accordance with its terms.
(f) 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, 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 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
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PLAN OF ARRANGEMENT
89
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) 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 such election otherwise
made by any such holder shall be and be deemed to be an election to receive Duke
Energy Common Shares.
(b) 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
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PLAN OF ARRANGEMENT
90
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.
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; provided that,
notwithstanding subsection 190(5) of the CBCA, the written objection to the
Arrangement Resolution referred to in subsection 190(5) of the CBCA must be
received by Westcoast not later than 2:00 p.m. (Vancouver time) on the Business
Day preceding the Westcoast Meeting. 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
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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
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
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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 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
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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
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 Duke Energy Average Price as of the Effective Date, 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.
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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 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
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PLAN OF ARRANGEMENT
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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 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.
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(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 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.
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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 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 or an Exempt
Exchangeable Share Voting Event (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
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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.
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.
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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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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;
"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:
(a) the Foreign Currency Amount, by
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(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 not more than three
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;
"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;
"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.
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102
"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;
"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
(b) an additional amount equal to the full amount of all cash
dividends declared, payable and unpaid, on such Exchangeable Share;
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;
"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
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103
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;
"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;
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"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 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 shall be no earlier than the eighth
anniversary of the Effective Date, unless:
(a) 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;
(b) 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
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;
(c) 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, 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
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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
(d) 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;
"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 _____________ 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, being a corporation organized and existing under the
laws of the State of New York or the State
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of Delaware, 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
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
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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
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. For
greater certainty, subject to applicable law, no approval of the holders of
Exchangeable Shares to an amendment to the articles of the Company shall be
required to give effect to such subdivision.
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.
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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;
(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).
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3.7 Except as provided in this Article 3, the holders of Exchangeable
Shares shall not be entitled to receive dividends in respect thereof.
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, 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").
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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
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
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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 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
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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. 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 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,
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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
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").
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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 or an Exempt Exchangeable Share
Voting Event), 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 or an
Exempt Exchangeable Share Voting Event, 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 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
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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.
ARTICLE 8
PURCHASE FOR CANCELLATION
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.
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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-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:
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(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,
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.
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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;
(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,
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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 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.
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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 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.
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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.
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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:
-------------------------------------------------------
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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).
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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:
125
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
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Support Agreement
126
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.
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Support Agreement
127
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 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;
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(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
(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
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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 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
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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.
(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;
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(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;
(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
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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.
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
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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 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
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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.
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.
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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.
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.
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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.
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.
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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: __________________________________
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SCHEDULE G
FORM OF VOTING AND EXCHANGE TRUST AGREEMENT
VOTING AND EXCHANGE AGREEMENT ("AGREEMENT") made as of the ___ day of
_________, 200_.
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 -
[ ],
a United States trust company incorporated under the laws of
________________ (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:
139
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 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;
"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;
"DUKE ENERGY COMMON SHARES" means the shares of common stock, no par
value per share, in the capital of Duke Energy;
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"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 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 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;
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"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;
"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;
"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;
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"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.
1.5 PAYMENTS
All payments to be made hereunder will be made without interest and
less any tax required by Canadian law to be deducted or withheld.
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, in each case as trustee for
and on behalf of the Beneficiaries as provided in this Agreement. The Trustee
will 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.
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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 and 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 the exercise of the portion of the Voting
Rights in respect of the Exchangeable Shares held by the Beneficiaries.
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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.
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 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
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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 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
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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
___________. 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
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
___________ copies of all such materials. Notwithstanding the
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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 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.
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(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.
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 be deemed to be surrendered by
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the Beneficiary to Duke Energy or Callco, as the case may be, and such
Beneficiary Votes and the Voting Rights represented thereby shall cease and be
terminated immediately, upon 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 upon 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 upon 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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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 _________
or at such other places in Canada 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
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the by-laws of Exchangeco and such additional documents and instruments as the
Trustee, 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
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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 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.
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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 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:
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(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
(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 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
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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 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.
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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 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;
(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
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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.
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.
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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 __________ 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;
(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
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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 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:
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(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 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
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(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 Exchangeco, in securities in which, under
the laws of the Province of Ontario, 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 Exchangeco. 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 Canada or, with the consent of Exchangeco, in the
deposit department of the Trustee or any other loan or trust company authorized
to accept deposits under the laws of Canada or any province thereof at the rate
of interest then current on similar deposits.
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 each of the Provinces of Canada 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 any province of
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Canada, 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 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
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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 by the Trustee in any
suit or litigation in which the Trustee is determined to have acted in bad faith
or with 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, 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
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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, negligence, recklessness,
willful misconduct or bad faith on the part of the Trustee.
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.
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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.
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
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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.
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
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(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.
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:
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(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.
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 George 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.
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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.
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:
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(a) if to Duke Energy or Exchangeco, at:
Duke Energy Corporation
422 South Church Street
Charlotte, North Carolina 28201-1244
Attention: Martha B. Wyrsch
Telecopier Number: (303) 605-1605
(b) if to the Trustee, 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.
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.
13.7 GOVERNING LAWS; CONSENT TO JURISDICTION
This Agreement shall be governed by and construed in accordance with
the laws of ______________. Each party hereby irrevocably attorns to the
jurisdiction of the courts of _______________ in respect of all matters arising
under or in relation to this Agreement and Duke Energy hereby appoints
_____________ as its registered office in _______________ 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
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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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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:
----------------------------------
---------------------------
TRUST COMPANY
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
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VOTING AND EXCHANGE TRUST AGREEMENT